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Insurers escape the worst of Hurricane Irene
by Staff Writers
Zurich (AFP) Aug 30, 2011

Global insurance companies have got off relatively lightly with Hurricane Irene and it is just as well because their earnings this year were already under pressure from other natural disasters, analysts say.

Irene ploughed along the US and Canadian eastern seaboard at the weekend after causing perhaps a billion dollars worth of damage in the Carribean, with at least 40 deaths reported and extensive flooding inland.

"We do not believe that the magnitude of this event is such that it will significantly influence the industry's creditworthiness," Standard and Poor's said in a report Tuesday.

But "because of the magnitude and the frequency of the catastrophe losses year-to-date, we believe that reinsurers' 2011 earnings will erode," the ratings agency said.

S&P put the insurance losses at around $5 billion (3.46 billion euros), in line with French bank Societe Generale's estimate.

The figure is very significantly lower than the $72.3 billion in damages caused by Hurricane Katrina in 2005 which ripped through New Orleans and left 1,500 people dead.

"The worst is avoided," Societe Generale said.

"Major losses are likely to come from New York, for business interruption given the hundreds of flights that were cancelled, reduced hotel occupancy rates and disruption to utility companies," it said.

IHS Global Insight noted that if insured property damages reached up to $5 billion, it would suggest total economic losses of up to $15 billion.

"In comparative terms, at $5 billion in total property damage, Irene would not even figure on the top 10 list of the most destructive Atlantic hurricanes," it noted.

"At $15 billion, it would rank around sixth, similar to Hurricane Charley in 2004," it added.

A US insurance estimator AIR Worldwide earlier said insured damages in the Caribbean and Bahamas meanwhile could reach $1.1 billion.

When asked by AFP, insurers and reinsurers said it was too early to give a precise damages estimate of the hurricane.

An Allianz spokesman explained said it could take time for water to recede from flood areas before damages could be calculated.

Bank Vontobel believes that insurers would have to bear two-thirds of the damage, with reinsurers forking out the remainder.

Societe Generale meanwhile estimated losses at below $200 million for Munich Re and Swiss Re, and below $50 million for Hannover Re and French reinsurer SCOR.

Swiss insurer Zurich Financial Services (ZFS) could suffer a loss of around $250 million, Societe Generale estimated.

The industry was hit badly earlier this year by the massive earthquake and tsunami in Japan, earthquakes in New Zealand, floods in Australia and winter storms in the United States.

"According to the US National Climatic Data Center, the first half of 2011 alone is the costliest so far in the US for any year since 1980," S&P said.

It said it expected reinsurers to post losses in 2011, "as their initial catastrophe budgets have already been exhausted in the first half of the year."

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