C’bean Hurricanes cost Swiss Re US$2B in claims

The company announced in a statement that it expected to deal with US$750 million (900 million euros) in claims for damage caused by Hurricanes Rita and Wilma in the United States and the Caribbean in September and October.

Swiss Re estimated more than one month ago that it would already be dealing with about $1.2 billion in claims from Hurricane Katrina, which led to devastating floods in the US city of New Orleans in August.

A company spokesman has repeated that earlier estimate for claims arising from Katrina. The reinsurer said that it would not meet one of its financial targets for 2005, an objective of a 10% increase in earnings per share.

Swiss Re would also resort to "equalisation reserves to mitigate part of the claims caused by this year’s extraordinary hurricane season", it added.

Spokesman Beat Werder said the company had resorted to those reserves several times this decade to spread out the financial impact of unusually large disasters or claims.

The reserves stood at US$1.2 billion at the end of 2004 and Werder declined to say how much would be used. In 2001 those reserves amounted to US$ 2.0 billion.

Swiss Re maintained its guidance on a dividend payment for 2005 of 2.50 Swiss francs per share, which had been increased in July over the 1.60 Swiss francs paid to shareholders in 2004. "Our financial strength remains very strong, enabling Swiss Re to take full benefit of the excellent pricing conditions in the current renewal season," said chief executive John Coomber.

"This year’s hurricane season reinforces the benefits of Swiss Re’s highly diversified portfolio across lines of business and geographies," he added.

Claims to insurers in major disasters often cover not only physical damage to property or humans, but also business interruption insurance which is prevalent in wealthy countries.

Hurricane Rita hit part of Texas on September 24, prompting the evacuation of the city of Houston and affecting neighbouring US states in the wake of Hurricane Katrina.

The total claims to the insurance industry following Rita are expected to reach US$10 billion, with "a major part stemming from offshore oil installations", Swiss Re said.

Claims to the industry from Hurricane Wilma are estimated to reach between six and 12 billion dollars following its sweep through Mexican coastal resorts, through Cuba and into Florida last month, it added.

Katrina’s cost to insurers is estimated at about $40 billion. Insurers have been locked in a dispute with authorities over whether the damage in New Orleans was directly caused by the hurricane, which is covered by private policies, or by flooding, which generally is not.

"The issue relating to Katrina is still under investigation," Werder said.

Swiss Re has long warned of the impact of increasingly frequent extreme weather conditions on the insurance industry and has urged measures to mitigate climate change and its impact.

The world’s second-biggest reinsurer posted a 6.0% drop in first-half net profit to 1.35 billion Swiss francs.

In 2004, Swiss Re recorded a 45% increase in annual net profit to 2.5 billion Swiss francs, despite what was regarded then as a peak year for catastrophes.