IE 11 is not supported. For an optimal experience visit our site on another browser.

Latest storms may cost insurers $20 billion

/ Source: The Associated Press

Swiss Reinsurance Co., the world’s second-largest reinsurer, said Wednesday the global insurance industry could face more than $20 billion in claims from Gulf Coast hurricanes Rita and Wilma.

Meanwhile, another big reinsurer, Hannover Re AG of Germany, said Wednesday it will lower its 2005 net profit target when it announces its third-quarter earnings next week, blaming its exposure to the hurricanes

While previous forecasts had put the total insurance industry cost from Rita in the range of $5 billion to $10 billion, Swiss Re said claims will be at or above the high end of estimates, mostly because of damage to offshore oil installations.

The company said Wilma, which last month became the record 12th hurricane and 21st tropical storm of the season, would cause insured claims of between $6 billion and $12 billion.

The two storms followed in the wake of Hurricane Katrina — the costliest single-day event in history — costing the global insurance industry between $40 billion and $60 billion, analysts and reinsurance companies say.

Swiss Re said it expected its own claims for Rita and Wilma to reach $750 million, bringing its total payouts for catastrophes this year to over $3 billion.

The company said it would not meet its target of 10 percent earnings per share by the end of the year, which most analysts already expected.

But John Coomber, Swiss Re’s chief executive, said the company would benefit from higher reinsurance premiums.

“Our financial strength remains very strong, enabling Swiss Re to take full benefit of the excellent pricing conditions in the current renewal season,” Coomber said.

Re-insurers sell backup insurance to other insurance companies, spreading risk so that enormous losses from natural catastrophes can be covered.

Swiss Re shares fell 0.2 percent to 88.70 Swiss francs ($68.89) during midmorning trading on the Zurich exchange.

Katrina struck the U.S. Gulf coast in late August; Rita hit Texas and Louisiana in late September. Both hurricanes destroyed businesses and homes and choked the flow of trade. They also hobbled oil and gas facilities.

Wilma, which earlier caused heavy damage in Mexico, last week caused widespread wind damage across south Florida.

It was the second time this year that Hannover Re, the world’s third-biggest by gross premiums, has had to cut its forecast because of exposure to hurricane damage.

The Hanover, Germany-based company said its exposure to Hurricane Wilma, which hit Mexico on Oct. 21 and made landfall in Florida Oct. 24, made it impossible to reach its target of $371.2 million in net profits.

That figure already was down from a previous 2005 net profit forecast of between $516.3 million and $564.4 million in the aftermath of Hurricane Katrina.