Yesterday, Bermuda-based reinsurer Everest Re Group Ltd., (RE) estimated its first quarter 2011 pre-tax losses to range between $140 million and $210 million, owing to the deadly February 2011 New Zealand earthquake. The estimate is based on a projected industry loss of $8–$12 billion, resulting from the catastrophe.
The Australian floods will likely cause a gross loss of another $45 million to Everest Re, which writes 7% of its Reinsurance business in the Asia/Australia region.
For Everest Re, it is too early to gauge the amount of catastrophe (cat) loss from the Japan Tsunami and earthquake, one of the most expensive calamities in recent history, coming shortly after the Australian floods and the New Zealand tremor.
Reinsurers sell coverage to primary insurance providers to help protect against the cost of major claims.
Industry analysts are of the opinion that the scale of losses involved in Japan disaster would be so much that it could induce a turning or at least a flattening of rates in the non-US property catastrophe market. A.M. Best stated that the loss event had strong chances of changing the direction of the global reinsurance markets. It said that if major global reinsurers and Lloyd’s got adversely affected, some of the excess capacity in the market would be absorbed, thus setting the way for return of hard market.
These cat losses usually increase the loss ratio. Loss ratio typically measures the total losses paid out in claims divided by total premiums earned. The loss ratio component surged to 74.9% in 2010, up 1390 basis points year over year, principally due to the increase in current year catastrophe losses resulting from the Chilean earthquake, Australian hailstorms and floods, the New Zealand earthquake and the Canadian hailstorm.
Peer ACE Ltd. (ACE) guided first quarter 2011 preliminary net after-tax losses from the New Zealand earthquake, the Australian floods, the Cyclone Yasi and the U.S. winter storms to be $210 million, including reinstatement premiums. Besides, the company estimates net after-tax losses from the recent Japanese earthquake to range between $200 million and $250 million.
Another peer, XL Group plc (XL), expects its preliminary net loss to range from $70 million to $85 million, attributable to the earthquake.
Everest Re had gross written premiums of $4.2 billion in 2010, with approximately 80% representing reinsurance and 20% representing insurance. Shareholders’ equity at December 31, 2010 was $6.3 billion, up 3% from year-end 2009.
ACE LIMITED (ACE): Free Stock Analysis Report
EVEREST RE LTD (RE): Free Stock Analysis Report
XL GROUP PLC (XL): Free Stock Analysis Report
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