Insurers keep a cool head over tsunami costs

Insurance companies are taking the tidal waves in their stride Keystone

The world’s second-largest reinsurer, Swiss Re, says it expects its losses from the Asian tidal waves to amount to less than SFr100 million ($88.3 million).

This content was published on December 30, 2004 - 10:29

Although the exact costs to the insurance sector are still hard to assess, insurance companies do not appear to be too concerned.

More than 80,000 people are now known to have lost their lives when Sunday’s earthquake in the Indian Ocean sent huge tidal waves sweeping over the shores of Sri Lanka, Indonesia and India.

On Thursday, Zurich-based Swiss Re said most of its costs in the devastated area would arise from claims related to property insurance and the interruption of business.

Contrast

“The claims burden for the insurance sector will be in sharp contrast to the human and economic damages caused by the event,” Swiss Re said in a statement.

But the company added that the “sheer size of the event and the absence of historical data available make it difficult to provide an exact estimation of the damage, particularly as information from the affected areas is still scarce”.

The Swiss insurer, Zurich Financial Services, said it was too early to assess the level of claims.

“We have operations in those countries and we insure large companies worldwide,” it said, adding that it could take four to six weeks to put a figure on potential claims.

Swiss Re’s prediction of losses of less than SFr100 million was in line with an earlier assessment by the world’s biggest reinsurance company, Munich Re, which said it expected costs would be below €100 million (SFr150 million).

Exposure

Analysts predict that, despite the scale of the disaster, insurers are unlikely to face severe losses.

Most of the victims were poor people without insurance, and the major European insurers and reinsurers have little exposure in the region.

Insurance companies have had a bad year, with recent cyclones in the United States, the Caribbean and Japan causing losses of up to $35 billion.

In contrast, some analysts are predicting tsunami losses for insurers of less than $5 billion, arising mainly from claims relating to high-value property in tourist areas in the Maldives and the Thai island resort of Phuket.

Shares in Swiss Re have come under pressure as investors sought details of the company’s exposure to the region.

But the firm’s stock rallied during trading on Thursday, ending the day at SFr81.40, just below the share price when the quake struck.

swissinfo with agencies

Key facts

The world number two reinsurer, Swiss Re, put its liability at less than SFr100 million ($88.3 million).
The number one reinsurance company, Munich Re, has said its losses from the tsunamis are unlikely to top €100 million (SFr150 million).

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In brief

Leading insurers and reinsurers are not expected to be hit hard by claims relating to Sunday's tidal waves in southeast Asia.

Other insurers say it will be several weeks before they can assess the level of claims.

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