Bermuda's multi-billion bill for global disasters

Experts predict this will lead to a hardening of the market — when insurance is more difficult to obtain and rates are higher.

Ratings agency A.M. Best issued a report yesterday quoting Barrie Cornes, an insurance analyst at Panmure Gordon, who said combined losses could top $60 billion, making it the world’s second most costly disaster.

Hurricane Katrina losses hit $71 billion after being adjusted for inflation.

Mr. Cornes said: “The loss will be so large that it will probably provide the trigger to ensure a re-rating of the non-life sector, as sufficient capacity is withdrawn to allow rates to rise.”

Killed

Earlier this week, several reinsurers were giving loss estimates for the massive earthquake that struck near Christchurch, New Zealand, on February 22.

The disaster, measuring 6.3 on the Richter scale, killed more than 165 people.

Swiss Reinsurance said insurers face claims of $8-12 billion from that event, making it the world’s eighth costliest disaster.

Mr. Cornes believes that when quake and flood claims from New Zealand and Australia are added to the Japanese tsunami and quake claims, it will “swing the market from being soft to hardening”.

Thirteen island companies have issued loss estimates for New Zealand and Australia, with the total exposure between $1.18 billion to $1.355 billion. They gave these estimates:

ACE Ltd.: Losses of $210 million from the New Zealand earthquake and the Australian flood. The only firm to give figures for Japan, saying exposure will be $200-250 million.

Arch Capital: Losses of $35-70 million from New Zealand. They cannot yet give an estimate on Japan.

Aspen Insurance holdings: $60 million from New Zealand, $30 million from Australia. Aspen does not have any known exposure in Japan but it is too early to issue a loss estimate.

Catlin Group: $125 million from New Zealand.

Endurance Specialty holdings: $45 million from New Zealand, $15 million from Australia. No estimate for Japan as yet.

Flagstone Reinsurance holdings SA: $60-90 million from New Zealand. Substantial reinsurance cover in Japan but no estimate.

Lancashire holdings: $15-25 million from New Zealand and Australia. The firm is monitoring “potential underwriting exposures” in Japan.

Maiden holdings: Expects minimal, if any, losses from the disasters.

Montpelier Re holdings: $75 million losses from New Zealand and up to $15 million from Cyclone Yasi and Australia. Has started estimating for Japan.

PartnerRe: $180-240 million from New Zealand and Australia.

RenaissanceRe holdings: $190 million from New Zealand, $30 million from Australia. Losses from Japan “will be significant”.

Validus Holdings: $25 million to $50 million for the trans-Tasman disasters.

XL Group PLC: $70-$85 million from New Zealand. No estimate for Japan or Australia.