Reinsurers say first quarter cats insufficient to turn market – just

But, despite the scale of events witnessed already in the first quarter of this year, such as the Chile earthquake and windstorm Xynthia in North-West Europe, the leading reinsurers say they can cope and no rapid hardening in terms is expected, so far. Latest to report on the claims were Bermuda–based reinsurers Validus and Flagstone Re that followed fellow Bermudians PartnerRe and Everest Re. Validus reported that it expects to suffer losses of between $170m and $270m from the Chile earthquake and $20m to $30m from Xynthia.hideThe company recently reported a net operating profit of $533m for 2009 against $175.1 million in 2008. Gross premiums written for the year were $1.621bn compared to $1.362bn for 2008, an increase of $258.8 million, or 19.0%. Flagstone said that its preliminary estimate of claims from Chile is $50m net of reinstatement premiums and retrocession. The company expects claims from Xynthia, which struck Europe on February 27, to be between $3m and $6m, net of reinstatement premiums and retrocession. Flagstone stressed that these are early estimates and may well change, particularly for Chile because the picture will only become clearer when a large number of buildings are inspected. “That could take some months,” said the company. PartnerRe said it expects initial claims from Chile to be worth $220m to $320m, on a pre-tax basis and net of reinstatement premiums and retrocession. The Company said that it expects that total insured industry losses from the M8.8 earthquake in Chile, to be in the range of approximately $6-$10bn. PartnerRe said that Xynthia is estimated to have caused industry losses in the range of $2-$4bn. It expects to pay out between $40-$70m pre-tax, net of reinstatement premium and retrocession. The group reported net profit of $1.5bn for 2009 on the back of net premiums written of $3.9bn, which was roughly the same as in 2008. Everest Re said that its preliminary loss estimate for exposures to the Chile earthquake is $225m. “We're extending our full support to our ceding company clients as they deal with the devastation caused by these events. Ours is a business of risk and we have ample capacity to absorb these losses. As such, we're prepared to handle these claims in an effective and efficient manner,” said Joseph V. Taranto, chairman and CEO of Everest Re. Everest recently reported a net profit of $807m for 2009 compared to a net loss of $18.8m for 2008. Gross written premiums reached $4.1bn, up 12% compared to 2008 on an underlying basis. About 90% of earthquake premiums underwritten by Chilean insurers are reportedly ceded to reinsurers. Everest is one of the biggest reinsurers of Chilean catastrophe risk along with the big two European reinsurers Munich Re and Swiss Re. Munich Re has estimated losses in Chile of €500m while Swiss Re estimated $500m. Swiss Re believes the total insured loss for the earthquake will fall between $4bn and $7bn and that total economic losses could reach over $15 billion. Swiss Re said that it would pay out claims of around $100m from Xynthia pointing out that a portion of the losses from wind and flood in the countries affected would be covered by state-run schemes. Munich Re said it expects claims from Xynthia to reach about €100m. The insured market loss from the European storm should total between €1.5bn and €2.5bn, some €300 to €500m of which is attributable to Germany, said the company. Torsten Jeworrek, Reinsurance CEO and board member at Munich Re, said that losses are big but that the industry is prepared. “Carrying losses from catastrophes of this dimension is part of our core business. We calculate risk-adequate prices for this, and will naturally continue to offer capacity in Chile. We are proceeding on the assumption that an event of this size will affect the prices for catastrophe covers.” Nicholas von Bomhard, Chairman of Munich Re said that the company would again aim for a net profit of over €2bn compared with €2.5bn for 2009, despite the scale of the catastrophes so far this year. Munich Re reported an operating profit of €4.72bn in 2009 while gross premiums written rose by 9.5% to €41.4bn against €37.8bn the year before. The group said that group premium volume of around €2.5bn will be up for renewal as of April 1, 2010 in Japan and Korea and parts of the U.S. market, Australia and Latin America on July 1, 2010. “With the exception of loss-affected segments, Munich Re expects markets to generally move sideways, with a slight downward tendency. At the moment, we do not see any signs of a marked change in the trend,” said Mr. Jeworrek. Munich Re’s confidence in its position was affirmed by its continued strategy of buying-back shares. It announced a further share buy-back programme at the beginning of October and by March 8 it had repurchased shares with a total value of about €677m. The group said that the target is €1bn by its next Annual General Meeting on April 28. It also plans to pay a dividend for the past financial year of €5.75 (5.50) per share in April that is equivalent to a total of almost €1.1bn based on the shares currently in circulation. Since May 2007, Munich Re has announced share buy-backs of more than €5bn and, including the current buy-back, some €4bn has already been implemented. The company said that it will “carefully consider further buy-backs, weighing up the benefit against the advantages of comfortable capitalisation – also with a view to opportunities for organic and possibly external growth.” Hannover Re estimated the market loss from Chile to be between $4bn and $7bn and its exposure to be about €185m. The Hanover-based reinsurance group believes the market loss for Xynthia will be between €1.5bn and €3bn and its loss will reach about €40m. The group reported gross written premium booked up by 26.5% to €10.3bn from €8.1 bn in 2008. On the back of a combined ratio of 96.6% against 95.4% the year before and investment income up sharply to €1.1bn last year from €278.5m the year before, Hannover Re reported an operating profit of €1.1bn compared with €148.1m in 2008. Group net income climbed by €858.2m to €731.2m, the biggest net income in the group's history. Hannover Re said that, despite the lively start to the year in catastrophe terms, it views the current financial year with “optimism.” It said that the January 1 treaty renewals in non-life reinsurance “passed off in line with expectations.” Chief Executive Officer Ulrich Wallin said that the company will concentrate on segments in which risk-adequate premiums can be obtained or where prices are rising, particularly in worldwide credit and surety reinsurance and aviation business. “In non-life reinsurance we anticipate growth of around 4% in net premium and a healthy profit contribution,” Mr. Wallin said. “Given the lower returns attainable on investments on account of the reduced interest rate level, Hannover Re will keep an especially close eye on the underwriting result,” he added. Hannover Re said that its assumption of a return on equity target of at least 15% is currently not threatened by the Chile earthquake and winter storm Xynthia. But the group added: “As a consequence of these catastrophe events the major loss expectancy for the first quarter has been significantly surpassed. Attainment of the targeted return is conditional upon there being no further exceeding of the major loss expectancy and no drastic downturns on capital markets.”

Reinsurers say first quarter cats insufficient to turn market – just

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