Insurers off the hook as Swiss Re caps tsunami costs

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The Independent Online

Swiss Re, the world's second largest reinsurer, said its costs resulting from the tsunami in south Asia would be no more than 100m Swiss francs (£46m).

This is a fraction of the US$750m (£390m) the company bore after this year's hurricane season in the US, despite the huge loss of life and widespread devastation that has plunged much of south Asia into chaos.

The group said: "The sheer size of the event and the absence of historical data make it difficult to provide an exact estimation of the damage. However, the claims for the insurance industry will be in sharp contrast to the human and economic losses triggered by this event".

Swiss Re is one of many insurance companies whose staff will have spent their Christmas holiday calculating the probable liabilities in the wake of the tsunami disaster. Munich Re, the largest reinsurer, said this week that it expected its costs to be in the region of $136m.

It is unlikely the tsunami will have an adverse impact on current year profit forecasts at the large insurance companies as many of the victims were from poor rural coastlines - the majority had no businesses, personal or property insurance cover. The bill is likely to be highest at firms providing insurance cover for buildings, principally hotels on coastlines that bore the brunt of the tsunami.

Economists estimated that the total impact in terms of reduced GDP may be as high as $14bn for the region, with Sri Lanka and the Maldives suffering most, as GDP is expected to fall by 2 and 4 per cent respectively. Large though this figure is, some perspective is given by the $132bn bill that Japan faced after the Kobe earthquake in 1995, which killed 5,000 people.

Meanwhile, some companies may be expecting a surge in business as a result of the disaster. Aggreko, which supplies temporary power generators, has been operating in Sri Lanka for more than 10 years and recently completed a long-term power supply contract with its government. Its shares closed up 10.25p at 166.25p as investors speculated there would be significant demand for its services.

Rupert Soames, the chief executive of Aggreko, said: "Our first response to this terrible event was to donate $20,000 to the Sri Lankan relief effort. We are providing emergency power in Jaffna and have considerable back-up in Colombo, as well as operations in Indonesia.

"However, the Sri Lankan government's priority is not power at the moment - it is burying the dead. We are always extremely sensitive when dealing with a situation like this. Our business would face irreparable damage if we were ever accused of profiteering".