Lloyd's insurers count cost of hurricane

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The Independent Online

Shares in listed Lloyd's of London insurers fell yesterday, as investors grew nervous of potential losses from Hurricane Charley, which ravaged the coast of Florida over the weekend, killing 16 people.

Shares in listed Lloyd's of London insurers fell yesterday, as investors grew nervous of potential losses from Hurricane Charley, which ravaged the coast of Florida over the weekend, killing 16 people.

Kiln took the worst of market jitters as its shares fell 3.3 per cent to 73p, while SVB Holdings, Beazley, Goshawk and Cox saw their shares fall between 1.5 and 3 per cent.

But analysts in London played down talk of insurers facing potential losses in excess of $10bn (£5.4bn), as had been initially predicted, instead estimating that the total insurable loss would be closer to $6bn, similar to the cost of Hurricane Hugo, which hit the US in 1989.

Most insurers said it was too early to assess their liability from the disaster. However, Hiscox and Royal & SunAlliance - two of the UK's largest - said they did not expect any claims to have a material effect on their financial position.

In Germany, Munich Re said it expected its total liability to be more than €100m (£67m), but added that this would also be within its budget.

Geoff Miller, an analyst for Bridgewell Securities, said the storm would be nowhere near as catastrophic as Hurricane Andrew, which hit the US and the Bahamas in 1992, costing the insurance industry $20.5bn - more than the total loss from the 11 September terrorist attacks. "We think it's very manageable this time," Mr Miller said. "We would only be worried if there was a similar event during the same hurricane season."

He added that while the event would have an effect on second half earnings, rates would be kept higher next year as a result.

While the estimate for the total cost of damage caused by Hurricane Charley is near $15bn, Mr Miller said that the main reason for the insurable cost being much lower was that an increasing number of properties had been left uninsured since Hurricane Andrew. Insurance premiums have soared to huge levels since then, as many insurers have realised that they were underpricing their risk.

However, Mr Miller said many properties were now also insured by the state, which took a bigger role in disaster insurance after 10 companies were forced into insolvency by Hurricane Andrew.

While insurers appeared to be well covered for the event, Hurricane Charley still clocks in as one of the top 10 insurable events of the past 30 years.

Cost of disaster

  1. Hurricane Andrew, US, 1992, $20.5bn
  2. 9/11 terrorist attacks, US, 2001, $19.3bn
  3. Northridge earthquake, US, 1994, $17bn
  4. Typhoon Mireille, Japan, 1991, $7.5bn
  5. Winterstorm Daria, France & UK, 1990, $6.3bn
  6. Winterstorm Lothar, France & Switzerland, 1999, $6.3bn
  7. Hurricane Hugo, Puerto Rico & US, 1989, $6.1bn
  8. Hurricane Charley, US, 2004, $6bn (estimated)
  9. Storm and floods, Europe 1987, $4.7bn
  10. Winterstorm Vivian, Western Europe, 1990, $4.4bn

Based on information from Swiss Re

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