S&P REPORT SAYS HURRICANE LOSSES PUT PRESSURE ON INSURERS’ EQUITY:

The shareholders’ equity of many insurers and reinsurers is coming under greater pressure than anticipated as P/C losses from the 2004 hurricane season continue to rise with new estimates, according to a report by Standard & Poor’s Ratings Services. The report, titled “Shareholders’ Equity Suffers As Insurers and Reinsurers Restate Hurricane Losses,” cited two issues that continue to plague insurers, reinsurers and, ultimately, investors. S&P indicated: “First, companies initially underestimated claims because of assumptions they made for construction costs and structural soundness of insured property, and obstacles they faced in gathering accurate information while the storms were still raging. Second, primary insurers were not adequately reinsured for the frequency of the storm season, which brought four hurricanes to the U.S. East Coast in August and September 2004 instead of just one.” The rating agency said that in its opinion the increasing estimates affect, among others, American International Group, Everest Re Group, IPC Holdings, RenaissanceRe Holdings, St. Paul Travelers Cos., XL Capital, and Zurich. The report cites a steep restatement by RNR, which revised its losses from hurricane-related claims in the third quarter of 2004 upward by 22.4 percent, to $520 million–equivalent to 21.2 percent of shareholders’ equity.

Topics Catastrophe Natural Disasters Carriers Profit Loss Hurricane Reinsurance