The benign claims period that settled on the insurance industry following Hurricanes Gustav and Ike in 2008 appears to have come to a dramatic end. First quarter trading updates from the listed underwriters - mainly Lloyd's players - have reported rising claims. That included losses from February's Chilean earthquake, Europe's Xynthia windstorm and last month's Deepwater Horizon oil platform disaster in the Gulf of Mexico. "Q1 has proved the costliest on record for the insurance industry," said analyst Christian Stobbs of KBC Peel Hunt.
The Chilean earthquake is easily proving to be the costliest event. Virtually all underwriters have reported losses from that with Catlin estimating the highest hit so far, at £140m, followed by Amlin with $142m-$165m (£98m-£114m). The total insured loss for the earthquake is estimated at between $4bn and $10bn. Catlin also topped the list of pain for Deepwater Horizon losses, at $40m, with Lancashire and Chaucer coming joint second with a $25m loss each. The lowest hit reported so far from came from Beazley at $6m. KBC Peel Hunt reckons that this single event could lead to losses of $1bn for the industry; making it the costliest energy loss since Piper Alpha in 1988.
But such losses do force underwriters to hike premium rates in order to recover losses - and that could help slow the trend towards softening conditions seen in the last year or so. "While losses experienced to date may not be market moving events in isolation, the aggregation of losses is likely to impact on rates," says Mr Stobbs. What's more, further losses could mount as this year's hurricane season gets underway, possibly signalling further support for rates. "Significantly, weather forecasters are indicating an active North Atlantic hurricane season," notes Mr Stobbs.
