GENEVA -- Swiss Reinsurance Co., the world's second-largest reinsurance company, on Monday doubled to $40 billion its estimate of claims the global insurance industry will face from Hurricane Katrina -- a figure that would make it the world's costliest hurricane ever.
Swiss Re, which previously agreed with the world's largest reinsurer Munich Re that the total losses would be $20 billion, said it increased loss estimates because the damage caused by the hurricane was greater than thought.
"Due to the unique nature of the event, the complexity and the magnitude of destruction caused, accurate claims estimates remain difficult," the Zurich-based company said.
Swiss Re also more than doubled to $1.2 billion the estimate of the claims the company itself may face, which means it will fail to meet its earnings-per-share growth target of 10 percent this year. It previously had estimated its claims would be about $500 million.
Hannover Re AG, the world's third-largest reinsurer by gross premiums, noted that some estimates for Katrina's insurance losses go as high as $60 billion. It said that could mean it also might have to revise its net profit forecast below a previous estimate of at least $384 million.
"If the total insured loss is in the area of $40 billion to $60 billion, our exposure will be above the previous estimate of 250 million euros pretax, and this could lower our group net income," Chief Executive Wilhelm Zeller said during an insurance industry meeting in Monaco.
Munich Re said it also will raise its estimates after it evaluates its exposure to the hurricane.
Risk Management Solutions Inc. of Newark, Calif., last week raised its forecast for the total insured loss caused by Katrina to $40 billion to $60 billion, up from its previous estimate of $20 billion to $35 billion. It now sees the total economic damage caused by the hurricane above $125 billion, up from its previous estimate of above $100 billion.
The revised estimates would make Katrina the most costly hurricane ever, ahead of Andrew in 1992, when claims reached $22 billion with figures adjusted to current dollar values, according to Swiss Re figures.
Swiss Re said it will use its reserves to cushion the impact of the hurricane. Chief Executive John Coomber said the higher frequency of natural disasters would force up prices in upcoming renewals.
French reinsurer Scor SA, which has drastically cut back its U.S. business during restructuring over the past three years, said it is sticking to its original estimate that its exposure to losses from Katrina will be in a range between 25 million euros and 35 million euros ($31 million to $43.45 million).
The company said it was not liable for damages deemed to be caused by the hurricane but did cover businesses and infrastructure that may have been damaged by flooding. Scor said in recent years it has focused more on areas away from the coasts where weather risk is lower.
A draft order released last week by Louisiana's insurance commissioner would significantly restrict the ability of property and health insurance companies to cancel the policies of Hurricane Katrina victims in that state.
The order, which is not expected to be finalized until late this week so as to allow insurers time to respond, says policy provisions that require premium payments will be suspended retroactive to Aug. 26, when Louisiana declared a state of emergency.
It also says that any cancellation notice issued after Aug. 26 for a policy that was in effect on that day will be void. The order says the notices should be reissued once the state of emergency is lifted. Currently, that would be Sept. 25, but the date could be extended.
The draft order was presented at an emergency summit of insurance commissioners from the hurricane-damaged Gulf Coast states and nearly 300 insurance company officials who write policies in their states.
The officials gathered at an Atlanta airport hotel to discuss how to deal with an expected deluge of insurance claims related to Katrina. Louisiana Insurance Commissioner J. Robert Wooley estimated the insured losses in his state alone at $19 billion. The Florida insurance commissioner estimated the total economic impact from the hurricane at up to $150 billion.
"You, as an industry at this point in time, will need to be a leader, and you will be judged by how you respond," Alabama Insurance Commissioner Walter Bell told those at the meeting.
Bell told the group it may need to look at how to help people who don't have flood insurance. He noted that many residents in Mobile whose homes were destroyed by flooding were not in a designated flood plain and therefore may not have had flood insurance.
Specifically, the draft order says that all cancellation and termination provisions are suspended during the state of emergency. It also says that all insurers with policy holders in the seven parishes shall waive any and all restrictions relative to out-of-network access to health care services, and that all health insurance issuers shall reimburse at the highest possible rate to minimize people's out-of-pocket expenses.
The order related to property and health insurance companies also would put in place provisions designed to speed up the claims process.