Assessing the Tab for Q1 Catastrophes

Xynthia could drain up to $4 billion from insurers' balance sheets, with Risk Management Solutions estimating a range of $1.36 billion to $2.72 billion and AIR Worldwide going a little higher at $2.04 billion to $4.09 billion (not including business interruption or infrastructure losses). According to EQECAT, 65% of the losses estimated from the storm occurred in France, with 25% in Germany and 10% in Belgium, Luxembourg and the Netherlands. Portugal and Spain were omitted, according to EQECAT, because their model doesn't cover these countries.

So, how much is this going to cost the insurers and reinsurers involved? Well, the estimated price tags are already getting steep. Munich Re (0KFE) expects losses from both the quake and the storm to hit $681.1 million, according to a report in Business Insurance. Swiss Re (SWCEY) is forecasting $600 million and said in a statement that the quake in Chile is "likely to become one of the most expensive ever for the global insurance industry." Swiss Re said in a statement. The firm has estimated that total economic losses from the quake could hit $15 billion, with total insured losses ranging from $4 billion to $7 billion.

Hannover Re (HVRRY) puts its total for the two events at around $306.5 million, with Everest Re (RE) projecting $250 million, Flagstone Re (FSR) $56 million and PartnerRe (PRE) $260 million to $390 million. RenaissanceRe (RNR) isn't providing estimates but says the impact "will be significant and could be material."

The action stands in stark contrast to last year, which was relatively light from a cat loss standpoint. Even with Hurricanes Katrina and Gustav -- and the September situation for American International Group (AIG) and the decimation of the banking sector -- property-catastrophe reinsurance rates stayed contained. Of course, the January 1, 2008 renewal was defined by the "excess capital" held by reinsurers. If 2010 turns out to be a year of heavy catastrophe losses, we could see a profound change in the cost of reinsurance protection following what generally been a downward trend for property-catastrophe rates following the price spike after Hurricanes Katrina, Rita and Wilma.