S&P Sees No Effect on Australian Insurers’ Ratings from Tsunami Losses

December 29, 2004

Standard & Poor’s Ratings Services has issued a bulletin stating that it does not expect Australian general insurers to be materially affected by the cost of insurance claims arising from the Indian Ocean tsunami that struck Sri Lanka, India, Thailand, Malaysia, and other countries in the Asian region, on Dec. 26, 2004.

“Although it will be some time before a true estimate of the insured claims cost arising from this disaster will be known, the Australian general insurance sector by and large has minimal exposure to the Asian region,” indicated S&P credit analyst Kate Thomson, Financial Services Ratings.

The bulletin noted that travel insurance policies will likely incur claims costs for Australian insurers, but this is unlikely to be financially material. “At this early stage, no changes to the financial strength ratings on Australian general insurers, including Insurance Australia Group Ltd. (financial strength rating on local operating subsidiary, AA/Stable) and Promina Group Ltd. (financial strength rating on local operating subsidiary, A+/Stable), are expected,” Thomson added.

“QBE Insurance Group Ltd. (financial strength rating on operating subsidiary A+/Stable), which operates globally and is the only Australia-based insurer with material exposure to the disaster, will likely incur claims for property damage, business interruption, and travel insurance,” said S&P. “Although QBE’s ultimate cost of claims will not be certain for many weeks, the effect on its profitability in 2004, and the ‘A+’ financial strength rating on QBE, should be minimal, because QBE provides for large catastrophe losses and also uses reinsurance extensively.”

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