Munich Re Estimates Tsunami Claims Below $136 Million

December 29, 2004

Munich Re, the world’s biggest reinsurer, has issued a bulletin concerning possible losses from the tidal waves that struck many countries around the Indian Ocean on Dec. 26, which estimates the company’s losses at no more than 100 million euros ($136 million).

The company noted that the undersea quake that caused the series of deadly tidal waves had been the strongest in 40 years, and that the loss of human life and the damages caused had been immense. However, the bulletin stated that “insurance penetration is relatively low, and the insured property losses are likely to be limited due to the sparse concentrations of values.”

The company tempered its claims estimate with the observation that it is “too early for a substantiated loss estimate,” but it said that “judging by the information it has received so far, the Munich Re Group expects its own burden to be limited. It also noted that “at present there is no reason to adjust the result forecast for the current business year (profit target: 1.8 to 2 billion euros [$2.5 to $2.72 billion] ).

Munich Re also gave an overall picture of 2004 disasters. It noted that the company has been keeping data and analyzing all reports on natural hazard events with large material or human losses throughout the world for the last 30 years. 2004 losses occurred primarily in the second half of the year and were “marked by extreme weather-related natural catastrophes, with hurricanes in the Atlantic and typhoons in the West Pacific generating record losses.”

Stefan Heyd, member of Munich Re’s Board of Management stated: “We are shocked at the scale of human tragedy in southern Asia. Many thousands of people have died, as in the devastating earthquake that hit Bam (Iran) exactly one year ago to the day. The terrible effects spreading all around the Indian Ocean and reaching as far as the Horn of Africa are a further reminder of the global threat from natural catastrophes.”

Heyd, whose responsibilities on the Board include corporate underwriting, commented on the weather extremes of 2004 stating: “They underline our long-standing demand for prompt and rigorous measures against global climate change. After the disappointing outcome of the recent climate summit in Buenos Aires, time is running out.

“We will continue to provide cover for losses from natural catastrophes if the price is commensurate with the risk that is highly exposed due to weather-related phenomena and concentrations of values. The unprecedented claims burden from natural catastrophes has contributed to risk awareness and appreciation for insurance protection growing again. It has also led to the prices for these covers remaining stable in the renewal season that is now coming to an end.”

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