The U.K.’s Brit Insurance Holdings PLC announced that it has preliminarily estimated its combined loss claims from Hurricane Katrina, the New Orleans Flood and Rita at 145 million pounds ($256 million).
“This comprises 125 million pounds ($220.8 million) for Katrina/NOF and 20 million pounds ($35.3 million) for Rita, net of reinsurance recoveries and reinstatements, based on currently available information,” said the announcement. Brit indicated that the claims are expected to arise primarily in its U.S. direct property, reinsurance, retrocession and energy portfolios.
The company added that it believes “the net impact of the above estimate from the two Hurricanes/ NOF on 2005 pre tax profits will be approximately equivalent to Brit’s pre-tax result for the first six months of 2005 of 112 million pounds [$198 million].” It also added that it doesn’t expect any adverse impact on its ratings (“A” from A.M. Best; “A+” from Fitch).
“The Group has now had the opportunity to conduct extensive modeling on Hurricane Katrina/NOF and a ground-up review of all exposed contracts and has recently received initial reports from its loss adjusters to complement those available from industry agencies,” the report continued. “There remain significant complexities in establishing a final cost of Hurricane Katrina/NOF, including the unprecedented flooding, limited access by claims adjusters and the potential legal and regulatory issues, and the response of reinsurance policies.”
CEO Dane Douetil noted: “On 6 September we announced that it was too early to give a provisional estimate of the impact of Hurricane Katrina/NOF. Now that some meaningful data is becoming available by zip code, the Group is in a position to provide an initial estimate. We believe that the extraordinary flood element makes this largest ever loss to the industry, although there is still some uncertainty as to how state and federal government will deal with this element of the loss.
“We expect that the unprecedented industry losses arising from Hurricanes Katrina/NOF and Rita, following on the 2004 hurricane losses, are likely to have a significant impact on pricing, especially in our energy, property, reinsurance and retrocession businesses. Brit’s strong balance sheet means that we are well positioned to take advantage of the opportunities that are likely to present themselves as a result. Meanwhile our UK business, which is becoming an increasingly significant part of our overall underwriting, continues to develop well. We believe that 2006 will present significant opportunities for Brit to continue to develop its ever growing franchise.”
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