Gustav Could Cost Insurers $8B, Says Swiss Re

Hurricane Gustav will cost the global insurance industry up to $8 billion, Swiss Reinsurance Co. said Monday.

Insured damages from natural disasters through the end of August were 20 percent higher than in the same period last year, the company said before an annual industry meeting in Monaco this week.

It said the damage from Gustav would be between $4 billion and $8 billion.

The Zurich-based reinsurance company, which acts as a back-up to smaller insurers by buying some of their risk in return for a premium, also expressed concern about the possibility of high inflation.

Insurance companies could find themselves unable to pay for damages if inflation stays high and therefore should take rising costs into account in its pricing, Swiss Re said.

The company said it is examining the possibility of expanding its activities in the field of aviation and engineering insurance to make up for difficult conditions in other market segments.

Analysts at Zuercher Kantonalbank said Swiss Re’s assessment was in line with that of other insurers and will likely result in companies building up their capital reserves to deal with rising pay-outs.