Fitch Ratings yesterday said insured losses from Sunday's 9.0 magnitude earthquake off the coast of Sumatra and the ensuing tsunami would affect the Asian primary insurance market and worldwide reinsurance markets in Bermuda as well as Singapore and London.

The ratings firm said yesterday that while US primary insurers are not likely to incur material losses as the result of this event, some US primary insurers may have modest exposure on property owned by multi-national companies insured through policies issued by US carriers.

Sunday's tsunami, triggered by a 9.0-magnitude earthquake underwater near the island of Sumatra, killed at least 55,000 people as it obliterated seaside towns in 11 countries including India, Indonesia, Sri Lanka and Thailand.

Millions of people were displaced from their homes and thousands are missing, including many hundreds of tourists who were visiting beachfront resorts in Thailand.

Fitch said in a report yesterday: "At present, there are no reliable estimates of the insured losses resulting from this earthquake. However, Fitch notes that large economic losses will not necessarily result in large insured losses depending upon the extent to which insurance is in use in these locations. At present, it appears that a significant portion of the property damage is not covered by insurance, though that varies from country to country. To date none of the major catastrophe modelling firms (AIR, EQE and RMS) has issued any insured loss estimates. Property damage notwithstanding, the event also has the potential to generate significant life insurance and travel accident claims. It will likely be some time before all of the life insurance claims are submitted as large numbers of people remain unaccounted for."

Fourth quarter 2004 earnings of Asian primary insurers and reinsurers worldwide will be affected because the earthquake and resultant tsunami occurred in December. The event occurred too late to affect January 1 reinsurance renewal pricing, however Fitch said retrocessional reinsurance (reinsurance purchased by reinsurers) pricing could be affected and many retrocessional policies renew on March 1.

Fitch does not expect any of its rated catastrophe bonds were triggered because the epicentre of the quake occurred outside of the risk areas.

"Large earthquakes are rare, rarer than large hurricanes. Therefore, this quake will provide important data to the catastrophe modellers and may result in revisions to their earthquake models. If this results in increased estimates of loss frequency or severity, the effect may ultimately be seen as increased rates for insurance and reinsurance," Fitch said. "Losses to some regional insurers may be large. This may spur increased demand for finite risk reinsurance products that provide current capital benefits at the cost of reduced future earnings for the purchasers. "