ACE Ltd. yesterday warned that its operating earnings for the third quarter will be reduced by approximately $90 million, principally from the central European floods this summer.

ACE is the second Bermuda-registered insurer to report a loss from the floods, which caused an estimated $3.5 billion to $4 billion in insured damages.

Partner Re announced earlier this month that it would receive claims of $110 million to $120 million as a result of the floods in Germany, Austria and the Czech Republic.

ACE said the loss would reduce operating earnings by 33 cents a share.

Morgan Stanley analyst Alice Schroeder said that the company had previously estimated ACE earnings of 92 cents a share versus an analysts' consensus of 90 cents and earnings for the year of $3.50 versus a consensus of $3.49. She added that Morgan Stanley would probably revise its estimates now, although it did not view the loss "as event outside the normal range of (catastrophe) risks we expect on this industry".

"We have noted in our recent research that the probability that ACE (among other companies that we cover( could face a material impact from this catastrophe would increase as the estimates of insured losses rise," Ms Schroeder said. "Those estimates have, indeed, been on the rise."

A statement from ACE said: "Recent increases in industry estimates of insured losses together with additional flood losses incurred in France are included in our estimates.

"ACE incurred losses both directly and as an excess of loss reinsurer where increases in forecasted insured losses led to penetration of several higher layers of coverage.

ACE will release its quarterly earnings and financial supplement on October 29. A conference call and webcast are scheduled for 9.30 a.m. on October 30.

Although ACE and PartnerRe are the only Bermuda-based reinsurers to warn of claims from the floods so far, Morgan Stanley said other companies that it covers, including IPC Re, RenaissanceRe and XL Capital, are also expected to receive claims.

"While we view these potential exposures as smaller relative to their size than the $120 million that PartnerRe disclosed last week, we have noted that the higher the insured losses get, the likelier it is that they will become more significant for other companies that we follow," Morgan Stanley said. "We still expect that the major European insurers would bear the majority of these losses."

However, the catastrophe is expected to contribute to higher premiums for reinsurers over the next 12 months.

Patrick Thiele, chairman and chief executive of PartnerRe Ltd., told the Wall Street Journal last week that the September 11 attacks accelerated the tightening of reinsurance capacity and rising rate cycle, which has been extended by weaker equity markets and the recent spate of corporate scandals. Also, liability losses are rising in longer tail lines - claims from prior years, he said.

"The World Trade Center, for being a terribly tragic event - words don't describe it - is just one of two or three or four events that have all tightened the market," he said. "Now throw in a reasonably significant flood in Europe, there certainly will not be a move to ease the current capacity tightness."