FRANKFURT / NEW ORLEANS (Bloomberg / BestWire) - Hannover Re, Germany's second-biggest reinsurer, estimated a net loss of about 40 million euros ($53 million) from the sunken deep-water oil rig in the Gulf of Mexico.

"We remain considerably below our major loss expectancy for the second quarter," Ulrich Wallin, chief executive officer at the Hanover, Germany-based reinsurer, said in an e-mailed statement yesterday.

The Deepwater Horizon oil rig caught fire and sank last week. The disaster may cost insurers and reinsurers a total of about $1.6 billion, according to estimates by JPMorgan Chase & Co. Munich Re, the world's biggest reinsurer, said today the accident may lead to claims for the Munich-based company in a "high two-digit million dollar range".

BP Plc, owner of the well, is spending $6 million a day trying to clean up the spill and stop the underwater flow, which continues at a rate of about 1,000 barrels a day. The spill may be one of the most significant in US history and the deepest spill of oil on record, according to the US Coast Guard.

Offshore drilling contractor Transocean Ltd. said the rig had a total insured value of $560 million.

In its latest update of the disaster that is presumed to have taken the lives of 11 crew members, Transocean said it is insured for total loss coverage and for wreck removal. The rig sank off the coast of Louisiana after an explosion and fire April 20.

Transocean established its own wholly owned captive insurance company, according to its annual report. Under 12-month policy periods that started May 1 last year, Transocean's insurance programme consists of commercial market and captive insurance policies.

In the event of a total loss of a drilling unit, a deductible ranging from $500,000 to $1.5 million would apply, the report said.

Transocean has a $10 million per occurrence deductible on personal injury and collision liability claims for crew and $5 million per occurrence for third-party, noncrew claims. Transocean also carries $950 million in third-party liability coverage. Liability losses of more than $950 million are retained by Transocean.

Mario Vitale, chief executive officer of Zurich Global Corporate, said the rig loss and subsequent oil spill is the latest driver in an increase in catastrophe costs for the insurance industry this year, which puts pressure on rates.

Rig operator BP Exploration & Production Inc. expects its self-insurance and captive insurance to cover costs associated with the massive clean-up effort. The energy company has spent about $30 million already to clean an oil spill resulting from the sinking of the semi-submersible drilling rig.