Ike and Gustav may cost reinsurer IPC Holdings $90m
IPC Holdings Ltd. could lose out on about $90 million in third quarter profit as a result of the destruction wreaked in the US and Caribbean by Hurricanes Gustav and Ike.
The predicted net impact of the two hurricanes on the insurer, mainly attributed to Ike, was based on estimated industry losses totalling $12 billion and includes the sum of estimates of net claims and claim expenses incurred, net of reinstatement premiums.
Meanwhile IPC revealed it had an exposure of $11.2 million in fixed maturity securities issued by bankrupt investment bank Lehman Brothers within its fixed maturity investment portfolio. In addition, IPC said it had securities issued by Morgan Stanley ($28.5 million), Goldman Sachs Group Inc. ($33 million) and Wachovia Corp. ($12 million) on September 30, 2008.
But it has no direct exposure to American International Group (AIG) and a small amount of indirect exposure to shares issued by Lehman, AIG, Washington Mutual, the Federal National Mortgage Association or the Federal Home Loan Mortgage Corporation resulting from its former investment in a Vanguard fund and a fund of hedge funds.
The insurer said that during the third quarter of 2008 its investments in equity funds performed in line with the major North American market indices, including the performance of its investment in the fund of hedge funds through to August 31, 2008. Its investment in the Vanguard Fund was redeemed on September 12, 2008.
The initial assessment of losses from the hurricanes comprised the insurance company's analysis and review of industry market loss estimates, in-force contracts, the output of catastrophe modelling and a limited number of loss advices from clients.
IPC said that given the magnitude and recent occurrence of these events, delays in receiving claims data, the contingent nature of business interruption and other exposures, and other uncertainties of loss estimation, meaningful imprecision remains regarding losses from the hurricanes, with the company's actual net losses possibly varying from this preliminary estimate.
