Lancashire Holdings Ltd. has increased its estimate for the financial impact of Hurricane Ike on its business by almost $40 million.

Lancashire now reckons that Ike will have a net negative impact on its financial results of approximately $189.2 million, up $38.4 million from the previous estimate of $150.8 million.

Net negative impact includes the sum of gross claims and claims expenses, reinsurance recoveries, reinstatement premiums, taxes and other adjustments.

In a statement released yesterday, Lancashire said the updated loss estimate was driven by Gulf of Mexico offshore energy contracts, with updated loss notifications from insureds of additional operational and weather-related delays in repair of damaged assets, and increased costs associated with removal of wreckage the main reason behind the rise.

This estimate was based on management's assessment of impacted contracts, a review of the company's potential exposures and discussions with certain counterparties, including brokers. Lancashire's actual ultimate net losses from these events may vary materially from this estimate.

Richard Brindle, group CEO, said: "Hurricane Ike was one of the most powerful storms ever to hit the Gulf of Mexico. Industry measures point to Ike being in the top three most damaging hurricanes to the offshore energy sector since records began.

"Market capacity available to write this class in 2009 is estimated to have dropped by approximately half since 2008.

"As anticipated, early indications are that pricing is up dramatically while coverage is significantly reduced.

"These factors have led to what is presently a highly dislocated market, with a correspondingly later renewal season than normal.

"Lancashire, as one of the major energy leaders, continues to shape this market.

"We exercised patience in the utilisation of our balance sheet in the first quarter, writing an insignificant amount of Gulf of Mexico energy risks. We took a similar approach in other capacity-constrained classes where we believe pricing will improve as the year progresses.

"We expect a surge in demand during the second quarter as we approach the onset of hurricane season. Overall, we expect to achieve moderate growth in book value per share in the first quarter.

"We believe we are extremely well placed to take advantage of highly compelling opportunities in both the energy market and across our portfolio."