Insurers Hiscox and Flagstone announce combined Japanese loss estimates up to $280m – The Royal Gazette | Bermuda News, Business, Sports, Events, & Community

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Insurers Hiscox and Flagstone announce combined Japanese loss estimates up to $280m

Bermuda-based insurer Hiscox Ltd has estimated a mean loss of between $60 million and $150 million from the earthquake and tsunami that devastated Japan on March 11.

Flagstone Reinsurance Holdings S.A. also announced a loss estimate of $80 million to $130 million from the disaster on its website yesterday.

Hiscox also estimates net claims of about $96 million for the New Zealand earthquake and $24 million for the Queensland floods this year.

The Hamilton, Bermuda-based company's exposure to the Japanese earthquake is primarily through its underwriting of global and regional reinsurance and retrocessional programs. Considerable uncertainties exist regarding the earthquake, as an estimate of the insured loss is still at an early stage, Hiscox noted.

However, based on an insured market loss of about $24 billion, the company could incur net claims between $60 million and $150 million in connection with the earthquake, with a mean loss of $100 million.

Initial investigations suggest that this range remains valid.

Insured market loss for the New Zealand earthquake is estimated to be $10 billion, while it is projected to be $2.4 billion for the floods in Queensland.

Commenting on these catastrophe losses, Robert Childs, chief underwriting officer of Hiscox, said: “These events will only minimally impair our own reinsurance programme. In the reinsurance we underwrite, we have seen significant increases in rates for the affected regions and expect this pressure to become widespread.”

Luxembourg-based Flagstone, which has underwriting operations in Bermuda, had estimated losses of $60 million to $90 million arising from last month's New Zealand earthquake earlier this month.

David Brown, Flagstone CEO, said: “Flagstone's retrocession strategy has been to buy protection for both extreme single events and for an accumulation of events during an underwriting year.

“As a result of this strategy, Flagstone has existing retrocessional protection that is effective in reducing our net exposure to both the Japanese and New Zealand losses, particularly at the higher end of our ranges.

“In addition, that protection is now effectively on a ‘next event' basis, providing Flagstone with substantial protection against further events in 2011.”

He continued: “Due to the frequency of events so far in 2011, and as a result of current protection and reinsurance triggered by the previous events, Flagstone's risk profile has been significantly reduced since December 31, 2010, from $272 million net event probable maximum loss (PML) to $162 million at the one in 100 return period, and from $326 million net to $204 million net event PML at the one in 250 return period.

“As a result of Flagstone's strong existing capital base and the substantial retrocessional protection already in place, we continue to maintain our solid financial position and a significant capital margin relative to the AM Best ‘A-' rating.

“As the year progresses, we look forward to serving our clients' needs and continuing to provide quality reinsurance capacity to the market.”

Scene of devastation: A man walks through the destroyed neighbourhood below Weather Hill in Natori, Japan. Bermuda reinsurers will pay some of the recovery bill from the disaster.

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Published March 31, 2011 at 2:00 am (Updated March 31, 2011 at 9:27 am)

Insurers Hiscox and Flagstone announce combined Japanese loss estimates up to $280m

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