Losses for the global insurance industry from the devastating earthquake and tidal waves in Southeast Asia are likely to be well below claims from the hurricanes in Florida this year because the regions hit over the weekend are generally underinsured, analysts said Monday.
Mother Nature's fury in the Indian Ocean is just one more disaster in a year marked by a number of catastrophes.
The world's largest reinsurance companies, Swiss Reinsurance Co. of Zurich, Switzerland, and Muenchener Rueckversicherungs-Gesellschaft of Munich, Germany, said it was too early to determine insured losses.
Even before the earthquake and tidal waves hit the region, a string of natural catastrophes had made 2004 the most costly year ever for the global insurance industry. Four hurricanes that hit the U.S. this summer, an earthquake in Japan and several typhoons are what primarily caused an estimated $105 billion in total economic damages, according to Swiss Re data.
The estimated bill for insured losses in those disasters came to $42 billion, well ahead even of 2001's $37 billion in insured losses resulting from the terrorist attacks on the World Trade Center and the Pentagon.
Jay Gelb, an insurance analyst at Prudential Equity Group, said that although economic damage from tsunami-caused flooding could cost billions of dollars, insured damage "could be a fraction of this amount because most of the impacted areas are not heavily insured, and it is unclear how much flood damage will be covered."
Of those companies with exposure to the region, European and local insurers probably would feel the brunt of the insured losses, said Robert Hartwig, chief economist at the Insurance Information Institute.
Said Donald Light, a senior analyst at consulting firm Celent Communications, "No one is sure of the exposure yet because people are trying to save lives on the scene rather than assess damage."
RenaissanceRe Holdings Ltd., XL Capital Ltd. and American International Group Inc. all have exposure to the affected region, but their shares were only modestly lower.
"Early reports from the countries impacted by the tragedy suggest that AIG will not have significant business exposures or losses," said AIG Chief Executive Maurice Greenberg.
Shares of RenaissanceRe slipped 57 cents to $50.98, XL Capital dropped 82 cents to $77.65 and AIG declined 58 cents to $65.71. All are traded on the New York Stock Exchange.
RenaissanceRe and XL Capital are based in Hamilton, Bermuda. AIG is based in New York.