LONDON: Lloyd’s of London insurance market has calculated that a hurricane in the Gulf of Mexico like the Katrina could cause losses of the order of $60 billion — $10 billion in offshore energy losses and $50 billion in property losses. The insurer has done a study and the details are available on its website.
Meanwhile, quoting leaked documents from the insurer, newspapers said U.K. and U.S. insurers will face more than $40 billion in claims for damage from Katrina, the hurricane that made a landfall on the Gulf of Mexico coast on 29 August, when the levees that protect New Orleans city were damaged and the whole city was flooded, causing death and destruction on a vast scale.
Lloyd’s had done similar Realistic Disaster Scenario studies to assess the industry’s possible liability from natural disasters like a California earthquake and a typhoon in Japan.
Lloyd’s Chairman Peter Levene had said on record that Hurricane Katrina would cost a lot of money but was within normal business planning. The insurance market had its second-most-profitable year in
2004 even though there were four major hurricanes.
A Lloyd’s spokesperson said it is not for the company to give industry-wide loss estimates, but from what is assessed, there is not yet any consensus on how much Katrina will cost. However, its
syndicates are well equipped to deal with the catastrophe.
German reinsurance company Hannover Re says Katrina could be the costliest natural disaster in history.
Lloyd’s is expecting to receive “significant insurance claims,” largely from offshore oil and gas platforms in the Gulf of Mexico, property damage and claims from businesses forced to close. It has
sought supply claims estimates from all insurers by 12 September.
The insurance industry in Britain feels home insurance costs will go up. The Association of British Insurers says its members now feel hurricane has become part of a pattern of global climate change and it is going to have a serious impact on insurers. The association, however, said it is not expecting an immediate increase in premia.
Insurance companies with the highest exposure are believed to be Munich Re, Swiss Re and AIG. A spokesperson for Britain’s Prudential said it would be hard to say there would be nothing at all, but it would be minimal.