Lloyd's estimates the Japanese earthquake and tsunami led to claims of $1.95bn, while the New Zealand earthquake cost its members $1.2bn and the Australian floods delivered a $650m hit
Insurance premiums are rising following the series of costly natural disasters that struck during the early months of 2011, Lloyd's of London said on Friday, as it reported that its insurance market faces claims totalling $3.8bn (£2.33bn).
Lloyd's said there were already signs that insurance rates were "firming" following the earthquakes in Japan and New Zealand, and flooding in Australia. However it remained confident that insurers who operate on its market will have no problem paying the claims.
The industry as a whole stands to lose more than $50bn for the first four months of this year, including the cost of the tornadoes which swept across the US in April, according to an insurer's estimate.
Lloyd's estimates the Japanese earthquake and tsunami led to claims of $1.95bn, while the New Zealand earthquake cost its members $1.2bn and the Australian floods delivered a $650m hit. It added that there would be no "material impact" on Lloyd's capital.
Lloyd's chief executive Richard Ward said: "The beginning of 2011 has seen a series of tragic events that have had a major impact on communities in Australia, New Zealand and Japan. As ever, our priority remains to assess and settle valid claims as swiftly as we can to help these communities get back on their feet. The Lloyd's market is as well capitalised as it has ever been and, while claims from all three events could still evolve over time, the market's total exposure is well within the worst case scenarios we model and prepare for."
He added: "We expect to see a firming of rates as a result of this first quarter and the recent tornadoes in the United States." Lloyd's of London insurer Hiscox and Munich Re, the world's largest reinsurer, already warned of hefty price rises this summer, with Hiscox predicting rate rises of 10% in the US catastrophe market.
"We've already seen an impact in lines that are directly affected, in particular the property catastrophe business," said a Lloyds spokeswoman. "In specific regions you've also seen rates hardening." Insurance brokers are busy negotiating policy renewals in the US property catastrophe business, with a deadline of 1 July.
The insurance industry as a whole faces a $30bn bill for Japan (excluding life insurance), $9bn for the Christchurch earthquake and $5bn for the Australian floods.
Lloyd's said that its members only face a small proportion of the Japanese bill because the majority of the Japanese losses will be absorbed by domestic insurers. Only 40% of these losses had been re-insured by the Japanese insurers, which leaves them footing the bill for the remaining 60%.
Major re-insurers, such as Swiss Re and Munich Re, took on the bulk of the re-insurance risk from Japan. Munich Re was dragged into the red in the first quarter of this year after suffering a $2.1bn hit from the Japanese earthquake – larger than the company's entire natural disaster budget. Swiss Re has reported a $1.2bn bill.
Unprecedented disasters
Lloyd's of London insurer Catlin said on Friday it had lost $375m from the three events, although its $200m estimate relating to Japan remains uncertain as the true cost, in terms of human losses and property damage, will not be known for many months.
"This series of catastrophic events is unprecedented so early in a year," said chief executive Stephen Catlin. "Rates for certain classes of business are starting to rise following the first-quarter catastrophes. In the light of the more than $50bn in natural catastrophe losses incurred since the beginning of this year – including the damage from tornadoes in the US in April – combined with the prolonged low investment return environment, it would be totally appropriate for rates to increase on a widespread basis."