Swiss Re puts Katrina’s damage at $20 billion

The world's insurers will have to dig deep into their pockets Keystone

Reinsurer Swiss Re says the havoc wreaked by Hurricane Katrina in the southern United States will cost the industry about $20 billion (SFr25 billion).

The number two player in the reinsurance business said it expected to receive claims for about $500 million, making Katrina the most costly hurricane after Andrew in 1992.

In a statement on Thursday, Swiss Re said that complexity of damage caused by the storm and subsequent flooding meant that estimates had a “more than usual degree of uncertainty”.

Company spokesman Henner Alms told swissinfo that it was also still too early after the disaster to make an accurate assessment.

“What makes it difficult to assess the real damage is the flooding that took place after the levees around New Orleans broke. Another factor is the oil rigs in the Gulf of Mexico that had to be evacuated before the storm hit,” he said.

Sophisticated models

He explained that in a first phase the company used sophisticated models of what the insured value was on the ground and overlaid it with meteorological data.

Only at a later stage would claims from clients be collected and assessed.

The $500 million estimate covers all damage that the company at present anticipates.

“This could be any kind of property damage -commercial or private – also liability damages but also maybe life,” Alms said.

Swiss Re has said it is covered for the claims that will come in the aftermath of Katrina.

“Yes…we obviously collected premiums in advance. We price for these kinds of events and therefore this catastrophe is within our preparations.

“You cap your exposure anyway. You don’t provide as much insurance protection as you potentially could in an area because if it is hit, your losses could be enormous,” Alms explained.

Hundreds of Swiss

In a related development, the Swiss foreign ministry on Thursday said that there were about 600 Swiss citizens in the three affected states of Alabama, Mississippi and Louisiana.

“Of these 600 Swiss registered with our authorities, we do not really know how many of them are right now in the affected area. This is something that we are trying to figure out,” ministry spokesman Lars Knuchel told swissinfo.

The ministry is liaising with the Swiss embassy in Washington and the consulates in Houston and Atlanta to coordinate efforts to trace Swiss nationals, while some Swiss have been able to call in, despite the poor communications at present.

Knuchel said that it was out of the question that Switzerland would involve itself directly in the rescue or aid operations.

“We work on the principle that it is the national and regional authorities of the state affected by such a catastrophe that is in charge,” he added.

Many enquiries

The US embassy in Bern said on Wednesday that after the flooding in Switzerland last week it had received many enquiries from Swiss individuals and institutions.

“We’ve received a number of calls and expressions of condolences from the Swiss public,” embassy spokesman Daniel Wendell told swissinfo.

“Samuel Schmid [this year’s Swiss president] and the foreign ministry have spoken directly to our ambassador in Bern… to discuss possible ways that they might offer assistance.

“We are very grateful for these gestures of solidarity. This includes the offer of pumps and other similar equipment.”

But Wendell added that it was “too early to tell what kind of support might be required”.

Earlier this week, the embassy donated $50,000 to help in the aftermath of last week’s flooding in Switzerland.

swissinfo, Robert Brookes

Key facts

Katrina first hit Florida as a category 1 hurricane on August 25.
Gaining in strength over the Gulf of Mexico, it made landfall again in Louisiana on August 29 as a category 4 hurricane.
It went on to cause vast devastation in Mississippi, Alabama and Tennessee.

In brief

Swiss Re says it expects to receive claims of about $500 million (SFr625 million) after the devastation caused by Hurricane Katrina.

Munich Re, the world’s largest reinsurer, has said it may face claims of up to €400 million (SFr618.7 million).

Swiss-based Converium says it expects claims of between $10-$20 million.

The market is still awaiting claims from other insurance companies, including Zurich Financial Services.