Natural disasters deflate reinsurer earnings

FRANKFURT, Germany — The financial damage from the hurricanes that struck Texas, Florida and the Caribbean in recent months crossed the Atlantic on Thursday when Munich Re, a German insurer, warned that virtually all of its profit this year would be wiped out by the horrendous cost of the disasters.

The hurricanes have already caused hundreds of deaths and left residents of Puerto Rico and other islands living in primitive conditions. Now, Munich Re and several other large reinsurers — companies that effectively insure other insurers — have reported big losses resulting from the natural disasters. That has consequences for regular consumers: The financial battering that insurers have suffered portends higher premiums for homeowners in disasterprone areas.

Virtually all insurance companies that sell to consumers and businesses unload some of their risk to reinsurers like Munich Re, Swiss Re or SCOR, a French company that also reported losses from the hurricanes Thursday. The cost of buying reinsurance is almost certain to rise and will eventually be passed on to customers.

Munich Re, which has warned about the effects of climate change since the 1970s, has predicted that the severity of storms is likely to increase in years to come. That would further raise the financial damage and, consequently, the cost of insurance.

Munich Re, by some measures the world’s largest reinsurer, said its losses from hurricanes Harvey, Irma and Maria would be $3.2 billion, although it warned that the estimate was “fraught with considerable uncertainty.” The losses will come to $3.7 billion including damage from other catastrophes such as earthquakes in Mexico, Munich Re said.

As a result, the company will report only a “small profit” for the full year.