Hurricane-related losses hit reinsurers
Global re-insurer giants are likely to see their profit chances buffeted as a result
The financial damage from the hurricanes that struck Texas, Florida and the Caribbean in recent months has crossed the Atlantic 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 disaster-prone areas.
Virtually all insurance companies that sell to consumers and businesses unload some of their risk to reinsurers. The cost of buying reinsurance is almost certain to rise and will eventually be passed on to customers.
Insurance has already become expensive and hard to get in states like Florida, which are frequently at risk of being hit by hurricanes. 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 that its losses from hurricanes Harvey, Irma and Maria would be €2.7 billion, although it warned that the estimate was “fraught with considerable uncertainty”.
Early in the year, before the hurricanes struck, Munich Re had said its profit for the year would be at least €2 billion.
All of the big reinsurance companies have suffered losses from the hurricanes. However, their shares have risen in recent weeks as investors bet that they will ultimately profit from higher premiums and increased demand for insurance.
Swiss Re, based in Zurich, said that its losses from the hurricanes and the Mexican earthquakes would be $3.6 billion.