Munich Re Raises Chile Loss Estimate to $1 Billion

Munich Re said it boosted its estimated losses from the Feb. 27 earthquake in Chile to about $1 billion (837.5 million euros), after retrocession and before taxes, from the $700 million it originally estimated in April.

The reinsurer said it had been difficult to give a reliable forecast for losses from the quake because primary insurers had low retentions, there was a high proportion of facultatively reinsured production facilities and buildings, and there have been ongoing business interruption losses.

Munich Re added that there was a high number of individual losses, as local insurers received more than 190,000 claims notifications by the end of April.

The reinsurer said it estimates total insured losses from the quake at about $8 billion.

There is high insurance density in Chile's commercial and industrial sectors, according to Munich Re. Even infrastructure such as motorways are insured in the country.

The Feb. 27 quake was the fifth-strongest since records began in 1900, Munich Re said. It killed nearly 350 people and triggered a tsunami that damaged industrial and port facilities.

Among others who have posted loss estimates, Lloyd's said it expects about $1.4 billion in losses from the quake (BestWire, June 4, 2010).

"Events like Chile's devastating earthquake reinforce our case for insisting that risks be consistently written at adequate prices, even after years where losses have been relatively low," said Torsten Jeworrek, Munich Re's reinsurance chief executive, in a statement. He added that Munich Re anticipates price increases in affected regions and businesses at July 1 renewals, which are weighted toward parts of the United States market, Australia and Latin America.

In Australia, Munich Re has reserved 160 million euros for damages related to two hailstorms that occurred in March.

Munich Reinsurance Co. currently has a Best's Financial Strength Rating of A+ (Superior).

(By David Pilla, international editor, BestWeek: David.Pilla@ambest.com)