Munich Re total hurricane damages US$1.6 billion

Munich Re recently estimated its total damages from Hurricanes Katrina and Rita at about US$1.6 billion (1.33 billion euros).The Company says it will likely have to pay out about 650 million euros after tax however Munich remains optimistic that it will achieve a 12% return on equity this year, as long as the purchase of HVB Group by UniCredito Italiano SpA is completed in 2005. Substantially higher reinsurance prices, Munich Re anticipates, will be necessary after the storms. Munich Re recently almost tripled its Katrina claims forecast to 1.1 billion euros from 400 million euros. Insurance Holdings Plc, a Lloyd’s of London insurer, has also recently predicted its total losses will be about 145 million pounds (US$257 million). Total insured damages from Katrina, Munich Re says, are currently resting at approximately US$30 billion, but the Company anticipates this figure may rise. Munich estimates that if claims rise to US$60 billion, its total costs from the hurricane will increase to 1.3 billion euros (US$650 million) after tax. “There are still significant uncertainties regarding coverage issues and thus also about the actual loss burdens facing the insurance industry,” Munich Re says.Total insured losses from Rita for Munich are estimated to reach between US$5 billion and US$10 billion. Its own damages related to Rita, Munich says, will be about 230 million euros, and 150 million euros after tax. Munich Re, however, stands to benefit from the sale of Germany bank HVB because the reinsurer is HVB’s biggest shareholder, with an 18.3% stake. “If we decide to exchange shares, then we would realize a disposal gain on the basis of current stock market prices,” Munich Re spokesman Florian Woest says.