Tsunami won’t affect insurer, reinsurer ratings: Moody’s

Claims from the December 26 Asian tsunami are not expected to impact the financial strength ratings of insurers and reinsurers rated by Moody’s Investor Service. In a special report on the tragic event which has taken the lives of more than 220,000 people, Moody’s says despite massive human and economic losses, insured losses are "expected to be manageable in the context of [companies’] capital strength and earnings capacity". The rater cites very early estimates of a US$5-$10 billion price tag for insurers associated with the tsunami, which struck a dozen countries within several hours of a submarine earthquake in the Indian Ocean off the coast of Sumatra. The waves hit as far away as Somalia and other African coutries.If the price tag should reach US$10 billion, that would still be just a fraction of economic losses which will certainly top $100 billion. "In comparison, the insured losses were roughly 50% of the total economiclosses when the four hurricanes struck the Southeastern U.S. in the third quarter of 2004," Moody’s notes. The rater notes limited amount of private insurance coverage in the affected regions as the main reason for the relatively low level of losses. Hardest hit are likely to be unrated local insurers in these regions, although these companies may be subsidiaries of, or reinsured by, large global carriers. "Moody’s recognizes that, while the losses at a single subsidiary relative to the consolidated entity may not appear to have a material impact on consolidated earnings and capital, the need to infuse significant amounts of additional capital into an unrated subsidiary to support it and keep it solvent may negatively impact the ratings of the consolidated entity." Moody’s does not expect major reinsurers to be significantly impacted, including those based in North America, Europe, Australia and Asia.