Estimates of the insurance bill to clean up after Hurricane Katrina rose yesterday when Swiss Re doubled its predictions for the size of its claims but admitted it was difficult to be certain about the final cost.
Swiss Re, the world's second-largest reinsurance firm, admitted it had been too conservative in its early estimates as it doubled its forecast for the total industry cost to $40bn (£22bn) and doubled the estimate for its own claims to $1.2bn.
Two weeks after Katrina's devastation, the industry is still a long way from agreeing the size of the bill, other than predicting it would be the biggest ever. The claims facing Swiss Re are so large that it will miss its target for growth in earnings per share this year. But it expects to charge more for insurance cover in the future.
Swiss Re's re-evaluation came as Lloyd's of London began to tally estimates from the 62 syndicates that make up its market. The listed insurer Hiscox, which runs syndicate 33 at Lloyd's, told the City its loss would be £55m. Four hurricanes last year cost Hiscox £70m.
Robert Hiscox, the chairman, with 40 years in the industry, said Katrina was "unique". "I can't think of another [hurricane] where wind has been followed by flood." Mr Hiscox said governments had to look again at their flood plans. "We are going into a turbulent period," he said, warning that London was prone to flooding. He described the Thames Barrier flood defences as "wholly inadequate".
Catlin, another London-listed insurer, estimated losses would be $275m but fall to $125m once its reinsurance cover was used. Catlin runs Lloyd's eighth-largest syndicate and its chief executive, Stephen Catlin, predicted that the hurricane could wipe out some insurers' full-year profits.
The Financial Services Authority has asked insurers for information about the impact of Katrina. While the industry is still assessing the cost, survivors are said to be mobilising against the insurers over whether the damage was due to floods - which are not covered - or by the storm, which is. This uncertainty is adding to the difficulty of estimating the total cost. Insurers have also been unable to send loss adjusters to the region, which means they must rely on computer models.
Hiscox's shares rose 5% to 191p while Catlin was up 6.5% to 470p.
