Losses from the 8.8 magnitude earthquake that rocked Chile on February 27th will not change reinsurance rates on a global or regional basis, according to speakers at this week’s Standard & Poor’s Insurance Conference.
“Chile is Chile,” said Byron Ehrhart, chairman of Aon Benfield Securities. “[The earthquake] is going to effect the reinsurance market in Chile and will not effect the market in South America or the Caribbean.”
Ian Branagan, chief risk officer for RenaissanceRe Holdings, agreed that losses will not figure into a harding market.
“The structure of the insurance and reinsurance placement mechanism in the Chilean market is extremely complicated,” Branagan said. “This means the earthquake will have an impact on the Chilean reinsurance market.”
Regional rates are unlikely to rise even though losses estimate continue to spike. This week two reinsurers increased their loss estimates for the Chile event.
Munich Re increased its “loss burden” from the earthquake to $1 billion (after retrocession and before tax) from $700 million in April and about $479 million in March.
Zurich-based Swiss Re also raised its estimate for losses to $630 million from $500 million previously.
Ehrhart added that he had little confidence in initial loss estimates put out shortly after the earthquake and that they remain “suspect” until final claims are tallied.
“After an event the first [loss estimates] come from the modeling firms, which have the least amount of knowledge about of what’s insured,” Ehrhart said.
RenaissanceRe’s Branagan added that insurers and reinsurers could learn from the Chile earthquake, specifically about the impact of a large quake in the region.
“They need to look at other areas that may be under assessed,” he said. “Most insurance and reinsurance companies have their insured loss in their model, but not at levels that the should be comfortable. You need to take what you learned and apply to to broader Caribbean and Mexico.”
Look for additional coverage of the S&P conference on Monday.
Risk Market News Newsletter
Join the newsletter to receive the latest updates in your inbox.