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Swiss Re reports loss, expects big price rises

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(Reuters) — A rise in insurance premiums, especially in areas affected by recent hurricanes and disasters, will help Swiss Re Ltd. recover from almost half a billion dollars of losses in the first nine months of this year, it said on Thursday.

“We expect those program that have been hit by losses to clearly respond in a significant fashion,” Chief Financial Officer David Cole told Reuters on Thursday. “Rate increases up to 50% in that regard would not be surprising.”

Swiss Re joined a chorus of insurers and reinsurers looking to rate rises as a reprieve from years of falling prices, after what looks set to be their most costly quarter on record.

Swiss Re did not release figures for the third quarter – for which it estimated claims from hurricanes Harvey, Irma and Maria in the United States and from two earthquakes in Mexico at roughly $3.6 billion – but nine-month figures implied a loss of around $1.7 billion from July through September.

That compares with a quarterly loss of €1.4 billion ($1.6 billion) that German rival Munich Re has said it expects to post on Nov. 9.

British insurers Lancashire Insurance Services Ltd. and RSA Group P.L.C. on Thursday also posted losses following hurricane outlays.

Despite hurting profits, higher catastrophe costs can lead to higher pricing in reinsurance markets.

The industry has been squeezed for years by falling industry prices coupled with low interest rates.

“It’s our very strong belief that the same factors that have led to changes in pricing cycles in the past will once again be very clear and lead to a change in the pricing environment here,” Mr. Cole said.

Last month, Hannover Re S.E. Chief Executive Ulrich Wallin said prices could rise 40% to 50% in regions hit by disasters, and 5% elsewhere.

A turnaround in prices would be the first major reversal since Hurricane Katrina in 2005.

Swiss Re said it would proceed with a proposed share buyback of up to 1 billion Swiss francs ($1 billion), which will start on Friday, adding it was able to absorb the losses and maintain financial flexibility due to strong capitalization.