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CHRISTCHURCH, New Zealand—International reinsurers likely will be hit by large claims from the devastating earthquake that occurred Tuesday near Christchurch, New Zealand’s second-largest city, sources say.
Catastrophe modeling company AIR Worldwide Corp. said Wednesday that insured losses could reach between $5 billion New Zealand ($3.81 billion) and $11.5 billion New Zealand ($8.76 billion).
Tuesday’s earthquake likely will give rise to losses similar to or larger than those experienced by insurers and reinsurers as a result of the earthquake that struck near Christchurch in September, according to a research note by London-based investment banking group Jeffries International Ltd.
The New Zealand Earthquake Commission, a government-sponsored plan that offers insurance to homeowners, likely will bear the brunt of primary losses. But European and Bermudian reinsurers, as well as Lloyd’s of London companies that suffered losses from the September earthquake, likely will see claims from Tuesday’s event as the reinsurance contract purchased by the Earthquake Commission runs until June, according to the note.
In addition, commercial claims likely will be higher from Tuesday’s event as the earthquake struck closer to Christchurch’s business district, the note said.
When losses from the recent flooding and cyclone in Australia are taken into account, the recent earthquake may result in some reinsurers being more than halfway through their catastrophe budgets for the year, the note said.
Tuesday’s earthquake likely will be considered an aftershock of the September temblor, according to AIR.
The New Zealand Earthquake Commission so far has classified aftershocks from the September earthquake as separate events with separate claims procedures, catastrophe modeler Risk Management Solutions Inc. said in a statement.
Brisbane, Australia-based insurer Suncorp Group Ltd. said it was too early to estimate the cost of Tuesday’s earthquake or the reinsurance treatment of the event.
Suncorp said in a statement that its reinsurance program contains separate “drop-down” cover that limits its New Zealand exposures to $60 million New Zealand ($45.7 million).
The insurer, which released its half-year financial results Wednesday, said the total cost of reinstatement premiums for the year to date was $223 million Australian ($226.3 million). Suncorp’s financial year runs to June.
Sydney-based insurer Insurance Australia Group Ltd. said in a statement that it was too early to estimate the cost of Tuesday’s earthquake, but noted that its reinsurance coverage limits mean the maximum financial impact on the company would be $40 million Australian ($40.6 million).