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Swiss Re says New Zealand quake claims could break 2011 budget


ZURICH (Reuters)—Swiss Reinsurance Co. Ltd. faces around $800 million of claims from the New Zealand earthquake, pushing it over its 2011 budget for natural catastrophes and eating into profits.

Total insurance industry claims from the quake would run to $6 billion to $12 billion, making it a significant global event for insurers, the world's second-biggest reinsurer said on Wednesday. Early estimates had pointed to an insured loss of up to $8 billion.

Reinsurers may be able to start hiking prices if there are more natural disasters leading to high payouts this year, analysts said.

The magnitude-6.3 earthquake that struck New Zealand's South Island on Feb. 22 caused deaths and widespread damage, particularly in Christchurch.

"The New Zealand earthquake is a big event and Swiss Re's share higher than expected," said Vontobel analyst Stefan Schuermann, adding he was cutting his 2011 earnings estimate.

The world's No.1 and No.3 players, Munich Reinsurance Co. and Hannover Reinsurance Co., on Wednesday said it was still too early to estimate their share of the costs.

Credit Suisse in a research note last month had estimated that, based on expected loss claims from a separate earthquake that hit New Zealand in September, Munich Re 's share of damage would be higher than Swiss Re 's.

Credit Suisse had calculated the share of losses at around 15.3% for Munich Re, 7.7% for Swiss Re, 3.8% for Hannover Re and 5.3% for Amlin P.L.C., but cautioned that the estimates should be seen as a frame of reference rather than guidance.

Shares in Swiss Re traded 2.1% lower at 1125 GMT, against a 1.8% drop in the European insurance sector, a 2.9% fall in Munich Re and a 3.4% dip in the stock of Hannover Re.

Swiss Re had estimated it would have to pay out $1.01 billion on natural catastrophe claims this year assuming a normal level of events.

But the company expects the hit from the New Zealand quake together with the cost of flooding in Australia to add up to around $1.025 billion in the first quarter alone.

While this will likely hit profit, it could help to increase the prices reinsurers can charge to take on risk from insurers if there are further large claims events this year.

The industry is currently suffering from low prices because of a glut of supply.

"For 2011, it is too early to make a positive call for premium rates on the back of this year's events. However, it is clear that these large losses could set the stage for a more positive development if areas such as U.S. hurricanes and European windstorms can also produce some big events this year," said Helvea analyst Tim Dawson.

"I can't speculate on whether prices will increase," said a Swiss Re spokesman. "What we have seen in the past is that if nat cats were that high, prices could be affected."

The earthquakes in September and February may force New Zealand's government to recapitalize its national disaster safety fund, analysts and insurers have said.

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