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Thailand flood losses rising but final tally unknown

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Thailand flood losses rising but final tally unknown

Last year will go on record as one of the costliest for insured catastrophe losses, but exactly how great the losses will be could depend largely on flood-ravaged Thailand.

Two major players in the reinsurance industry—Aon Corp.'s Aon Benfield unit and Munich Reinsurance Co.—released different estimates last week. Munich Re said it believes 2011 will top 2005 for insured cat losses, while Aon Benfield says it likely will rank second behind 2005, the year that Hurricane Katrina hit the Gulf Coast.

Part of the uncertainty stems from losses from months of flooding in Thailand. Estimates of total damage vary by the billions of dollars.

In the meantime, Munich Re estimates total catastrophe-related insured damage last year at $105 billion, which would surpass 2005 as the costliest year in terms of catastrophes. Munich Re sets 2005's insured damage tally at $101 billion.

Aon Benfield estimated that total insured catastrophe losses reached $107 billion in 2011, but it also set 2005's insured cat losses at $120 billion.

Robert Hartwig, president of the New York-based Insurance Information Institute Inc., discounted the discrepancy.

“I've noticed this, too, but do not consider it to be significant,” Mr. Hartwig said in an email.

He noted that 2011 figures are preliminary and that final figures won't be available for some time. He also said that the variance in recently released estimates is small and that the dollar volume of insured cats is “very large.”

Munich Re estimates that earthquakes in Japan and New Zealand early in the year accounted for about two-thirds of the total. The German reinsurer said insured losses from the March 2011 earthquake and tsunami in Japan could reach $40 billion, while insured losses from the February 2011 quakes in Christchurch, New Zealand, could reach $13 billion.

Aon Benfield put insured losses in Japan at about $35 billion and said insured losses from the New Zealand quakes may reach $15 billion.

Munich Re said severe weather during the tornado season in the United States, such as the tornado that hit Joplin, Mo., caused an estimated $25 billion in insured damage. Hurricane Irene, the only hurricane to make landfall in the United States last year, added another $7 billion in insured damage.

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But the greatest unknown is the total insured loss caused by months of flooding in Thailand.

Munich Re said the floods caused about $10 billion in insured damage, while Aon Benfield noted that Thai authorities put the figure at nearly $11 billion.

The uncertainty over the extent of the Thai flood damages is reflected in estimates of individual insurer losses released last week as fourth-quarter earnings report season approached.

For example, XL Group P.L.C. said its net losses from floods in Thailand could range from $135 million to $185 million.

XL also said it has registered additional losses of about $35 million related to catastrophic events that took place during the first three quarters of last year. XL said the developments on prior-quarter losses stemmed primarily from U.S. events—second-quarter tornadoes and third-quarter windstorms and subsequent flooding. The estimates are based on review of individual treaties and policies expected to be impacted, as well as available client data, XL said.

Two other insurance and reinsurance groups also announced Thai losses last week. Validus Holdings Ltd. issued a preliminary loss estimate of $55.5 million and said that industrywide insured losses in Thailand could reach $12 billion.

Arch Capital Ltd. said its losses in the Thai flooding could range from $35 million to $65 million.

All three companies stressed in their announcements that the extent of the damage remains unknown, and that the actual damages could vary widely from the preliminary estimates.

Senior Editor Sarah Veysey contributed to this story.