Earthquake losses could reach $12b

Sydney Morning Herald

Thursday March 3, 2011

Eric Johnston

SWISS RE, one of the world's biggest reinsurers, has labelled the Christchurch earthquake as a "significant event" for the global insurance industry, as it warned insurance losses from the disaster could top $US12 billion.The Zurich-based Swiss Re said its own payouts against last month's quake could reach $US800 million.Reinsurance is purchased by global insurers to protect against losses from catastrophes. While it is often the biggest single expense for general insurers, it is crucial for capping the cost of payouts.Australian insurance executives have warned reinsurers could be forced to raise rates or retreat from the Australian and New Zealand markets after a succession of natural disasters in the past two years triggered huge payouts."The purpose of insurance and reinsurance is to help individuals and communities cope with the devastating impact of such events," Swiss Re's chief executive, Stefan Lippe, said. He noted take-up rates for earthquake insurance are high in New Zealand, due to the government-backed insurance scheme, the Earthquake Commission. Householders can purchase private insurance above cover provided by the commission. Business risks are insured by private insurance companies.

© 2011 Sydney Morning Herald

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