National Underwriter - December 19, 2011

Thailand Floods Could Cause
up to $11B in Insured Losses

BY MARK E. RUQUET AND PHIL GUSMAN FLOODING IN Thailand that be- gan in July and peaked in Octo- ber and November could result in insured losses of more than $10 billion, according to the latest estimates.

Swiss Re says industry losses could come in between $8 billion and $11 billion. The global reinsurer put its own losses at around $600 million.

Aon Benfield, a subsidiary of Aon Corp., says industry losses could exceed $10 billion, and adds that economic losses could be as high as $45 billion.

Munich Re says it expects its share of losses to be around €500 million ($666.1 million at current exchange rate) net before tax.

Additionally, in November Tokio Marine Holdings announced that it had incurred estimated net claims of $1.3 billion from the event. Part of that figure includes a retained share of reinsurance, placed with Lloyd’s syndicate Tokio Marine Kiln Syndicate 1880. Syndicate 1880’s share of the $1.3 billion loss was recently estimated to be $700 million.

Based on the Swiss Re and Munich Re estimates, Moody’s Investors Service says it expects the event to “meaningfully hit” the reinsurance industry’s fourth-quarter results.

Moody’s said in its Weekly Credit
Outlook that it expects the largest global
reinsurance players to report the highest
losses: “In addition to Swiss Re and Munich
Re, these players include Hannover Re,
Lloyd’s of London, SCOR, Berkshire
Hathaway and Partner Re.”
The floods are due to heavy rains
that began in July and fell heaviest
in October and November. Moody’s
says the floods have submerged
major industrial areas containing
factories belonging mostly to
Japanese companies, disrupting
the manufacture of electronic key
components. Thailand is also a
major producer of hard-disk drives
for computers around the world,
Moody’s notes.

BY MARK E. RUQUET

PROPERTY-AND-CASUALTY insur- ance brokers were given a contin- ued “stable” outlook from Fitch Ratings, as revenue and earnings growth in 2012 is forecast to match or exceed levels recorded during the first nine months of 2011.

In a five-page report reviewing five publicly traded national insurance-brokerage firms, Fitch says that despite premium gains aiding top-line growth, brokers’ revenues are expected to be “modest due to a flat rate environment” in the commercial-insurance market.

In the rating service’s review of insurance brokers Aon, Arthur J. Gallagher (AJG), Brown & Brown, Marsh & McLennan (MMC) and Willis, average operating income increased for the group to just over $600 million in the first nine months of 2011—from slightly less than $600 million during the same period in 2010.

The increase, Fitch says, was primarily on the strength of higher earnings at MMC and at Aon from its acquisition of Hewitt Associates.

Willis’ results were negatively affected by debt-repurchase expenses and its 2011 operational review, which led to a

$130 million charge.

For AJG and Brown & Brown, operating income was essentially unchanged.

Acquisition activity increased, Fitch says, with the number of transactions through October 2011 equaling all of 2010 and surpassing all of 2009.

“Fitch expects overall revenue growth to continue to be driven by mergers and acquisitions, as a ready supply of smaller firms can provide a source of new revenue for larger firms,” says Fitch.