Chile earthquake to cost insurance industry $7bn

SWISS Re, the world’s second biggest reinsurer, has said the insurance sector will have to pay out as much as $7bn (£4.6bn) in damage claims from the earthquake in Chile.

Swiss Re yesterday estimated its own losses from the 8.8 magnitude earthquake, the fifth most powerful since seismic measurements began, at around $500m.

Rival Munich Re, the world leader in reinsurance, said the disaster would cost the company $543m, although it still expects to earn a net profit of more than €2bn this year.

Despite the large losses, analysts said the tragedy is unlikely to raise reinsurance prices.

“Although it will almost certainly lead to a change in reinsurance prices for business in that region, it is not an industry-changing event on its own,” said Helvea analyst Tim Dawson.

“In our view, we would need more than one ‘big’ event and only then see a reversal of the softening pricing trend,” analysts at Vontobel added.

But analysts did not rule out price changes this year given the amount of natural disasters that have already taken place since the start of 2010.

Swiss Re and Munich Re were both also hit by February’s European wind storm Xynthia, with Munich Re eyeing damage claims of up to €100m and Swiss Re of around $100m.