Reinsurer PartnerRe Ltd. has upped its loss estimate for the September 3rd, Christchurch New Zealand earthquake. The quake damaged over 100,000 homes, cut water and sewage lines and and loss estimates have been rising as more and more claims come to light.
PartnerRe has more than doubled its earlier estimate that it would face $64m in losses to now say that it expects to pay between $140m and $160m in losses. They say that recent information from a number of their cedents show that a higher than expected number of new claims have been placed during November and December. Also, new engineering reports suggest greater damage than originally thought.
Based on the information they have received and the amount their own losses have increased, PartnerRe says that the reinsurance industry as a whole should be braced for an industry loss of between $4.5 billion and $5.5 billion. It’s becoming apparent that this loss is not insignificant.
We wonder how that will affect outstanding industry-loss warranties which are exposed to this event. Yesterday, the Insurance Insider said that ‘half of the estimated $100mn “cold spot” industry loss warranty (ILW) market has triggered as the latest loss estimates for the New Zealand earthquake top $3bn’. So how much will have triggered if this latest estimate of around $5 billion is deemed more accurate?
It’s likely that this loss will trigger greater interest in New Zealand quake as a peril to make up part of a catastrophe bond issuance in the future as reinsurers seek to transfer the risk of another event off their books and into the capital markets.
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