Disasters cost insurer Munich Re almost a billion euros

May 9, 2011, 14:37 GMT

Munich - The world's biggest reinsurer, Munich Re, suffered first quarter losses of almost a billion euros due to this year's devastating natural disasters in countries such as Japan, the company said Monday.

Munich Re lost 947 million euros (1.357 billion dollars) in the first three months of 2011. This compared with a profit of 482 million euros in the same period last year.

The earthquake and tsunami in Japan cost Munich Re around 1.5 billion euros - almost equivalent to the combined cost of all reinsured natural catastrophes in 2010. This figure was set to rise as the claims process could last another six months.

Taken together with Australia's flooding and the earthquake in New Zealand, first quarter payouts amounted to 2.7 billion euros.

Income from insurance premiums did not even cover two thirds of damage and administration expenses following the catastrophes in Japan, New Zealand and Australia, Munich Re reported.

At the same time, the insurer saw market returns on capital investments shrink by a fifth compared to the same period last year, down to roughly 2 billion euros.

Despite this, the company did better than analysts had predicted.

The company had previously set a profit target for 2011 of 2.4 billion euros.

But while that target was no longer considered realistic, Munich Re chief Nikolaus von Bomhard said they still anticipated an overall profit for 2011.

'We want to - and can - achieve a profit for the entire year, even after these devastating natural catastrophes,' said Munich Re's head of finance, Joerg Schneider.

However, he said this would only be possible if further claims from natural catastrophes did not exceed 700-750 million euros during the remainder of the year.

Company bosses hope that shock at the Japanese catastrophe will lead to a global increase in demand for reinsurance and enable them to set higher prices.

In Japan, new earthquake insurance policies had already risen by up to 50 per cent, Schneider said. He anticipated increases of 25 to 50 per cent in contract renegotiations with some large clients, depending on their previous claims.

Last week, Munich Re's main competitor, Swiss Re, reported losses of 665 million dollars, while Hannover Re was forced to downgrade its profit expectations for 2011.

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