Thai floods may lift global insurance premiums

"We believe that some reinsurance firms have already used up their catastrophe budgets for the year after big losses linked to the earthquake and tsunami in Japan and the earthquake in New Zealand. Losses from the Thai floods will therefore directly affect their bottom line. However, we expect these to be manageable, and we do not expect them to result in downgrades for global reinsurers," the rating agency said in a statement.

Fitch Ratings foresees that as January renewal season arrives, lead reinsurers may adopt a broader increase in catastrophe insurance premiums to recover losses. In the Thai market itself, reinsurers are also likely to limit the level of flood coverage to less than 100 per cent of the total loss, it said.

The rating agency showed that after hurricane in Florida, hurricane-exposed property premiums were between flat and up 5 per cent. In New Zealand, property renewal prices doubled, and Japanese rates increased by 30 per cent-70 per cent after the tsunami.

Fitch Ratings noted that damage of the Thai floods is not yet unknown. A lack of available claims adjusters, the high number of claims and difficulties in accessing some areas are continuing to make estimating losses difficult.

Munich Re estimated own losses from the floods at around 500 million. On Tuesday Swiss Re estimated that the total insured market loss will be US$8-$11 billion, but said "significant uncertainty" remains. The Office of Insurance Commission in Thailand gave an initial insured loss estimate of around $7.2 billion, excluding business disruption claims.

"We believe losses for local non-life insurers in Thailand are likely to be manageable, and that they will not trigger widespread solvency problems because of the relatively low insurance penetration in the country, and potential government support due to the severity of this catastrophe," it noted.