Royal & Sun details hurricane cost

Hurricane Katrina was today estimated to have inflicted losses of up to £2m (€37m) on insurance giant Royal & Sun Alliance.

R&SA said the provisional figure was for claims arising in its marine and global and risk managed portfolios.

Although R&SA does not write any new business in the US, its customers include international organisations that have offices or property in the storm-hit region.

At the same time, the insurer also provides cover for shipping firms that may have been transporting cargo through the Gulf of Mexico when the hurricane struck.

R&SA said the losses were net of money that it expected to be able to recover from its reinsurers.

Shore Capital analyst Eamonn Flanagan said: “In the big picture, we wouldn’t view £25m (€37m) as a material.

“In fact, we believe the event will increase publicity of why you need insurance and this will benefit the sector as whole.”

R&SA has pursued a radical overhaul to reduce its exposure to risk in the US, where it recorded an underwriting loss of £651m (€962m) two years ago.

In its statement today, R&SA said: “The provisional loss estimate includes a very limited exposure from the group’s US business following its restructure in 2003.”

Today’s statement comes a week after Lloyd’s of London said its market would be able to cope with the “significant” level of claims expected in the wake of Katrina.

Hurricane Katrina is set to become the most expensive ever natural disaster suffered by insurers in history, with estimates of the total insured losses currently as high as $30bn (€24.1bn).

Europe-based reinsurer Hannover Re has stated that its losses from the hurricane are likely to be around €250m, while rival Swiss Re expects its claims to be around $500m (€401m).