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Fitch Report: Thai Floods May Lead Reinsurers to Raise Cat Premiums

Source: Dow Jones

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Posted on 09 Dec 2011

The flooding in Thailand may lead major global reinsurance firms to raise catastrophe premiums across the world to try to absorb the steep losses from natural disasters in the Asia-Pacific region, Fitch Ratings said in a new report.

The ratings firm suggested some reinsurance firms had already used up their catastrophe budgets for the year following the earthquake and tsunami in Japan and the earthquake in New Zealand. As a result, the losses from the Thai floods will directly affect their bottom lines, Fitch said, though the firm said it expects the hit to be manageable and not result in credit downgrades.

Fitch said the reinsurers could try to recover losses through a broader increase in catastrophe reinsurance premiums during the important January renewal season, while balancing the need to be competitive. And in the Thai market, reinsurers are also likely to limit the level of flood coverage to less than 100% of the total loss.

The credit rater added price increases thus far have been mainly focused on the countries that have been affected by natural disasters, noting U.S. casualty prices remained flat in the June and July renewal seasons, while New Zealand prices doubled and Japanese rates increased by 30% to 70%.

The flooding in Thailand has affected companies across the technology sector in particular, hurting worldwide hard-disk drive manufacturing. Thailand is the world's second-biggest hard-disk drive manufacturer. The auto sector has also adjusted production as a result.


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