Omega Insurance Suffers Losses From Natural Disasters In 2010

Posted on Mar 09, 2011 by Sergio Ulloa (G+)

Omega Insurance, the reinsurance specialist, has announced a pre-tax loss of US$42.8 million for 2010 as the property and casualty insurer feels the impact of higher payouts from natural disasters. In comparison, Omega reported a pre-tax profit of US$47.1 million in 2009. The Bermuda-based insurer's gross written premium income for 2010 totaled US$356.1 million - up from US$265.8 million generated in 2009 - but the insurers suffered from a higher loss ratio of 84.4 percent compared with a lower year-on-year ratio of 49.3 percent. Part of the Lloyd's of London syndicate, Omega Insurance, was exposed to the impact of the major natural catastrophes in 2010 which occurred in Chile, Australia and New Zealand, along with the man-made disaster - the Deepwater Horizon oil spill in the Gulf of Mexico; these events all contributed to Omega Insurance's US$65 million reinsurance and reinstatement premium cost for the year. The floods in Australia and the well published earthquakes which hit Chile in February and New Zealand in September 2010 were the most notable of the 950 natural catastrophes which occurred last year, making it the worst year on record for insurance payouts; Omega incurred losses of US$39.8 million on the Chilean and New Zealand earthquakes alone. Reinsurers were hit hard during 2010, with high payout claims spread throughout the year as a result of the natural catastrophes. Fellow Lloyd's insurer, Brit Insurance, along with market leaders in the reinsurance business - Munich Re and Swiss Re - have felt the adverse impact of the natural disasters, with huge claims resulting from floods in Australia and Pakistan, earthquakes in New Zealand and Chile, and heat-waves and subsequent fires in Russia. To mitigate over-exposure in its reinsurance business, Omega has taken steps to scale back and restructure its international risk portfolio in order to reduce possible future payouts. Omega's actions to improve its global business include the strengthening of its management structure and the re-modelling of the insurer's operations. It will also implement improved measures for risk analysis and controls to ensure future losses from claims are minimised. Together with the revamp of Omega's business practices, the insurer has improved its distribution channels and created stronger platforms in major markets in order to be better positioned for future growth. The unprecedented high levels of claim payments in 2010 has adversely impacted insurance company's profit margins for the year, which is coupled with the tough economic conditions insurers have been experiencing. With the global trading environment remaining uncertain and competition more acute, the position in the reinsurance business is likely to be challenging years to come. Another member of the Lloyd's syndicate - Chaucer Insurance - also revealed a fall in pre-tax profits in 2010, at US$56.6 million, down from US$122.5 million in 2009. Chaucer's results also felt the impact of exposure to extensive claim payouts for written business made in Chile, New Zealand and Australia. In 2011, natural catastrophes have already had devastating effects on nations with the January flooding in Queensland, Australia and the deadly earthquake which struck Christchurch in New Zealand in February; both disasters incurring fatalities and extensive damage to property in the local community. More recently, an earthquake measuring 7.2 magnitude on the Richter scale struck just over 100 miles off the coast of Japan at a depth of 8.8 miles; this lead to buildings in the capital, Tokyo, being shaken. Although there was no significant damage to infrastructure or reports of fatalities caused by the tremor, tsunami warnings were raised for people living in coastal regions. These early major natural catastrophes in key industrialised regions of the world will undoubtedly impact on insurers' underlying profits from written business in 2011. Insurance Companies mentioned: Omega Insurance Omega Insurance is based in Hamilton, Bermuda and operates in the insurance and reinsurance business. The company has underwriting platforms in Bermuda, London, Chicago, and Cologne. Omega operates within on-marine property insurance, property catastrophe treaty reinsurance, property per risk treaty reinsurance, professional indemnity insurance, motor insurance and reinsurance, marine insurance and reinsurance, and liability insurance and reinsurance lines. Chaucer Chaucer is a member of the Lloyd's of London syndicate and underwrites in over 28 major insurance and reinsurance lines. Classes of business include: balancing global marine, energy, non-marine and aviation and in the UK motor and nuclear insurance. Brit Insurance Holding Brit Insurance Holdings is a general insurance and reinsurance group, provides commercial insurance products. The company offers accident and health, contingency, marine, aerospace, professional risks, trucking, commercial motor, liability, personal lines, property and packages, small business, war and terrorism, and horses insurance policies. It also provides agriculture, casualty, marine, aviation, and property reinsurance policies. Munich Re Munich Re stands for exceptional solution-based expertise, consistent risk management, financial stability and client proximity. This is how Munich Re creates value for clients, shareholders and staff. It operates in all lines of insurance, with around 47,000 employees throughout the world. Especially when clients require solutions for complex risks, Munich Re is a much sought-after risk carrier. The primary insurance operations are mainly concentrated in the ERGO Insurance Group. ERGO is one of the largest insurance groups in Europe and Germany and 40 million clients in over 30 countries place their trust in the services and security it provides. In international healthcare business, Munich Re pools its insurance and reinsurance operations, as well as related services, under the Munich Health brand. Swiss Re Swiss Reinsurance Company Ltd was established in 1863 and is present in more than 20 countries. Swiss Re provides reinsurance products and financial service solutions. It offers various reinsurance products covering property, casualty, life, health and special lines - such as agricultural, aviation, space, engineering, HMO reinsurance, marine, nuclear energy, and special risks.