Endurance Estimates Net Katrina Losses Between $375-$450 Million

Bermuda-based Endurance Specialty Holdings Ltd. said its initial estimates of losses, net of reinsurance, reinstatement premiums, and tax benefits, related to Hurricane Katrina are between $375 and $450 million. The bulletin said the company expects “gross losses related to Hurricane Katrina, before reinsurance, reinstatement premiums, and tax benefits, to be between $400 million and $500 million.”

As with XL and Everest (See related articles), the estimates rest to a great extent on industry wide loss assumptions from Hurricane Katrina that are currently between $40 and $45 billion. “If the emergence of industry losses varies from the indicated range of $40 billion to $45 billion, our net economic losses are expected to be approximately 1 percent of gross industry losses,” said the announcement.

“Roughly 50 percent of our losses are assumed to have come from wind related exposures including energy related losses,” the bulletin explained. “The remainder is estimated to stem from flood related damages and related business interruption.”

Endurance said its estimates are “largely derived from a combination of a detailed review of in-force contracts and preliminary indications from clients and brokers. We have made limited use of industry catastrophe models, due to the complex interaction of wind and flood events and the potential for aggregation of multiple insurance coverages.”

The announcement also indicated: “Due to the extremely limited claims data, as well as potential legal and regulatory developments related to potential losses, both industry wide insured losses and Endurance’s losses from Hurricane Katrina may ultimately differ materially from our preliminary estimated losses.”

Chairman and CEO Kenneth J. LeStrange commented: “Katrina will be remembered as one of the most tragic catastrophic events to occur in the United States during the past 100 years. When we founded Endurance, we recognized and anticipated the volatility of catastrophic losses in our business strategy, and built the company to withstand these types of events. Our losses related to Hurricane Katrina represent approximately one year of Endurance’s earnings, highlighting the company’s financial strength. We are focused upon delivering our value of security and service to our many clients affected by this event.”