Platinum Underwriters Estimates Katrina Losses; Lowers Profit Forecast

Bermuda-based Platinum Underwriters Holdings, Ltd. announced that its estimated losses, net of reinstatement premiums, tax benefits and retrocessional recoveries, from Hurricane Katrina will be approximately 0.5 to 0.6 percent of the total insurance industry losses.

Assuming current overall losses for the industry at between $40 and $45 billion, that would translate into a loss estimate between $200 and $270 million.

Platinum, however, indicated that “due to the structure of its reinsurance contracts and the application of its retrocessional program, the Company expects that the larger the industry loss the lower its share of that loss.”

As most other reinsurers have noted (See previous articles), Platinum said its loss estimates “are preliminary and based on portfolio modeling, a review of individual contracts and preliminary indications from clients and brokers.” It has received very few claims notices to date. “The unique nature of the loss and the potential for legal and regulatory developments to impact the magnitude of the loss is expected to introduce significant uncertainty and delay into the loss adjustment and settlement processes,” the bulletin continued. As a consequence the Company noted that the actual impact on its results arising from Katrina “may differ materially from the current estimate.”

President and CEO Gregory E.A. Morrison commented, “We extend our sympathies to those who have been impacted by this tragic catastrophic event. Katrina may be the largest insured loss in the history of our industry. Nevertheless, our expected losses are consistent with our risk tolerance and we are well positioned to actively participate in the market following this event. We expect no fundamental changes in our risk appetite and, as we have demonstrated in prior catastrophes, we anticipate working closely with our clients in the upcoming months to satisfactorily resolve their claims.”

Platinum also indicated that other third quarter “catastrophic events, including Hurricanes Dennis and Emily and the floods in Europe,” would have a “net after-tax negative impact on third quarter results” of around $16 million.

Platinum said it still expects to be profitable in 2005 -“assuming no significant catastrophe losses or other unusual adverse events for the balance of the year.” However, mainly because of Katrina, it does “not expect to meet its previously announced earnings guidance for 2005.” Platinum said it would “provide updated guidance when it reports financial results for the third quarter ended September 30, 2005 after the close of the New York Stock Exchange on Thursday, October 27, 2005.”