Himalayan News Service

Mumbai, January 3:

There is no immediate impact on insurance companies from the tsunami that devastated coastal areas in countries around the Indian Ocean on December 26, said global rating agency major Standard and Poor’s.

Standard and Poor’s expects the accumulated insurance losses that result from the catastrophe to be smaller than those resulting from other major natural disasters that occurred in 2004. This is mainly because the affected areas are characterised by low insurance penetration and relatively undeveloped insurance markets in which the populace and property are generally underinsured or uninsured, it added.

The rating agency said although it is too early to quantify the ultimate losses for the insurance markets of the affected region, the current market estimation of aggregate insurance claims is currently no higher than $10 billion.

“This is significantly lower than the currently expected economic losses. Most of the expected insurance claims are likely to be in respect of property damage and business interruption, or travel insurance-related,” it added. Standard and Poor’s expects the associated insurance losses to negatively affect regional insurance markets mainly in terms of their fiscal year 2004-05 performance. “Nevertheless, the impact on the regional insurance industry is not likely to be serious,” it said, “Moreover, the ultimate losses are unlikely to have any significant effect on the global reinsurance industry.”

The agency said it would continue to monitor the impact of the tsunami on individually rated companies, as well as on the wider industry. It said the number of insured lives and the related insurance cost would not be known for some time. However, it is likely that most victims are uninsured or underinsured, added Standard and Poor’s. The insurance loss in respect of their deaths is likely to be significantly smaller.