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Protection rates likely to rise in wake of hurricane

Life and protection rates are likely to rise in the aftermath of Hurricane Katrina, says Scottish Widows marketing director, protection, Nick Kirwan.

He predicts that rates will inevitably be raised in the UK as well as the US, as reinsurers face a massive hit on capital and a reduction in capacity.

Other insurers say they may raise prices in line with increases.

Two weeks after the hurricane devastated New Orleans and surrounding regions, Standard & Poor’s has put 10 insurance groups with Katrina exposure on negative credit watch.

Specialist London-listed reinsurers Alea and Goshawk both announced to the City that they will need to raise more capital as a result of the hurricane.

Swiss Re’s estimate of the sums it could have to pay out following the disaster have risen from 275m to 660m.

Kirwan says: “With many of the reinsurers in the UK being American-owned, I think we can anticipate an impact on rates across life and protec- tion. All claims will be going through a few reinsurers worldwide and there will be a massive hit on capital.”

RGA head of communications Jason Hurley says: “We only reinsure life. Hence, there will be no direct impact on RGA for property or casual claims, only life insurance claims for the people who have died.

“Reductions in capital may mean that competitors’ prices rise, in which case we will, of course, increase ours.”

Swiss Re media relations manager Samantha Whiteley says: “The fact that events of the magnitude of Katrina can and do occur underlines the fact that insurers must charge an economically viable price for the insurance cover they provide. Swiss Re’s philosophy has always been to underwrite profitably and Swiss Re will remain firm on achieving appropriate prices across all of its business.”

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