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Global franchises will hand on Thai losses

Following the Thai flooding, attention has so far focused on reinsurance losses from the Japanese big three and regional (re)insurers, but global insurers' international cat programmes are also expected to take losses.

The Insurance Insider understands that reinsurance losses are widely anticipated on the Allianz, QBE, Axa, RSA, Zurich and Chartis programmes.

According to one underwriting source, Singapore subsidiary Allianz CP is expecting to hand $170mn of losses on to one of its exposed regional treaties, despite a surplus treaty that will pass 50 percent of Allianz CP's losses to Allianz Re.

Another Far East underwriting source said that Axa had reported that it would be handing on 2.4bn Thai baht ($77mn) of losses to reinsurers on its regional programme. Allianz and Axa both have big cat programmes that top out at EUR2.6bn and EUR1.5bn respectively, but each excludes Thailand.

In its interim management statement earlier this month, it appeared that RSA had assumed that its international cat programme would be triggered when it said that it expected losses of £20mn - equal to the programme's retention.

QBE, which sources have also cited as a likely generator of reinsurance losses, has a global cat programme with $1.3bn of cover excess $200mn. But it also bought an additional $150mn of aggregate cover for the final six months of 2011 after first-half losses.

Allianz CP wrote $28.5bn of limit in 2009, according to figures from the Thai Office of the Insurance Commission. QBE, meanwhile, wrote $22.7bn and Axa $20.8bn.

Between them the three companies have a market share of just over 22 percent for industrial all-risk policies.

RSA, Zurich and Chartis, meanwhile, are more likely to pick up losses from business written outside Bangkok and Singapore.

According to sources, these insurance firms will have exposure through the commercial property coverage that they write for multinational corporations.

To date, attention has focused almost exclusively on the Japanese-owned and insured industrial plants, but more than half of the flooded factories are said to be non-Japanese.

Some of these risks are likely to have been written out of other insurance hubs such as London and Zurich.

Businesses that will probably inflict insurance losses include US electronics company Western Digital, Anglo-Dutch conglomerate Unilever, US health and pharmaceutical company Johnson & Johnson, US-owned confectionery and drinks company Cadbury and technology conglomerate 3M.

However, according to sources, the insured losses on US-owned assets are likely to be far lower than on non-US factories, as risks written in the world's biggest insurance market routinely have a flood sub-limit that rarely exceeds $50mn-$100mn.

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