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Property and casualty insurer Chubb Corporation (CB) has announced its estimate of catastrophe losses (cat losses) for the months of April and May, based on property damages resulting from cataclysmic weather conditions.

The company expects pre-tax cat losses in the range of $250 million to $310 million in those two months. Chubb stated that its pre-tax losses for May were about $75–$85 million, in addition to the $175–$ 225 million catastrophe losses incurred during April, which was due to storms in the southern states of the U.S. In the month of May, the company was affected by unprecedented tornadoes.

Chubb’s geographic concentration exposes it to catastrophe losses. Compared with 2009, the company witnessed less profitable results in 2010 owing to a substantially higher impact of catastrophe losses. Similarly, the more profitable results were recorded in 2009 compared  with 2008 due to a significantly lower catastrophe losses, partly offset by a lower amount of favorable prior-year loss development. The impact of catastrophes accounted for 570 basis points of the combined ratio in 2010 as against 80 basis points in 2009 and 510 basis points in 2008.

The catastrophe losses, incurred early during the year, will expectedly drain Chubb’s second quarter 2011 earnings by 55–68 cents per share after tax.

Other insurers and reinsurers who suffered losses from the early 2011 catastrophe include companies like Allstate Corp. (ALL) and Travelers Companies Inc. (TRV). While Allstate anticipates net losses of $2.0 billion, Travelers estimates April and May cat losses to range between $1.0 billion and $1.05 billion.

Chubb will provide all the details regarding catastrophe losses in its second quarter earnings report, which is slated to be released on July 21, 2011, after the market closes.

Experts predict that the April-May cat losses would cost about $7.7–$12.5 billion to the industry. According to them, the insurers overall have already incurred heavy cat loss, which is almost twice the figure earlier predicted for full-year 2011. We expect the market to harden as severe natural disasters this year are pushing prices higher in the insurance industry after years of sharp pricing declines.

(We are reissuing this article to correct a mistake. The original article, issued earlier today, should no longer be relied upon.)
 
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