Insurer Losses From Subprime Approach Katrina Claims

Source: Bloomberg
March 14 (Bloomberg) -- The collapse of the subprime mortgage market will lead to record losses for insurance companies, overtaking Hurricane Katrina, the worst natural disaster in U.S. history.
The amount of asset writedowns and credit losses reported by the industry has reached at least $38 billion, just short of the $41.1 billion in claims from Katrina, which killed more than 1,500 people and left more than half of New Orleans homeless in 2005, data compiled by Bloomberg show.
American International Group Inc., the world's biggest insurer, reported the largest quarterly loss in its 89-year history because of the decline in investments linked to mortgages. Chief Executive Officer Martin Sullivan told shareholders last month that more losses are possible amid the most depressed U.S. housing market in a quarter century. The KBW Insurance Index ended 2007 with its worst quarter in five years and fell another 17 percent this year.
``This is a bigger event than Katrina,'' said Robert Haines, an insurance analyst at New York-based CreditSights Inc. ``This is a much more unprecedented event.''
After Katrina, companies including Northbrook, Illinois- based Allstate Corp., the largest publicly traded U.S. home insurer, raised rates in disaster-prone areas, bolstering their balance sheets and stock prices. Now, insurers are stuck holding mortgage-related investments in a market where there are so few buyers that it's hard to know what those assets are worth
LinkHere