Amlin breaches H2 cat budget as losses rise

Lloyd’s insurer Amlin has exceeded its catastrophe budget for the second half of 2011 because of worse-than-expected losses from first-half catastrophes.

Amlin’s loss estimates increased by a net amount of $73m (£46.2m). The insurer’s net exposure to February’s New Zealand earthquake increased to $338m from $305m, while loss estimates from March’s earthquake in Japan rose to $206m from $156m.

These increases were offset by a $10m reduction in Amlin’s loss estimate for the Missouri tornado in May. The company now expects $17m loss from this event.

The company has also sustained new losses from a series of events, including Hurricane Irene, the June earthquake in New Zealand and the Danish floods. Amlin estimates that together, these events will cost it less than $25m.

Amlin said that most of the claims arising from the new events and deterioration of previous estimates were covered by retrocession, but that the net additional losses were around $25m above second-half catastrophe budgets.

Despite the catastrophes’ effects on Amlin’s results, the company said that it is detecting improving rates in a number of important markets as a result of the events.

“While this year’s performance has been impacted by an exceptionally high level and frequency of catastrophe events, the overall outlook for underwriting returns is improving and we remain a strong business which is more than capable of delivering excellent returns for shareholders,” said Amlin chief executive Charles Philipps in a statement.

Amlin saw rate rises across its entire book of 0.9% in the year to 31 October 2011. Within this, Amlin UK saw the biggest price increase, at 5.2%.

Amlin said increases to fleet motor rates in the UK now average 7.1% for the year. However the company said liability rates in its UK division remain mixed.

UK property rates increased by 6.3% in the ten month period, and recent strategic initiatives, including the purchase of JR Clare in January 2011, have added new business of £43.2m.

Amlin is continuing work to restore Amlin Corporate Insurance to profitability. It cut the unit’s gross written premiums by 20% as it turned away unprofitable business. The company said ACI has had no new claims above €5m in the third quarter but attritional losses “remain above an acceptable level for this business”.

Amlin released reserves of £34.4m in the third quarter of 2011, bringing cumulative nine-month releases to £71.2m.