Claims news - Hurricane Katrina ups claims-settlements pressure.

(From Reinsurance)

Insurance companies are likely to come under political pressure to pay claims arising from Hurricane Katrina early and without dispute, according to Robert Cooney, president and chief executive officer of Bermuda-based Max Re.

Speaking at a client conference organised by Aon Captive Services Group (ACSG), Mr Cooney told delegates that the scale of the disaster has made it a political issue. "The magnitude of human suffering, and the economic loss to the region, will bring enormous political pressure on insurance companies to make payments," he said.

Mr Cooney predicted that there will be pressure not only to make payments quickly, but also to avoid challenging the validity of claims. This will be significant in a situation where there is a lack of distinction between storm and flood damage, and where storm damage is covered, while flood damage is not.

While this flexibility alone will increase industry costs, pressure to pay claims early will also affect cash flow and reduce investment returns.

Estimating that the final insured loss will be significantly more than the $25-$30bn that was initially speculated, he said that there would be knock-on effects across the industry. "This will impact the property market and also coastal areas exposed to catastrophe, not just in the US but in Europe too," he said.

Mr Cooney told the conference that the Katrina costs will add ...