S&P: Cyclone Larry Minor For Insurers

Despite the destructive force of Cyclone Larry upon Queensland, Australia, the storm is expected to be a moderate insurance event, said Standard & Poor's Ratings Services.

Cyclone Larry, which hit far North Queensland on March 20 with sustained winds of 125 mph, is a major disaster for the region, its people and infrastructure, said S&P. But insured losses at this stage are estimated to be between $300- and $400 million Australian ($214-to-$286 million U.S.). The estimate includes reinsurance losses.

"While profitability of insurers and reinsurers will be reduced slightly from this event, the scale of the losses will have little impact on the financial strength of the industry," said Michael Vine, credit analyst and director in S&P's Financial Services Ratings group.

Nevertheless, S&P said, the combined effect of Cyclone Larry, the ongoing softening of premium rates, and further possible losses from events such as Cyclone Glenda in Western Australia sees the earnings forecast for 2006 moderating from the strong results of 2005.

This scale of the event is well short of the insured losses in Australia from 1999's hail storm in Sydney of over $1.5 billion Australian ($1.07 billion U.S.) and the 1989 earthquake in Newcastle loss of over $1.1 billion Australian ($784 million U.S.).