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Recent Losses for the Reinsurers Are Manageable

Relatively high catastrophe losses thus far in 2010 look manageable for reinsurers.

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On Saturday February 27, a massive earthquake just offshore in southern Chile killed hundreds of people and caused extensive property damage. During the same weekend, a major windstorm in Europe named Xynthia hit France, Portugal, and Spain, spawning significant property losses and death halfway around the world.

Insurance companies underwrite diverse exposures on their own books, but theoretically uncorrelated risks can sometimes result in losses arriving right on top of one another. That is why reinsurance companies exist, to provide a means whereby insurance companies redistribute and diversify exposure to large single catastrophic events, as well as exposure to the potential coincidence of multiple unconnected events.

Bill Bergman does not own (actual or beneficial) shares in any of the securities mentioned above. Find out about Morningstar’s editorial policies.