Zurich Financial Services (Zurn) has been forced to strengthen its reserves by $300m (£206.6m) to counter unexpected reinsurance losses in the London Market during the last quarter of 2000.
Rumours suggest that the insurer has been hit by a surprise rise in stop loss claims. Zurn was unwilling to comment further, but described the problem as “finite risk reinsurance treaties”.
Overall, the group is preparing for a $500m (£344.3m) hit in its US net income for 2000, which it expects will leave it up to 5% below the 1999 profit of $2,286m (£1,574m).
Another $100m (£68.9m) will appear to have been lost from the results through changing the share structure last year, and also due to the impact of the strong US dollar compared to the relatively weak euro. In 1988, Zurich merged with the financial services part of British America Tobacco. Last October their shares were unified.
The bad storms across the UK and Europe have also resulted in $100m (£68.9m) worth of claims.
Claudia Krazz, press officer for Zurich Europe, said: “We found out that we had more reserves on specific topics that we did not have before.”
These included paying for Centre Re, their special department of reinsurance, which only insures risks up to a fixed sum.
Rumours on the market have suggested the $300m (£206.6m) reinsurance strengthening is also a result of residual value and from buying Lloyd's Names stop losses.
Zurn will provide more details on these developments in its final audited results on March 22.