The 1999 fiscal year was a difficult one for reinsurers exposed to catastrophe risks. At a time when competitive pressures had driven premiums to very low levels, the industry faced one of the most severe loss years in history.

According to Swiss Re's Sigma report, insured losses from natural catastrophes and man-made disasters during 1999 amounted to approximately $28.6 billion, of which $24.4 billion related to natural causes and $4.2 billion to man-made ones. This represents the second heaviest claims burden ever for (re)insurers, exceeded only by 1992, the year of Hurricane Andrew. During 1999, there were seven loss events, mainly storms and earthquakes, each costing in excess of $1 billion.

Two storms in the 26 – 28 December 1999 period, Lothar and Martin, are the most costly natural disasters ever to have hit Europe. Together, they caused unprecedented levels of damage and disruption primarily in France, but also in the German state of Baden-Württenburg and the northern Alps in Switzerland. Storms later developed along the northern Pyrenees continuing into the Mediterranean to affect northern Corsica and the coast of Italy down to Sicily.

These events affected all the Bermuda catastrophe writers but because of differing year-ends, the financial effects may be spread over differing fiscal periods.

From our review of their published financial information, however, it appears that the European storms were particularly hard felt by XL Capital's subsidiary, XL Mid Ocean (approximately $125 million), PartnerRe (estimated at $90 - $110 million) and LaSalle Re (approximately $30 million).

XL Mid Ocean is more than just a property catastrophe carrier and, consequently, it is very hard to glean anything other than a very general indication of the impact of catastrophe losses on its overall results.

What is clear, however, is that, with the possible exception of Renaissance Re, such losses have affected these companies' combined ratios and that investment performance has not grown sufficiently to absorb the impact on their reported net income.