ZURICH, Switzerland : European insurers face new costs and travel firms could lose business after tsunami waves killed more than 125,000 in Asia by last Friday.

But the financial impact is likely to be less than that of other disasters this year.

The markets took a cautious stance, however, pushing down shares in many insurers, reinsurers and tour operators.

Germany's Munich Re, Switzerland's Zurich Financial and other insurers said they could not yet assess the cost of the deadly waves, which brought havoc to shores from India to Thailand.

"So many things are unclear, it is just too early to tell. You need very complicated processes to estimate damages. Unlike the hurricanes, you can't just run a model," said Serge Troeber, a natural catastrophe expert at Swiss Re.

Swiss Re hopes, Troeber added, that its total claims will be less than those from four hurricanes that hit the United States this year, which the company puts at $640 million.

Rescue workers are continuing to search for bodies after the world's biggest earthquake in 40 years, off the Indonesian island of Sumatra, triggered huge waves that flattened houses and hurled fishing boats ashore.

Shares in the world's top two reinsurers, Munich Re and Swiss Re, which insure other insurers, were both down 1.6 per cent.

But shares in Germany's Hannover Re shed most of their losses after the company said it would stick to its earnings forecast for 2004, despite damage caused by the tsunami waves.

The shares were down 0.1 per cent.

Tourism also hit

Shares in Europe's largest tourism firm TUI AG also fell, as did German airline Lufthansa.

Some analysts doubted, however, that these firms would be badly hurt.

"A lot of people who now want to go to Asia for holidays will go instead to the Mediterranean or North Africa and that will be good for these companies, because margins are a little higher," said one tourism analyst in Germany, asking not to be named.

Lufthansa and Air France-KLM said they had seen no major cancellations and were flying to the regions as normal, while TUI said that it foresaw no significant impact on sales and earnings from the disaster.

But Swiss International Air Lines, whose volatile stock was down more than 5 per cent, said that it had received around 60 cancellations on flights to Bangkok between Sunday and the end of the year.

French holiday village operator Club Mediterranee, whose stock dropped 4 per cent at the opening, said its insurance would cover any losses from the tsunami waves, which hit two of its resorts in the Maldives and one in Thailand.

For insurers, the potentially large new losses come on top of a string of storms, typhoons and earthquakes that had already made 2004 the most expensive year to date for the sector, according to research from Swiss Re.

Disaster year

Excluding the tsunami, disasters - both natural and man-made - have killed 21,000 people around the world this year and have prompted claims to property insurers of about US$42 billion, according to the research, released last month.

A spokesman for Munich Re said it was too early to tell whether the company's 2004 profit target of 1.8 billion to 2 billion euros (US$2.4-2.7 billion) was at risk.

In principle, Munich Re assumed that the volume of damage would be lower than in the case of a large hurricane, because tsunami waves hit only coastal regions, not the heartland, he said.

Hannover Re also said that it could not yet determine what impact potential claims might have on its profit target, which it cut earlier this year after hurricanes hit the Caribbean and the United States.

Share prices, however, reflected a market view that reinsurers would pick up most of the tab for the disaster, leaving Europe's primary insurers relatively unscathed.

Shares in Zurich Financial fell 1.2 per cent, Germany's Allianz was 0.4 per cent weaker and France's AXA dipped 0.2 per cent - much smaller declines than those of the reinsurers, whose business is the most global.

Allianz said it did not expect the tsunami disaster to have a significant impact on its profits.

Agencies via Xinhua

(Business Weekly 01/07/2005 page20)