Zeller predicts a sharp rise in reinsurance premiums

"We expect that there will be strong rate increases in the reinsurance market that will put us in the position to earn back these losses in the next few years," chief executive Wilhelm Zeller said in an interview with Euro am Sonntag.

"That's why we maintain that the year 2002 will be a good one as long as there are no longer any similar extraordinary events," he told the newspaper.

The warning that much of the cost of the terrorist attacks on America will be passed on to the reinsurance industry's customers, namely insurance companies, came after a 46% fall in Hannover's share price to 42.80 euros ($39.80, �26.90).

Previous warning

Insurance premiums were already widely seen as likely to rise as a result of the attacks, with additional costs for terrorist specific policies.

Already, higher insurance costs have hammered activity in the airline and shipping sector.

On Friday, Munich Re, the world's number one reinsurer, said it would undertake a "fundamental reassessment of the risk situation" when reinsurance policies come up for renewal in the last quarter of the year, "as the attacks have revealed a previously unimaginable risk potential".

"Primary insurance and reinsurance coverage, as well as terms and conditions will have to be completely rethought," the group said.

Cheap shares?

Hannover Re estimates that it will face claims of about 400 million euros ($366m, �251m) following the attacks.

The claims are expected to wipe out its 2001pre-tax profits.

Rising premiums should push up earnings and eventually the share prices should reflect this, said Mr Zeller, insisting that he believes it will soon rise to 80 euros.

"I have twice purchased additional shares for my private portfolio because you will never get these shares so cheap," Mr Zeller told the newspaper.