The Bermuda insurance market could have to fork out as much as $1.7 billion in claims related to catastrophes that struck in the first quarter.

Last month's earthquake in Chile and a violent European windstorm called Xynthia — not to mention winter storms in the US and an extraordinary hailstorm in southern Australia — will likely force some companies to record first-quarter losses.

Property catastrophe reinsurance is a major part of the Bermuda market's business. Last year, an unusually quiet catastrophe year allowed many Bermuda companies to make impressive profits and bounce back from a dismal 2008.

But the expensive events in the first three months of this year serve as reminder of the riskiness of their business.

According to guidance given so far by 16 major players in the Bermuda market, their losses attributed solely to the earthquake could reach almost $1.5 billion.

The numbers include the estimate of Ace, which is a Swiss company but has substantial operations in Bermuda.

They do not include numbers from a major reinsurer, RenaissanceRe, which said catastrophe losses would be "meaningful", but not sufficiently high to stop the company making a first-quarter profit, nor Lancashire Holdings, which said there was too much uncertainty to make a realistic estimation.

Nor do they include estimates from a clutch of privately-held re/insurers, including Ariel Re, Harbor Point Re and Torus Insurance Holdings, nor from some public companies who have not yet given guidance, including Catlin Group and Aspen Insurance Holdings.

In their preliminary estimates, most reinsurers have offered a wide range for potential losses from the 8.8-magnitude earthquake that rocked central Chile on February 27, because there is still a high degree of uncertainty as to what actual claims will be.

According to a statement issued by ratings agency Moody's last Friday, 16 reinsurers worldwide had so far estimated losses of about $3.5 billion from the earthquake and storm combined.

The biggest hits were taken by the European giants, with Munich Re estimating losses of $679 million, Swiss Re, $600 million, and Hannover Re, $307 million.

The largest estimate put forward by a Bermuda reinsurer came from PartnerRe, which estimated a loss of between $220 million and $320 million for the earthquake, as well as $40 million to $70 million for the storm.

Validus Holdings stands to see the next biggest catastrophe losses, ranging between $190 million and $300 million. XL Capital was the third highest, with a catastrophe loss range of between $160 million and $230 million.

Moody's analyst James Eck said: "Much uncertainty still remains around these loss estimates, because most reinsurers appear to simply be making educated guesses based on market share percentages of possible industry-wide insured losses."

Last year, a strong recovery in the global markets and a lack of claims helped insurers to replenish their capital base. The Association of Bermuda Insurers and Reinsurers said earlier this month that the capital and surplus held by its 23 members rose by around 30 percent to $84 billion in 2009.

With underwriting opportunities limited by the global slowdown in economic activity, many had announced large share repurchase programmes to make use of their capital.

Mr. Eck suggested that some companies may be forced to hold back on those buybacks to ensure they have enough capital for this year's hurricane season.

"We view the capital cushion for significant share buybacks to have thinned considerably as a result of these recent catastrophe events," says Mr. Eck. "If the hurricane season in the Atlantic Ocean is an active one, and catastrophe losses continue to accumulate, companies could experience capital strain, and even find themselves vulnerable to ratings downgrades in the absence of timely equity recapitalisations."