Last week’s earthquake in Japan could lead to insured losses of nearly
$35 billion, risk modelling company AIR Worldwide said, making it one
of the most expensive catastrophes in history, reports Reuters.

That figure is nearly as much as the entire worldwide catastrophe loss
for the global insurance industry in 2010, and could be the triggering
event that forces higher prices in the insurance market after years of
declines.

AIR said its loss estimate range was $14.5 billion to $34.6 billion.
That was based on a range of 1.2 trillion yen to 2.8 trillion yen,
converted at 81.85 yen to the dollar.

The company cautioned that the estimate was preliminary, and its
models do not factor in the effects of the tsunami that followed the
earthquake, or any potential losses from nuclear damage.

AIR said that in many cases, buildings will have been damaged by the
8.9-magnitude earthquake and then swept away by the flooding
thereafter, making precise counting difficult. The firm intends to
issue updated estimates in future combining the quake and the floods.

At the upper end of the range, this temblor will go down by far as the
costliest earthquake in modern history in terms of insured losses,
surpassing the roughly $15 billion in losses of the 1994 Northridge
earthquake in California.

Of all catastrophes since 1970, adjusted for inflation, it would rank
as the second-costliest behind Hurricane Katrina.
It may also be enough to stem years of price declines in the global
property insurance and reinsurance markets, which are awash in excess capital following an absence of major hurricane disasters in recent times.

Going into this year, analysts and brokers said it would take a $50
billion event to stem the price market for just a year.

Since January 1, the industry has $10 billion in losses from the
earthquake in New Zealand, still-untold losses from floods in
Australia and an estimated $8 billion to $10 billion in losses from
unrest in the Middle East.

Cumulatively, some like Standard & Poor’s believe the losses may be
enough to trigger the long-awaited “hard market” in which insurers
again have pricing power.

There are also lingering questions about the cost of the clean-up and
long-term monitoring following explosions and radiation leaks at the
Fukushima nuclear reactors. Such reactors generally have insurance
that excludes earthquake damage, and many Japanese homeowners have nuclear exclusions in their own policies.

Chaucer operates Lloyd’s Syndicate 1176, one of the world’s biggest
insurers of nuclear risk. A Chaucer spokesman declined to comment.

 

 

Source: ThisDay