The Japanese government will likely bear most of the damage from the earthquake
Insurance and reinsurance companies in Japan and abroad, as well as hedge funds and other catastrophe bond investors, are expected to bear a relatively small share of losses from the earthquake, according to a recent New York Times article. and the resulting tsunami. , which is expected to exceed $ 100 billion. For comparison, the 1995 earthquake in Kobe, Japan caused about $ 100 billion in damage, according to the Insurance Information Institute, but only about $ 3 billion was covered by insurance. Thus, a substantial part of the losses resulting from this most recent disaster will likely fall on the Japanese government.
The article further notes that coverage of losses resulting from the likely nuclear contamination caused by the earthquake and tsunami is also uncertain. Although Japan requires its nuclear operators to purchase approximately $ 2.2 billion in liability insurance from a local captive, this insurance does not cover damage caused by earthquakes or outages. ‘activity. According to the article, the initial estimate of insured losses from the earthquake, provided by AIR Worldwide, was relatively “narrow,” valued at between $ 15 billion and $ 35 billion, and only included damage resulting from the earthquake. land and the resulting fires, but not the tsunami, landslides or nuclear accidents. While this initial estimate includes the cost of physical damage to homes and their contents, farms and commercial property, as well as insured operating losses, the company’s estimates will not include various uninsured losses, including losses. swept away cars, warped roads and weakened bridges, and “surge in demand” – understood as soaring material and labor costs that coincide with large-scale reconstruction after a disaster. As the article notes, “[t]Uninsured losses could turn out to be the biggest of all. âThe company plans to revise its estimates in the coming week.
The impact of this catastrophe has already spread to insurers and reinsurers in the United States and Europe, according to the article, which reports that American life and health insurers operating in Japan suffered a price loss due to fears. radiation exposure. The article further notes that Aflac, which sells a popular line of cancer insurance in Japan, was among the biggest losers. According to the article, “[b]Commercial insurers that operate globally, such as ACE, Chartis, Allianz and Zurich, have a relatively small presence in Japan, and therefore low exposure. About 90 percent of the P&C business in Japan is underwritten by three major domestic insurance groups, the MS&AD Insurance Group, the Tokio Marine Group and the NKSJ Group. “However, according to Kenji Kawada, senior analyst for Moody’s Japan KK, who is cited in the article, “[a] A significant portion of the losses will flow back to the global reinsurance industry, âwith Munich Re, Swiss Re, Scor, Hannover Re, Berkshire Hathaway, PartnerRe and Everest Re being among the largest reinsurers with an interest in Japan. While Moody’s expects the ratings of major reinsurers to remain stable, it expects reinsurance prices to reverse and rise slightly as a result of this disaster.