Swiss Re Sees Claims Costs of $1.2 Billion From Japan Earthquake, Tsunami
Swiss Re Estimates Claims of $1.2 Billion From Japan Quake
Chris Ratcliffe/Bloomberg
Pedestrians walk in to the Swiss Re Insurance building in the City of London's financial district.
Pedestrians walk in to the Swiss Re Insurance building in the City of London's financial district. Photographer: Chris Ratcliffe/Bloomberg
March 16 (Bloomberg) -- Tom Larsen, a senior vice president at Eqecat Inc., which specializes in gauging the effect of disasters, talks about the outlook for insurance losses from Japan's earthquake. He speaks from San Francisco with Andrea Catherwood on Bloomberg Television's "Last Word." (Source: Bloomberg)
March 16 (Bloomberg) -- Daniel Amos, chief executive officer of Aflac Inc., discusses the impact of last week's earthquake and tsunami in Japan on the Columbus, Georgia-based insurer and Aflac's contribution to the relief effort. The world’s largest seller of supplemental health insurance gets most of its revenue in Japan. Amos talks with Betty Liu on Bloomberg Television's "In the Loop." (Source: Bloomberg)
March 15 (Bloomberg) -- Joseph Plumeri, chief executive officer of insurance broker Willis Group Holdings Plc, discusses the potential impact of Japan's earthquake and tsunami on the insurance industry. Plumeri, speaking with Erik Schatzker on Bloomberg Television's "InsideTrack," also talks about the country's damaged nuclear reactors. (Source: Bloomberg)
Swiss Reinsurance Co., the world’s second-biggest reinsurer, estimated it will face claims of about $1.2 billion from the earthquake and the tsunami in Japan.
The figure is low because Japan’s government insures residential properties covered by non-life companies against earthquake and tsunami damage and this protection is not reinsured internationally, the Zurich-based company said in an e-mailed statement today. The preliminary claims figure is net of retrocession and before tax, Swiss Re said.
A 9.0-magnitude earthquake off Japan’s coast on March 11 has left 8,649 people confirmed dead by noon yesterday, with more than 13,000 still missing and operators of the Fukushima Dai-Ichi atomic power plant battling to prevent a meltdown. The nuclear accident won’t have a “significant” effect on reinsurers, according to Swiss Re.
“It is clearly below market fears,” said Christian Muschick, a Frankfurt-based analyst with Silvia Quandt & Cie. “It should help the sentiment for reinsurers,” because losses don’t seem worse than those tied to the Kobe-earthquake in 1995, Japan’s most destructive until March 11, he said.
Swiss Re rose 1.7 percent to 50.85 Swiss francs as of 9:37 a.m. in Zurich trading, valuing the company at about 18.8 billion francs ($20.8 billion). Munich Re, the world’s largest reinsurer, gained 2.1 percent to 110 euros in Frankfurt trading.
Eqecat, AIR Projections
Catastrophe modeling firm Eqecat said on March 16 that insurers and reinsurers will probably have losses of $12 billion to $25 billion from the Japan earthquake and tsunami, after modeler AIR Worldwide had estimated losses of as much as 2.8 trillion yen ($35 billion) from the quake alone. Scor SE (SCR), the world’s sixth-largest reinsurer, said on March 14 that its claims will be less than 185 million euros ($262 million).
Major catastrophe losses for the company in the first quarter of this year will be about $2.3 billion, after floods in Australia, cyclone Yasi and the temblors that struck New Zealand, Swiss Re has said. This compares with the firm’s $1 billion annual budget. The $1.2 billion Japan estimate is “subject to a higher-than-usual degree of uncertainty” and exact calculations may take several months, Swiss Re said today.
“It eats into Swiss Re’s excess capital a bit, but I don’t see it changing the S&P deliberations,” said Tim Dawson, a Geneva-based analyst with Helvea. The reinsurer is bidding to regain the AA- credit rating that Standard & Poor’s cut in 2009 after the company’s record loss the year before.
‘Excludes Earthquake Shock’
The company said on Feb. 17 that capital was more than $10 billion in excess of S&P’s AA requirements.
“Coverage for nuclear facilities in Japan excludes earthquake shock, fire following earthquake and tsunami,” though commercial and industrial risks are commonly reinsured, Swiss Re said today. “The incident at the Fukushima nuclear power plant is unlikely to result in a significant direct loss for the property and casualty insurance industry.”
The insurance losses from the Japan quake may be large enough to turn prices for catastrophe cover that have been falling for two years, according to Stefan Schuermann, a Zurich- based analyst with Vontobel Holding AG.
“We remain convinced that high recent cat losses including the Japanese catastrophe will most likely turn the soft reinsurance market, to be tested on April 1 renewals,” he said in a note to investors.
Reinsurers limit their own risks by selling parts of them to other reinsurers in a process known as retrocession.
To contact the reporters on this story: Carolyn Bandel in Zurich at cbandel@bloomberg.net; Leigh Baldwin in Zurich at lbaldwin3@bloomberg.net.
To contact the editor responsible for this story: Frank Connelly at fconnelly@bloomberg.net.
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