New York-based consultancy Towers Watson said Monday that the earthquake and tsunamin in Japan on March 11 "will not have a devastating effect on either the capital of the Japanese insurance industry or the international reinsurance market."
"The low take-up rates for earthquake insurance and the propensity of the Japanese market to insure domestically means that the vast majority of the Japan loss will be absorbed within the country," William Eyre, Jr., managing director of Towers Watsons reinsurance brokerage business, says in a statement.
Some reinsurers may see a bigger loss from the two recent earthquakes in New Zealand than from Japan, he added.
The company expects $20 billion to $45 billion in total insured losses, 6.6% to 15% of a total expected loss of at least $300 billion. In comparison, 43% of the $150 billion in damage following Hurricane Katrina a total of just under $75 billion was insured.
Of the insured loss, only $12 billion to $15 billion will be reinsured internationally; about 30% to 40% of the insured loss or 4% to 5% of the overall economic loss, Franois Morin, Towers Watsons global product leader, property & casualty claims reserving, says in a statement.
There were several factors in 2005 that do not appear to be present to the same extent, Towers Watson notes. In the wake of the three major hurricanes Katrina, Rita and Wilma there was the two-pronged recalibration of catastrophe risk by the major modeling firms and required capital for reinsurers, which was promulgated by the rating agencies.
Nathan Golia is senior editor of Insurance & Technology. He joined the publication in 2010 as associate editor and covers all aspects of the nexus between insurance and information technology, including mobility, distribution, core systems, customer interaction, and risk ... View Full Bio