Japan earthquake, tsunami could cost insurers $10 billion, analyst says
The earthquake and tsunami that hit Japan and the Pacific on Friday could cost the insurance industry about $10 billion, according to James Shuck, an analyst with Jefferies International Ltd. in London. That’s far smaller than the $50 billion analysts estimate a giant, once-in-250 years earthquake would cause. The number is smaller because the earthquake occurred in an area of relatively low population, and because many Japanese do not have earthquake insurance, he said.
"At this stage insured losses from the Japanese earthquake appear limited,” he said, in a note. “From an insurance perspective, it is fortunate that the epicentre was near Sendai rather than Tokyo."
Insurance claims are likely to be for property rather than life, he said. Only about 10% of Japanese homes are covered under earthquake insurance, and that coverage is only for part of the property value. The 1995 Kobe earthquake, for instance, incurred $100 billion of economic losses, but only $3 billion of insurance losses.
Aflac Inc. is the largest foreign insurer in Japan, and has "rather limited" financial exposure to the earthquake and tsunami, its chief executive told the AP. Aflac does not sell property insurance.
The biggest business impact of the tsunami so far seems to be on automakers. Major ports in Japan are closed, and car companies such as Honda, Nissan and Toyota have suspended parts of their operations.
-- Alana Semuels
Photo: Damage from the 1995 Kobe earthquake. Credit: BlatantNews.com via Flickr