Predictions that the Japanese earthquake could prove to be the most costly ever natural disaster hit insurers yesterday.
AIR Worldwide, a catastrophe risk expert, warned that the insured loss could climb to £21.5bn for the earthquake damage alone. That news led the investment bank Panmure Gordon to speculate that the total bill could top £37bn.
In comparison, the insurance bill from January's earthquake in New Zealand is expected to be nearer £6bn.
Lloyd's of London refused to be drawn on the effect of the disaster on insurers. "It is far too early for us to comment on any potential business impact," the insurance market said. "We are confident the market can respond to any claims in the normal course of business."
In yesterday's stock market trading Lloyd's insurer Caitlin Group was hit the hardest, slipping 3.25 per cent. Other Lloyd's insurers hit included Beazley, down 2.5 per cent, and Hiscox, which fell 0.8 per cent.
Specialist reinsurers – which take on risk from insurance firms – are expected to suffer the biggest disaster bills. The world's biggest reinsurer, Munich Re, fell 3.7 per cent in Frankfurt yesterday following a 5 per cent tumble on Friday. Swiss Re, Hannover and Allianz also saw further falls in their share prices yesterday.
Reinsurers said it was too early to give estimates of the cost. Swiss Re said: "The circumstances in Japan are particularly complex since damage to property was not only caused by the earthquake itself but also by fire following the earthquake and the ensuing tsunami. It will take some time to estimate the damage."
In Japan, cover for residential earthquake shock and tsunami damage are actually provided by a government-run scheme, and so should not impact on global insurers as the risk is not normally reinsured in the private market.
However, cover for fire following earthquake is typically reinsured, and it is this area where bills could mount, along with commercial and industrial policies, where cover is common for earthquake, fire following earthquake, and tsunami.
Fears that damage to Japanese nuclear facilities could hit the Lloyd's insurer Chaucer Holdings led its shares to slump 8.5 per cent in the immediate aftermath of the disaster on Friday.
But yesterday Chaucer – one of the world's biggest insurers of nuclear risk – climbed 2.3 per cent after it assured investors that it would not be affected through its Nuclear Syndicate 1176.
The syndicate is one of a panel of insurers that covers Tokyo Electric Power Company, the owner of two of the three nuclear sites in the affected area – Fukushima Daiichi and Fukushima Daini.
Chaucer – which is involved in takeover talks – said it had no cover in place for property damage or business interruption at the two sites. It does provide cover for property damage at the Tohuku Electric Power plant in Onagawa, but earthquake and tsunami are specifically excluded from that cover.
"Chaucer does not expect any significant insured loss to arise in respect of this event," the insurer said yesterday. "The company will provide estimates of its other exposures to this event as soon as the size of the insured loss with regard to Chaucer has become clearer."
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