Munich Re Estimates Japan Quake, Tsunami Claims over $2 Billion
Munich Re announced that it has estimated its claims burden from the earthquake and tsunami in Japan at around €1.5 billion [$2.128 billion], after retrocession and before tax.
As a result Munich Re said its “profit target of around €2.4 billion [$3.4 billion] for the financial year 2011 can no longer be maintained.”
As most of the companies with exposures to the disaster have indicated, Munich Re also noted that the “initial loss estimate is based solely on modeling. Owing to the extent of the destruction, further possible aftershocks and difficult clearing-up operations, it will be many weeks before the losses are assessed and all the claims notifications from Japanese primary insurers have come in.”
The bulletin also explained that “many reinsurance covers do not attach until very high losses have been sustained by individual cedants.” Therefore it will “only become apparent at a later stage whether and to what extent reinsurers are affected by losses under particular treaties. Further uncertainties result from the impact on international flows of goods and supply chains from business interruptions suffered by Japanese industrial producers.”
Torsten Jeworrek, Munich Re’s Reinsurance CEO, noted that the magnitude 9.0 earthquake on March 11 struck the northeast coast of the main island of Honshu and was followed by a massive tsunami that devastated a number of cities and towns along Japan’s northeast coast
“The earthquake was not only the strongest ever recorded in Japan: it was also the fourth most severe ever measured anywhere in the world,” he added.
“That makes clear the extent of the losses and the suffering,” he continued. “Our full sympathies are with the Japanese people and our clients there.” Jeworrek also noted that Munich Re’s business relations with Japanese insurance companies date back to 1912, and that the reinsurer would continue to “make our capacity available to our clients in Japan and support them in dealing with the losses. We can be counted on, particularly at moments like this, and are in close contact with our clients.”
Munich Re said most of the losses it anticipates will be from coverage of commercial business. It added that, “with the exception of covers placed with mutual insurers, earthquake insurance for residential buildings in Japan is provided solely by the Japanese earthquake pool, which is insured by the Japanese state together with private Japanese insurance companies. Due to supervisory regulations, risks from the earthquake pool may not be transferred to the international reinsurance market.”
Concerning the ongoing nuclear reactor crisis at the Fukushima power plant, Munich Re stated that the “private insurance industry will not be significantly affected by the accidents.”
As the world’s biggest reinsurer, Munich Re is usually the one that bears the biggest losses. Its expected claims are almost double those of Swiss Re.
In addition to the losses from Japan, Munich Re has also been impacted by “high losses from the earthquake in New Zealand, the floods in Brisbane and Cyclone Yasi in Australia.”
The reinsurer indicated that with the “projected losses from the earthquake and tsunami in Japan, the major-loss burden from natural catastrophes amounts to over €2.5 billion [$3.55 billion] (after retrocession and before tax), thus far exceeding the volume to be expected for this period. That means the profit target for 2011 of around €2.4 billion is no longer achievable.”
Source: Munich Re