The unexpected nature of Friday’s earthquake in Japan, plus the damage from the subsequent tsunami and fires, makes estimating insured losses from the disaster especially difficult, senior executives at two top catastrophe risk modeling firms said on Saturday.
However, most experts agree the growing threat of disaster from damaged nuclear reactors is unlikely to have much effect on the mainstream insurance business because of the way insurance for the nuclear power industry is structured.
Insurance policies often exclude certain factors from coverage, and that will probably occur in this case — exclusions on earthquake damage in the property insurance for reactors and exclusions on nuclear damage for homeowners’ insurance policies.
What remains is likely to be an international liability pool, where reactor operators insure each other against claims in situations like this one.
How deep that liability extends is unknown, however — Japan is not a party to major international conventions limiting the nuclear liability of operators.
Generally speaking, the insurance industry does not model the potential for nuclear accidents when it looks at the effects of disasters in areas with nuclear power.
“The scrambling of the reactor is a huge event that’s really difficult to model,” Eqecat senior vice president Tom Larsen said in an interview.
Any impact was more likely to be felt by life insurers than property insurers, he said.
Even without the nuclear threat, though, there is plenty of scope for damage claims of historic proportions.
About US$24 billion of insured property is located in the 3km band along the coast of the four -prefectures most affected by the quake, senior vice president of research and modeling at -disaster-modeling firm Air Worldwide Jayanta Guin said. There is about US$300 billion of insured property in the four prefectures most affected by the quake’s shaking.
It would be days or even weeks until an accurate estimate could be made of what was lost, how it was lost and what it would take to repair the damage, Guin said.
One problem is that the damage was difficult to model because the intensity and location of the quake were unexpected, Guin added.
Eqecat, another risk modeler, said the quake was at least eight times stronger than any it had modeled in that part of Japan.
The firm said on Saturday that economic losses from the quake would likely exceed US$100 billion. It did not release an estimate for insured losses.
Equity analysts covering the insurance industry said on Friday that the quake may have caused up to US$15 billion in insured losses, which would make it the costliest quake in insurance industry history.
Another major question for the insurance industry in the days ahead will be whether the disaster will force insurers and reinsurers to raise prices after three years of declines.
Going into this year, brokers and analysts said it would take an insured event of US$40 billion to US$50 billion to stem price declines for at least one year.
Standard & Poor’s equity analysts estimated on Friday that insurers faced at least US$30 billion in claims this quarter from a combination of earthquakes in Japan and New Zealand, floods in Australia and losses related to unrest in the Middle East.
Major insurers and reinsurers with exposure to the Japanese market, such as American International Group, ACE Ltd, Munich Re and Swiss Re, are expected to take weeks to assess their losses. Even then, the numbers are likely to rise steadily for months afterwards, as they did with the earthquake in New Zealand in September.
POOR INTERNAL CONTROLS: Insurance Bureau Director-General Shih Chiung-hwa said the company is expected to get back on track while its chairman is suspended The Financial Supervisory Commission (FSC) yesterday fined Shin Kong Life Insurance Co (新光人壽) NT$27.6 million (US$939,415) for a reckless investment that endangered its solvency, and suspended its chairman Eugene Wu (吳東進) for poor supervision. The penalty is the second-highest in a single case after Nan Shan Life Insurance Co (南山人壽) was fined NT$30 million in September last year and its chairman Du Ying-tzyong (杜英宗) suspended for two years, the commission said. In three rounds of special and regular examinations conducted since last year, the commission found that Shin Kong Life had given too much power to an asset and liability management committee
HEAVY INVESTMENT: Moody’s affirmed the firm’s ‘Aa3’ rating with a ‘stable’ outlook due to its leading position in the industry and ability to match customer requirements Taiwan Semiconductor Manufacturing Co’s (TSMC, 台積電) revenue this year is expected to increase about 21 percent to NT$1.29 trillion (US$44.01 billion) from NT$1.07 trillion last year, driven by strong demand for advanced 5-nanometer and 7-nanometer chips mainly used in smartphones and high-performance computing devices, a Moody’s Investors Service report on Wednesday said. TSMC’s rate of revenue growth next year is to increase to 7.5 percent, the ratings agency said. The company, which supplies 5-nanometer chips for Apple Inc’s new iPad series, has introduced the advanced chips ahead of its competitors and gained a significant share of the market for the foundry industry’s
Sony Corp has cut its estimated Play Station 5 (PS5) production for this fiscal year by 4 million units, down to about 11 million, following production issues with its custom-designed system-on-chip (SOC) for the new console, people familiar with the matter said. The Tokyo-based electronics giant in July boosted orders with suppliers in anticipation of heightened demand for gaming in the holiday season and beyond, as people spend more time at home due to the COVID-19 pandemic. However, the company has come up against manufacturing issues, such as production yields as low as 50 percent for its SOC, which have cut into
O2O BICYCLE SHOW: The Taiwan Bicycle Show next year is to be online to offline, with forums, audio-visual conferences and livestreaming of the offline events Local bicycle makers expect demand to continue outpacing supply due to orders triggered by the COVID-19 pandemic, with some companies seeing orders back up through next year. “Next year is all full in terms of orders. Our lead time on components is one year,” Giant Manufacturing Co Ltd (巨大機械) chairwoman Bonnie Tu (杜綉珍) told a news conference in Taipei organized by the Taiwan External Trade Development Council (TAITRA) to announce next year’s Taipei Cycle Show. The pandemic has reduced bicycle supplies and increased demand around the world, Robert Wu (吳盈進), chairman of KMC (Kuei Meng) International Inc (桂盟國際), one of the world’s