Insurance companies have started releasing preliminary estimates of losses due to the recent series of natural disasters to strike Japan and the South Pacific region. Some insurers are taking a major hit from the well reported earthquake and tsunami in Japan, as well as less known disasters in Australia and New Zealand.
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The earthquake and resulting tsunami in Japan is the latest in a series of natural disasters during the first quarter of 2011. In February 2011, Cyclone Yasi hit Australia causing extensive damage to that country. Yasi was a category 5 storm and was reportedly stronger than Hurricane Katrina, the storm that struck New Orleans in 2005.
This was the second disaster that Australia saw over the last few months, as the country experienced seasonal flooding in eastern Australia starting in November 2010 and continuing into 2011.
In late February, an earthquake measuring 6.3 struck New Zealand causing hundreds of deaths and billions in damage. This was also the second earthquake to occur in New Zealand in recent months, as that country suffered a 7.1 earthquake in September 2010.
Partner Re (NYSE:PRE) estimates that its pretax loss due to the most recent New Zealand earthquake would range between $180 million and $240 million. This is based on a total loss of $7.4 billion to $11.1 billion for the entire event.
Ace Limited (NYSE:ACE) is suffering losses from all these recent events, with the company estimating losses from the Australian and New Zealand disasters at $195 million. The Japanese disasters will cost the company between $200 and $250 million. All the losses are reported by the company on an after tax basis.
XL Group (NYSE:XL) will have pretax losses of $70 million to $85 million from the most recent earthquake in New Zealand. This loss is mostly from the company's reinsurance segment, which provides insurance to other insurers. The company is using an estimate for total industry losses from the earthquake in a range from $8 billion to $12 billion.
Everest Re Group (NYSE:RE) expects to take an after tax hit of between $120 million and $180 million from the second New Zealand earthquake. The company also estimates that the after tax loss from the Australian flooding will be $37 million.
Everest Re Group will also have "significant" losses from the Japan earthquake, but felt it was too early to make an accurate estimate. An examination of the company's government filings shows that the company received $277.7 million in gross premiums in 2010 from insurance written in Asia.
Renaissance Re (NYSE:RNR) expects the Australian flooding and latest New Zealand earthquake to cost the company $220 million, consisting of $30 million in losses in Australia and $190 million from New Zealand. Renaissance Re also felt that it was too early to estimate losses from the Japanese disasters.
Although the ultimate cost of the disasters in Japan is not known yet, a look at previous disasters may be instructive in determining the total insured losses. The Insurance Information Institute (III) reports that the costliest earthquake in history occurred in Northridge, California in 1994, and cost the industry $15.3 billion.
U.S. based companies may also be protected by the large Japanese property and casualty industry, which may have retained much of this exposure. The Japanese non-life insurance industry took in $107 billion in premiums in 2009, according to the III.
Loss estimates are starting to roll in from many publicly traded property and casualty companies with exposure to the wave of catastrophes that struck Japan, Australia and New Zealand. (The first written policy appeared in Hammurabi's Code. Find out how it evolved from there. Check out The History Of Insurance.)
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