Shock absorbers

14 March 2011 By John Foley Follow @johnsfoley

Estimates of insurance losses of $35 billion may prove conservative, but still fall short of other disasters like Hurricane Katrina. Yet the sector is well capitalised, and providers have learned from past catastrophes. Big claims can turn the cycle towards higher profitability.

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Insurance and reinsurance stocks fell on March 14, three days after an earthquake and resulting tsunami claimed thousands of lives in northeast Japan. Preliminary estimates of insured losses were $15 billion to $35 billion, according to risk consultant AIR Worldwide.

Commercial and industrial insurance policies in Japan are provided mainly by domestic firms, with just 6 percent written by foreign companies such as ACE Limited, Allianz and Zurich. Shares in Japan's largest provider of fire and earthquake policies, Tokio Marine Group, fell 12 percent on March 14.

Hurricane Katrina, which hit the United States in 2005, gave rise to $71 billion of insured losses, according to Swiss Re, excluding life and liability insurance claims, making it the world's biggest loss from a single event.

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