NU Online News Service, Feb. 25, 8:54 a.m.EST

The latest New Zealand earthquake is “absolutely not” the typeof event to harden the reinsurance market, said the global head ofbusiness intelligence for Guy Carpenter.

In terms of the size of loss and the effect the Feb. 22earthquake will have on reinsurers’ earnings, it “would not createa sustained turn in rates,” said David Flandro of the globalreinsurance intermediary.

Though a meaningful event, the impact of the destructiveearthquake will be localized to the New Zealand market, added JohnDeMartini, leader of broker Towers Watson’s catastrophe riskmanagement practice.

Mr. Flandro added, “It could change the supply and demandpicture there.”

In January Mr. Flandro said a $50 billion hurricane loss “wouldonly give the market pause for a year or so,” but a terror event orearthquake in a major city could have a larger effect.

Global reinsurance capacity remains more than adequate. Theearthquake struck near Christchurch, New Zealand—an area affectedby an earlier earthquake in September 2010. Though it is believedthe latest earthquake has caused more damage than the Septemberquake, Mr. Flandro said reinsurers’ disclosure from the Septemberearthquake gives a look at exposure.

The median exposure to the September quake was 2 percent ofglobal capital in the reinsurance market and 10 percent of 2010pre-tax earnings, Mr. Flandro said. Aon Benfield in Januaryreported that at the end of the 2010 third quarter there was $470billion of reinsurer capacity.

Catastrophe modeler AIR Worldwide said losses from the earthquake are expected to be between NZ$5billion (US$3.5 billion) and NZ$11.5 billion (US$8 billion).

Mr. DeMartini said the Feb. 22 temblor is being treated as aseparate event, meaning losses felt by a company like Australia’sSuncorp will not be reinsured in full.

According to Moody’s, companies like Suncorp could have benefitted if thisearthquake, which has been classified as an aftershock of theSeptember quake, was not considered a new event.

The New Zealand Earthquake Commission (EQC) said otheraftershocks from the September earthquake are considered separateevents, according to a note from Willis Re sent to clients.

The country’s finance minister said that the EQC, which providescoverage of up to NZ$100,000 (US$73,385) per building forresidential owners who purchase fire insurance, has sufficientfunds to cover expected claims, Willis Re reported. The EQC isliable for the first NZ$1.5 billion (US$1.12 billion) of losses andit has NZ$2.5 billion (US$1.87 billion) in reinsurance cover.

It may take some time for the true impact of the earthquake tobe realized. Mr. Flandro said claims from earthquakes “develop moreslowly than wind events” because the damage isn’t alwaysimmediately evident.