Catastrophe-risk modeler EQECAT has dramatically changed its estimate of insured losses from the Tohoku, Japan earthquake to between $22 billion and $39 billion.

Shortly after the March 11 earthquake EQECAT released an insured-loss estimate of between $12 billion and $25 billion.  

EQECAT says the upward shift in estimating losses is due to several factors. First, water depths from the tsunami that followed the earthquake were thought to be eight meters (26 feet), but the depths were more than 25 meters (82 feet) and extended inland about 10 kilometers (nearly 6.25 miles).

“Measured water depths were generally beyond the height of prepared tsunami defenses,” EQECAT says. “In many coastal areas even the tallest buildings were completely inundated with water. Damage to wood structures was virtually 100 percent—houses were completely removed from their foundations.”

Losses were also adjusted due to a better understanding of damages caused by liquefaction, landslides, power outages, transportation interruption and disruption at the nuclear power plant in Fukushima.

Property insurers will bear a large portion of losses. Revised property-loss estimates resemble EQECAT’s original prediction for losses to the entire market—between $15 billion and $25 billion. Of this amount, $7 billion to $12 billion is attributed to Japan’s unregulated cooperative insurance companies, collectively known as Kyosai. Kyosai does not cede losses to the government’s Japan Earthquake Reinsurance Pool (JER) like the general non-life companies do. Losses to the general non-life companies are estimated to be in the range of $3 billion to $5 billion, EQECAT says.

The non-life commercial insurers, which rarely cover business interruption, are expected to pay out between $5 billion to $8 billion, the modeler adds.

EQECAT’s overall loss estimate also includes marine, auto, life and personal-accident lines of coverage, as well as demand surge. The estimate does not include loss-adjustment expenses, contingent business interruption or losses related to the current emergency at power plants.

The adjustment comes after reinsurance-brokerage firm Holborn says modelers were underestimating market losses from the quake by as much as $23 billion. Holborn puts insurance-market losses at between $35 billion and $55 billion after adding coverages not included in predictions given by the three catastrophe-risk modeling firms: EQECAT, AIR Worldwide and Risk Management Solutions.

Aon Benfield said last week that catastrophe models may not be as accurate as some carriers might expect and cautioned insurers to examine their loss estimates more closely. Aon Benfield says the insurance industry has recently witnessed evidence of models both underestimating and overestimating loss estimates.