NU Online News Service, March 25, 2:21 p.m. EDT
Standard and Poor's says it believes claims-loss estimates on residential losses to insurers from the recent earthquake in Japan will not be exceeded, but the ratings future of the domestic insurers hinges on whether those estimates are surpassed or not.
The New York-based rating service said current estimates put residential losses at ¥ 1 trillion ($12.3 billion at the current exchange rate), but S&P says "the current expectation" is that the actual loss will be below that number.
However, if the claims figures exceed the ¥1 trillion mark, some insurers can expect downgrades of one notch.
The company says it revised the outlook of nine Japanese insurers today to negative from stable.
The companies are:
- Mitsui Sumitomo Insurance Co. Ltd.
- Aioi Nissay Dowa Insurance Co. Ltd.
- Mitsui Sumitomo Kirameki Life Insurance Co. Ltd.
- Mitsui Sumitomo MetLife Insurance Co. Ltd.
- Sompo Japan Insurance Inc.
- NIPPONKOA Insurance Co. Ltd.
- Sompo Japan Himawari Life Insurance Co. Ltd.
- Kyoei Fire & Marine Insurance Co.
- Secom General Insurance Co.
S&P says it made the downgrade decision believing that the March 11 disaster would "negatively affect the financial bases of the aforementioned insurers."
S&P said it affirmed the ratings on six insurers and maintained the outlooks at stable.
The six are:
- Tokio Marine & Nichido Fire Insurance Co. Ltd.
- Tokio Marine & Nichido Life Insurance Co. Ltd.
- Nisshin Fire & Marine Insurance Co. Ltd.
- ACE Insurance
- Allianz Fire and Marine Insurance Japan Ltd.
- Toa Reinsurance Co.
Today, AIR Worldwide issued a revised loss estimate for the event, putting it between $20 billion and $30 billion. Previously, the cat modeler had expected losses between $15 billion and $35 billion.
In a statement, Jayanta Guin, senior vice president of research and modeling at AIR, comments that this "unprecedented event" has never before been so well recorded and this avoids double-counting in affected areas.
Moody's says in a report today that loss estimates range from $12 billion to $35 billion.
The insurance and economic losses are expected to exceed the 1995 Kobe earthquake that Moody's says caused more than $100 billion in economic loss and $6 billion in insured losses. Due to the tsunami, the loss of life is expected to exceed 15,000 people, Moody's says.
In a note to policyholders, Michael Korn, managing principal with the insurance brokerage firm Integro, says the "horrific events in Japan" have the potential to "push the insurance industry into unfamiliar waters."
The combination of events—earthquake, tsunami, continued strong aftershocks and the nuclear-reactor crisis—conspire to place the industry in a situation it has "never experienced or adjusted before."
He advises that while there are a number of obvious losses from property and business interruption, clients need to be aware of potential loss coverage ranging from extra expense to contingent time elements involving suppliers and damage to other facilities that impairs their operations.
"There are many factors in play as the situation continues to unfold," Korn notes. "It will take time to determine the proximate cause for each loss scenario and how individual policies will respond."
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