New reports are supporting the notion that while the Japan earthquake and tsunami may not be enough to reverse the soft market, the impact of combined first-quarter catastrophes should improve pricing in some areas.
Consulting firm Towers Watson, with offices in New York and London, says in a report that based on published reports and market estimates, reinsurance rates are expected to increase 20-50 percent for Japan programs. India was expected to see increases in April 1 renewals. Australia and New Zealand should experience increases on their July 1 renewal program.
Increases in the U.S. depend upon individual reinsurance exposures, but with the upcoming hurricane season, pressure is expected on catastrophe renewals that take place midyear, Towers Watson says.
The report does not indicate what the rate of increase might be for India, Australia or New Zealand, but one consultant put U.S. increases in the double-digit range.
Overall, the results of the global catastrophes, along with revisions in Risk Management Solutions' (RMS) 11.0 model, likely mean "some firming of catastrophe rates that will vary on a regional basis," but not at the rate seen after Hurricane Katrina in 2005.
The impact from the quake may also be felt by reinsurance company stockholders if companies decide to buffer their earnings with a suspension of stock buyback programs, a report from Moody's says.
In its "Reinsurance Monitor" report, Moody's says that suspending share buybacks will blunt the need for rate increases.
The March 11 Tohoku earthquake is expected to result in insured losses between $20 billion and $45 billion, according to Towers Watson. The firm says, however, that only $12 billion to $15 billion will be reinsured internationally—meaning the impact is unlikely to approach the level of Hurricane Katrina.
Moody's, though, estimates reinsurer losses of between $25 billion and $50 billion, noting that it will make 2011 "exceedingly challenging" for the carriers.
An Aon Benfield report notes there have been more than 830 aftershocks following the main magnitude 9.0 quake, with at least 57 of those above magnitude 6.0. Aside from the damage in Japan, Aon Benfield says tsunami waves crossed the Pacific Ocean and caused a combined $88.4 million in damage to coastal locations of Hawaii and California in the U.S.
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