The massive earthquake in Japan has sent the stock value of re-insurers plummeting, less than a month after the sector was hit by the deadly tremblor that slammed Christchurch, New Zealand.
Several re-insurance companies, which back up insurers and are among those hit hard by catastrophes, said it was too soon to estimate the damage but “it will be an expensive event”, noted Christian Muschick, an analyst at the private German bank Silvia Quandt.
The cost in human life has already reached over 700 and many thousands are still missing, media reports said, after the massive 8.9-magnitude earthquake, the biggest ever recorded in Japan, was followed by huge aftershocks and tsunamis along the nation’s Pacific coast.
The Pacific Tsunami Warning Centre west of Honolulu, Hawaii, issued a widespread warning extending across virtually the entire Pacific Ocean, including Australia, Antarctica and South America.
In Paris, an insurance sector analyst who did not wish to be identified told AFP: “After the floods in Australia, the quake in New Zealand and now the one in Japan, the bill for re-insurers is already looking expensive this year.”
The Italian investment bank Mediobanca said in a note that “there are no more detailed estimates, at this stage, on the likely impact on population and buildings.
“However, we expect the reinsurance sector to be significantly affected by the news which comes after the earthquake in New Zealand last month.”
Swiss Re spokesman Tom Armitage told AFP in Switzerland: “It is too soon to consider the financial consequences, whether for the sector or for a company like Swiss Re,” the second-biggest re-insurance group after Munich Re of Germany.
Muschick noted that a previous massive Japanese quake, which struck Kobe in 1995, cost a total of $6 billion, a figure that does not take into account inflation since then.
He estimated that Friday’s disaster would cause less damage because the epicentre was located in a less populated area and the country was better prepared for a big quake. Media nonetheless reported major damage and fires in Japan, the world’s third largest economy after the United States and China.
On Thursday, Munich Re had said the deadly Christchurch earthquake in New Zealand on February 22 would cost it about one billion Australian dollars (€726 million). Munich Re stuck to its 2011 earnings forecast but warned: “It will only be able to achieve this target if random major losses remain below the average level to be expected in the further course of the year.”
Schneider FX analyst Stephen Gallo said the cost to Japanese insurers might cause them to quickly repatriate funds invested worldwide, which could push the yen higher and raise the nominal cost of the catastrophe further.
Shares in European re-insurance groups showed heavy losses in midday trading, with Munich Re off by 5.35 per cent at €110.5 while Frankfurt’s DAX index was 0.95 per cent lower overall.
Swiss Re showed a loss of 5.6 per cent at SFr50.60 , making it the worst performer on the Swiss Market Index, which was down 0.75 per cent.