The most unprofitable disaster

The tragic events in Japan in March 2011 has been dubbed as the Great Earthquake Tohoku. It will be one of the most devastating in modern history. According to the World Bank, the damage from the disaster could reach $ 122-235 billion, the Japanese government for meeting on 22 March estimated losses of $ 197-308 billion, which is 3-5% of GDP. For example, the Russian budget revenue in 2010 totaled $ 272 billion a result growth of the Japanese economy, the World Bank estimates, the middle of this year may slow down to 0.25-0.5 percentage points, and a complete reconstruction of the country will take about five years. But suffer not only the Japanese economy. Serious losses catastrophe in store for the global insurance industry, which will offset a substantial part of the losses. Negative records. "In terms of damage to the Great Earthquake Tohoku could surpass all known natural disasters," - said in a report prepared by the Japanese office of the international rating agency Standard & Poor's. It is estimated consulting firm AIR Worldwide, a preliminary amount of insured losses of about $ 35 billion Moreover, these losses do not include damage from tsunami and accidents at nuclear power plants in Fukushima. That is, insurers have to pay much larger sums. "The March earthquake in 2011 will go down in history as the" three event ": earthquakes, tsunamis, and radiation effects. It is the latter two factors (the tsunami, and especially radiological contamination) have a local event an event of global significance: there are reports of losses from the tsunami in the resorts of Hawaii and the radiation track already recorded in different parts of the world "- said" F. "Irina Ford, chief underwriter reinsurance business, "Seek Re". The earthquake and tsunami also struck by the Sea insurance market. "This event - the largest in the history of marine insurance. Covokupnye damages in respect of hull, cargo clearance and could reach $ 2 billion, of which $ 300 million for comprehensive insurance are already known. European reinsurers and Lloyd's syndicates and even publish projections of possible loss is potentially very cautious in their predictions of the final - after the event itself has not ended ", - says Irina Ford. But it is obvious that here, disaster will result in record payouts for the insurance industry. So far, the most unprofitable for insurers was an earthquake in California in 1994. Payments are due the tragedy in Northridge, were $ 20.3 billion in Japan, the most expensive for the insurance industry before the year was considered the Kobe earthquake, which occurred in 1995. Then the loss insurers were "only" $ 3.5 billion and total economic losses from natural disasters exceeded $ 100 billion National Insurance shakes. Giant of the refunds would have on the Japanese home market, where as a result of consolidation, which took place in the last 20 years, dominated by three giants: Tokio Marine & Nichido Fire Insurance Company, NKSJ Holdings and MS & AD Insurance Group. Compensation for homeownership will be made jointly with the state reinsurance company Japan Earthquake Reinsurance. According to Standard & Poor's, a zone of high risk get the national companies that specialize in property insurance. "Japanese insurance companies in the sector risks other than life insurance, are particularly vulnerable, which is why we have revised our forecast for this sector from" stable "to" negative "," - the report says Standard & Poor's. As experts explain the agency, the negative outlook reflects the possibility of further downgrades of individual insurers as information on the amount of insurance benefits, as well as on the basis of assessing the impact of volatility on the stock market capital of companies. Thus, according to S & P, some insurers because of the earthquake may lose 5-10% of the capital. As for the stock market, there may be significant losses: Since the earthquake the maximum fall in the main Japanese index Nikkei 225 higher than 20% - from 10 298 to 8227 points. And although now the situation has stabilized (March 25, Nikkei to 9,500 points otros), quotes, insurance companies are still in the red: Tokio Marine, NKSJ Holdings and MS & AD have lost two weeks in 10-12% of its value. To this we must add the possible investpoteri, because a large proportion of the investment portfolios of Japanese nonlife companies invested in stocks. Experts stress that the property losses in the north-eastern Japan are difficult to analyze. Preliminary estimates are uncertain because of the complicated nature of the loss. These include earthquakes, fires caused by them, the destruction of the tsunami, and the potential damage from radiation exposure. All of these risks can be covered by different insurance policies and depend on the policy exclusions from the cover set in each of the insurance company, the specific wording of the contracts. "The insurance industry in Japan is the custom to divide the losses from the earthquake (Earth Movements) and losses on subsequent fires (Fire following). Loss of radioactive contamination are excluded by default to all international treaties, but the physical damage caused to other property will be met ", - says Irina Ford. According to experts S & P, most of the losses of Japanese nonlife insurers will be associated with three types of coverage: the risk of damage from earthquakes to residential property of private individuals, the risk of fires caused by the earthquake and extended coverage risks earthquake for commercial and industrial enterprises. "If actual insured losses exceed the aggregate current market estimates, the capital of some insurers may be significantly undermined, and this, in turn, could prompt the agency to lower ratings of insurance companies - said in a report. - Nevertheless, we believe that at this stage downgrades will be limited to a single step. " That is, no matter what the damage calculated by the catastrophe, S & P experts suggest that because of exemptions in the programs and the high proportion of reinsurance Japanese insurers still will not incur significant losses, no matter how further developments. Reinsurers profit falls. In fact, the only good work with the risks of insurers has kept Japan from more serious losses. But that part of the insurance coverage will be borne by global reinsurers, creates certain problems for the industry on a global scale. Earnings of international companies, according to S & P, may this year be reduced by a quarter. Particularly difficult to have those who have been forced to cover losses from earthquakes in New Zealand, occurring in February of this year (insurance payments are valued at $ 12.6 billion), as well as last year's earthquake in Chile and New Zealand (another $ 10, 7 billion). Among the largest holders of Japanese risk experts call the Munich Re, Lloyd's, SCOR, Swiss Re and Hannover Re. But to call critical loss reinsurers can not. "The capitalization of these companies is enough to cover the damage, even if it would exceed initial estimates," - the report says S & P. "Due to the fact that global reinsurers have high capitalization losses as a percentage of capital may be small, although in absolute terms, they can count billions of dollars", - experts say S & P. Life is expensive. Life insurers, who worked for the Japanese market, too, faced with losses, however, payments to victims, are likely to be stretched in time: "For them, the consequences will be deferred nature." But the massive scale of the victims does not imply that companies get away "slight shock". According to Victor Yuen, Director General of "Genesis", is on life insurers will form the most significant benefits. "I do not know for what amount has been insured property plant - probably in the billions. Insurance is the amount of liability insurance for nuclear power plant operator as a dangerous object may be generally very large, even infinite. I think that the basic pay may be just on liability for damage to life and health, for the displacement of entire villages, loss of property of citizens ", - he said. In general, experts believe S & P: insurance industry cope with the aftermath of the earthquake, insurers will be able to fully cover all losses. Coincides with this assessment and the opinion of Russian experts. "Today it is extremely difficult to talk about the reasonableness of any projections on the amount of alleged damages. Obviously, it is huge. However, its impact on the insurance industry as a whole should not be catastrophic, given the good performance in terms of capitalization the world's leading insurance market, actively working in Japan, such as, Allianz. Our shareholders this figure is 1.7 times the solvency standard for the size of its own funds. Even considering the enormous amount of damage, the insurance industry will be able to cover, and continue to develop further ", - says Dmitry Popov, First Deputy General Director of" Rosno. " Russia - no risk? The scale of the tragedy is not anticipated that it would not be reflected on the Russian insurance market. According to the deputy director general of the rating agency "Expert RA" Paul Samiev, we can suffer major players that go to the international reinsurance market. "In the Company of the first tier may be affected quite strongly. The losses can come from third countries, the chain of reinsurance. Foreign reinsurance markets are now available quite limited number of Russian companies. And the circle - the top-50 ", - says Pavel Samiev. It is known that in recent years the Russian market was involved in the reinsurance and catastrophic risk programs, some Lloyd's syndicates and European companies - for example, Germany's Hannover Re. Now, participants in these programs will have to pay for the events in the southern hemisphere, and for the Japanese tragedy. For example, according to Prime-TASS, the losses of "Ingosstrakh" for Japanese events can be up to $ 1.5 million These risks, according to General Director of "Ingosstrakh" Alexander Grigoriev, the company received from European and Korean reinsurers. Losses associated with the earthquake, according to Paul Samiev may occur in other major insurers and reinsurers in the Far East, working with the Asian region, from specialist companies involved in marine insurance and reinsurance. It is known that during the tsunami and earthquake hit Russia's refrigerator "Jungle": tsunami wave wrecked vessel with mooring and washed up on shore first, and then converges wave has washed the ship in the port, and subsequently by strong tidal currents to run aground. The vessel was damaged, faulty main engine. Of the crew injured one person - a broken leg. But it is much heavier than might be the implications of the growth rates for the reinsurance. "Reinsurers say that if South America is something burnt, then it should not affect the countries in Europe. But this is only a theory, in practice it is different "- says the head of the reinsurance company" RESO-Guarantee "Vladimir Nenashev. By the admission of insurers after the terrorist attacks in New York, prices for reinsurance jumped several times over the place. Another burst of growth rates was in 2005 after a series of hurricanes that hit the U.S. coast. "The accident with the oil spill on the platform of BP influenced the rates of insurance and reinsurance in the segment. And after the explosion at the Domodedovo airport, we are faced with the fact that European reinsurers are trying to raise tariffs for Russian market on the risks associated with terrorism. While this tragedy reinsurers generally were unaffected. So, perhaps, the rates for reinsurance in the next year will go up "- gives his predictions Vladimir Nenashev. It is estimated Victor Yuen, the cost of reinsurance coverage can increase by 2-3 times, regardless of type of insurance. Insurance and reinsurance companies in Japan Company adjusted total equity ($ million) (Shareholders) 2009 2008 1 Tokio Marine & Nichido Fire Insurance Co. Ltd. 20776 15883 2 Mitsui Sumitomo Insurance Co. Ltd. 18506 15793 3 Sompo Japan Insurance Inc. 15572 12294 4 NIPPONKOA Insurance Co. Ltd. 7307 6412 5 Toa Reinsurance Co. 2819 2592 6 Kyoei Fire & Marine Insurance Co. 1072 999 7 Nisshin Fire & Marine Insurance Co. Ltd. 785 713 8 Nissay Dowa General Insurance Co. Ltd. Mr.. on sf Total 66837 54686 Source: Global Reinsurance Highlights, 2010 leading insurance and reinsurance companies in the world The company adjusted total equity ($ billion) (Shareholders) 2009 2008 1 Berkshire Hathaway Re 64,146 50,795 2 Munich Reinsurance Co. 30.372 28.235 3 Lloyd's 28,930 20,524 4 Swiss Reinsurance Co. Lrd. 26.152 20.266 5 Tokio Marine Group 20,776 15,883 6 Mitsui Sumitomo Insurance Co. Ltd. 18.506 15.793 7 Sompo Japan Insurance Inc. 15.572 12.294 8 Hannover Rueckversicherung AG 8,114 6,637 9 PartnerRe Ltd. 7.646 4.199 10 NIPPONKOA Insurance Co. Ltd. 7.307 6.412 11 Everest Reinsurance Co. 6.102 4.960 12 SCOR SE 5,581 4,806 13 AXIS Capital Holdings Ltd. 5.500 4.461 14 Transatlantic Holdings Inc. 4.034 3.198 15 Validus Holdings Ltd. 4.031 1.939 16 Arch Capital Group Ltd. 3.794 3.010 17 Odyssey Re Group Ltd. 3.555 2.828 18 Aspen Insurance Holdings Ltd. 3.305 2.779 19 Catlin Group Ltd. 3.278 2.469 20 RenaissanceRe Holdings Ltd. 3.191 2.383 21 Toa Reinsurance Co. 2.819 2.592 22 Endurance Specialty Holdings Ltd. 2.787 2.512 23 Amlin AG 2,538 1,760 24 Platinum Underwriters Holdings Ltd. 2.078 1.809 25 White Mountains Re Group Ltd. 2.057 2.157 Total 282.170 224.702 Source: Global Reinsurance Highlights, 2010 The most destructive earthquakes 1970-2009's First Region Magnitude insurance payments, $ billion U.S. (Northridge), 1994 6.6 20.276 Japan (Kobe) 1995 7.2 3.482 Indonesia, Thailand, 2004 9 , 0 2.273 1.662 7.1 1989 U.S. Taiwan 1999 7.0 1.289 7.0 1.289 Turkey 1999 Ecuador 1987 6.8 1.266 5.5 1.207 Australia 1989 Japan 2004 6.9 0.68 1987 6.0 0.676 U.S. earthquakes from 2010 till March 2011 Region Year Assessment of Magnitude of insurance payments, $ 8.8 billion in Chile 2010 8.000 2010 7.0 New Zealand 2.700 New Zealand (Christchurch) 2011 6.3 6,000-12,000 Source: Swiss Re, the U.S. Geological Survey study , Standard & Poor's