Early assessment of Japan insurance/tsunami losses

Insurance stocks sank in Europe on news of the Japanese earthquake/tsunami. Bloomberg has an article here, but updates will make it obsolete by 11:30 a.m. Friday.

Post Online quotes a Jefferies International analyst projecting a $10B insurance loss from the Japan earthquake.

WSJ has a rundown of insurance losses. Most companies (sensibly) say it’s too early to tell what their losses might be, but:

  • Munich Re said Thursday that it would have trouble making 2011 profit targets if cats continued at the recent pace. That, of course, was before the earthquake.
  • Swiss Re has “substantial” exposure to Japanese market, according to analysts. Japan was Swiss Re’s 9th largest market, with net premiums and fee income of $574 million – about 3% of total group premium.
  • Scor Re reported in its annual report that it’s the No. 3 reinsurer in Japan. In December, the Journal notes, it placed a cat bond offering it €75 million protection against European wind and Japan quake.
  • Axa is not exposed, according to the Journal.
  • Lloyd’s writes £289 million in Japan, 90% of which is reinsurance. Japan is Lloyd’s ninth largest market. The article also details exposure from several syndicates.

FT Alphaville cites Espirito Santo insurance analyst Joy Ferneyhough. Money quote:

Ultimately we see 2 scenarios here;

1) this is a big industry loss (this would need to be >$30-50bn ) and stocks take significant 2011 earnings hits but prices rise globally and premiums rise, valuation multiples rise and growth/momentum funds come back in > +ve for reinsurance/Lloyds share prices (after initial weakness).

2) this isn’t a large industry loss and so we get worst of both worlds. More niggly losses in 2011 which drive earnings downgrades but no real impact on capacity so prices stay weak where they are (a bit like 2010).

We will know more once the cat modelling companies communicate their initial findings.

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