Sign in Subscribe
Tsunamis

Insurers and Reinsurers Have Financial Strength to Pay for Japan Earthquake Claims

Strategic Insights

— 2 min read

The massive 8.9-magnitude earthquake that struck Japan on March 11, followed by a devastating tsunami, has placed extraordinary demands on the insurance industry. Despite the severity of the disaster, insurers and reinsurers worldwide have the financial strength to pay the claims that will emerge, according to the Insurance Information Institute (I.I.I.). The I.I.I. notes that four of the five costliest earthquakes and tsunamis in the past 30 years have occurred within the past 13 months, including the recent quakes in New Zealand and Chile.

Key Takeaways:

  • The insurance industry has the financial strength to pay claims from the Japan earthquake, despite the severity of the disaster.
  • Prior to the Japan earthquake, insured earthquake losses worldwide since February 2010 totaled an estimated $23 billion.
  • The Japanese nonlife insurance industry is large, with $107 billion in premiums written in 2009, meaning a larger share of losses may be retained by domestic Japanese insurers and reinsurers.
  • The earthquake that struck Northridge, California, in January 1994 remains the top of the list of costliest earthquakes, with $15.3 billion in insured losses at the time (approximately $22.5 billion in 2010 dollars).
  • The February 2011 quake in New Zealand, the February 2010 earthquake and tsunami in Chile, and the September 2010 quake in New Zealand rank second, third, and fourth, respectively, on the list of costliest earthquakes, according to loss estimates compiled by Munich Re.
  • The fifth-costliest earthquake worldwide since 1980 occurred in Japan in January 1995, causing $3 billion in insured losses at the time (approximately $4.3 billion in 2010 dollars).
  • The U.S. has expanded its ability to detect and respond to tsunamis since the 2004 Indian Ocean tsunami, with 39 tsunami detection stations installed worldwide and 83 communities recognized through the National Weather Service's Tsunami Ready program.

Statistics:

  • $23 billion: estimated insured earthquake losses worldwide since February 2010
  • $107 billion: premiums written by the Japanese nonlife insurance industry in 2009
  • $15.3 billion: insured losses from the 1994 Northridge earthquake (approximately $22.5 billion in 2010 dollars)
  • $10 billion: insured losses in 2004 Indian Ocean tsunami
  • 39: number of tsunami detection stations installed worldwide as part of the National Oceanic and Atmospheric Administration's (NOAA) Tsunami Warning System
  • 83: number of communities recognized through the National Weather Service's Tsunami Ready program

Sources:

  • Insurance Information Institute (http://www.iii.org/index.html)
  • Dr. Robert Hartwig, economist and president of the I.I.I. (http://www.twitter.com/Bob_Hartwig)
  • U.S. Geological Survey
  • National Oceanic and Atmospheric Administration (NOAA)
  • National Weather Service's Tsunami Ready program (http://www.tsunamiready.noaa.gov/)
  • Munich Re

Read more