Swiss Re estimates it will face $1.2 billion in claims from the devastating earthquake and tsunami in Japan, handing the reinsurer a still higher catastrophe bill for the year.
The disaster in Japan is one of the costliest natural disasters in the history for global insurers, having caused insured losses of $12 billion to $25 billion, according to risk modeling firm Eqecat.
Insurance shares have been under pressure since the disaster, which has also led to the world's worst atomic crisis in 25 years, as skittish investors sell on the possibility that some could cut share buybacks or raise capital to offset losses.
Each year Zurich-based Swiss Re prepares an estimate for what it expects natural catastrophes will cost.
Although this year has begun with a much higher tab, with Swiss Re already facing around $800 million in claims from the earthquake that struck New Zealand's South Island on February 22nd, a spokesman said the reinsurer was able to handle the bill from Japan as well.
"We will be able to absorb current estimates for claims and still maintain significant excess capital," he said.
Swiss Re has said it had $10 billion more than it needed to regain the 'AA' credit rating it lost in the financial crisis, when it had to take out a costly loan from Buffett-owned rival Berkshire Hathaway.
Shares in Swiss Re, which have lost about 0.5 per cent this year, were indicated to open up 1 per cent as investors had been bracing for an expensive bill.
"In conjunction with the Japan catastrophe Swiss Re's share price has suffered quite a lot. That should now be compensated for," a trader said.
Swiss Re said the problems at the Fukushima nuclear power plant were unlikely to result in a significant direct loss for property and casualty insurers.
Engineers today restored electricity to three reactors at a crippled Japanese nuclear plant and hope to test water pumps at the quake-damaged facility soon, the first clear signs of progress in days.
Swiss Re said insurance cover for commercial and industrial risks in Japan was sold in the private market for earthquake, fire following earthquake and tsunami, and was commonly reinsured, though property coverage excluded nuclear contamination.
The higher claims bill may hit profits but could also help to increase the prices reinsurers can charge to take on risk from insurers if there are further large claims events this year.
The industry is currently suffering from low prices, though some analysts have said they do not think the losses from Japan will be high enough to stem years of falling prices in the property insurance market.
Swiss Re said its estimate was still very tentative and that it expected determining precise claims would take several months. The figure of $1.2 billion was net of retrocession - reinsurance for reinsurers - and before tax, it also said.
Reuters
