Hardy sees Japan crisis losses capped at £12m

JAPAN’S dual earthquake and tsunami catastrophes will cost Lloyd’s insurer Hardy Underwriting between £9m and £12m, it said yesterday.

The figure came in below expectations thanks to a series of decisions made by Hardy to contain the impact of a possible crisis, including being well-protected by reinsurance and under-exposed to Japan’s rural coastal areas.

The estimate is based on an industry loss of $35bn (£21.5bn) – higher than the maximum estimate by risk modelling firm AIR Worldwide, which placed losses at $20-30bn.

Hardy, which wrote gross premiums of £280m last year, said its loss estimate was low because it had based its disaster scenarios on an event centred on Tokyo, whereas the rural areas affected generated far lower insured losses.

The losses will be to its reinsurance division, which insures other insurers’ coverage of risk and pays out only on a proportion of the losses they incur. Its reinsurance is primarily of home contents, rather than structural damage caused by the earthquake.

The loss equates to about seven per cent of Hardy’s net tangible assets in 2010. Analysts said the result was “reassuring”.

“The group appears to have benefitted from earthquake and tsunami exclusions on its material Kyosai account and a more effective reinsurance programme for 2011,” said Numis analyst Nick Johnson.

“Hardy should be one of the key beneficiaries of anticipated rate increases in Japan and international catastrophe reinsurance.” Its shares closed up 0.72 per cent at 280p.