Japan quake losses could reach $50bn

Damage caused by the 8.8 magnitude earthquake and tsunami that battered Japan’s north-eastern coast last night could cost $50bn (£31bn), analysts have said.

The tremor, the most powerful to hit Japan in 100 years, and the 7.3m wave ripped through coastal areas and towns such as Sendai and Fukushima at about 3pm local time, destroying large areas.

Power stations and oil and gas storage facilities are alight while airports around Tokyo are closed, but the death toll is estimated at hundreds and not thousands.

Execution Noble analyst Joy Ferneyhough said the loss could be $30-50bn.

"The size of industry loss will be determined by the insurance density of the area hit," she said, but added that "whilst reports from Tokyo suggest it was felt there it appears any damage will have been outside of the city, making really serious financial catastrophe losses less likely."

Other analysts estimated slightly lower losses.

“Overall insured losses appear significant but manageable at this stage. We are working on an industry loss in the region of $10bn,” said Jefferies analyst James Shuck.

The catastrophe comes just weeks after a similar-sized quake devastated Christchurch in New Zealand, with losses estimated at up to $12bn.

Share prices of insurers across Europe slumped as analysts said their profits may be affected.

Lloyd’s insurers such as Catlin, Amlin, Hardy, Beazley and Hiscox saw their shares fall up to about five per cent by lunchtime on fears they are exposed to the catastrophe.

“The Lloyd’s insurers would be more at risk here than the reinsurers,” Collins Stewart analyst Ben Cohen said.

“Catlin looks to have the highest exposure at 16 per cent of net asset value, along with Hardy at 16 per cent. Lancashire has 15 per cent, Novae 11 per cent and Hiscox nine per cent,” he added.

But reinsurers also saw their stock price dive on fears that they would be left with a large claims bill.

Swiss Re, which admitted that it will bear an estimated $800m loss from the Christchurch quake, fell more than five per cent as investors feared this additional event could outstrip its budget for the year’s catastrophes and eat into profits.

Peers Munich Re and Hannover Re were also substantially lower.

Shuck said the majority of insured losses would be likely to be in property and household claims – but many homes would not be protected.

“Insurance take-up rates are low and many homes will not be covered. Around ten per cent of households actually elect for supplementary earthquake cover and coverage is only for a fraction of the property value,” he warned.

Lloyd’s declined to give an estimate of its exposure to the quake.

“Our thoughts are with all those affected by the major earthquake and tsunami events in Japan. It is far too early for us to comment on any potential business impact but, as ever, our efforts will be focused on dealing with claims quickly and helping people and businesses recover,” it said in a statement.