Swiss Re provides estimate of its claims costs from Japan earthquake and tsunami
21 March 2011, Zurich
Swiss Re estimates claims costs of USD 1.2 billion, net of retrocession and before tax, from the earthquake and the tsunami in Japan. These estimates are subject to a high degree of uncertainty as the event continues to unfold, making loss assessment particularly challenging.
- Swiss Re estimates claims costs of USD 1.2 billion, net of retrocession and before tax
- Estimates subject to high degree of uncertainty due to complexity of loss assessment
On 11 March 2011, a 9.0-magnitude earthquake struck off the coast of Honshu, Japan. The event caused strong ground motions in the northeastern prefectures of Japan. The earthquake also triggered a tsunami which caused a substantial loss of life and extensive damage in coastal areas. Failures in cooling systems of the Fukushima nuclear power plant led to explosions, severe damage to nuclear reactors and the release of radioactivity into the environment.
"We extend our sympathies to the Japanese nation as they cope with the human tragedy and the destruction caused by this event," says Stefan Lippe, Chief Executive Officer of Swiss Re. "We remain committed to using our expertise and experience to support clients in Japan as they manage the risks related to such devastating events. It is the purpose of our industry to aid communities in their recovery and redevelopment efforts."
A government-run insurance scheme provides cover for earthquake shock and tsunami for residential properties insured by non-life companies. This cover is not reinsured in the international reinsurance market. Cover for fire-following earthquake is offered by primary insurers and is typically protected by their reinsurance treaties.
Insurance cover for commercial and industrial risks is sold in the private market for earthquake, fire following earthquake and tsunami, and is commonly reinsured. Coverage for property policies excludes nuclear contamination. Coverage for nuclear facilities in Japan excludes earthquake shock, fire following earthquake and tsunami, for both physical damage and liability. Swiss Re believes that the incident at the Fukushima nuclear power plant is unlikely to result in a significant direct loss for the Property & Casualty insurance industry.
Based on preliminary estimates, Swiss Re expects its claims for the earthquake and the tsunami, net of the benefits of retrocession, to be approximately USD 1.2 billion before tax.
Our claims estimate is subject to a higher than usual degree of uncertainty, and may need to be subsequently adjusted, for various reasons. First, Swiss Re expects that determining precise claims information will take several months. The company's current estimate is driven primarily by modeled estimates for its portfolio. Calibrating this to ceding clients' estimates, and to original policyholder losses, will take an extended period of time, because of the current situation in Japan. Second, the high proportion of commercial and industrial claims in the reinsured share of this event will extend the evaluation process.
Swiss Re has made a donation towards instant relief measures and also pledged to support the rebuilding efforts. Swiss Re employees are being encouraged to make charitable contributions through the Swiss Red Cross and the Save the Children Fund, which will be matched by Swiss Re.
Swiss Re remains fully committed to continuing to provide capacity to the Japanese market and maintaining its strong relationships with clients.
Notes to editors
Swiss Reinsurance Company Ltd
Swiss Re is a leading and highly diversified global reinsurer. The company operates through offices in more than 20 countries. Founded in Zurich, Switzerland, in 1863, Swiss Re offers financial services products that enable risk-taking essential to enterprise and progress. The company’s traditional reinsurance products and related services for property and casualty, as well as the life and health business are complemented by insurance-based corporate finance solutions and supplementary services for comprehensive risk management. Swiss Re is rated “A+“ by Standard & Poor’s, “A1” by Moody’s and “A” by A.M. Best.
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