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12 March 2011

Calamity insurance costs to go up after Japan earthquake and tsunami

Calamity insurance costs to go up after Japan earthquake and tsunami : As Japan suffers the jolt of a severe earthquake and tsunami, insurance companies feel the cost of catastrophic insurance for next year will move skywards.

"Since most of the re-insurance treaties in India are due for renewal in April, there may be some impact on the premium rates, especially for the catastrophic cover," Future Generali India Insurance MD & CEO K G Krishnamoorthy Rao told PTI.

A 33-foot tsunami, triggered by a powerful 8.9-magnitude quake, struck Japan today, leaving huge damage to properties and reportedly killing 26 people.

Although the extent of the damage is yet to be quantified, the re-insurers would have to take a hit while compensating for the loss.

"The Japanese earthquake or tsunami will have an effect on the re-insurance market but only next year from a rate perspective," Bharti AXA General Insurance CEO & MD Amarnath Ananthanarayanan said.

The reinsurance companies, which act as insurers of last resort for general insurers, would be making up for majority of the losses. These companies usually take up the cost associated to an event when the claim to be settled is too high.

"The estimation of losses will take time. However this can affect a few insurers and reinsurance firms operating in the region," Rao said.

The first three months of the current year saw insurance companies bearing the brunt of rising claims on account of events like floods in Australia, storms in the US and a severe earthquake in New Zealand.

Expert also said the global re-insurance companies, like Munich Re or Swiss Re , might have to enhance their natural catastrophe budget for 2011.

"In terms of the Indian reinsurance market, given that there have been fortunately no major catastrophes, the reinsurers will want to take a greater share of the Indian pie and therefore the rates will be very reasonable despite this earthquake or tsunami," Ananthanarayanan said.