You are here
Insurance industry likely spared Japan nuclear threat
NEW YORK—The unexpected nature of this week’s earthquake in Japan, plus the damage from the subsequent tsunami and fires, makes estimating insured losses from the disaster especially difficult, senior executives at two top catastrophe risk modelling firms said. But most experts agree the growing threat of disaster from damaged nuclear reactors is unlikely to have much effect on the mainstream insurance business because of the way insurance for the nuclear power industry is structured.
Insurance policies often exclude certain factors from coverage, and that will probably occur in this case—exclusions on earthquake damage in the property insurance for reactors and exclusions on nuclear damage for homeowners’ insurance policies. What remains is likely to be an international liability pool, where reactor operators insure each other against claims in situations like this one. How deep that liability extends is unknown, however—Japan is not a party to major international conventions limiting the nuclear liability of operators.
Generally speaking, the insurance industry does not model the potential for nuclear accidents when it looks at the effects of disasters in areas with nuclear power. “The scrambling of the reactor is a huge event that’s really difficult to model,” Eqecat senior vice president Tom Larsen said in an interview. He said any impact was more likely to be felt by life insurers than property insurers.
$100 billion economic loss
Even without the nuclear threat, though, there is plenty of scope for damage claims of historic proportions. About $24 billion of insured property is located in the three-kilometre (1.8-mile) band along the coast of the four prefectures, or states, most affected by the quake, Jayanta Guin of disaster-modelling firm Air Worldwide told Reuters. There is about $300 billion of insured property in the four prefectures most affected by the quake’s shaking.
That does not equate in any way to a similar loss value, Guin said, adding that it would be days or even weeks until an accurate estimate could be made of what was lost, how it was lost, and what it would take to repair the damage. One problem is that the damage was difficult to model because the intensity and location of the quake were unexpected, Guin said. Eqecat, another risk modeller, said the quake was at least eight times stronger than any it had modelled in that particular part of Japan for the next 30 years. The firm said on Saturday that economic losses from the quake would likely exceed $100 billion. It did not release an estimate for insured losses. (Reuters)
User comments posted on this website are the sole views and opinions of the comment writer and are not representative of Guardian Media Limited or its staff. Guardian Media Limited accepts no liability and will not be held accountable for user comments.
Please help us keep out site clean from inappropriate comments by using the flag option.
Guardian Media Limited reserves the right to remove, to edit or to censor any comments. Any content which is considered unsuitable, unlawful or offensive, includes personal details, advertises or promotes products, services or websites or repeats previous comments will be removed.