LONDON, April 5 (Reuters) - Japanese insurers may have to pay more than twice as much to reinsure themselves against earthquake claims as they did before last year’s Tohoku quake, reinsurance broker Guy Carpenter said on Thursday.
The cost of so-called excess of loss earthquake cover - where the reinsurer pays all claims above an agreed level - has risen by up to 125 percent since April 2010, equalling highs last seen in 1994, the broker said in a report into Asian reinsurance price trends.
The Tohoku earthquake killed about 16,000 people and triggered insurance claims estimated at up to $34 billion, making it one of the costliest natural disasters on record, when it struck north-eastern Japan in March last year.
Insurance prices typically rise in the wake of major natural disasters as weaker players retrench, freeing those still in the market to hike their rates in an effort to recoup earlier losses.
Last year was the insurance industry’s second-costliest natural disaster year on record with total claims of $116 billion, according to reinsurer Swiss Re.
The Asia-Pacific region, also hit by the Christchurch, New Zealand quake, heavy floods in Australia, and Thailand’s worst inundation in half a century, bore the brunt of the losses.
The price of reinsurance not linked to catastrophes in Asia still rose only moderately overall, Guy Carpenter said, reflecting an abundant supply of capital thanks to growing interest in the sector from capital market investors.
Rival broker Willis on Monday also said reinsurance prices were rising overall, with significant increases confined to catastrophe-related business.
Richard Ward, Chief Executive of the Lloyd’s of London insurance market, said last month he was disappointed insurance prices, which prior to last year’s disasters had been flat or falling for three years, had not risen more strongly.
Guy Carpenter, part of brokerage firm Marsh said the Thai floods, which knocked out major foreign-owned manufacturing operations and triggered a flurry of business interruption claims around the world, had taken the industry by surprise.
“There are risks out there in the global market that the sector needs to understand better, and 2011 has taught us that,” Guy Carpenter Global Head of Business Intelligence David Flandro told Reuters.
The Thai floods are expected to cost the insurance industry up to $20 billion, brokers and insurers have said.