EQECAT Updates Quake Estimates

As Japan digs out from the destruction caused by last week’s earthquake and subsequent tsunami, modeling firm EQECAT is updating its insured loss estimate for the Tohoku Pacifica Offshore Earthquake.

EQECAT estimates the total insured loss from this event to be $12-25 Billion with damage from this event concentrated in Chiba (northern), Ibaraki, Tochigi, Fukushima, Miyagi, and Iwate (southern) prefectures.

EQECAT says the largest component of insured loss will be covered by the property insurance market, which provides earthquake insurance to individuals and businesses in Japan. This loss estimate encompasses the effects of earthquake shaking, ensuing tsunami and fires, and losses to Automobiles, Marine, Life, and Personal Accident insurance lines but excludes any damage that may accrue from the country’s four crippled nuclear power plants.

The firm expects claims related to shake damage to total between $8 billion and $15 billion, with  $2 to 4 billion that total expected to be ceded to the Japan Earthquake Reinsurance Pool (JERP), which will reduce the total losses to Non-life property insurers in Japan.

In the case of automobiles, EQECAT expects less than $1 billion in insured losses as the standard auto policy excludes earthquake coverage. “Although a large number of cars were damaged in the aftermath of the earthquake by the raging tsunami waves, few of these cars will have earthquake coverage,” the update states. “It is estimated that as low as 10,000 cars and as high as 50,000 cars will be affected by the earthquake.”

Costlier in many ways is the toll the event has taken on human life. EQECAT estimates that over 12 million people, 10% of the total population of Japan, have been significantly affected by this event. “At least 10,000 people are currently confirmed dead or missing. This number will likely grow. The average life insurance policy limit is about $360K USD. If 100% of those confirmed dead or missing are insured, it is expected that life insurers will be liable for as much as $3 Billion.”

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