Broker snap: Quake impact less than expected for insurers

14th Mar 2011 12:22

The scale of the Japanese earthquake is indeed huge, but in terms of an insured loss it appears, at first sight, to be on a more limited scale than might have been expected, according to broker Daniel Stewart."Given that traditionally the two biggest natural disasters that the insurance has modelled are 1) a Tokyo earthquake, and 2) a Manhattan windstorm, a $10bn hit to the insurance industry should be viewed as 'containable' though of course further aftershocks and possibly further earthquakes are expected," says analyst Simon Willis.London-based insurance underwriter Chaucer, which is a nuclear specialist, reported Monday that it is one of the panel of insurers providing coverage to Tokyo Electric Power Company, owner of two out of three nuclear sites in the affected area. However, it "does not expect any significant insured loss: at these two plants, there is no coverage in place for property damage or business interruption and, at the third, cover for property damage is provided but earthquake and tsunami are specifically excluded," says Willis.While Daniel Stewart estimates the hit to insurers will range from 5% to 15% of net asset value (NAV), it notes that for a disaster of this magnitude it could have been larger.Lloyd's-based insurance stocks generally trade on 0.8-1.3 times NAV, and many offer attractive yields, according to Daniel Stewart. The broker's preferences lie with Hiscox and Amlin which are on price-to-tangible NAV ratios of around 1.2 with yields of 4-5%.