Munich Re said that maintaining a profit target of nearly EUR2.4bn for the financial year 2011, is no longer achievable, after estimating the claims payments of EUR1.5bn, after retrocession and before tax, from Japan earthquake and tsunami.
According to the reinsurer, the initial loss estimations from Japan, are based solely on modeling and it will take several weeks before the losses are assessed and all claims notifications from Japanese primary insurers have come in, owing to the extent of the destruction, further possible aftershocks and clearing-up operations.
The reinsurer said that the estimates will be clear at a later stage whether and to what extent reinsurers are affected by losses under particular treaties.
Further uncertainties are expected to result from the impact on international flows of goods and supply chains from business interruptions suffered by Japanese industrial producers.
Munich Re said that the losses will result primarily from covers in commercial business.
With the exception of covers placed with mutual insurers, earthquake insurance for residential buildings in Japan is provided solely by the Japanese earthquake pool, which is insured by the Japanese state together with private Japanese insurance companies.
Due to Japanese supervisory regulations, risks from the earthquake pool may not be transferred to the international reinsurance market. The private insurance industry will not be significantly affected by the accidents at the Fukushima nuclear power plant.
For Munich Re, the first quarter of 2011 had already been marked by high losses from the earthquake in New Zealand, the floods in Brisbane and Cyclone Yasi in Australia.
Now including the projected losses from the earthquake and tsunami in Japan, the major-loss burden from natural catastrophes amounts to over EU2.5bn, after retrocession and before tax, thus far exceeding the volume to be expected for this period.