NU Online News Service, March 22, 3:12 p.m. EDT
Due to the earthquake and tsunami in Japan, Munich Re says it will not reach its profit target for 2011 after reporting an expected loss of more $2 billion from the event.
The Munich, Germany-based company says its estimated loss of around €1.5 billion (U.S. $2.1 billion at the current exchange rate) is after retrocession and before tax.
The company’s 2011 profit target had been around €2.4 billion ($3.4 billion).
Munich Re says its initial loss estimate is based solely on modeling. Owing to the extent of the destruction, further possible aftershocks and difficult cleanup operations, it will be many weeks before the losses are assessed and all the claims notifications from Japanese primary insurers have come in, says the company.
As many reinsurance covers do not attach until very high losses have been sustained by individual cedants, it will only become apparent at a later stage whether and to what extent reinsurers are affected by losses under particular treaties, Munich Re says.
Further uncertainties result from the impact on the international flow of goods and supply chains from business interruptions suffered by Japanese industrial producers, the company notes.
The losses result mainly from covers in commercial business. Munich Re adds that the private insurance industry will not be significantly affected by the accidents at the Fukushima nuclear power plant.
The carrier says that the 2011 first quarter was already marked by high losses from the earthquake in New Zealand, the floods in Brisbane, Australia, and Cyclone Yasi.
Including the projected losses from the earthquake and tsunami in Japan, the major-loss burden from natural catastrophes amounts to more than €2.5 billion ($3.55 billion), after retrocession and before tax, far exceeding the volume to be expected for the quarter, the company says. That means its 2011 profit target is no longer achievable.
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