Aspen Japan Quake Estimate: $160 Million
Aspen Insurance Holdings Limited yesterday [Apr.12] announced an estimate of losses from the Tohoku Earthquake, which occurred off the coast of Northeast Japan and the ensuing tsunami on March 11, 2011 and commented on current market conditions.
Chief Executive Officer Chris O’Kane said, “We wish to extend our deepest sympathies to all of those impacted by the events in Japan and throughout the Asia-Pacific region. We remain committed to providing continued support to our clients at this very difficult time.”
The Company’s initial estimate of losses from the Tohoku Earthquake is approximately $160 million, post tax and net of reinstatement premiums, and is consistent with an industry insured loss of $30 billion. This represents 5 percent of shareholders’ equity as at December 31, 2010.
The estimate is based on the Company’s review of the market loss, the individual treaties and policies expected to be impacted and discussions with clients and brokers. Given the magnitude and recent occurrence of these events, there is considerable uncertainty associated with this estimate and actual losses may differ materially.
Commenting on current market conditions, Chris O’Kane said, “The Tohoku earthquake has contributed to an extremely active first quarter in terms of natural catastrophe events, and we believe that it is important to highlight a positive change in trading conditions and market sentiment which took place in March. We had anticipated that rates for our property reinsurance account would reduce by between 5 percent and 10 percent in the April renewals whereas we have achieved average rate increases of 5 percent.”
“This understates the improvement as approximately 40 percent of April renewal premium was quoted or completed prior to the Tohoku Earthquake. Furthermore, we are aware of 17 catastrophe programs where the placement had initially been quoted pre the Tohoku earthquake and, which had to be re-priced to secure completion.”
Chris O’Kane further commented, “We believe that the catastrophe events in the first quarter, combined with low investment returns and the profound change in exposure modelling implied by the latest release from one of the principle vendor modelling agencies, have created conditions for much better pricing for catastrophe exposed property lines of business. Up to 35 percent of our 2011 business could consequently be subject to meaningful positive price changes. Our balance sheet remains strong and we believe that we are well positioned to benefit from an improved pricing environment.
