Japan’s earthquake and escalating nuclear threat have caused huge after shocks in the financial markets. Most recently, global insurers AIG, Prudential and MetLife have started to feel the pressure. To date, Japan’s earthquake has caused an estimated loss of almost $25 billion. This could shape up to be one of the most expensive disasters in history for insurers.
These insurance companies have started to feel the heat as skittish investors begin to sell shares. The uncertainty is related to the possibility that the insurers may need to cancel share buy backs. There have also been fears that the insurers may need to raise capital to offset losses.
Although the financial situation is volatile, experts believe that the insurer’s credit ratings will remain unaffected because of little exposure to the damaged property in Japan. However, the growing concern is the question how insurers will be affected in the future due to potential sickness, caused by radiation exposure.
AIG released a statement Wednesday that potential losses received from claims from the earthquake are expected to be “minimal.” They also advised that these claims will cost the company approximately $700 million in the first quarter.
The company added that it expects the “vast majority” of any losses recorded by a major claim, Fuji Fire and Marine will come under their special reinsurance fund. Fuji Fire and Marine has said that the total potential loss it could sustain from those claims is about $508 million.
For MetLife, the timing of this disaster coincides with its recent attempt to exit another Asian market, Taiwan. MetLife has recently brokered a deal to sell its Taiwanese unit due to poor financial performance. The transaction is expected to close by April of this year.
Although Japan accounts for about 42% of Prudential’s overseas earnings, some analysts have taken a long-term bullish stance on their stock. Like AIG and MetLife, the caveat is the uncertainty of any possible health problems for the Japanese people down the road due to radiation exposure from the Fukuchima Daichi nuclear plant.
If you are interested in joining our mailing list, please submit your email below. 
