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Moody's: Insurer, Reinsurer Ratings May Be Affected by Quake Losses

Source: WSJ - Art Patnaude

Posted on 14 Mar 2011

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Insurance and reinsurance companies around the world face heavy losses after Friday's massive earthquake in Japan, which in turn results in negative credit implications for the two sectors, said rating agency Moody's Investor Service Inc.

The sectors and market participants that will be most affected are Japanese domestic insurers, Japan Earthquake Reinsurance Co. Ltd., international insurers, global reinsurers, retrocessionaires and catastrophe bonds, according to Moody's.

"The ultimate amount of insured losses from this event, as well as the market participants that will bear them, will depend on the types of coverage provided ... the amount of reinsurance purchased, and the structure of reinsurance programs," said James Eck, a Moody's vice president and senior credit officer in New York, and Kenji Kawada, a vice president and senior analyst at the ratings agency in Tokyo.

Among Japanese domestic insurers, the nonlife sector is highly concentrated, with three groups—MS&AD Insurance Group, Tokio Marine Group, and NKSJ Group—accounting for nearly 90% of the Japanese market, Moody's noted.

As the total ramifications of the event continue to unfold, it is already clear that the earthquake will have implications beyond the country's borders, the agency said.

"A meaningful portion of losses will flow to the global reinsurance industry [including various Lloyd's syndicates], as catastrophe reinsurance covering Japanese earthquakes is a large market," the report said.