Chaucer Expects to Escape Significant Nuclear Loss in Japan Quake
Auto Insurance Quotes Compare: Chaucer Expects to Escape Significant Nuclear Loss in Japan Quake
Citing legal exclusions, Lloyd's insurer Chaucer Holdings plc does not expect its Nuclear Syndicate 1176 to suffer "any significant insured loss" as a result of the earthquake and tsunami that hit northeastern Japan on March 11.
The Japanese Nuclear Act of 1961, amended in 2009, stipulates that operators of nuclear power plants face no liability for "grave natural disaster of an exceptional nature."
Chaucer provides insurance to Tokyo Electric Power Co., which owns two of the three nuclear power plants in the area affected by the disaster. These plants are Fukushima Dai-ichi and Fukushima Daini. Chaucer said it has no business interruption or property polices in effect on the two facilities.
The company also provides property damage cover, with an earthquake and tsunami exclusion, for the third plant, Onagawa, which is owned by Tohuku Electric Power Co.
Chaucer "will provide estimates of its other exposures to this event as soon as the size of the loss and, importantly, the size of the insured loss with regard to Chaucer has become clearer," it said in a statement.
Attempts to reach Chaucer officials for comment were unsuccessful.
Chaucer alluded to a possibly complicating factor, confirming it remains in "talks with a number of interested parties relating to a possible offer for the company."
Lloyd's is focusing on the swift handling of claims. "It is far too early for us to comment on any potential business impact," Lloyd's said in a statement.
Lloyd's regularly applies stress tests to its syndicates and to the market. "For large-scale natural catastrophes of this nature, and we are confident the market can respond to any claims in the normal course of business," Lloyd's said.
Swiss Re also struck an optimistic note about the likely insurance effects of the disaster on the nuclear power industry.
"Overall, there is unlikely to be a significant impact on the property/casualty insurance industry as a result of this nuclear incident," Swiss Re said in a statement.
But Swiss Re, which said it is assessing its exposure, also expressed caution. "Given the nature of the destruction, combined with the ongoing recovery efforts and evacuation areas, it will take some time to estimate the damage," the reinsurer said in a statement.
The situation in Japan is "particularly complex," Swiss Re said, noting property damage was caused by the earthquake, fire and the tsunami. A government program provides insurance for earthquake and fire damage to residential properties, Swiss Re said, noting these risks do not tend to find their way into the private reinsurance market.
Post-earthquake fire is insured by primary underwriters, who then buy reinsurance, Swiss Re said. Private insurers, backed by reinsurance, cover the industrial and commercial risks.
Swiss Re also cited the exclusions that affect the insurance of nuclear plants in Japan. "Coverage for property policies excludes nuclear contamination," Swiss Re said.
French reinsurer Scor said it does not offer liability or damage insurance to nuclear plants in Japan. It added that it does provide industrial, commercial and household reinsurance in Japan.
"In the worst-case scenario for the events of last week, Scor estimates that its total P&C losses net of proportional and nonproportional protection, before tax, will not exceed 185 million euros (160 million pounds), Scor said in a statement.
Scor said its life reinsurance exposures in Japan are "marginal," while its investment exposure in the country is less than 40 million euros, of which just 13 milllion euros are in Japanese yen.
"The potential consequences of these events do not alter Scor's solvency," Scor said. Lloyd's and units of Swiss Re and Scor have current Best's Financial Strength Ratings of A (Excellent).
(By Robert O'Connor, London editor: Robert.OConnor@ambest.com)
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