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The cost of reinsuring properties in Turkey against natural catastrophes has doubled in areas devastated by last year’s earthquake, according to new figures, as the industry assessed the fallout from another major quake in Japan.
The earthquake in Turkey and Syria last year, which killed tens of thousands of people and left insurers with an estimated bill of $6bn, prompted a “radical tightening” in some types of property catastrophe reinsurance, according to broker Gallagher Re.
The price of such reinsurance, which insurers buy to share the cost of claims for events such as hurricanes and earthquakes, rose by between 50 per cent and 100 per cent in Turkey in end-of-year policy renewals, Gallagher Re said on Tuesday.
This added up to the “most challenging renewal faced by Turkish [insurers] in a generation”, the broker said.
The quake was the biggest single contributor to natural catastrophe-related insurance losses reaching $100bn last year for the fourth year running. This set the backdrop for the negotiations for the many policies that renewed on January 1.
A powerful earthquake off Japan’s west coast on New Year’s Day, which had a preliminary magnitude of 7.6, left at least 48 dead and caused significant damage to roads and infrastructure. Industry figures said it was too early to gauge the size of the likely claims, but that the event would be a factor in another round of renewals on reinsurance contracts in April.
Initial estimates from the US Geological Survey indicate a 36 per cent chance that economic losses caused by the quake — whether covered by insurance or not — will fall in the $1bn to $10bn range.
Another report on Tuesday by London-based broker Howden said the cost of global property catastrophe reinsurance had risen by 3 per cent in the January renewals, more modest than the previous year, but disappointing insurers who had hoped for some reprieve. Reinsurance prices have surged over the past 18 months, squeezing insurers and their customers.
David Flandro, head of industry analysis at Howden’s reinsurance broking arm, said “generationally strong pricing” had “enticed” reinsurers to take on more business.
However, that was not enough to prevent the cost of reinsurance rising sharply in some other parts of the world, including areas of the US afflicted by extreme weather last year. The cost of reinsuring such areas rose by between 10 per cent and 50 per cent, according to Gallagher Re’s report.
