Total cost of Japan disaster could be $300bn

RMS issued an update on the Japanese earthquake and tsunami disasters. It is reproduced in full below.

The March 11 Tohoku Earthquake and Tsunami is a complex ‘Super Cat’ event, where the final costs will not only reflect the level of direct damage to property from strong shaking and the catastrophic tsunami but will also involve other significant secondary consequences. The most substantive of these reflect failures in emergency generators and non-operability at four nuclear power plant complexes situated along the northeast coast of Honshu in the direct path of the strongest shaking and tsunami impacts. Disruption in direct and emergency power supplies as a result of the tsunami at the Fukushima Daiichi plant led to damage at three reactors, overheating fuel ponds, and radiation releases. These in turn have triggered large-scale evacuations, crop contamination concerns, and power outages, which could last over the long-term. Power outages have already caused intermittent closures of public transport systems, and some interruption of business and manufacturing processes.

Overall, RMS estimates that the total economic loss resulting from the earthquake shaking and tsunami inundation, as well as from the impact of the disruptions in power supplies, evacuations and decommissioning several nuclear power stations, will be in the range USD$200–300bn (about 4-5% of Japanese GDP). Specifically, beyond damage to property and infrastructure, the estimate includes the costs of interrupted business processes and ports and a reduction in industrial and manufacturing production. Exposure to loss in this Super Cat event includes large scale destruction of housing, agriculture, land contamination, auto and marine sectors, industrial production and infrastructure damage.

It is still premature to estimate the total insured losses at this stage due to continuing uncertainties surrounding the event, but only a minor proportion of the economic loss will be covered by insurance.

The Financial Times reported that the total costs to insurers would rival hurricane Katrina