Impact of Japan earthquake may play out in 2011-12 catastrophe pricing: JLT Specialty Ltd.

The 2011 Honshu earthquake in Japan may not have been a market-changing event in its own right, according to a Natural Catastrophe Audio Briefing by JLT Specialty Ltd., but on the heels of the New Zealand earthquake in 2011, the Australian fires, the Chilean earthquake and the European floods of last year – and without yet knowing the results of the 2011 hurricane season – insurers may be tempted to stabilize rates in natural catastrophe zones in 2011-12.
Christopher Tabbitt, head of placement and servicing in JLT Specialty Ltd.’s division in London, made the observation while speaking as a participant in the audio podcast. He was asked to comment on the implication of the Japanese quake on insurance buyers.
“There is every chance that the market is likely to try and take the opportunity… and use this to try and stabilise rates, and even increase rates wherever possible,” Tabbitt said. “But I believe that is still is only likely to be in natural catastrophe zones, on poorly performing risks and on risks where limited quality risk management information is available.”
Referring specifically to the casualty portfolio, Tabbitt said the Honshu earthquake made very little impact at all on the Mar. 31, 2011 renewals, “although I do expect to see that it will be a catalyst towards stabilising rates during the course of 2011 and into 2012.”
He said “it was through our property book that we saw a change in some insurers’ underwriting behaviours and attitudes. Underwriters were attempting to avoid extending quotes that were near expiry. Many insurers were trying to resist extending or entering into long-term deals where there was a considerable natural catastrophe exposure.”
Tabbitt said some Lloyd’s syndicates are reducing capacity they deploy on excess catastrophe risks, generally in excess of about $50 million. “And we have seen rate increases of 5-15%,” he said.