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Insurance costs may hit $60B

LONDON — Japan’s devastating earthquake and tsunami may cost the global insurance industry as much as $60 billion, which would make the disaster the most expensive ever behind Hurricane Katrina, according to estimates.

LONDON — Japan’s devastating earthquake and tsunami may cost the global insurance industry as much as $60 billion, which would make the disaster the most expensive ever behind Hurricane Katrina, according to estimates.

Global insurance stocks took a hit on Monday as traders reacted to images of flattened towns and ravaged coast lines, but analysts stressed there are some mitigating factors, including the fact that damage to residential property is covered by a state-backed system and that nuclear damage is excluded from policies.

Analysts said those elements mean insurance costs will likely fall short of those associated with Hurricane Katrina in 2005, though the cost of Friday’s quake won’t be known for some time.

Expenses will continue to mount due to ongoing aftershocks from the massive March 11 earthquake off the coast of northeast Japan and shutdowns at electronics factories, car manufacturers and oil refineries. The official death toll of 2,800 is expected to rise above 10,000.

“ . . . it is still in the very early aftermath of the event,” said Jayanta Guin, senior vice-president of research and modeling at AIR Worldwide, which has put early estimates for insurance costs at $15-35 billion.

“Search and rescue efforts are still underway and damage assessment has only just begun, while considerable uncertainty still remains in the seismic parameters that define the event,” added.

A Credit Suisse report suggested initial insurance cost estimates ranging from $10 billion to $50 billion.

Barrie Cornes, an insurance analyst at Panmure Gordon & Co. in London, warned with the tsunami bill added in, the cost to the global insurance industry could rise above $60 billion dollars.

“The loss will be so large that it will probably provide the trigger to ensure a re-rating of the non-life sector — a similar impact happened post 9/11,” Cornes said.