Published on The Malta Independent¸ issue 20th March 2011
News and current affairs programmes are focusing on the earthquake¸ measuring 8.9 on the Richter scale¸ that occurred on the seabed close to Urayasu and triggered a powerful tsunami that hit the north-eastern part of Japan. This was undoubtedly the biggest earthquake in Japan’s history¸ with the rupture extending across four segments of the earthquake zone that runs parallel to Japan’s eastern coast. Seismologists both inside and outside Japan said that such a scenario had not been contemplated.
While the effects of the tsunami are significant¸ shake damage was also considerable¸ with many reports of collapsed buildings and streets strewn with rubble. It is estimated that about 70 per cent of all residential buildings in the affected areas are constructed of wood and about 25 per cent of concrete. Commercial construction is more than 50 per cent concrete¸ about 35 per cent steel and other metals and less than 10 per cent wood. Buildings in Tokyo – some 370km away from the epicentre – shook visibly¸ sending people into the streets. Residential structures in Japan are well constructed and are generally resistant to earthquakes but the devastation is shocking and has badly affected the Japanese nation. It is estimated that so far about three or four million of the 100 million population have been affected directly and may be currently homeless.
Even the price of oil was hit as last week¸ down $3.37 to $97.82 a barrel in electronic trading on the New York Mercantile Exchange. In London¸ Brent crude was down $4.58 at $109.09 a barrel as demand from Japan plummeted.
The event also caused serious damage to the Fukushima-Daiichi nuclear plant¸ to the extent that at the time of writing there have been explosions in three out of the four reactors that were in use and the cooling system has failed. According to Jiji Press¸ TEPCO (an operator) said a fuel rod meltdown at the plant could not be ruled out as the levels of cooling water had fallen sharply. Naturally¸ the Japanese authorities have been battling around the clock to contain the damage by trying to cool down the reactors. Last week¸ a visibly shaken Prime Minister Naoto Kan informed the nation in a television broadcast that the radiation that had spread from four reactors was enough to “impact upon human health” and the risk of more leaks was “very high.” An exclusion zone of 30 kilometres in circumference has been established¸ and over 150¸000 local residents have been advised to stay indoors to avoid the risk of radiation sickness.
Sadly¸ the massive earthquake has led to untold damage to life and property. Early estimates for the losses to insurers and re-insurers around the globe range from $10 to $50 billion. Another question that arises is how badly has the re-insurance industry – which will surely have to respond to many claims in the near future – been affected. In a short period of six months¸ it has faced three catastrophes with floods in Australia¸ an earthquake in New Zealand and now an earthquake and tsunami in Japan; the bill for re-insurers is already looking expensive.
It is¸ of course¸ the re-insurance companies¸ which act as insurers of last resort for general insurers¸ that will be making up for the majority of losses. These companies usually take up the cost associated with an event when the claim to be settled is high. In fact¸ the disaster in Japan has sent the stock value of re-insurers plummeting¸ less than a month after the sector was hit by the deadly earthquake in Christchurch¸ New Zealand.