Monthly Archives: March 2011

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Initial Estimates of Claims from Japan Quake

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Though it is far too early to pin down an exact number for the amount of money the Japan quake will cost insurers, initial estimates have started to surface for some of the hardest hit insurers and reinsurers.

Swiss Re, the world’s second-biggest reinsurer, has estimated it will face claims of about $1.2 billion from the earthquake and tsunami in Japan.

The figure is low because Japan’s government insures residential properties covered by non-life companies against earthquake and tsunami damage and this protection is not reinsured internationally, the Zurich-based company said in an e-mailed statement today. The preliminary claims figure is net of retrocession and before tax, Swiss Re said.

Eqecat, a catastrophe modeling firm, has stated that insurers and reinsurers will likely have losses of $12 billion to $25 billion. However, AIR Wolrdwide has estimated losses of up to $35 billion from the quake alone.

AIG has recently reported that it will record $1 billion in claims for the first quarter, most of which can be attributed to the Japan earthquake and tsunami.

Zurich-based ACE Ltd., a major player in the insurance and reinsurance market, said its initial loss estimates are $200 million to $250 million.

Though Lloyd’s of London has not officially released an estimate, an anonymous market source has said “$3 billion in losses for the Lloyd’s market as a whole sounds plausible.”

QBE Insurance Group Ltd. of Australia has said it estimates $125 million in claims from the quake and tsunami.

Below is a video of the always-entertaining Joe Plumeri speaking on the topic of Japan’s insured losses.

You’re watching Willis’s Plumeri Says Japan Insured Losses Still Unknown. See the Web’s top videos on AOL Video

The Cost of a Data Breach

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Six years ago, The Ponemon Institute conducted its first “Cost of a Data Breach” study in the United States. Since then, the independent research firm has expanded into the United Kingdom, Germany, France and Australia. This most recent study focuses on actual data breach experiences of 51 U.S. companies from 15 different industry sectors.

The results of Ponemon’s 2010 study, which were released this month, find that:

  • For the first time, malicious or criminal attacks are the most expensive cause of data breaches and not the least common one
  • Organizations are more proactively protecting themselves from malicious attacks
  • Companies’ investments in finding and remediating data breaches may be paying off
  • For the third straight year, direct costs accounted for a larger proportion of overall data breach costs

Other important findings include: more organizations favor rapid response to data breaches, and that is costing them greatly; for the fifth year in a row, data breach costs have continued to rise (the average cost of a data breach in 2010 increased to $7.2million, up 7% from $6.8million in 2009); breaches by third-party outsourcers are becoming slightly less common but much more expensive; more companies had better-than-average security postures, and those organizations enjoyed much lower data breach costs.

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The report points to popular and effective technologies that are currently available to secure data both within an organization and among business partners.

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They include:

  • Encryption (including whole disk encryption and for mobile devices/smartphones)
  • Data loss prevention (DLP) solutions
  • Identity and access management solutions
  • Endpoint security solutions and other anti-malware tools

Earthquake, Tsunami Reshape Japan’s Coastline

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In the wake of the devastating earthquake and tsunami that ravaged Japan, the world’s attention has rightfully turned to to ongoing nuclear crisis at Fukushima. Three reactors are at risk of meltdown while spent fuel rods at a fourth reactor are at risk of catching fire, which would spew radioactive gas into the atmosphere. More than 200,000 people have either been evacuated or told by authorities to shelter-in-place and all but 50 workers at the nuclear plant have been sent home as radiation levels continue to “soar.” By all accounts this is now a full-scale international crisis as Japan’s neighbors are at risk and with the nation’s prime minister reporting asking energy “what the hell is going on?” the incident is becoming more harrowing by the minute.

All we can do now is monitor the information being reported and hope for the best in an incident that may already have caused insured losses of up to $35 billion, according to risk modeling firm AIR Worldwide, and has triggered the biggest two-day stock market decline in Japan since 1987, according to comments by CNBC’s Erin Burnett today on Morning Joe.

Looking back at the initial disaster, however, more and more is becoming known about the gravity of the catastrophe. The video below from ABC shows how the quake and tsunami drastically reshaped parts of Japan’s coastline. The awesome power of nature will never cease to amaze. Truly heart-breaking imagery. (More images of destruction can be seen here and here.)

For more breaking news coming out of Japan, stay tuned to our Twitter feed, @RiskMgmt.

How Japan’s Building Codes Prevented Casualties

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The tragic juxtaposition between the death toll from the 7.0 magnitude earthquake that devastated Haiti in January 2010 and the 8.8 quake that hit Chile less than two months later was glaring. The former killed an estimated 250,000 while the later left less than 600 dead.

It is still far too early to have even a close guess on the number of casualties from this morning’s 8.9 magnitude quake and the resulting tsunami in Japan. But while even one life lost makes this a tragedy, it seems as though the final total could be far below the horrific worst-case scenario that I envisioned when first hearing of the disaster’s size.

And much like was the case in Chile, Japan’s building codes had a lot to do with it.

From seawalls that line stretches of Japan’s coastline, to skyscrapers that sway to absorb earthquakes, to building codes that are among the world’s most rigorous, no country may be better prepared to withstand earthquakes than Japan.

The Times’ piece goes into more detail about tsunami protection.

Over the years, Japan has spent billions of dollars developing the most advanced technology against earthquakes and tsunamis. The Japanese, who regularly experience smaller earthquakes and have lived through major ones, know how to react to quakes and tsunamis because of regular drills — unlike Southeast Asians, many of whom died in the 2004 Indian Ocean tsunami because they lingered near the coast.

Communities along Japan’s coastline, especially in areas that have been hit by tsunamis in the past, tend to be the best prepared. Local authorities can usually contact residents directly through warning systems set up in each home; footpaths and other escape routes leading to higher ground tend to be clearly marked.

In the country that gave the world the word tsunami, Japan, especially in the 1980’s and 1990’s, built concrete seawalls in many communities, some as high as 40 feet. In addition, some coastal towns have set up networks of sensors that can sound alarms in every residence and automatically closed floodgates when an earthquake strikes to prevent waves from surging up rivers. Ports are sometimes equipped with raised platforms.

Resiliency in action.

Recently, I profiled the Institute of Business and Home Safety Research Center, an organization that is striving to improve building standards and the resiliency of building materials by testing them. Hopefully, in tragedy, we can also get a lesson that shows the critical importance of enforcing building codes based upon good science.

UPDATE: Here’s an image that further shows the need for good science. The projected path of the tsunami resulting from the quake. (via Business Insider)