Chartis hit by $700m Japan quake losses

AIG said this morning that its property casualty insurance unit, Chartis, is expected to post a pre-tax insurance loss of $1bn in the first quarter of 2011, related to various catastrophe's including the recent Japan earthquake.

The earthquake in Japan on March 11, consequent tsunami, and related exposures will result in a pre-tax insurance loss of $700m, AIG said.

The preliminary estimate excludes losses arising from AIG’s general insurance operations in Japan that participate in the Japanese Earthquake Reinsurance Company (JERC).

AIG’s preliminary estimate also includes catastrophe losses related to the New Zealand earthquake, U.S. winter storms, northeast Australian floods, Cyclone Yasi, and the Brazil floods that have occurred in the first quarter to date.

The JERC is the exclusive provider of earthquake coverage for personal dwellings and their contents in Japan.

In accordance with Japanese statutory accounting rules, AIG’s general insurance operations in Japan have previously established catastrophe reserves of approximately $500m for potential claims associated with earthquake damage to personal dwellings and have deposited funds for a substantial portion of these reserves with the JERC.

These deposits will be utilized to pay earthquake claims on personal dwellings, thereby reducing the impact on the liquidity of the operations, AIG said.

“Our priority is supporting all of our customers and employees who have borne the impact of these many catastrophes,” said AIG president and chief executive Robert Benmosche.

“In Japan, where the people in the affected areas continue to bear many hardships, including aftershocks, lack of electricity, and fuel shortages, we are working closely with our customers and continue to monitor events in the country as they unfold. We have been able to make substantial progress due to the remarkable efforts of our claims department and our customer service department, which have been working non-stop since the event. We have also been actively engaged in bringing relief supplies to the hardest hit areas.

“The catastrophe in Japan has affected people, their homes, infrastructure, and businesses both in and outside of Japan, and our industry is working hard to quantify the complex impact of the devastation, a process that will take some time.

Benmosche concluded: “As a result, our preliminary loss estimate will change as the industry losses from JERC for earthquake damage to personal dwellings become known and other information becomes available as the situation in the quarter evolves. Our preliminary estimate is based on our current assessment of what our policies cover and the provisions of reinsurance purchased by AIG and its affiliates.”