Real estate losses in Japan - residential and commercial - could surpass the $35 billion level when all of the devastation from the March 11 earthquake is finally assessed, according to worldwide research and financial groups.
New York City-based SNL Financial estimates U.S. companies likely to be hardest hit are Starwood Hotels & Resorts Worldwide, ProLogis, Simon Property Group and AMB Property.
Boston-based AIR Worldwide estimates insured property losses will range between 1.2 trillion JPY to 2.8 trillion JPY. Using today's exchange rate of 81.85 JPY to the dollar, this translates to a range of between $15 billion and $35 billion.
"The losses are most sensitive to rupture dimensions, and become extremely large if the modeled rupture is extended southward towards the Tokyo and Chiba prefectures, which contain a higher concentration of insured properties," AIR says.
Dr. Jayanta Guin
AIR's senior vice president of research and modeling, Dr. Jayanta Guin, says in a prepared statement, "Given the enormity of the earthquake... it is still in the very early aftermath of the event.
"Search and rescue efforts are still under way and damage assessment has only just begun, while considerable uncertainty still remains in the seismic parameters that define the event."
Insurance Information Institute in New York City states insurers and reinsurers worldwide have the financial strength to pay the claims that will emerge after the 8.9-magnitude earthquake and the resulting tsunami in Japan.
But these events, coupled with the severe quakes that recently struck New Zealand and Chile, have placed extraordinary demands on the industry, according to the Institute.
"The insurance industry will fulfill its traditional role as an economic first-responder, helping Japan recover from its devastating quake, just as it has done in New Zealand and Chile," said Dr. Robert Hartwig, an economist and president of the I.I.I.
Dr. Robert Hartwig
"What makes (Japan's) natural disaster so extraordinary is that four of the five costliest earthquakes and tsunamis in the past 30 years have occurred within the past 13 months, once you include what happened on March 11 in Japan."
Prior to the March 11 earthquake, insured earthquake losses worldwide dating back to February 2010, totaled an estimated $23 billon.
"The Japanese nonlife insurance industry is very large--third only to the United States and Germany--with $107 billion in premiums written in 2009," said Hartwig.
"The implication is that a larger share of losses are likely to be retained by domestic Japanese insurers and reinsurers than was the case with recent earthquakes in Chile and New Zealand."
Hartwig also noted that some Japanese seismic risk has been securitized through the catastrophe bond market, though it is too soon to tell if payouts under any of those bonds will be triggered.
The earthquake that struck Northridge, CA in January 1994 remains at the top of the list, which goes back to 1980, having caused $15.3 billion in insured losses at the time, or $22.5 billion in 2010 dollars.
The February 2011 quake in New Zealand (up to $10 billion in insured losses), the February 2010 earthquake and tsunami in Chile ($8 billion), and the September 2010 quake in New Zealand ($5 billion), rank second, third, and fourth, respectively, on the list of costliest earthquakes, according to loss estimates compiled by Munich Re.
The fifth-costliest earthquake worldwide since 1980 also occurred in Japan, in January 1995, causing $3 billion in insured losses at the time ($4.3 billion in 2010 dollars).
According to the U.S. Geological Survey, the March 10, 8.9 magnitude quake was centered about 230 miles northeast of Tokyo at a depth of about 17 miles.
The quake is being reported as one of the largest in a century, with the broadcaster NHK describing it as the worst ever recorded in Japan.
In Northern Japan the tsunami that followed the earthquake washed away houses and cars and pushed ships aground.
The Pacific Tsunami Warning Center issued a tsunami warning for most of the region, saying that the tsunami could reach the coastal areas of Russia, Taiwan, Hawaii, Indonesian, the Marshall Islands, Papua New Guinea and Australia.
The center also extended the tsunami alert to the U.S. West Coast, Mexico, Central America and South America. The tsunami warning was later expanded to include much of Alaska, and all of California coast north from Santa Barbara and into Oregon.
Japan is the world's most indebted country, with $11 trillion in debt, and a debt to GDP ratio that is 200%.
In January, Standard & Poor's cut Japan's sovereign debt rating for the first time since 2002. S&P noted the government has no "coherent strategy" to deal with its mountain of debt.
Japan's economy is still struggling 16 years after the Kobe quake in 1995.
Immediately after the quake, the central bank of Japan, began pumping in massive liquidity.
To stabilize the markets, the Bank of Japan, let flow with a record $265 billion into the financial system. The yen has been strengthening in the days after the quake, as repatriated yen come back into Japan for rebuilding.
Bond market players on Wall Street say the debate now is whether U.S. Treasury yields will climb higher as Japan stops purchasing U.S. debt and comes back into the worldwide capital markets as a borrower to deal with the catastrophic events from the quake and tsunami.
Japan ranks third behind the Federal Reserve and China in ownership of U.S. debt, an estimated $880 billion. More than nine out of 10 Japanese government bonds are held by domestic investors. Historically, Japan has not used its foreign exchange reserves for domestic spending purposes.