UPDATE: Japan Quake, Tsunami Caused Up To $25Bln Insured Loss

Disaster-modeling company Eqecat on Wednesday said insured losses from Japan's earthquake and tsunami would be $12 billion to $25 billion, an estimate whose high end is significantly lower than an earlier prediction.

Eqecat said a portion of the costs in its estimate--$2 billion to $4 billion--would be borne by the government's Japan Earthquake Reinsurance Pool, which will reduce the total cost to private insurers.

The massive earthquake, upgraded by seismologists this week to a magnitude 9.0, toppled buildings and triggered a tsunami that swept away cars, buildings and ships. The estimate from Eqecat includes insured losses from the quake, the ensuing tsunami and fires, and losses to cars and ships. Eqecat said it had reports of 90 large commercial vessels and thousands of smaller vessels getting pushed far inland by the tsunami.

The estimate also includes an estimated payout of $2 billion to $3 billion by life insurers.

While the exact cost of the disaster won't be known for months, estimates from catastrophe-risk modeling companies like Eqecat give an early glimpse at the ultimate costs. A competing firm, AIR Worldwide, estimated Sunday the quake caused insured property losses of $15 billion to $35 billion. Its estimate didn't include the effects of the tsunami.

While Eqecat's estimate is lower, the disaster could still become the largest ever earthquake loss for the insurance industry. The only quakes that rival it are the $15.3 billion earthquake in Northridge, Calif., in 1995, and last month's temblor in Christchurch, New Zealand, where insured costs are still being tallied but could exceed $10 billion.

Industry analysts have been attempting to determine if losses from the disaster would force the price of catastrophe insurance higher around the globe. Insurers and reinsurers are already on the hook for substantial claims tied to storms and flooding in Australia and the Christchurch quake, and analysts said many reinsurance companies will report first-quarter losses and may end up losing money for all of 2011.

The world's largest reinsurers, Swiss Reinsurance Co. (RUKN.VX) and Munich Re (MUV2.XE), said before last week's catastrophe they had already largely exhausted their annual provision for natural disasters.

If the Eqecat estimate proves true, prices may stop their years-long decline, but some analysts and executives have said losses would have to be substantially larger to cause prices to rise.

Ratings firm Standard & Poor's said on Tuesday before the release of the Eqecat estimate that it didn't expect to make widespread ratings cuts against insurers "because much of the industry is dealing with this disaster from a position of capital strength." The company has downgraded its outlook on Japanese property insurers to negative from stable.

However large the insured loss, the economic damage of the quake is sure to be much larger. Earthquake coverage is far from universal in Japan, and many homes and businesses were uncovered. Also, the government is ultimately responsible for liability costs tied to the ongoing nuclear disaster.

Japan's Fire and Disaster Management Agency said Monday the number of buildings completely or partially destroyed by the earthquake had reached 75,000. But Eqecat, in a statement, warned it was "an early tally."

-By Erik Holm, Dow Jones Newswires; 212-416-2892; erik.holm@dowjones.com

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