Japan earthquake causes fall in insurance shares

Insurance stocks worldwide have fallen in response to a tsunami and earthquake in Japan measuring 8.9 on the Richter scale.

Shares in large insurers such as Munich Re fell in anticipation of big payouts to cover the cost of the disaster.

Economists said the economic impact could be “considerable”, although it was too early to make any judgements.

Asian stock markets also fell after the quake struck only minutes before the 0645 GMT close of trading in Tokyo.

The Nikkei ended the day down 1.7%, and Nikkei futures fell 3% in after-hours trading in Singapore. Markets in the UK, France and Germany were also down slightly.

But insurers were the biggest early losers.

In Frankfurt, insurers Munich Re fell by 5.2%, while Allianz fell by 2.5%. Swiss Re and Hannover Re were also down by more than 4%.

In London, insurers Admiral, RSA and Prudential were down by 2.4%, 1.9%, and 1.7% respectively.

Munich Re has already said it would have to pay out about $1bn because of the Christchurch earthquake in New Zealand on 22 February.

The Tokyo market had already been suffering amid the turmoil in the Middle East before it closed at its lowest level in five weeks.

Across Asia other markets also fell.

Hong Kong’s Hang Seng dropped some 1.8% following the earthquake, and ended the day down 1.6%. The Shanghai composite fell by 0.8%.

By early afternoon, the major European markets were down only slightly – by less than 1%.

Analysts suggested that shares in Japan were likely to be hit in the near-term, due largely to the uncertainties surrounding the economic impact of the quake.

Daiwa Capital Markets, who said it was too early to make any predictions, pointed out that the Nikkei had fallen by 25% in the six months after the Kobe earthquake in 1995, when other markets were rising.