Japan Quake, Tsunami, Nuclear Meltdown to Exact $100 Billion Economic Toll
Beyond this human cost, insurance companies and the nuclear power industry are likely to pay an economic toll of at least $100 billion, according to a risk modeler, Equecat interviewed by Reuters. That $100 billion represents about a third of the value of the property in the insured regions. Reuters reports that American International Group (AIG), ACE Ltd (ACE), Munich Re (MUVGn) and Swiss Re (RUKN) are likely to be exposed to some of that damage. However, only about 14% of Japanese property owners have earthquake insurance, so it's likely that the Japanese government will pay much of the rebuilding costs.
The expected economic damage is far higher than many recent quakes. For comparison, here are a few of the larger quakes in the last 20 years and their economic costs:
- Kobe's January 1995 7.1 quake generated damage that cost over $100 billion, according to the BBC.
- Northridge's January 2004 6.7 quake took $45 billion to repair the wreckage it left in its wake, according to money.ca
- Chile's February, 2010 8.8 quake was estimated to cost between $15 billion and $30 billion, according to the Economist.
- San Francisco's October 1989 7.1 quake cost between $6 billion and $8 billion to fix, according to vibrationdata.
These reactors' inability to withstand the earthquake and tsunami calls into question the safety of the industry and is likely to raise questions about the safety of nuclear plants in the U.S., such as California's Diablo Canyon (near San Luis Obisbo) and San Onofre (in San Clemente), that lie on earthquake faults, according to the Washington Post. Nuclear power accounts for 30% of Japan's energy supply and 20% of the U.S.'s.
What happens next is unclear, however, the economic damage from this tragedy is likely to rise. In its wake, the demand for energy is likely to shift away from nuclear and towards more sustainable sources. And the insurers that pay for the cleanup are likely to raise their rates as they seek to rebuild their depleted capital.