AIG said its P&C arm Chartis faces an estimated $1bn in Q1 pre-tax net catastrophe losses, including $700mn from the Japan quake and tsunami. The $1bn total also includes losses from last month's New Zealand earthquake, US winter storms, northeast Australian floods, Cyclone Yasi, and the Brazil floods, and is equivalent to 1.1 percent of total AIG shareholders' equity as at 31 December.
However, the Japan estimate does not include losses from AIG's general insurance operations in the country that participate in the Japanese Earthquake Reinsurance Company (JERC).
The company said it had excluded losses from JERC - the exclusive provider of earthquake cover for homeowners' property and contents in Japan - because the industry loss "remains unquantified at this time".
The insurer added that, in accordance with Japanese accounting rules, it had previously established catastrophe reserves of around $500mn for potential claims in relation to quake damage on personal dwellings, and has deposited funds for a "substantial portion" of the reserves with the JERC. The deposits go towards paying the quake claims, reducing the impact on the liquidity of the operations, explained AIG.
With US GAAP prohibiting cat reserves to be set up before a cat event has occurred, the maximum pre-tax loss AIG's general insurance operations in Japan can incur from quake claims on homeowners' property is $575mn, the insurer said.
The figure includes exposure from its 54.66 percent stake in Fuji Fire and Marine Insurance Co.