Global insurance rates are unlikely to harden as a direct result of the Japanese earthquake, according to risk management consultancy Towers Watson.

While low earthquake insurance penetration and the relatively small amount of insurance losses passed on to international players mean the catastrophe is unlikely to impact global prices, the cumulative impact of natural disasters in New Zealand, Australia and Chile would cause insurers to “re-evaluate their pricing levels”.

The Tohoku Earthquake is set to become the third largest insurance event in history. Towers Watson estimates insured losses between $US20 billion ($18.9 billion) and $US45 billion ($42.7 billion), just behind Hurricane Katrina at $US65 billion ($61.7 billion) and the World Trade Centre attacks at $US40 billion ($37.9 billion).

In its latest report on Tohoku Earthquake, Towers Watson said less than 12% of an estimated $US300 billion ($284 billion) in economic losses would be covered by insurance. The international insurance community will absorb only 4% of total economic losses, it says.

“Consequently, the impact on the world reinsurance market, although significant, is unlikely to approach the level of Katrina,” the report said.

“So we do not believe that Japan’s catastrophe will result in the global price hardening that occurred following Katrina.”

While the report discounts Japan as having a singular impact on global prices, it does warn the sheer number of recent cat events will force insurers to consider hiking premiums.

“Market estimates include projected 20-50% rate increases for Japanese programs, likely increases in India, Australia and New Zealand,” it said.

“Impacts on US programs may be different, depending on the type of exposures reinsured, but many industry observers are expecting 5% to 15% increases for the upcoming hurricane renewal season.”