News Analysis - Pricing risk in the wake of the Asian tsunami.

(From Reinsurance)

Byline: Mairi Mallon.

On Boxing Day 2004, a massive earthquake in the Indian Ocean unleashed tsunamis that hit coastlines several hours later without warning.

On top of the appalling death toll of more than 150,000 in this freak event, economic losses in the region were estimated at $10bn (GBP5.3bn).

But, in another cruel blow, as one of the poorest regions in the world, most of the property destroyed was either uninsured or underinsured, and the insured loss is expected to be between $2.5bn and $4bn.

While the cost to insurance companies is low compared to the catastrophic damage, experts say it has exposed how the industry is unprepared to deal with disasters on this scale and that greater emphasis should be put on preventive measures.

There are as yet no reliable estimates for the overall insured costs, with none of the major catastrophe-modelling firms (AIR, EQE or RMS) having issued any loss estimates.