Japan earthquake tsunami cost $60 billion

The horror of the disaster in Japan affects us all. Our hearts go out to the people of Japan and we are grateful to organizations such as the Red Cross that can help with the disaster relief. If you wish to contribute to the disaster relief fund click here.

The cost of Japan's earthquake and tsunami could be as high as Hurricane Katrina and might hit $60 billion.

You would think that it would cost even more than the Gulf Coast disaster in 2005 but there are differences in the way Japan will pay for the losses.

The 11 earthquakes reaching an 8.9 magnitude affected homes, factories, manufacturing, refineries and nuclear power plants. The death toll is still not yet determined due to the circumstances of trying to locate people and lack of communication.

Will this trigger the "hard market" and higher rates for everyone's commercial insurance? Could be. This is what happened after 9/11. We do know that the reinsurers were hit hard at that time. Japan being no stranger to earthquake or tsunami have had a system in place to deal with this issue and so the whiplash may not be as severe as 9/11 or even Hurricane Katrina.

Japan has an Earthquake Insurance System which is backed by the government up to $52.6 billion. So most of the home property claims will fall under Japanese insurers. The Japanese government will have to absorb the cost of earthquake-related damage to the nuclear power facilities.

The Japanese Nuclear Act of 1961 absolves nuclear power operators of liability from damage caused by major natural disasters.