Japan’s earthquake will cause a global financial aftershock

The cost of insurance and rebuilding could cause global markets to falter – and the Japanese economy to boom.

Earthquake insurance is hard to get for most households in Japan, so much of the cost – estimated at $100bn – will have to come from a mountain of ordinary savings held in Japanese financial institutions, much of it invested overseas. For anything that is insured, possibly amounting to between $10bn and $15bn – the situation is complicated. Japanese insurers will also have to sell overseas assets, but they will be spared the full cost because they have reinsured a lot of their risk with overseas insurance firms, who in turn have reinsured it with other insurers. This insurance trail is a global labyrinth. Japan’s risk, it turns out, is the world’s risk.

An insight to how the history lessons from previous earthquakes may be affect global financial market in this commentary from Guardian News.