Stock repurchases by most reinsurers may be halted by Japan's disaster, and that may push down share prices this year, a Deutsche Bank AG analyst said.
Reinsurers in the U.S. and Bermuda are already facing almost a full year's worth of losses in the first quarter, said Joshua Shanker, a New York-based analyst at Deutsche Bank AG, in a note Monday. With a seasonal decline in share buybacks during the June-to-October North Atlantic hurricane season, losses from the Japanese disaster will cause a "near-term moratorium" on some repurchase programs.
Insurers and reinsurers have been returning capital to shareholders through dividends and stock repurchases as the prices that businesses pay for coverage decline.
The Tohoku region catastrophe, which may have claimed more than 10,000 lives, could cost the global insurance industry as much as ¥2.8 trillion ($35 billion) in claims, according to AIR Worldwide.
"Meaningful share repurchase efforts have been supporting the share prices of a number of underwriters," Shanker said. A halt to buybacks may "be a negative catalyst on future trading."
Reinsurers help protect primary carriers against the cost of major claims from disasters such as hurricanes and earthquakes. U.S. commercial insurance rates fell 5.4 percent in the last three months of 2010 and have dropped every quarter since 2004, according to the Council of Insurance Agents and Brokers.