The insurance industry is facing losses this quarter that will approach and probably surpass $US50 billion, according to preliminary estimates from Munich Re, Standard & Poor’s and US risk consultants, AIR Worldwide.

A very preliminary estimate of the damage caused by Friday’s quake and tsunamis has emerged, with US risk consultants AIR Worldwide releasing a statement this morning that insured losses could be as much as $US35 billion. But that doesn’t include the costs from the damage caused by the tsunamis.

Of course there’s an important question to be settled here: was the quake and following tsunamis one event, or two?

It’s an age old question that bedevils insurance at these times. We have seen it raised in Christchurch, where the February 22 quake is now seen to have occurred on a separate geological structure unconnected to the fault where the September quake happened. It was also raised after the September 11 terror attacks where some insurers argued the destruction of the two towers were a separate —  not singular — event.

AIR Worldwide said Friday’s quake was unforeseen and never planned for: “The event is the largest in Japan’s lengthy earthquake history, with the rupture extending across four segments of the subduction zone that parallels the Japan coast to the east.”

AIR now describes Friday’s quake as a 9.1 magnitude quake (the US Geological service says 8.9 and the Japanese Government now says it was a 9.0 event). It said that “insured property losses will likely be between $US14.5 billion and $US34.6 billion” — but that estimate contains a number of very important exclusions, most notably the cost of the tsunamis:

“Additionally, the AIR Earthquake Model for Japan does not account for the effects of tsunami. As more detailed information becomes available, AIR plans to independently estimate the loss due to tsunami and provide a combined loss estimate that avoids double-counting in the affected areas.”

Nor does its estimates for this type of event include losses from cars being damaged, losses to uninsured properties; losses to land; losses to infrastructure; indirect business interruption losses; loss adjustment expenses and demand surge—the increase in costs of materials, services, and labor due to increased demand following a catastrophic event.”

And Standard & Poor’s said late Friday night that the insurance industry could see a new record quarterly loss for the March quarter as losses from the Japanese earthquake and subsequent tsunamis are tallied.

There’s also the impact of the floods in Brisbane and the rest of Australia, plus cyclone Yasi which could see damage bills of well over $A6 billion and insured losses of up to three quarters of that amount, according to some estimates.

If the AIR estimate is used, losses will top $US40 billion, and rise towards $US50 billion, depending on the cost of the nuclear plant problems and whether they are included. Add in the cost of the tsunamis and other insurance losses (motor vehicles and business and land costs) and the losses could easily surge towards $US100 billion.

The US Insurance Institute says the Japanese domestic insurance industry had a capacity of $US107 billion in written premiums in 2009, making it the third biggest market after the US and Germany:

“The implication is that a larger share of losses are likely to be retained by domestic Japanese insurers and reinsurers than was the case with recent earthquakes in Chile and New Zealand.”

Another unknown is the impact on so-called catastrophe bonds (or cat bonds). They are special financial securities designed to securitise and spread the financial burden of major insurable risks such as earthquakes, hurricanes and other events where the losses could be more than a range of $US25 to $US50 million from any one event.

Around $US1.25 billion of these cat bonds could be impacted by the quake. The impact of the tsunami is yet to be established. According to Swiss Re around $US12.5 billion of these bonds have been issued, meaning potential losses could be 10% of the issued bonds, and more when the tsunami losses become clearer.

According to a list of top 10 quakes issued over the weekend by the big German reinsurer Munich Re, Christchurch’s February 22 earthquake’s insurance loss of $US10 billion is still rising.

The biggest loss was generated by the 1995 Kobe quake at $US100 billion in 1995 dollars, with the losses for insurers put at $US3 billion in original dollars of 1995 values.

Unhappily, Japan now has the top two spots in this most unwelcome of lists.