A meaningful portion of losses will flow to the global reinsurance industry [including various Lloyd's syndicates], as catastrophe reinsurance covering Japanese earthquakes is a large market,

Japan's devastating earth quake will result in losses that will rank among the largest in history for insurance and reinsurance companies worldwide, two major rating agencies said Monday.

However, Moody's Investors Service Inc. and Fitch Ratings added that time is still needed to assess the full extent of Friday's natural disaster.

"Estimating claims will be a protracted process, as the size and scope of the event will place significant strain on insurers' claims adjustment resources," the Moody's report said, adding subsequent aftershocks in the weeks ahead could cause additional losses.

Fitch said it doesn't expect any major ratings downgrades for insurance and reinsurance companies, as these industries should be able to absorb losses without widespread solvency problems or undue financial strain.

However, among the two types of companies, primary insurers are more vulnerable and could be downgraded one or more notches if loss estimates escalate, Fitch warned.

At the moment, all Japanese insurers have significant catastrophe reserves that both the Japanese regulator and Fitch include in their capital calculations. But "it is possible that catastrophe reserves will be significantly depleted and consequently capital adequacy reduced," Fitch said.

As for the ratings of reinsurance companies, Fitch noted implications are likely to be limited. While some of these companies will be more susceptible than others, "the reinsurance sector is currently well-capitalized following several profitable years and is capable of absorbing a loss of this magnitude," it said.

Moody's said the sectors and market participants that will be most affected are Japanese domestic insurers, Japan Earthquake Reinsurance Co. Ltd., international insurers, global reinsurers/Lloyd's market, retrocessionaires, and catastrophe bonds.

"The ultimate amount of insured losses from this event, as well as the market participants that will bear them, will depend on the types of coverage provided...the amount of reinsurance purchased, and the structure of reinsurance programs," said James Eck, a Moody's vice president and senior credit officer in New York, and Kenji Kawada, a vice president and senior analyst at the rating agency in Tokyo.

Among Japanese domestic insurers, the non-life sector is highly concentrated, with three groups--MS&AD Insurance Group, Tokio Marine Group, and NKSJ Group--accounting for nearly 90% of the Japanese market, Moody's noted.

As the total ramifications of the event continue to unfold, it is already clear that the earthquake will have implications beyond the country's borders, the agency said.

"A meaningful portion of losses will flow to the global reinsurance industry [including various Lloyd's syndicates], as catastrophe reinsurance covering Japanese earthquakes is a large market," the Moody's report said.