CAM May 7, 2014 Natural Disasters Preparation ＆ Response of the Japanese General Insurance Industry Takashi Okuma General Manager International Department The General Insurance Association of Japan (GIAJ) 1 Natural Disasters in Japan Japan is one of the natural disaster-prone countries (Typhoons, Earthquakes, Tsunamis, Floods, etc.) The two major natural disasters prominent in Japan are typhoons and earthquakes In particular, in terms of large losses, typhoons and earthquakes are predominant 2 Public Relief “Disaster Victims Livelihood Recovery Support System” Human suffering: Act on Provision of Disaster Condolence Grant (1973) Payment to family members of the deceased and those who become severely disabled For family members of the deceased: 5 million yen (when the victim was the family's main breadwinner) or 2.5 million yen (otherwise) For those who become severely disabled: 2.5 million yen (when the victim is the family's main breadwinner) or 1.25 million yen (otherwise) Home damage: Act on Support for Livelihood Recovery of Disaster Victims (1998) Payment for livelihood recovery of households with seriously damaged houses For damage to houses: 1 million yen (total loss) or 0.5 million yen (half loss) For reconstruction of houses: 2 million (to rebuild a house), 1 million yen (to repair the house), or 0.5 million yen (to rent a house) A total of 289.4 billion yen was provided to 189,869 households affected by the Great East Japan Earthquake. Other than the above, there are various loan schemes for living expenses and livelihood recovery Tax breaks/relief for disaster victims are also be available 3 Insurance Products Common Fire Policy: Coverage Fire, Explosion, Lightning Storm Flood Water leakage Burglary Breakage Earthquake Insurance for Dwelling Risks: EIDR Following fire Damage Tsunami Volcanic Eruption EIDR is not applicable for commercial properties. If necessary, commercial earthquake coverage has to be purchased. 4 Historical Natural Disasters in Japan Typhoons, Heavy Rain & Floods 10 Largest Insurance Claims Paid (As of March 31, 2013) Claims paid (JPY Billion ) Name of the disaster Date Fire & Voluntary Marine & Miscellaneous Total Automobile Transit Casualty 1 Typhoon Mireille September 26~28, 1991 522.5 26.9 18.5 567.9 2 Typhoon Songda September 4~8, 2004 356.4 25.9 5.1 387.4 3 Typhoon Bart September 21~25, 1999 284.7 21.2 8.8 314.7 4 Typhoon Vicki September 22, 1998 151.4 6.1 2.4 160.0 5 Typhoon Tokage October 20, 2004 111.3 17.9 8.9 138.0 6 Typhoon Shanshan September 15~20, 2006 116.1 14.7 1.2 132.0 7 Typhoon Chaba August 30~31, 2004 103.7 13.8 3.5 121.0 8 Typhoon Roke September 15~22, 2011 100.4 10.0 1.9 112.3 9 Tokai heavy rain September 10~12, 2000 44.7 54.5 3.9 103.0 10 Typhoon Yancy September 3, 1993 93.3 3.5 1.0 97.7 Source: General Insurance Association of Japan 5 Historical Natural Disasters in Japan Earthquake 10 Largest Earthquake Insurance for Dwelling Risk Claims Paid (As of March 31, 2013) Number of Claims paid Name of the earthquake Date Magnitude policies (JPY Billion ) 1 Great East Japan March 11, 2011 9.0 764,792 1,243.9 2 Great Hanshin Awaji January 17, 1995 7.3 65,427 78.3 3 Off Miyagi Prefecture April 7, 2011 7.2 30,750 32.2 4 West, Off Fukuoka Prefecture March 20, 2005 7.0 22,031 16.9 5 Geiyo (Hiroshima & Ehime Prefecture) March 24, 2001 6.7 24,450 16.9 6 Mid Niigata Prefecture (2004) October 23, 2004 6.8 12,607 14.9 7 Mid Niigata Prefecture (2007) July 16, 2007 6.8 7,861 8.2 8 West, Off Fukuoka Prefecture April 20, 2005 5.8 11,335 6.4 9 Off Tokachi (Hokkaido Prefecture) September 26, 2003 8.0 10,552 6.0 10 Iwate-Miyagi Inland (2008) June 14, 2008 7.2 8,276 5.5 Source: Japan Earthquake Reinsurance 6 Insurance Systems Typhoons, Heavy Rain & Floods Most household / commercial losses caused by natural disasters are covered by insurance products provided by private insurance companies. (without any financial support from the government) Private insurance companies have weathered huge losses by the catastrophe reserve system and international reinsurance. Earthquakes Though the frequency of destructive earthquake occurrences is very low, the scale of loss/damage levels of earthquakes can sometimes be extraordinarily huge. Therefore, it is difficult for insurance companies to make seismic risks insurable.>>>>>Support by the government is an absolute “MUST”. In Japan, Earthquake Insurance on Dwelling Risks is supported by a governmental reinsurance scheme. Commercial Earthquake risks are not supported by Governmental reinsurance scheme, so insurers control risks by themselves using unique cat modeling and reinsurance cover. etc. 7 Earthquake Insurance for Dwelling Risks Objective: “To contribute to the stabilization of the lives of the affected people” (Article 1, Act on Earthquake Insurance) Characteristic Points “No loss, no profit” principle All net premiums are accumulated and kept in an insurers’ reserve and a government special account. The government’s liability is funded by this Special Account. Unified product with industry-wide common rates Liability sharing of insurance companies and government ( From April 1, 2014 to the present ) 100 billion 362 billion 7,000 7,000billion billion (JPY) (JPY) 50% Government's Liability 99.5% 6,738.6 billion JPY Private Insurers' Liability 50% 261.4 billion JPY 0.5% 8 Earthquake Insurance for Dwelling Risks Interest Residential Buildings and/or Household Property Fire, Destruction, Burial or Flood resulting from an Earthquake, Volcanic Eruption Scope of cover and Tsunami ・Arranged as an optional rider to a fire Insurance policy Underwriting ・Compulsory for insurers / Non-compulsory for homeowners ・30% - 50% of the insured amount of fire insurance policy Amount insured ・Limited to a maximum of JPY 50mil. (US $0.5mil.) for a building and JPY 10mil. for household property Degree of loss Amount of insurance claim paid Payment of insurance Total loss 100% of amount insured claims Half loss 50% of amount insured Partial loss 5% of amount insured ・JPY 7.0 trillion per any one occurrence ・Determined on the assumption of the recurrence of the Great Kanto Earthquake Aggregate limit of (1923) indemnity ・If exceeded, claims payable shall be reduced pro rata by the proportion of JPY 7.0 trillion to the total amount of claims 9 The Great East Japan Earthquake (March 11, 2011) Earthquake Tsunami March 11 14:46 Mw9.0 There was only a 20 minute period 3 aftershocks over M7 occurred within 40 min between the main shock and following followed by a series of after shocks including set of tsunamis. many in the range M6~7. 0 hour 02 min earthquakes from Mar 11 to Apr 8 (data from Japan Meteorological Agency) copyright@ Prof. Kenji SATAKE http://outreach.eri.u-tokyo.ac.jp/ Earthquake Research Institute; The University of Tokyo 10 The Great East Japan Earthquake (March 11, 2011) - Damage - Causes of death fire, 1.10% others, 2.20% HUMAN crushing, 4.40% Dead 15,885 Missing 2,623 Injured 6,148 drowning,drowning, 92.5%92.50% April 10, 2014 National Police Agency Apr 19, 2012 National Police Agency BUILDING Macro economic damage Total loss 127,305 Half loss 272,941 about trillion JPY Partial loss 741,752 16.9 June 24,2011 Estimated by Cabinet Office, Government of Japan April 10, 2014 National Police Agency ｛social capital・dwelling・installation｝ ※not including losses incurred by the Nuclear accident 11 The Great East Japan Earthquake (March 11, 2011) - Response of the Japanese General Insurance Industry - Total amount of claims paid for earthquake insurance and number of claim payments June 21, 2011 (70 days after) Ratio of case settlements: 92.5% (billion yen) 800,000 Total amount of claims paid: 1,001 billion yen 1,400 Number of claim payments: 554,005 700,000 1,200 600,000 1,000 500,000 800 May 31, 2012 (15 months after) 400,000 Ratio of case settlements: 99.2% 600 300,000 Total amount of claims paid: 1,235 billion yen Number of claim payments: 783,648 400 200,000 100,000 200 0 0 4/5/11 4/27/11 5/26/11 6/21/11 7/20/11 8/17/11 9/28/11 10/26/11 11/24/11 12/28/11 3/1/12 Number of claim payments Total amount of claims paid Ratio of case settlements = Settled cases / Reported claims (%) 12 The Great East Japan Earthquake (March 11, 2011) - Response of the Japanese General Insurance Industry - 1. Measures for prompt payment of insurance claims The GIAJ works as an organization responsible for the industry-wide dealing of earthquake insurance claims by concerted action and is exempt from the Antimonopoly Act on the basis of the Insurance Business Law and governmental approval. Preparation at ordinary times Development of an industry wide master plan to deal with earthquake insurance claims Industry-wide exercises and training under the master plan 13 The Great East Japan Earthquake (March 11, 2011) - Response of the Japanese General Insurance Industry - 1. Measures for prompt payment of insurance claims (continued) Response since the disasters occurred Under the master plan, the GIAJ established an Earthquake Insurance Central Command, which is directed by the GIAJ chairman and the Earthquake Insurance Local Headquarters in Sendai Insurers have dealt with insurance claims in an appropriate and smooth manner under the direction of Central Command Central Command・Outline Chief ： Established at GIAJ headquarters GIAJ chairman Affairs Planning System Accounting Survey Consultation & Press & Human Resources System Management Staff members of the GIAJ work in every team.