Swiss Re: Major Japanese earthquake could cause $130bn-$150bn of insured losses
A repeat of the 1923 Great Kanto earthquake would likely result in a triple-digit billion dollar loss for the (re)insurance sector, according to reports released to commemorate the 100th anniversary of the event by Swiss Re and Moody’s RMS.
Swiss Re said a major Japanese earthquake had the potential to cause insured losses in the $130bn to $150bn range, which would represent the largest single-event loss on record for the industry.
Moody’s RMS said a repeat of the 1923 Great Kanto earthquake would likely result in economic losses of around $331bn, of which more than a third would likely be covered by insurance.
The Great Kanto earthquake remains Japan’s worst natural disaster, with around 105,000 lives lost and an economic impact equivalent to 30 percent of Japan’s GDP in 1923.
Around 300,000 buildings were destroyed across the impacted region, many due to fire. Japan responded by developing some of the most stringent building codes and disaster mitigation strategies in the world.
Following the earthquake Japan implemented fire and seismic design requirements for structures built in Tokyo with the region’s most populated areas reducing their population density by more than 50 percent.
Subsequent loss events
Japan remains one of the world’s most earthquake-prone countries, and has been struck by four large quakes of Mw 8 or more and 148 mid-sized earthquakes of Mw 5-7 since 1950.
The strong culture of risk prevention and preparedness developed after the 1923 event was reflected by the relatively low loss of life following 2011’s Mw 9 Tohoku earthquake and tsunami, the strongest earthquake ever recorded in the country.
Inflation-adjusted economic losses from the disaster were still above $280bn, the highest from any natural catastrophe globally since 1970.
Swiss Re warned that if an earthquake were to again strike the Kanto region, where a sizeable percentage of buildings were constructed before 1981, the human and economic fallout could be vast.
“Despite Japanese non-life insurance companies' capital resilience under stringent solvency regulation, earthquake risk in Tokyo remains a major threat that calls for continuous strengthening of worst-case scenario planning and modelling of all loss drivers,” the reinsurer said.