The 1995 Kobe earthquake: Reflecting on past lessons and assessing modern resilience

On Tuesday, January 17, 1995, at 5:46 a.m. local time, Japan woke to a stark reminder of its vulnerability to earthquakes, as a magnitude Mw 6.9 event struck near the northern end of Awaji Island in Hyōgo Prefecture, just 20 kilometers from the bustling city of Kobe. Known as the Kobe, Hyogoken-Nanbu, or Great Hanshin Earthquake, this event devastated the Hanshin region, Japan's second-largest urban area.

The earthquake centered around Kobe and Osaka, cities with 1.4 million and 2.6 million residents in 1995, a region that by 2020 saw modest population growth of around five percent (Statistics Bureau of Japan, 1995, 2020). Occurring on the Nojima Fault, the earthquake caused a shallow inland right-lateral strike-slip fault rupturing 40 kilometers from the northern end of Awaji Island through Kobe, delivering catastrophic ground motion lasting approximately 20 seconds (Toda et al., 1996) (Figure 1).

Intense shaking combined with its proximity to a densely populated area led to massive destruction. Awaji Island experienced horizontal displacements of up to 1.5 meters, while Kobe saw displacements of around 30 centimeters (Hashimoto et al., 1996). The disaster claimed over 6,400 lives, injured 43,000 people, and displaced more than 300,000 residents.

Widespread structural damage paralyzed the city, with economic losses estimated at US$130 billion, including more than US$100 billion in infrastructure and property damages, and as much as US$50 billion in economic disruption (Toyoda, 2008). For Japan it was the second-deadliest earthquake of the twentieth century, only surpassed by the 1923 Great Kantō Earthquake, which claimed over 105,000 lives.

The Kobe earthquake catalyzed monumental recovery efforts and systemic improvements in Japan's disaster resilience, driving advances in building codes, seismic retrofitting, and emergency response systems, laying the groundwork for a more disaster-prepared nation.

In December 1995, the Japanese government established January 17 as 'Disaster Prevention and Volunteerism Day' to honor the victims and reinforce the nation's commitment to disaster preparedness.

In 2005, RMS released a 10-year retrospective report to analyze the earthquake's impact and Japan's recovery efforts. Today, we revisit this milestone and expand on that work to assess how a similar event would affect the modern Hanshin region and its surroundings, accounting for changes in urban development, risk mitigation, and resilience strategies.

Figure 1: Map showing the Hanshin region affected by the 1995 Kobe earthquake. Colored contours represent ground shaking intensity (maximum above MMI 8.5) based on United States Geological Survey (USGS) data. The earthquake epicenter is marked with a yellow star. The red area indicates the Nojima Fault, which ruptured during the event and is included in the Moody's RMS Japan Earthquake Model source database.

Regional destruction and economic fallout in Kobe

The 1995 earthquake impacted areas across Hyōgo, Kyoto, and Osaka Prefectures, with the worst destruction concentrated in Hyōgo, particularly Kobe. Once considered a low-risk seismic region, despite a minor Mw 6.1 earthquake in 1916, the city was unprepared for the 1995 disaster (Ghasemi & Otsuka, 1996). The event caused widespread devastation, extensively damaging the city's infrastructure and profoundly impacting the lives of its residents.

Infrastructure damage

Newspapers symbolized the scale of destruction by showing the collapse of the elevated Kobe Route of the Hanshin Expressway.

With only 30 percent of Osaka-Kobe tracks functional, railways as well as roads were largely inoperable. Daikai Station on the Kobe Rapid Railway line was destroyed, taking part of National Route 28 and the Shinkansen Line.

Kobe's port facilities, the world's sixth-largest container port and contributing 40 percent of the city's industrial output were destroyed (Chang, 2000). Eighty-five percent of the region's schools, many hospitals, and other major public facilities were destroyed. Twenty-two percent of central business district offices were rendered unusable, disrupting a local and national economy already in crisis.

In addition to infrastructure failures, secondary disasters compounded the devastation. Fires broke out across the city as ~300 separate incidents destroyed thousands of homes-an area equivalent to 70 U.S. city blocks-and claimed 600-700 lives. While these were localized fires compared to the catastrophic firestorms of the 1923 Great Kantō Earthquake, they served as a reminder of the urban fire risks associated with earthquakes in Japan.

Socioeconomic consequences

Damage to Kobe's physical capital stock was estimated at US$114 billion-equivalent to 2.3 percent of Japan's GDP and 0.8 percent of its physical capital stock at the time, a cost three times greater than any prior disaster in Japanese history (Horwich, 2000).

The earthquake caused significant population displacement as unemployment rose sharply with 80 percent of the city's 2,000 small and medium-sized businesses closed. Nearly 100,000 people-around 2.5 percent of the region's population-migrated to other parts of Japan, many permanently (Chang, 1996).

Engineering vulnerabilities

The earthquake also highlighted vulnerabilities in engineering practices. At least 60 percent of all bridges in the Kobe area were damaged, exposing flaws in existing seismic design for infrastructure and risks associated with building on unstable reclaimed land. (Ghasemi & Otsuka, 1996).

Older wood-frame houses with heavy tiled roofs, originally designed for typhoon resistance, were particularly vulnerable due to their top-heavy structure, while structures built to Japan's updated 1981 seismic building codes performed markedly better (Hasegawa, 2013). This disaster underscored the importance of modern seismic standards, leading to stricter building codes, mandatory retrofitting of older structures, and widespread adoption of advanced seismic isolation technologies.

Phenomenal recovery and improvement in earthquake resilience

The Japanese government allocated over US$58 billion to restore infrastructure, housing, and public facilities (RMS, 2005).

Milestones included restoring electricity within a few days, rail systems and roads operational within 5-7 months, the main expressway rebuilt in 21 months, the port fully reconstructed within 26 months, and all debris cleared by the two-year mark (Horwich, 2000).

Within 15 months, manufacturing rebounded to 98 percent of pre-earthquake levels, and most shops reopened within 18 months. Although less than half of the port facilities were rebuilt a year after the quake, import trade fully recovered. Export volume reached 85 percent of pre-earthquake levels. By 1999, Kobe's economy had reached 75-90 percent of its pre-earthquake level, although the Port of Kobe permanently lost significant business to competing Asian ports (RMS, 2005).

Policy reforms

The slow, fragmented government response drew criticism, leading to sweeping disaster management reforms and the establishment of the Central Disaster Management Council to improve government coordination. Marking a turning point in Japan's approach to earthquake preparedness, stricter building codes mandated retrofitting of older buildings, and urban planning began incorporating fire-resistant designs, open spaces to mitigate fire risks, and restrictions on construction in fault zones and unstable reclaimed areas.

Japan also accelerated the development of its Earthquake Early Warning (EEW) system, operational by 2007, providing vital seconds of warning before seismic shaking begins. Public education campaigns and regular nationwide drills fostered a culture of preparedness, enabling communities to respond swiftly during emergencies.

Insurance reforms

Earthquake insurance uptake in Japan was low before the 1995 Kobe event, but it led to surging demand, prompting significant reforms the following year. Coverage for household contents was improved, with payouts for partial losses increased from 10 percent to 50 percent of the insured amount and damage assessments conducted independently.

Coverage limits were also raised substantially. Building coverage increased from 10 million JPY to 50 million JPY (~US$315,000 at US$1= 0.0063 JPY) and contents coverage doubled to 10 million JPY. Additionally, premium rates for buildings and contents were standardized, addressing policyholder concerns and enhancing financial protection.

Evolution of economic losses: The 1995 Kobe earthquake versus today

The economic impact of the 1995 Kobe earthquake if it occurred in 2024 would differ significantly, reflecting decades of changes in urban development, infrastructure resilience, and economic conditions. Additionally, evolving insurance policies and policyholder behavior would shape the financial and social consequences.

At the time, direct property losses were estimated at 10 trillion JPY (~US$63.2 billion), with contributions from buildings, utilities, and infrastructure sectors (City Bureau, 2011). Adjusting for changes in building stock, inflation, and vulnerability, the same event today would result in economic losses 60-80 percent higher, influenced by:

• Building Stock Growth: Despite Japan's declining population, its building stock has grown modestly. Residential and non-residential expansions reported by the 2023 Housing and Land Statistics Survey and Net Capital Stock trends, could drive a 25-35 percent increase in losses.
• Inflation and Reconstruction Costs: Prefecture-level inflation data and the Construction Cost Index (MLIT, 2023) indicate reconstruction costs have risen by 30-40 percent since 1995.
• Vulnerability Changes: The overall impact of changes in vulnerability towards losses is considered minimal, as countering factors at an aggregate level, such as aging of buildings and improvements in building codes, generally offset each other.

Insurance market impacts: Then and now

At the time, the Kobe event highlighted the earthquake insurance penetration gap with insured losses amounting to 78 billion JPY (~$US492 million), largely from residential claims (GIAJ, 2019). Since then, insurance take-up rates have surged, particularly in affected regions, with household coverage rising from three percent to 35 percent in Hyōgo Prefecture and five percent to 40 percent in Osaka Prefecture (GIROJ, 2023). Nationally, coverage expanded from 10 percent in 1995 to over 35 percent by 2023, driven by increased awareness after Kobe and the 2011 Tōhoku earthquakes (Figure 2).

Today, insured losses for a Kobe-like event are projected to be 15-25 times higher, with enhanced coverage structures accounting for approximately 60 percent of this increase. Japan's earthquake insurance scheme, established in 1966 and reinsured by the government, has evolved to provide better protection, but the financial burden on insurers in a comparable event would be unprecedented.

Figure 2: Evolution of earthquake insurance penetration in Japan, including Hyōgo, Osaka, and Kyoto Prefectures. The sharp increases following the 1995 Kobe, 2004 Niigata, and 2011 Tōhoku earthquakes (indicated by vertical shaded areas) highlight how major seismic events significantly drive the adoption of earthquake insurance, both nationally and regionally.

Simulating Kobe's impact today

Using Moody's RMS Japan Earthquake HD Model and 2024 exposure data, we estimate economic losses for a Kobe-like earthquake at US$181 billion, with gross insured losses reaching US$18.5 billion. Residential properties dominate insured losses (~70 percent, or US$13 billion), particularly in the Hanshin region, encompassing Kobe, northern Osaka, and Himeji (Figure 3).

Figure 3: Total gross insured losses compared to exposure (total insured value) in the Hanshin area for a simulated earthquake scenario akin to the 1995 Kobe event. The analysis used the latest Moody's RMS Japan Earthquake HD Model and 2024 Industry Exposure Database (IED) data. The earthquake epicenter is marked with a yellow star, while the orange contour indicates the Nojima Fault source used in the simulation. The chart on the left illustrates gross insured losses broken down by line of business for Kobe and Osaka.

In eastern Osaka, concentrated high-value areas would lead to substantial losses, while Himeji to the west of Kobe would experience similarly amplified impacts. Despite lower overall exposure, northern Awaji Island would face significant localized losses. Nara and Kyoto would also see considerable damage, mainly from their extensive residential and commercial properties.

In Osaka and Kobe, residential properties would account for 79-93 percent of insured losses, with Kyosai (cooperative insurance) contributing 5-9 percent. Commercial and industrial properties would make up 11 percent and 10 percent of losses in Osaka respectively, and four percent and three percent in Kobe, reflecting the cities' differing exposure profiles (Figure 3).

Despite advancements in seismic resilience, the Kansai region remains highly vulnerable. Recent earthquakes, such as the 2018 Northern Osaka Earthquake (Mw 5.9) and the 2024 Noto Peninsula Earthquake (Mw 7.5), underscore the persistent threat of seismic hazards, including those from the Rokko-Awajishima Fault System, which caused the 1995 Kobe earthquake.

A future large-scale event along this fault could pose an even greater challenge to the region's preparedness and resilience.