Quantifying and managing Japan earthquake risk

Japan has experienced some of the most devastating earthquakes in recent history, and even though the country has strong seismic building codes and construction techniques, it is at risk for very large loss producing events. Based on the new high-resolution KCC Japan Earthquake Reference Model:

• A repeat of an event like the Great Kanto Earthquake of 1923 would result in total property losses (insured and uninsured) exceeding $1.5 trillion USD
• A larger magnitude event impacting Tokyo could produce total property losses exceeding $3 trillion USD
• In Japan, the most seismically active regions correspond to the most densely populated areas
• Scientists estimate a greater than 80 percent chance of a major event near Tokyo within the next 30 years
• On a long run expected basis, Japan’s earthquake loss potential (insured and uninsured) averages to over $20 billion USD per year

Earthquakes in Japan are of major interest to (re)insurers. Over 37 M7 and greater damaging earthquakes have impacted Japan since 1900, and property damage from the most costly events of the past few decades are estimated to total over $400 billion USD. Based on recent events, 10-15 percent of Japan’s total earthquake loss potential is covered by the global (re)insurance community.