Insured losses from Japan snowstorms in February hit $2.5 billion

by Artemis on May 23, 2014

Reported insurance industry losses from the severe snowstorms which struck Japan in February have near doubled since our last update on the catastrophe event, now totaling nearly $2.5 billion according to the General Insurance Association of Japan.

When we last updated on the insured losses from this event we had a range of $1.137 billion to $1.42 billion from the loss estimates reported by Japan’s three largest insurance groups, NKSJ Holdings, Inc., MS&AD Insurance Group Holdings, Inc. and Tokio Marine & Nichido Fire.

The General Insurance Association of Japan reports Japanese non-life insurance companies as having paid ¥231.9 billion of insured claims for fire policies and ¥21.8 billion of insured claims for automobile policies, up to the 30th April. In total that is ¥253.6 billion, which converts to just slightly under $2.5 billion of insurance industry losses.

At this level of losses, which could rise with more claims to pay, the snowstorm in February is the fourth largest insurance industry loss in Japan from a windstorm related event since 1991. That puts this loss above many typhoon events in terms of the impact to the insurance industry in Japan, perhaps signifying the importance of reinsurance for snowstorm events in the country.

To get to the $2.5 billion estimate of insured losses the General Insurance Association of Japan surveyed 25 Japanese member companies and 13 foreign property casualty insurance companies and one other, bringing the total surveyed to 39. The penetration of the three large insurance groups is clear as they look set to take more than half of the total industry insured loss.

The losses suffered by individual insurance groups have risen steadily as well. NKSJ Holdings, Inc. had reported that its subsidiaries Sompo Japan Insurance Inc. and NIPPONKOA Insurance Company, Limited losses reached JPY16.9 billion ($163m), but that more than doubled to JPY38.7 billion ($380m) by mid-April.

MS&AD Insurance Group Holdings, Inc. reported that losses incurred by its subsidiaries Mitsui Sumitomo Insurance Co., Ltd. and Aioi Nissay Dowa Insurance Co., Ltd. were projected to rise to JPY75 billion (just over $722m). Tokio Marine & Nichido Fire forecast that its losses would reach as much as $535m.

At these levels of loss each of these Japanese primary insurance groups are likely to have called on their reinsurance programs to help them pay claims. With an industry loss of $2.5 billion, which could rise further, these snowstorms in Japan are among the largest catastrophe loss events of 2014.

There could be some impact to collateralized reinsurance layers within the primary insurers programs, but any exposure for ILS funds or capital market investors is likely to be limited due to the continued dominance of traditional reinsurance in Japan. The other point to note is that at these levels of loss the primary insurance groups could have looked to catastrophe bonds for this event, particularly in the case of MS&AD whose $722m loss would not be an unusual level for a cat bond protection to trigger at.

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