Typhoon Lan strengthens on course for Japan, targets Tokyo region

Typhoon Lan is currently heading for Japan with sustained winds estimated as being in the Category 3 region and further strengthening expected, possibly to super typhoon status, followed by a slight weakening as the storm nears the Tokyo region of the country, with a landfall just to the east of Japan’s largest city as a Category 2+ typhoon possible.

Typhoon Lan has been intensifying in recent hours, with some meteorologists estimating that its winds are stronger than are being reported by the JTWC, with suggestions that it could already be a Category 4 equivalent storm with winds in the region of 120 knots (138mph) or higher.

Typhoon Lan track and forecast path

For the insurance and reinsurance industry the prospects of a Category 2 or higher typhoon coming ashore just to the east of Tokyo will raise some concerns, particularly as that storm track could push any surge into Tokyo Bay.

The Tokyo region has some of the highest concentrations of insured exposure in the world, both residential and commercial, as well as some low-lying areas of reclaimed land that are exposed to storm surges.

Given the uncertainty over how much typhoon Lan will intensify and then how much it will weaken as it nears the Japanese coast, it’s going to be a difficult storm to model for.

But even a Category 2 typhoon landfall has the potential to create a sizeable insurance loss, and some reinsurance losses. Although Japan typhoon exposed catastrophe bonds should be largely safe from a storm at that intensity. Should typhoon Lan make it to landfall as a stronger storm though, it could put many more reinsurance and ILS structures at risk, but right now the forecasts would suggest that is less likely to occur.

Retrocessionaires will be looking at typhoon Lan with some trepidation, with all having been hit by the recent three hurricane loss events, the Mexico earthquakes and some the California wildfires.

Landfall is expected for typhoon Lan on Sunday with impacts being felt well into Monday in northern Japan. There remains a chance that the typhoon could curve and miss the Tokyo area, or avoid landfall completely, but these scenarios are becoming less probable as the storm nears and all model runs now show a landfall situation.

Typhoon Lan has a particularly large wind-field, meaning its effects will be widely felt. Torrential rainfall, with the potential for flooding and landslides is expected.

Storm surge is a risk in the Tokyo region, with typhoon Lan expected to make landfall to the southeast of the city and the highest storm surge expected to the north of where it makes landfall. If the surge pushes up into Tokyo Bay itself the storm surge could be exacerbated by the effects of water being squeezed into this area.

Some of the typhoon catastrophe bonds now outstanding include storm surge and flooding damage, including rainfall induced, although typhoon strength winds are the largest contributor to expected loss for these bonds.

Other ILS fund backed and collateralized reinsurance arrangements will have a similar exposure, perhaps even broader in some cases and retrocession markets will also be exposed to another loss in a different peril bucket of their portfolios, should typhoon Lan maintain its strength.

Also, reinsurers retro sidecars could be exposed should Lan make landfall as an intense typhoon.

Typhoon Lan is expected to accelerate towards the Japanese coast though, which means the effects will not linger and that could help to reduce the eventual economic and insured impacts from the storm.

However, with some forecast model runs showing a landfall with minimum central pressure as low as 925mb to 930mb, typhoon Lan is certainly a storm to watch over the coming day or so.