Typhoon Jebi industry insured loss estimated up to $4.5bn

Typhoon Jebi’s impacts on Japan are expected to result in a loss to the insurance industry of up to $4.5 billion by catastrophe risk modeller AIR Worldwide, an amount which has the potential to cause some impacts to reinsurance interests.

AIR officially put its industry insured loss estimate for Typhoon Jebi, which made landfall in Japan on September 4th of this year, at between JPY 257 billion ($2.3 billion) and JPY 502 billion ($4.5 billion) yesterday.

Typhoon Jebi was always assumed to be one of the largest losses of the year so far, given it was cited as the strongest typhoon to hit the Japanese mainland in more than 20 years.

Market sources believe that Jebi’s losses will hit certain reinsurance layers and the fact that Japan has seen so many weather and catastrophe events in recent weeks suggests that aggregates could also be under pressure.

It’s hard at this time to identify whether any ILS fund participation in reinsurance programs could be affected, but the layers of excess treaties that may be at risk due to Jebi are likely the same areas some funds would be playing. However any ILS fund losses would be a minimal share of the overall losses, given where the major global reinsurance firms including the Bermudians participate on Japanese programs.

AIR Worldwide said that typhoon Jebi resulted in a storm surge that inundated some parts of Osaka Prefecture, and a recorded rate of 100 mm (3.9 inches) of rain in an hour in Kyoto. More than 500 millimeters (nearly 20 inches) of rain fall was measured in total in some areas.

AIR cited “Major damage to buildings and infrastructure, there has been significant business interruption, particularly to manufacturing and tourism, with widespread shipping and transportation impacts.”

AIR’s industry insured loss of up to $4.5 billion includes insured damage to property (residential, commercial, industrial, and agricultural/mutual), structures and their contents, as well as automobile damage.

Importantly it does not include business interruption, loss adjustment expenses or demand surge, all factors that could be exacerbated by the flooding that occurred following typhoon Jebi’s rainfall.

At up to $4.5 billion in industry insured loss, typhoon Jebi’s impact is unlikely to hit any exposed Japan typhoon catastrophe bonds, with any ILS market impacts more likely restricted to collateralized reinsurance participations.