Japan earthquake updates (13th March)

For our latest updates read our article from the 14th March.

Here are some updates on the situation in Japan after the major earthquake and tsunami event which struck the country on Friday 11th March. Events are still unfolding and it is likely that much uncertainty will exist over the damage totals and effects of aftershocks over the coming days. It’s worth coming back to this post throughout the day as we will add any useful updates.

Latest updates (most recent at the top):

– We’ve updated the details on the catastrophe bonds which could be at risk of losses from this event. The new post with further analysis on the structure of the transactions can be found here.

– Japanese news agency Kyodo reports ‘The radiation level at a quake-hit nuclear power plant in Fukushima Prefecture has again exceeded the legal limit, Tokyo Electric Power Co. reported to the government Monday.’

– NASA has published the first satellite images which show the size of the area affected by flooding from the tsunami.

– The Japanese government has said that it will be closely monitoring the financial markets tomorrow when the Tokyo Nikkei stock exchange reopens to ensure that there is no short-selling or other activities designed to profit from the aftermath of the earthquake. The Bank of Japan is likely to inject as much as $30 billion in funds into the markets to try to soothe the markets and prevent borrowing costs from rising dramatically.

– The FT reports that some expats and companies are looking at relocation options in the short term to move away from Tokyo.

– The BBC reports that Japan’s Earthquake Research Committee has released some estimated data about Friday’s earthquake and said that the intensity of the event ‘Forced the tectonic plate on which Japan sits to spring eastward by about 20m (66 feet), says NHK. The researchers also say the quake caused some areas, from Iwate to Fukushima prefectures, to sink up to about 75cm’.

– The situation at the Fukushima facility remains critical. Japan’s chief cabinet secretary Yukio Edano said earlier today that a partial meltdown at the reactor Unit 3 at Fukushima was ‘highly possible’. No further news has been released on the Onagawa facility so at the moment it is assumed that the situation is stable right now.

– The Japanese government have announced rolling blackouts to try to conserve energy and electrical power. This is the first time that has been required in Japanese history.

– A third nuclear facility has caused concerns as the cooling pump failed at the Tokai nuclear plant (which is much closer to Tokyo). After an initial panic it emerged that alternative cooling systems continued to work as normal and it was reported that temperatures continued to drop in the reactor.

– The International Atomic Energy Agency (IAEA) in Vienna has said that a second nuclear plant at Onagawa (further north from Fukushima) has now been placed in a state of emergency due to higher than normal radiation levels. Investigations are ongoing.

– The situation at the Fukushima nuclear plant has deteriorated further. Now, three of the reactors are reportedly having cooling attempts made using sea water as other sources of cooling have failed. As many as 300,000 people have been evacuated from the surrounding areas. Official sources suggest that the situation is not as serious as a full meltdown of the reactors but it’s very hard to tell where this element of this disaster will lead and how serious any leak of radiation has been so far, some reports suggest a partial meltdown could be underway.

– Japan’s meteorological agency has said that there have been around 150 severe aftershocks in the area of Friday’s earthquake every day since the event. It is an extremely active area right now and they are warning that there is at least a 70% chance of a further earthquake or aftershock above M7.0 over the next three days. Aftershocks are being felt regularly in the Tokyo area as well.

– Risk modeller AIR Worldwide reports that they see this event resulting in an insured loss of between $14.5 billion to $34.6 billion. However, the AIR model does not take into account tsunami losses, although care should be taken with estimates as there is likely to be a lot of double counting between losses caused by quake and tsunami.

AIR Worldwide says:

The AIR Earthquake Model for Japan does not account for the effects of tsunami. It should be emphasized, however, that any external estimates of tsunami losses should not be added to the loss estimates provided here, as that would result in significant double counting. Many of the properties destroyed by the tsunami first sustained damage from ground shaking and fire, as witnessed by videos of tsunami waves sweeping along entire buildings ablaze. As more detailed information becomes available—including satellite photos from NASA of the flood extent—AIR plans to independently estimate the loss due to tsunami and provide a combined loss estimate that avoids double-counting in the affected areas.

AIR’s report also highlights some astounding geological facts such as one GPS station on Honshu moved 8 feet according to the USGS. Italy’s National Institute of Geophysics and Volcanology estimate that the earth’s axis shifted nearly 4 inches as a result of the earthquake.

Despite structural damage being light in Tokyo itself AIR says that there is likely to be significant non-structural property damage and content damage. In an area as densely populated as Tokyo this could add significantly to the final loss estimates.

You can read AIR Worldwide’s latest on the event here.

– Loss of life is likely to be extremely high from these twin disasters. Official reports suggest 2,000 dead but there are reports of close to 10,000 people missing from a single town of 17,000. With access restricted to many of the tsunami hit areas it is likely that the final figures for loss of life will be in the tens of thousands. Life re/insurers will suffer losses from this event.

– Risk modeller EQECAT says that they expect economic losses to be over $100 billion from this event. EQECAT say it is too early to give an estimate of insured losses but their latest report on the event (available here in PDF format) includes some insight into the areas economic losses will come from:

Economic damages from this event will be devastating. Strong shaking has impacted over 12 million people, over 10% of the population. More than 2 million people live in cities that were over-run with flooding from the tsunami. Several ports were damaged, but these were not the largest ports in the country. The electrical power grid has sustained damage that will persist for weeks if not months and years. Petroleum refining capacity has sustained a short-term hit but most capacity could be restored within a month.

The eastern prefectures of Ibaraki, Tochigi, Fukushima, Miyagi and Iwate will suffer the most damage. Four million people residing in areas of very strong ground motion translates to approximately 2 million dwelling units. Most dwellings will be relatively undamaged, but 30% of these dwellings are expected to have damage ranging from minimal to severe. Property damage to dwellings alone is expected to exceed $20 Billion USD. Additional damage to contents, and living expenses for those who are forced to evacuate their houses, could double this figure.

Damage to commercial facilities is widespread. Several manufactures, including Honda, Toyota, Nissan and Sony have indicated that they have damaged and closed facilities. Restoration of production will require the re-settlement of displaced workers, repair of damage, and restoration of critical infrastructure such as power,  highways and ports. We expect damage to commercial facilities to be approximately equal to residential damage.

Fire following economic losses will likely approach $5 to $10 Billion USD. Several large fires have produced significant impacts.

Tsunami losses will also include losses to automobiles. Approximately 1 million automobiles were registered in areas that suffered significant flood damages. If one-third of these are damaged from the tsunami, the property losses to automobiles could exceed several billion dollars. Including the flood losses to property, flooding losses will likely exceed $20 Billion USD.

Critical infrastructure damage has not been completely tallied. The experience from recent earthquakes demonstrates that much of this damage can be restored quickly if it is rapidly identified and repaired. The cumulative damage to infrastructure will likely exceed the damage to dwellings and run to $30 Billion USD or more.

Marine losses, including losses to port facilities could cost as much as $10 Billion USD. There are several large ports in the area, and thousands of boats have been run aground.

It is premature to produce insured loss estimates at this time. EQECAT is evaluating the event and its impacts and expects to release an estimate early the week of March 13.

– The Nikkei stock market in Tokyo will open as normal tomorrow (Monday). Investors are extremely nervous of how the market will react and it is expected to slide (potentially significantly). Sources we’ve spoken to expect around a 5% correction in prices and a knock on effect to other global stock markets. The Japanese economy has been on a knife-edge caused by initially deflation, rising debts and then some inflationary factors, meaning that an event of this size could knock the economy back significantly.

Our updates from yesterday can be found here.