Japan struck by M6.8 earthquake in Kumamoto prefecture. Damage reported limited so far

An earthquake has struck Japan in the Kumamoto prefecture of Kyushu. Preliminarily given a 7.1 magnitude, this has now been revised down to M6.8 by the USGS. However, Japan’s earthquake scale reports shaking at Shindo 7 level from this relatively shallow event, which is likely to result in some damage although reports are limited so soon after the event.

The earthquake struck just south of Kumamoto city in the last hour and was at a depth of about 10 kilometers, according to the Japan Meteorological Agency. That is relatively shallow and quakes can cause greater shaking effects when closer to the surface.

The Japanese Shindo earthquake scale has reported level 7 shaking in some areas, which is at the highest on the scale.

A Shindo 6 level of shaking was reported for urban areas such as the cities of Yatsuhiro and Uto, as well as the towns of Mashiki and Misato, and even in the city of Kumamoto’s Minami Ward, according to Japanese media reports.

A a tsunami advisory has been issued for areas of the Ariake and Yatsushiro coasts, although no reports of any major impacts have been seen at this time.

Other areas of Kumamoto, Nagasaki, Kagoshima, Fukuoka, Saga and Miyazaki prefectures have all experienced Shindo 5 level shaking, reports state.

Kyushu Electric reported around 48,000 households are without power after the earthquake.

CNN has reported that firms including Sony and TSMC, the world’s largest contract ⁠chipmaker, have plants in the area of the quake, but so far there are no reports of damage.

An earthquake a decade ago near Kumamoto that struck at magnitude 7.0 was estimated to have caused insurance and reinsurance market losses of up to US $4 billion, currency converted at the time.

Japan remains a peak peril zone for its earthquake and typhoon exposure, with meaningful insurance limit and global reinsurance capacity exposed to major events there.

Japan is also a peak peril zone for the catastrophe bond market.

There is currently $1.55 billion of outstanding cat bonds that are solely exposed to Japanese earthquake risks, while there is more exposure held in Japanese multi-peril deals ($100m definitely has exposure to earthquake events) and international multi-peril cat bond structures.

The catastrophe bonds exposed to Japanese earthquakes would typically be expected to be more exposed to more intense quakes than this. However with much of that coverage being indemnity triggered, there can always be a some uncertainty, or a potential threat, if damage turns out to be meaningful (at this time that is not the case, damage reports are limited at this time).

It’s worth also noting that much of the Japanese cat bond exposure is based on residential property damages, rather than commercial.

There is also likely to be parametric insurance covers in the region, given it has quite a large industrial base and some significant cities and urban areas. Again though, most parametric triggers are likely to be set for earthquakes at higher intensity than magnitude 7, although some could be based on the levels of ground shaking seen.

It’s too early at this time to have a clear picture of the scale of any damage from today’s earthquake and with aftershocks still occurring, there has been an M5.6 and M4.9 so far, the insurance, reinsurance and cat bond markets will need to watch developments with this event closely until clarity of the impact of this event emerges.

We will update this story, or report again, if damage reports suggest a greater threat to any structures.