Typhoon Faxai insured loss $5bn to as much as $9bn: RMS

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Catastrophe risk modelling specialist RMS has estimated that the insurance and reinsurance market faces an industry loss of between $5 billion and $9 billion from recent typhoon Faxai in Japan.

typhoon-faxaiIt’s the highest estimate of industry losses from the typhoon so far, above the estimate from fellow catastrophe risk modeller AIR Worldwide that pegged the insured loss estimate at $3 billion to $7 billion.

That puts the range of mid-point estimates as being from AIR’s $5 billion mid-point, up to RMS’ mid-point of $7 billion.

Typhoon Faxai struck Japan on September 9th, impacting the Tokyo area with some of the largest and most significant damage seen in the Chiba, Kanagawa and Shizuoka prefectures.

It’s becoming clearer that the insurance and reinsurance market is facing a reasonably significant loss from typhoon Faxai, as the estimates rise.

Early estimates have begun to emerge from major Japanese domestic insurance carriers.

But it seems clear the big international commercial insurers operating in Japan are going to see reasonable impacts from the typhoon as well.

RMS’ estimate (which equates to JPY 500 to 950 billion) for the insurance and reinsurance market loss is based on impacts from property damage and business interruption caused by typhoon wind and coastal flood, across residential, commercial, industrial, marine, and automobile lines. It also includes private and mutual/kyosai market losses as well.

RMS has factored in an element of post-event loss amplification and also non-modeled losses in its estimate for typhoon Faxai.

This means RMS has considered the potential for material and labor costs to be inflated due to the forthcoming Summer Olympics, as well as amplification due to contents and business interruption from extended power outages, and also automobile losses.

As a result the catastrophe risk modeller is trying to provide a clear view of industry insured loss potential from Faxai, considering some of the factors that led to the significant loss creep with last years typhoon Jebi.

Margaret Joseph, Senior Manager, RMS, commented on the event, “The equivalent of a category 2 on the Saffir-Simpson Hurricane Wind Scale (SSHWS) at landfall, Typhoon Faxai was one of the strongest landfalling typhoons on record in the Kanto region, and the strongest landfalling typhoon in this region to impact the Greater Tokyo area since Typhoon Ma-on in 2004. Faxai underwent an eyewall replacement cycle immediately prior to landfall, which weakened wind speeds; however, a wider area experienced the system’s strongest winds as a result of a broadening of the wind field.”

RMS has derived its estimate using a reconstructed wind field and coastal flood footprint analysed through its Japan Typhoon HD model. The company also took into account data and insights gathered by analysis of aerial imagery and field reconnaissance by its modelers based in Tokyo.

As we explained earlier this week, typhoon Faxai could contribute to erosion of some ILS contract aggregate deductibles, as well as some losses likely to flow to private quota shares and sidecar deals.

There is also the potential for some lower layer collateralised reinsurance or retro deals to be exposed to the typhoon, the higher the eventual industry loss actually settles.

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