Fitch Ratings has disclosed that insured losses from the earthquake that struck the Ishikawa prefecture on the Noto Peninsula, Japan, on 1 January 2024 are “likely to be small”, with “no major impact” on Japanese non-life insurers’ earnings.
Writing in a report on the matter, Fitch said that underwriting risks from earthquakes are low for Japan’s three non-life groups, “mainly because their exposure to earthquake risks has been low and within manageable levels.”
The three main non-life groups are of course Tokio Marine Holdings, Inc., MS&AD Insurance Group Holdings, Inc., and Sompo Holdings, Inc.
Citing the Nomura Research Institute, Fitch noted that the economic losses caused by the 7.6 magnitude earthquake are estimated to exceed JPY800 billion ($5.6 billion).
As per the rating agency, this amount is less than 5% of the JPY16.9 trillion ($118 billion) of economic losses from the Great East Japan Earthquake on 11 March 2011, and is small relative to the three non-life groups’ aggregate net assets of around JPY8 trillion ($57 billion).
On a side note, analysts at Karen Clark & Company recently estimated that insured losses from the earthquake could reach $6.4 billion, with residential losses accounting for over two-thirds of the total.
CoreLogic’s modelled insured loss estimate was similar, with the firm anticipating a figure between $1-$5 billion. Meanwhile, Verisk said that insured losses would land somewhere between $1.8-3.3 billion.
Fitch stated that the main area the quake struck in Ishikawa prefecture was a rural and residential area rather than an industrial site and, therefore, “the losses from residential would account for at least more than half of the total economic losses”.
“Japanese non-lifers have limited net retention on residential earthquake risk as it is run by the government. In addition, their net exposure to corporate earthquake risk is also small, as the Japanese insurers tend to avoid retaining large earthquake risks and transfer the exposure to major European and US reinsurers to limit their retention,” Fitch explained.
The rating agency concluded, “Therefore, Fitch estimates that the net insured losses of the non-life groups from the earthquake would be small.”
