A large earthquake in the Greater Tokyo area: Is the insurance industry ready to cope?
Swiss Re hosted a seminar in Tokyo, Japan on 1 June 2005, to preview a new study which examines the likelihood, impact and implications of a large earthquake in the Tokyo area. The preliminary results, which are yet to undergo full scientific review, throw up important findings for the insurance industry.
Initial results of the joint US-Japan study indicate that the overall likelihood for JMA intensity-6 or greater (''severe'' on the Japan Meteorological Agency intensity scale) shaking in Tokyo, Kawasaki, and Yokohama for the next 30 years is in the indicative range of 35 - 40%1. The research, which is sponsored by Swiss Re, has also found that while a recurrence of the great 1923 Kanto earthquake is less likely than previously thought, earthquakes similar to the 1855 Ansei-Edo event are larger and more common than previously assumed. The new shaking probability and the fact that a repetition of the Great Kanto event is less probable than previously thought, are complementary to the recently released governmental earthquake probability study. Given that the Kanto-type earthquake has typically dominated risk assessments for insurance purposes, the results indicate that a review may be necessary to ensure the latest information is reflected in risk assessment.
The by-invitation-only seminar was attended by more than 150 insurance and reinsurance industry practitioners, risk consultants, academics and other leading members of the regulatory and business communities. The research study covers newly gathered information on historical events, their observed shaking intensity and newly determined earthquake probabilities. It furthermore identifies future sources of possible catastrophic quakes that threaten Tokyo and its surroundings.
Expert panel
Hosted by Swiss Re Japan, the seminar featured:
- Dr Ross Stein, Principal Investigator, U.S. Geological Survey (USGS2) and Dr Shinji Toda, Principal Investigator, Active Fault Research Center of Japan, National Institute of Advanced Industrial Science and Technology (AIST3) presented their assessment on the likelihood for JMA intensity-6 or greater shaking in Tokyo, Kawasaki, and Yokohama in the next 30 years. Using a rich record of earthquake observations and employing new analyses of existing data as building blocks, they infer the faults on which past earthquakes occurred, and the rate at which these faults are reloaded, enabling the identification of likely sites for future earthquakes.
- Dr Yoshimitsu Okada, Director, Strategic Planning Department, National Research Institute for Earth Science and Disaster Prevention (NIED4) presented the framework and the published 30-year probabilities from the milestone study sponsored by the Japanese government, recently released.
- Werner Schaad, Chief Underwriting Officer, Property & Casualty business group, Swiss Re, and Dr Silvio Tschudi, Head of Cat Perils Swiss Re Germany, Chief Underwriting Office, Earthquake Group, Swiss Re, provided an interpretation of the preliminary findings and what they mean from an underwriting perspective, with the objective to ensure sustainable risk assessment and mitigation measures.
Ross Stein, Shinji Toda, Yoshimitsu Okada and Werner Schaad then summarised the current status of probabilistic earthquake risk assessment, bridging both the governmental and Swiss Re supported studies and provided an outlook on what the industry can expect in light of what the new findings indicate.
The speakers stressed the evolving nature of the science behind measuring earthquake occurrence probability and therefore the need for continuous development of and contributions towards the science.
Taking action moving forward
What is clear is that the insurance industry will need to take heed of these results, and other recent studies such as that sponsored by the Japanese Government, to ensure they are basing their business decisions on the latest information available.
Based on the wealth of new insights, Swiss Re will review, and possibly update, its own earthquake risk assessment model, so that latest scientific findings are appropriately reflected. All players in the insurance and related industry were encouraged to examine these research results and analyse the potential impact and implications they might have on their businesses.
Notes
1 All reported event probabilities are preliminary and subject to scientific review.
2 United States Geological Survey
3 National Institute of Advanced Industrial and Science Technology
4 National Research Institute for Earth Science and Disaster Prevention
5 Geographical Survey Institute
6 Japanese Meteorological Agency
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For more information, please contact Atsuhiro Dodo or Silvio Tschudi at Swiss Re Japan.
The joint research study between the Active Fault Research Center of Japan, National Institute of Advanced Industrial Science and Technology (AIST) and the US Geological Survey (USGS), together with earth scientists from the National Research Institute for Earth Science and Disaster Prevention (NIED), Geographical Survey Institute (GSI5) and Japanese Meteorological Agency (JMA6), applies the latest hazard assessment methods in its assessments. The study is supported by Swiss Re, one of the world's largest reinsurers of natural hazard risk. Full results will be available by the end of 2005.
