Hagibis insured losses could rise as high as $16bn according to AIR

Industry insured losses from Typhoon Hagibis, which hit Japan on 12 October, will be between JPY865bn ($8bn) and JPY1,730bn ($16bn), with more than half of the losses caused by inland flooding, according to catastrophe modelling firm AIR Worldwide. It is early days yet, but AIR’s initial estimate is in line with high and conservative estimates published by a number of international insurers and reinsurers in recent days. As credit ratings agency AM Best pointed out in its note published this week, the market is playing a safe hand because Typhoon Jebi, which hammered Japan late last August, caused substantial loss creep, which meant it was under-reserved and led to red faces across the industry. AIR noted that the level of rainfall and subsequent flooding that followed Hagibis is unprecedented, thus making it difficult to accurately forecast the ultimate insured loss. Everyone is therefore playing it safe. AIR explained that its loss estimates explicitly capture residential, commercial, industrial, automobile and agriculture/mutual losses from wind and storm surge, as well as from inland flood both on and off the floodplain. This is based on a larger “ensemble” of simulated event scenarios that reflect uncertainty in precipitation observations, modelled flows and levee failures. “The level of rainfall and resultant flooding associated with Typhoon Hagibis is unprecedented, thus there is no analogous event in Japan’s recent history from which to draw insights on the cost associated with damage remediation and claiming behaviour,” explained the modelling firm. “Because of the intense rainfall within a short time period, much of the floodwater has a high mud content and includes a large amount of debris; this could potentially increase the costs of repair and cleanup and drive up business interruption losses – especially for commercial and industrial properties. In addition, Hagibis impacted some of the same region damaged by Typhoon Faxai a few weeks earlier. Additional damage caused by Hagibis to properties that were [previously] damaged by Faxai but were not repaired would further complicate claims settlements,” it continued. Typhoon Hagibis was a rare event. The Japan Meteorological Agency issued its highest (Level 5) special warning for heavy rain, and unprecedented rainfall followed. A wide swathe of Honshu just outside the Tokyo metro area received between 250mm and 500+mm of rain, while the resort town of Hakone recorded 939.5mm of precipitation, breaking the calendar-day rainfall record for all of Japan, explained AIR. Many regions received between 30% and 40% of their yearly rainfall in just two days, with more than 100 stations breaking daily rainfall records at those locations. As a result, numerous rivers – the Abukuma, Arakawa, Chikuma, Kuji, Naka, Shinano, Tone and Watarase rivers among them – experienced severe and devastating flooding. AIR reported that, of the 540 river gauging stations on Honshu island, more than 85 exceeded their 100-year return period peak flows, with more than 100 exceeding their historical records. Further, before Hagibis made landfall, a magnitude 5.7 earthquake struck the region – parts of which were in the early stages of recovery from Typhoon Faxai, which struck just one month prior. A tornado was also reported in Ichihara, Chiba Prefecture, on 12 October

Hagibis insured losses could rise as high as $16bn according to AIR

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