Insured loss from Faxai could reach $7bn but no threat to insurers’ capital

The total insured loss from Typhoon Faxai – which hit Japan on 9 September, hammering the Tokyo prefectures of Chiba, Kanagawa and Shizuoka – will be between $3bn and $7bn, with Japanese insurers carrying roughly $2.8bn. Leading Japanese insurers MS&AD Insurance Group and Sompo Japan Nipponkoa Insurance alone estimate they have incurred losses of about $1bn each from the event. US catastrophe risk modelling firm AIR Worldwide estimates that industry insured losses from Faxai will be between JPY340bn ($3bn) and JPY740bn ($7bn). Ratings agency Fitch said it does not expect any major impact on Japan’s P&C players, due to strong capital buffers. Typhoon Faxai made landfall in Yokosuka, a southern suburb of Tokyo, on the main island of Honshu early morning on Monday, 9 September, with one-minute sustained wind speeds of 170kph (105mph). The typhoon crossed Tokyo Bay to strike Tokyo City with winds still equivalent to a strong Category 2 hurricane, said AIR. “Faxai brought damaging winds across southeastern Honshu, along with storm surge and heavy precipitation to coastal regions. Impacts were reported across Chiba, Kanagawa and Shizuoka prefectures. Storm surge was highest along the eastern shores of Tokyo Bay – JMA recorded a storm surge of more than one metre in Mera, Chiba Prefecture. The city of Izu in Shizuoka Prefecture experienced 17 inches of rain in 24 hours through early Monday, with recorded rates of more than four inches per hour,” explained the modelling firm. According to AIR, Typhoon Faxai surpassed Typhoon Higos for the strongest sustained wind speed at landfall in the region and tied with 1958's Typhoon Helen for the lowest recorded central pressure. Faxai was comparable in strength to Typhoon Jebi, which devastated the southern Shikoku Island in 2018. The high winds downed two electrical towers and multiple utility poles, leaving more than 900,000 people without power in the prefectures of Chiba, Ibaraki, Kanagawa, Shizuoka and Tokyo. Faxai also hit crops in the region and ravaged rice fields and fruit farms just before harvest time. According to the General Insurance Association of Japan (GIAJ), the cost to Japan’s domestic insurance industry will be about JPY300bn ($2bn). It confirmed that MS&AD Insurance Group and Sompo Japan Nipponkoa Insurance expect losses of $1bn each. On 19 September, the GIAJ estimated claims from foreign and domestic insurers totalled almost 185,000. “With Faxai affecting Chiba and the Greater Tokyo area – with winds exceeding 216kph in some areas and rainfall exceeding 300mm in some areas during the course of the storm – our team knew from our experiences dealing with hurricanes in the western hemisphere that this storm could quickly generate enough aggregated losses to exceed our catastrophe designation threshold of $2.5bn,” said Ted Gregory, director of operations for PCS. Tom Johansmeyer, head of PCS, added: “The 2018 events in Japan were challenging enough for the reinsurance and ILS market, both because of the losses caused and the ambiguity in previously available industry loss reporting. Now, with a second year of losses, it’s clear that the global market needs to start taking a closer look at how to understand cat losses in Japan.” It is currently not clear what impact Faxai will have upon the Japanese market, but it was revealed last week that four major Japanese non-life insurers will raise their accident insurance premiums in October for the first time in six years. The premiums will be increased by about 4%, reported Jiji Press, quoting unnamed sources.

Insured loss from Faxai could reach $7bn but no threat to insurers’ capital

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