Moody’s RMS puts Japan earthquake insured loss at $3bn – $6bn

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Catastrophe risk modeller Moody’s RMS estimates that the total insurance industry loss from the magnitude 7.5 earthquake that struck Japan on New Year’s Day will likely fall between $3 billion and $6 billion.

This estimate from Moody’s RMS is based on analysis of the devastating quake using the risk modellers Japan Earthquake and Tsunami high-definition (HD) Model.

The range reflects property damage, contents, and business interruption across residential, commercial, and industrial lines, and also includes both private and mutual markets.

Moody’s RMS explains that the up to $6 billion range includes losses from strong ground shaking, earthquake-induced fires, tsunami inundation, land sliding, and liquefaction-induced ground deformation, as well as taking into account sources of post-event loss amplification, and inflation.

However, the total insured loss estimate does not include losses to non-modeled exposures such as transport and utility infrastructure, government, or automobile lines, says the firm.

“This event highlights the importance of evaluating shallow crustal earthquakes within a comprehensive view of seismic risk – in Japan and around the world. While the seismic risk in Japan is driven by subduction zone events, there have been several damaging shallow crustal events in recent decades including the 1995 Great Hanshin Earthquake, the 2016 Kumamoto Earthquakes, and now the 2024 Noto Peninsula Earthquake,” said Chesley Williams, Senior Director, Moody’s RMS.

Moody’s RMS is the latest to release an estimate for the insured loss from the Japan earthquake, which hit the Noto Peninsula shortly after 4pm local time on January 1st, 2024. The quake occurred at a shallow depth of 6.2 miles (10 km) beneath the Earth’s surface.

Last week, Karen Clark & Company pegged the total insured loss from the event at $6.4 billion, while CoreLogic put out a range of $1 billion to $5 billion.

Verisk’s Extreme Event Solutions unit also released an estimate earlier this week of between $1.8 billion and $3.3 billion, although this excludes certain factors such as losses to uninsured properties, losses to land, infrastructure, automobiles, and business interruption, both direct and indirect.

In the aftermath, AM Best warned that if losses from the quake hit individual earthquake reinsurance excess-of-loss layers, it could fuel rate increases at the April 1st reinsurance renewal.

Fellow ratings agency Fitch has also commented on the event, stating that it expects losses to have “no major impact” on Japanese non-life insurers’ earnings.

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