Co-operative insurers respond to the Japan earthquake

The earthquake and tsunami which hit Japan last March were the worst natural disaster Japanese cooperative insurers had had to deal with in.

The earthquake and tsunami which hit Japan last March were the worst natural disaster Japanese cooperative insurers had had to deal with in.

The damage was unprecedented and the claims very high: members of the Japan Cooperative Insurance Association (JCIA) had paid out over JPY 800 billion (USD 10bn) in property claims alone, the conference heard. Nevertheless, the disaster planning work which ICMIF’s Japanese members had undertaken had paid off. Claims procedures were working, and all of the cooperative insurers remained in good financial health.

At last year’s ICMIF conference in Manchester JCIA’s Takao Goto shared with conference delegates some powerful images of the aftermath of the earthquake and tsunami. The March 11th event had been responsible directly for 15,815 deaths, and a further 3,966 were missing, he said. There were some tragic stories: Mr Goto told of the primary school which had been in the tsunami’s path, where 74 young children and ten teachers had lost their lives. Both Takao Goto, and Mototsugu Shimasaki of JCIA member Zenkyoren who also addressed the conference, thanked ICMIF members for the messages of support and encouragement which had come from the worldwide cooperative and mutual movement. “We derived great strength from this support. You have our deepest gratitude,” Mr Shimasaki told delegates.

Although the Great East Japan Earthquake of 2011 was unprecedented in its effect, Japan has experienced serious earthquakes before and all JCIA’s cooperatives had taken anticipatory steps. As Takao Goto explained, this included prudent reinsurance, the issuing of catastrophe bonds, and the creation of deep reserve funds specifically put aside to meet extraordinary losses. As insurance consultancy Towers Watson noted approvingly a month after the disaster, Zenkyoren had a solvency margin of USD 90 billion, almost five times its required solvency margin. Zenkyoren had also negotiated some of the world’s largest reinsurance arrangements.

Japan’s cooperative insurers were ready in other ways. Takao Goto explained how a member of JCIA ran a specially designed centre for training damage assessors, complete with examples of building construction techniques for hands-on experience.

The preparations clearly helped with the cooperatives’ responses after the earthquake and tsunami. Mr Goto described how each insurer had established a disaster coordination centre led by the senior management, and had taken immediate steps to assess damage and communicate with policyholders. The arrangement normally was for two assessors to visit each property, and staff from the whole of Japan were drafted in to meet the need.

Japan’s cooperative insurers did other things to help. Policyholders were able to make claims without all the documentation normally required, and the time period for accepting that a death had occurred was shortened. Aerial photos were used to assess damage, and ex gratia payments made where policies excluded earthquake damage (only about a half of Japanese households insured by cooperative insurers and commercial insurers have earthquake protection, according to Towers Watson).

The cooperatives were able to help in other ways, too. Mr Goto described the work which had been done in providing immediate disaster relief to those affected: money had been raised, emergency food supplies sent in, mobile shops established and telephone support lines put in place for those who had suffered physically or emotionally from their experiences.

Economically speaking, the earthquake has caused real damage to the country: more than JPY 16 trillion (USD 205 bn) according to Mr Shimasaki, without taking account of lost agricultural or fishery production. By the end of September, Japan’s cooperative insurers had already taken claims of JPY 830 bn (USD 10.7 bn) on property policies and JPY 53 bn (USD 680m) on life policies. Japan’s commercial insurance companies had also paid out big amounts in claims: JPY 1.15 trillion (USD 14 bn) on property and JPY 130 bn (USD 1.7 bn) on life, Mr Goto told the conference.

“People in the affected areas are facing very difficult times. Our members and customers are in an unparalleled predicament,” said Mototsugu Shimasaki. But Japan would recover, both speakers told delegates, even if the process took some considerable time.

Nevertheless the experience of the disaster had been a powerful one. Mr Shimasaki, speaking on behalf of his President Mr Yoshinori Yokoi, spoke of the way it had strengthened his commitment to the cooperative way of working: “The earthquake has renewed our awareness of the importance of cooperation, the principles of helping each other and of forming strong bonds between us,” he said.

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