Earthquake insurance premiums could rise by 30%

Earthquake insurance premiums on residential real estate in Japan could rise by as much as 30% to reflect updated earthquake risk predictions.

Up until now, the highest premium hike was in July 2014 when premiums were raised by 15.5% in response to the 2011 Tohoku disaster. To lessen the immediate burden on consumers, the Financial Services Agency, which is in charge of approving insurance premiums, is considering applying the increase in stages over several years. The higher premiums could go into effect as early as next year.

The premiums have been calculated by the General Insurance Rating Organisation of Japan and are based on government estimates of earthquake risks.

At the end of 2014, the government estimated the risk of an earthquake producing a seismic intensity scale (shindo) of 6 or above within the next 30 years as follows:

  • Shinjuku, Tokyo: 46% (up from 26% in 2013)
  • Saitama City: 51% (up from 30%)
  • Yokohama City: 78% (up from 66%)
  • Chiba City: 73% (up from 67%)

For example, the earthquake insurance premium for a maximum coverage of 10 million Yen on an apartment in central Tokyo might currently be 20,000 Yen per year.  A 30% increase would amount to an extra 6,000 Yen per year in premiums. For those who have already taken out earthquake insurance, the higher rate would apply when they renew their policy.

Actual insurance premiums will vary depending on the location of the property and the method of construction.  There may be some locations where premiums increase by more than 30%, and other safer areas where the increase is less.

Total payouts following the 2011 Tohoku disaster were approximately 1.2 trillion Yen as at April 2012. In the event of an earthquake occurring directly underneath Tokyo, payouts are predicted to reach up to 3.1 trillion Yen (around 26 billion USD).

Earthquake insurance covers damage to your home and valuables in the event of an earthquake or tsunami. This insurance can only be taken out as an extra on top of fire insurance. In the 2013 year, 58.1% of people who took out fire insurance also took out the additional earthquake insurance.

Read more about earthquake insurance in Japan below:

Source: The Mainichi Shimbun, May 4, 2015.

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