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Outline of Japan’s Earthquake Insurance System

Outline of the Earthquake Insurance

  • The Earthquake Insurance is an insurance exclusively for earthquake disasters. It indemnifies against damage caused by fire, destruction, burying or washing away, resulting from an earthquake or volcanic eruption or from a tsunami following either of these events.
  • The Earthquake Insurance covers buildings for residential use and household goods.
  • Fire insurance does not indemnify against damage caused by fire resulting from an earthquake or fire damage that spreads because of an earthquake.
  • The Earthquake Insurance is attached to fire insurance. Namely, it is a prerequisite to carry fire insurance in order to carry the Earthquake Insurance. Fire insurance policyholders without the Earthquake Insurance can attach it  midway through the policy period.
  • The Earthquake Insurance, whose objective is to stabilize the livelihoods of the affected by earthquakes, is established with the government reinsuring massive earthquake damage which exceeds of certain amount of liability that private insurance companies underwrite.

 

Reinsuranse by the Government

  • For the purpose of stabilizing the livelihoods of the affected by earthquakes, the government reinsures the earthquake insurance liabilities underwritten by private insurance companies. Reinsurance premiums are collected and managed separately in the Special Account for Earthquake Reinsurance.  Reinsurance claims are paid out to private insurance companies at the time when massive earthquakes occur.
  • The total amount of reinsurance claims to be paid by the government for a single earthquake, etc. must fall within the limit decided by the Diet every fiscal year.
  • The limit is 11.1268 trillion yen. Combined with the liability sharing for private insurance companies, the limit on total payouts for a single earthquake, etc. sums to 11.3 trillion yen.
  • The limit on total payouts has always been set at a value that can accommodate massive earthquakes at a level equivalent to that of the Great Kanto Earthquake. The total payouts for past major earthquakes, including the Great Hanshin-Awaji Earthquake and the Great East Japan Earthquake, fell within this limit, enabling the smooth payment of insurance claims.
  • In the case of an earthquake causing damages that exceed the limit, we believe that the government will make every efforts to make timely and appropriate policy decisions, including those for securing financial resources, regardless of the framework of the insurance system, according to the actual conditions of such damages, while also considering other possible measures, such as utilizing the Disaster Victims Livelihood Recovery Support System .

     

 

Indemnification under the Earthquake Insurance

  • Buildings for residential use and household goods (movables for daily living).
    The following items are not covered:
    Buildings not used as a residence, including factories and offices; and precious metals, jewels and antiques with values exceeding 300,000 yen per item or per set, currency, securities (checks, share certificates, gift certificates, etc.), deposits and savings certificates, revenue stamps, postage stamps, automobiles, etc.
  • The amount insured under Earthquake Insurance can be set within a range of between 30% and 50% of those under fire insurance. The amount insured is also limited to 50 million yen for buildings and 10 million yen for household goods.

 

Payment of insurance claims

  • Under the Earthquake Insurance, insurance claims are paid out when insured buildings or household goods have sustained total loss, half loss or partial loss.   
Buildings and household goods
Total loss100% of the insured amount (limited to the market value)
Half loss50% of the insured amount (limited to 50% of the market value)
Partial loss5% of the insured amount (limited to 5% of the market value) 

 

  • Standards for total loss, half loss and partial loss
Buildings 

 

Standard

Total lossWith damage caused by an earthquake, cases where the amount of damage to major structural parts of the building (foundations, pillars, walls, roofs, etc.) is 50% or over of the market value of the building, or the area of floor space destroyed by fire or washed away is  70% or over of the total floor space of the building
Half lossWith damage caused by an earthquake, cases where the amount of damage to major structural parts of the building (foundations, pillars, walls, roofs, etc.) is 20% or over and less than 50% of the market value of the building, or the area of floor space destroyed by fire or washed away is 20% or over and less than 70% of the total floor space of the building

Partial loss

With damage caused by an earthquake, cases where the amount of damage to major structural parts of the building (foundations, pillars, walls, roofs, etc.) is 3% or over and less than 20% of the market value of the building, or cases where the building has sustained damage from inundations above floor level or 45cm above ground level, but the damage does not amount to total loss or half loss
  Household goods
 

Standard

Total lossWith damage caused by an earthquake, cases wherethe amount of damage to household goods is 80% or over of their market value
Half lossWith damage caused by an earthquake, cases where the amount of damage to household goods is 30% or over and less than 80% of their market value
Partial lossWith damage caused by an earthquake, cases where the amount of damage to household goods is 10% or over and less than 30% of their market value

 

  • Main cases when insurance claims cannot be paid out:
    • Damage caused intentionally, by gross negligence or as a consequence of a violation of laws or regulations.
    • Damaged caused ten or more days after the date of the earthquake.
    • Damage caused by war or insurrection, etc.
    • Loss or theft at the time of an earthquake.

 

(Reference)Premiums for the Earthquake Insurance

  • Premiums for the Earthquake Insurance are calculated, reflecting the structure and location of the insured buildings and of the buildings accommodating the insured household goods. Insurance period can be short periods, 1 year or long periods of 2-5 years. For details, please contact the consultation center or agents of each general insurance company.

 

Annual standard premiums per insured amount of 10 million yen (Unit: yen)

 Prefecture

   Fireproof 

Non-fireproof

Hokkaido

8,400

 16,500

Aomori

8,400

 16,500

Iwate

6,500

 10,600

Miyagi

8,400

 16,500

Akita

6,500

 10,600

Yamagata

6,500

 10,600

Fukushima

6,500

 13,000

Ibaraki

11,800

 24,400

Tochigi

6,500

 10,600

Gunma

6,500

 10,600

Saitama

13,600

 24,400

Chiba

20,200

 32,600

Tokyo

20,200

 32,600

Kanagawa

20,200

 32,600

Niigata

8,400

 16,500

Toyama

6,500

 10,600

Ishikawa

6,500

 10,600

Fukui

6,500

 10,600

Yamanashi

8,400

 16,500

Nagano

6,500

 10,600

Gifu

8,400

 16,500

Shizuoka

20,200

 32,600

Aichi

20,200

 32,600

Mie

20,200

 32,600

Shiga

6,500

 10,600

Kyoto

8,400

 16,500

Osaka

13,600

 24,400

Hyogo

8,400

 16,500

Nara

8,400

 16,500

Wakayama

20,200

 32,600

Tottori

6,500

 10,600

Shimane

6,500

 10,600

Okayama

6,500

 10,600

Hiroshima

6,500

 10,600

Yamaguchi

6,500

 10,600

Tokushima

11,800

27,900

Kagawa

8,400

 16,500

Ehime

11,800

 24,400

Kochi

11,800

 27,900

Fukuoka

6,500

 10,600

Saga

6,500

10,600

Nagasaki

6,500

 10,600

Kumamoto

6,500

 10,600

Oita

8,400

 16,500

Miyazaki

8,400

 16,500

Kagoshima

6,500

10,600

Okinawa

8,400

 16,500

 

 

  • Premiums for longer policies
    Premiums for long-term policies (policies of 2-5 years with the proviso of the payment of premiums for long-term insurance) are calculated by multiplying the long-term coefficient.

   Period

  Coefficient

2years

1.9

3yaers

2.75

4years

3.6

5years

4.45

 

  • Discounts
    There are four types of discounts available: age of construction discount, earthquake-resistance class discount, seismic isolated building discount, and earthquake-resistance diagnosis discount. Discounts of 10%
    50% are applied to standard premiums, depending on the age of construction or earthquake-resistant performance (discounts cannot be stacked). For details, please contact the consultation center or agents of each general insurance company.

Discount program

Description of discount

Rate of discount on insurance premiums

Age of construction discount

(Contracts commenced on or after October 1, 2001)

Cases where the insured building is one that was constructed new on or after June 1, 198110%

Earthquake-resistance class discount

(Contracts commenced on or after October 1, 2001)

Cases where the insured building has an earthquake-resistance rating (preventing the collapse of the structural framework) as stipulated in the Japanese Housing Performance Indication Standards prescribed in the Housing Quality Assurance Act, or an earthquake-resistance rating as stipulated in the Evaluation Guidelines for Earthquake-Resistance Class (Preventing the Collapse of the Structural Framework) based on Seismic Diagnosis prescribed by the Ministry of Land, Infrastructure, Transport and TourismClass 110%
Class 2

30%

Class 350%

Seismic isolated building discount

(Contracts commenced on or after October 1, 2007)

Cases where the insured building is a seismic-isolated building pursuant to the Housing Quality Assurance Act50%

Earthquake-resistance diagnosis discount

(Contracts commenced on or after October 1, 2007)

Cases where the insured building satisfies the earthquake-resistance standards set forth in the Building Standards Act (effective on June 1, 1981) as a result of an earthquake-resistance diagnosis or seismic retrofitting conducted by local governments, etc.10%

  

  • Tax deductions for the Earthquake Insurance premiums
    In January 2007, existing tax deductions for general insurance premiums were revised, and a deduction for earthquake
    insurance premiums was established to support independent efforts of the people to prepare for damage caused by earthquake disasters. The maximum of 50,000 yen for income tax (national tax) and the maximum of 25,000 yen for inhabitants tax (local tax) can be deducted from gross income, etc. herewith.

 

Attachment

   Special Account for Earthquake Reinsurance(PDF)(PDF:66KB)PDF

   Budget Information(FY2016)(PDF)(PDF:34KB)PDF

   Settlement of Accounts Information(FY2014)(PDF)(PDF:122KB)PDF

  

 

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