Typhoons Faxai, Hagibis Unlikely to Affect Stability of Japan’s Non-Life Insurers: AM Best

The recent mega-typhoons in Japan are unlikely to affect the financial stability of the country’s three major non-life insurers due to their appropriate catastrophe risk management and strong capitalization levels, according to a new AM Best commentary.

Net of reinsurance, the total catastrophe loss impact of Typhoon Faxai on the three mega insurance groups – MS&AD Insurance Groups Holdings, Inc. (MS&AD), Sompo Japan Nipponkoa Insurance Inc. (SJNK) and Tokio Marine & Nichido Fire Insurance Co. (TMNF) – is unlikely to exceed 200 billion Japanese yen ($1.8 billion), said an AM Best commentary, titled, “Typhoons Faxai and Hagibis Unlikely to Impact Japanese Insurers’ Capitalization.”

This estimate is before the release of catastrophe loss reserves, so the net loss is unlikely to place significant negative pressure on the solvency and capitalization of these groups, the report said.

Preliminary claim figures for Typhoon Hagibis are unavailable as it typically takes up to two weeks for the local insurers to publish their estimates, said the ratings agency.

AM Best believes that the losses from Typhoon Hagibis will be largely driven by flood impact, rather than wind damage. Given the record breaking level of rainfall in some areas, as well as the relatively high population density surrounding Greater Tokyo, AM Best expects that the three mega-insurance groups’ gross losses from Typhoon Hagibis will be as significant as that from Typhoon Faxai, albeit possibly less severe than Typhoon Jebi in 2018.

In AM Best’s view, the underwriting profit generated by the domestic business of the three mega-insurers this year should be sufficient to cover the expected net losses from Typhoons Faxai and Hagibis, although claims from Typhoon Hagibis may result in it exceeding its domestic catastrophe loss budget for the year.

Nonetheless, AM Best does not expect the three mega groups to report an overall loss for the current fiscal year, barring any further major catastrophe events in the next five months to the fiscal year-end on March 31.

Source: AM Best

Photograph: Beach houses are damaged as Typhoon Faxai hits the beachfront area in Miura, south of Tokyo, on Monday, Sept. 9, 2019. Photographer: Kyodo News via AP.