BOSTON, March 13, 2011 –Based on currently available information, catastrophe modeling firm AIR Worldwide estimates that insured property losses from the Mw9.1 earthquake that struck Japan on Friday will range between 1.2 trillion JPY to 2.8 trillion JPY. Using today’s exchange rate of 81.85 JPY to the dollar, this translates to a range of between 15 billion USD and 35 billion USD. To obtain this preliminary range, AIR simulated dozens of scenarios with varying magnitude (8.9 to 9.1), focal depth (15 km to 30 km) and rupture width (100 km to 150 km). The losses are most sensitive to rupture dimensions, and become extremely large if the modeled rupture is extended southward towards the Tokyo and Chiba prefectures, which contain a higher concentration of insured properties.
“Given the enormity of the Mw9.1 earthquake that struck Japan two days ago, it is still in the very early aftermath of the event,” said Dr. Jayanta Guin, senior vice president of research and modeling at AIR Worldwide. “Search and rescue efforts are still underway and damage assessment has only just begun, while considerable uncertainty still remains in the seismic parameters that define the event.”
Of significance, the website of Japan’s national seismic network remains offline, so ground motion observations are still unavailable. Since considerable uncertainty still exists with respect to the parameters of this earthquake, AIR considers this a preliminary loss estimate and plans to refine it when additional information such as ground motion recordings becomes available. Additionally, the AIR Earthquake Model for Japan does not account for the effects of tsunami. As more detailed information becomes available, AIR plans to independently estimate the loss due to tsunami and provide a combined loss estimate that avoids double-counting in the affected areas.Of significance, the website of Japan’s national seismic network remains offline, so ground motion observations are still unavailable. Since considerable uncertainty still exists with respect to the parameters of this earthquake, AIR considers this a preliminary loss estimate and plans to refine it when additional information such as ground motion recordings becomes available. Additionally, the AIR Earthquake Model for Japan does not account for the effects of tsunami. As more detailed information becomes available, AIR plans to independently estimate the loss due to tsunami and provide a combined loss estimate that avoids double-counting in the affected areas.
The event is the largest in Japan’s lengthy earthquake history, with the rupture extending across four segments of the subduction zone that parallels the Japan coast to the east. Seismologists both inside and outside Japan have said that such a scenario had not been contemplated and it was therefore not included in the official national seismic hazard maps of Japan.
Strong shaking was felt over most of northern Honshu. Roads across the region buckled and several landslides have been reported. While the effects of the tsunami are significant, shake damage was considerable, with many reports of collapsed buildings and streets strewn with rubble. High-rise office and apartment buildings in Tokyo—some 370 km from the epicenter—shook visibly, sending people into the streets. Shaking was felt as far south as Kyoto and Osaka.
According to AIR, earthquake insurance penetration in Japan is relatively low (ranging between 14 to 17 percent nationwide). About 70% of all residential construction is estimated to be of wood and about 25% of concrete. Commercial construction consists of more than 50% concrete, about one-third light metal or steel, and less than 10% wood. Residential structures in the region of Japan impacted by today’s quake are generally resistant to earthquake shaking. Some vulnerable structures do exist; they are comprised of non-ductile reinforced concrete frame and heavy wood-frame construction.
There have been relatively few reports of major structural damage in Tokyo and Chiba prefectures, though several serious fires broke out. However, in light of Japan Meteorological Agency (JMA) intensities of 5- to 5+ throughout the Tokyo area, there are likely to be many instances of non-structural damage and damage to contents. Given the high concentration of insured properties in these regions, even relatively small individual claims will likely add up to significant numbers.
A major concern now is the crippled Fukushima Daiichi Nuclear Power Station. An explosion in one of the buildings prompted officials to expand the evacuation area around the plant to a 12-mile radius, affecting as many as 170,000 people. Reports had indicated that leaks of radioactive materials, which had begun immediately after the explosion, had diminished. Most recently officials have now flooded the reactor with seawater in an effort to avoid a nuclear meltdown. The seawater is likely to permanently disable the reactor. On Sunday morning, local time, a second reactor at the same plant was also experiencing critical failures of its cooling system.
The tsunami remains the main story of this event as it will be responsible for most of the fatalities. The JMA has reported maximum tsunami heights of three meters or more for the northeast coast of Japan, with the prefectures of Fukushima, Ibaraki, Iwate and Miyagi being the most severely affected. In Miyagi prefecture, some waves reached 10 km inland. AIR plans to use this and other information as it becomes available to estimate the loss resulting from the tsunami and to issue a combined shake, fire-following and tsunami loss estimate.
AIR will continue to provide information on events as they unfold.
*Note to editors
AIR's insured loss estimates reflect:
- Insured physical damage to property (residential, commercial/ industrial, and agriculture), both structures and their contents resulting from shake and fire following;
- Direct business interruption losses;
The loss estimates do not reflect:
- Losses from non-modeled perils, including tsunami and landslide;
- Losses to automobiles;
- Losses to uninsured properties;
- Losses to land;
- Losses to infrastructure;
- Indirect business interruption losses;
- Loss adjustment expenses;
- Demand surge—the increase in costs of materials, services, and labor due to increased demand following a catastrophic event.
About AIR Worldwide
AIR Worldwide (AIR) is the scientific leader and most respected provider of risk modeling software and consulting services. AIR founded the catastrophe modeling industry in 1987 and today models the risk from natural catastrophes and terrorism in more than 50 countries. More than 400 insurance, reinsurance, financial, corporate, and government clients rely on AIR software and services for catastrophe risk management, insurance-linked securities, detailed site-specific wind and seismic engineering analyses, agricultural risk management, and property replacement-cost valuation. AIR is a member of the Verisk Insurance Solutions group at Verisk Analytics and is headquartered in Boston with additional offices in North America, Europe, and Asia. For more information, please visit www.air-worldwide.com.