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On 21 March, The Nikkei reported that the Japanese non-life insurance industry would made a loss estimate of 1 trillion yen (approx. 12.5 billion USD) for the total insured loss from the series of earthquake and tsunami. The impact seems to be so huge, and the market is a bit concerned aboutthe solvency of the Japanese insurers and re-insurers in abroad. Indeed, the stock price of major Japanese non-life insurers, fell sharply right after the earthquake occurred.
But, as a matter of fact, the Japanese private insurers will be responsible for lesser amount compared to the above estimation in view of the government-run insurance scheme (see the below attached diagram for your understanding).
Under the scheme which is divided into three layers, the government would be responsible for 50% of 1,925 billion yen excess of 115 billion yen. Provided that the earthquake causes a 1 trillion yen damage, the loss of the private insurers will be 557.5 billion yen (7 billion USD).
However, the private insurers and the government have earlier on set aside a total amount of 2.3 trillion yen arising from the previous earthquake loss reserve (private: 1 trillion, government: 1.3 trillion) – a prudent measure taken in case of such a huge disaster . Though the market still have to wait for precise claims information to be determined, we believe that most if not all have enough financial strength to make payment for the losses incurred.
The government-run scheme for residential properties as illustrated below….