EARTHQUAKEINSURANCEIN
JAPAN
October 2022

General Insurance Rating Organization of Japan (GIROJ)Preface
Japan is a country that has large numbers of natural disasters due to such things as
typhoons, earthquakes and volcanic eruptions, and, in particular, as it is the world’s
most earthquake-afflicted country, massive earthquake disasters have occurred
frequently.
The general (non-life) insurance system in Japan commenced in the latter half of theth
19 century, when Japan was reincarnated into a modern state. However, though thenecessity for earthquake insurance was proclaimed and considered every time anearthquake disaster occurred, there was great difficulty in establishing such insurance,since there was a possibility of causing huge amounts of loss once a large-scale
earthquake occurred.
As a result of considerations by the general insurance companies and the government,with the Niigata Earthquake in 1964 as the turning point, by limiting the coverage andamount insured and other means, and through acceptance of reinsurance by thegovernment, earthquake insurance systems for residences and household goods were
finally established in 1966.
Afterwards, in response to the various needs of the insurance users wheneverearthquake disaster occurred, the earthquake insurance systems have been revised manytimes and the coverage and amount insured, etc., have been broadly improved.
In addition, in order to maintain more reasonable rate, reconsideration has been given
in rating for earthquake insurance, in reflection of the results, etc., of Japan’s worldclass, leading edge earthquake research.
This book explains about “earthquake insurance in Japan,” which is characterized inthese various ways, and we hope it will assist you in understanding the subject moredeeply.
There are two types of earthquake insurance in Japan--one for residences and the one
for offices and factories, etc.--and this book deals with the former.
March, 2003
General Insurance Rating Organization of Japan(GIROJ)

Publication of the 4th Edition
Earthquake Insurance in Japan has been expanded and revised in the fourth edition toreflect the following changes that have taken place in earthquake insurance in Japan
since the publication of the third edition in July 2014.
1.

Damage classifications were subdivided in January 2017; “Half loss” has been
divided into “large half loss” and “small half loss,” creating four classifications,“total loss,” “large half loss,” “small half loss” and “partial loss.”

2.

The Standard Full Rates of earthquake insurance were revised in January 2017,
January 2019, January 2021 and October 2022.

3.

The Enforcement Order for the Act on Earthquake Insurance and the Regulation
for Enforcement of the Act on Earthquake Insurance were amended in April andOctober 2016, April 2017, February and April 2019 and April 2021, altering theliability sharing between the Japanese Government and insurance companies.

October, 2022
General Insurance Rating Organization of Japan(GIROJ)

Map of Japan

HOKKAIDO region ■■■Hokkaido
CHUBU region ■■■NiigataToyamaKINKI region ■
■
■
Shiga

■
■
■TOHOKU region

Gifu

AomoriIshikawa

Akita

Fukui

Kyoto
Osaka

Iwate
Yamagata

Hyogo

Miyagi
Fukushima

CHUGOKU region ■■■■■■KANTO region

Tottori
OkayamaTochigi

ShimaneGumma

Hiroshima
Yamaguchi

Ibaraki
SaitamaTokyo

KYUSYU region ■
■
■

Chiba
Kanagawa

Fukuoka
Oita■■■CHUBU region

Saga
Nagasaki

Yamanashi
NaganoShizuoka
Aichi

Kumamoto
MiyazakiKagoshima
Okinawa■■■KINKI region
Mie
Nara
Wakayama■■■SHIKOKU region
Tokushima
Kagawa
Kochi
Ehime

0

250

500

kilometers
0

200

miles

400

Contents
Chapter 1 Earthquakes and Buildings in Japan
Section 1 Seismic Risk in Japan ....................................................................................... 3
1.1 Seismic Activity in the Japanese Archipelago and Surrounding Areas .................. 3
1.2 Seismic Risk Evaluation ......................................................................................... 8
Section 2 Earthquake Damage of Buildings in Japan .................................................... 17
2.1 Modernization of Buildings .................................................................................. 17
2.2 Earthquake Damage of Buildings ......................................................................... 17
Chapter 2 Earthquake Insurance System in Japan
Section 1 Difficulties of Making Seismic Risk Insurable .............................................. 23
1.1 Non-Applicable Law of Large Numbers .............................................................. 23
1.2 Losses of Possibly Huge Amounts ....................................................................... 24
1.3 Fear of Adverse Selection ..................................................................................... 24
Section 2 Needs and Concepts of Earthquake Insurance ............................................... 27
Section 3 Establishment of the Earthquake Insurance System ....................................... 29
3.1 Background of Establishment ............................................................................... 29
3.2 Implementation of the Earthquake Insurance System .......................................... 29
3.3 Enactment of the Act on Earthquake Insurance .................................................... 29
Section 4 Transition of Earthquake Insurance System ................................................... 31
4.1 1980 Revision ....................................................................................................... 31
4.2 1991 Revision ....................................................................................................... 32
4.3 1996 Revision ....................................................................................................... 32
4.4 2001 Revision ....................................................................................................... 33
4.5 2005 Revision ....................................................................................................... 34
4.6 2007 Revision ....................................................................................................... 35
4.7 2010 Revision ....................................................................................................... 37
4.8 2014 Revision ....................................................................................................... 37
4.9 2017 Revision ....................................................................................................... 37
4.10 2019 Revision ..................................................................................................... 38
4.11 2021 Revision ..................................................................................................... 39
4.12 2022 Revision ..................................................................................................... 39
Section 5 Specifics of Earthquake Insurance ................................................................. 41
5.1 Object of Insurance ............................................................................................... 41
5.2 Losses to Be Covered ........................................................................................... 41
5.3 Payment Method of Insurance Claims .................................................................. 42
5.4 Participation Method ............................................................................................ 43
5.5 Amount Insured .................................................................................................... 43
5.6 Earthquake Insurance Standard Rates ................................................................... 43
Section 6 Reinsurance and Liability Reserves ............................................................... 45
6.1 Reinsurance ........................................................................................................... 45
6.2 Liability Reserves ................................................................................................. 47

Chapter 3 Rating Method of Earthquake Insurance
Section 1 Requirements for Premium Rates and Rating ................................................ 51
1.1 Requirements and Procedures of Earthquake Insurance Rate .............................. 51
1.2 Composition of Earthquake Insurance Rate and Rating ....................................... 54
Section 2 Estimation of Earthquake Damage for Rating for Earthquake Insurance ...... 57
2.1 Factors and Forms of Earthquake Damage ........................................................... 57
2.2 Estimation of Earthquake Damage ....................................................................... 60
Chapter 4 Laws and Regulations for Buildings and Disaster Victim Support
Section 1 Laws and Regulations for Buildings ................................................................ 69
1.1 Building Standards Act ......................................................................................... 69
1.2 Act on Promotion of Seismic Retrofitting of Buildings ....................................... 69
1.3 Housing Quality Assurance Act ............................................................................ 70
1.4 Long-Life Housing Promotion Act ....................................................................... 70
Section 2 System for Disaster Victim Support ............................................................... 73
2.1 Disaster Victim Support System ........................................................................... 73
2.2 Act on Support for Reconstructing Livelihoods of Disaster Victims ................... 73<Attachment>
Attachment 1. Laws, Enforcement Orders, Regulations for Enforcement
Concerning Earthquake Insurance .......................................................... 81
Attachment 2. Insurance Council’s Report ..................................................................... 95
Attachment 3. Report of the Project Team for the Earthquake Insurance System ....... 117<Appendix>
Appendix 1. Transition of Earthquake Insurance System ............................................ 126
Appendix 2. Transition of Earthquake Insurance Premium Rate ................................. 136
Appendix 3. Explanation of the Seismic Intensity Scale of
the Japan Meteorological Agency ............................................................ 146

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1.1 Seismic Activity in the Japanese Archipelago
and Surrounding Areas

epicenters, a testimony to the very frequent
occurrence of earthquakes in Japan.
Japan is located in an area that could be termed anearthquake epidemic zone, about 10% of theearthquakes in the world, limited to the earthquakes ofmagnitude 6 and over, 20% of the earthquakes in theworld have occurred around the Japanese archipelago.
Considering the fact that the land area of Japan is just
0.3% of the entire world, this is quite a high frequency.
Figure 1.1.2 is the trend in monthly numbers of felt
earthquakes that occur in and around Japan from 1990
to July 2022. There are months in which extremely
large numbers of felt earthquakes occur, effected byaftershocks from large earthquakes or earthquake
swarms, and so forth; however, even without
considering these, earthquakes occur in Japan about
50 to 100 times per month, and are felt as many as
1,000 times per year.
Figure 1.1.3 plots the epicenters of earthquakes ofmagnitude 5.5 or higher that occurred on the coast ofJapan from 1970 to 2018. The Japanese archipelago is

1.1.1 Distribution of earthquakes
Figure 1.1.1 plots the epicenters of earthquakes from1970 to 2018. It is clear from this figure that there areregions with many earthquakes and regions with few,
and that earthquakes do not occur equally by region.
Upon precise observation, it is also recognizable thatthe earthquake epicenters are distributed in thin, longzones, as if to draw a pattern on the earth. For
example, in the coastal areas on the continent and in
the island arc facing the Pacific Ocean, epicenters
continue in a narrow range, surrounding the Pacific
Ocean. From a worldwide point of view this is an areawith numerous earthquakes, and it’s called the
Circum-Pacific seismic belt. In particular, the westside of said--from the Kamchatka Peninsula to theJapanese archipelago, Indonesia and New Zealand--isan area with extreme numbers of earthquakes. The
map of Japan is covered with dots indicating seismic(Fig. 1.1.1) Epicenter distribution of earthquakes from 1970 to 2018 (M5.5 or higher)
Created from GEM Foundation and the International Seismological Centre data3

Chapter 1 Earthquakes and Buildings in Japan

Section 1 Seismic Risk in Japan

almost covered with red marks indicating epicenters
and this tells us about the large number of earthquakes
in Japan. Observing the earthquake occurrence status
in this area from the macro point of view, thefollowing can be said: The Pacific coast area of East
Japan and the area from Kyushu to Nansei islands
have extremely many earthquakes. A belt-like

distribution as seen in figure 1.1.1 can clearly be seenin figure 1.1.3. Observing this in greater detail, there
is a great deal of shading seen everywhere, even in thebelt-like distribution. In other areas as well, at a more
precise level, many differing densities of epicenters
can be seen, and it is recognizable that seismic activity
displays different aspects in every area.

(Fig. 1.1.2) Trend in monthly number of felt earthquakes occurred in and around Japan from 1990 to July 2022
Created from Japan Meteorological Agency date4

Chapter 1 Earthquakes and Buildings in Japan

Section 1 Seismic Risk in Japan(Fig. 1.1.3) Epicenter distribution of earthquakes from 1970 to 2018 (M5.5 or higher)
Created from GEM Foundation and the International Seismological Centre data

5

Chapter 1 Earthquakes and Buildings in Japan

Section 1 Seismic Risk in Japan

1.1.2 Earthquake occurrence mechanism
At present, many researchers support that theoccurrence mechanism of earthquakes can be
explained by the theory of plate tectonics. According
to this theory, the earth is covered with over ten pieces
of bedrock called “plates.” Approximately several tensof kilometers thick and with no space between them,
the plates are moving in different directions each other(figures 1.1.4 and 1.1.5). Crustal deformation istaking place at the interplates, with such things as thebuilding of mountain chains due to the crushing ofplates, or the formation of trenches from one platesinking beneath another. It is explained thatearthquakes are a phenomenon of deformation energy
being released at once by the destruction of the plates
themselves or the occurrence of sliding between theplates, etc., when deformation energy accumulated in
the plates reaches its limit from such crustal
deformation.
Therefore, seismicity tends to be active near theinterplates. In fact, as becomes clear when comparing
the interplates in figures 1.1.4 or 1.1.5 and thebelt-like epicenter distributions seen in figures 1.1.1
and 1.1.3, the location of both is almost the same.
Especially at the interplates in figure 1.1.4, said to bea subduction zone, there is a much higher number ofoccurrences of earthquakes than in other interplates.
Japan is located in an area next to such a subduction
zone, and it can be considered that very frequent
occurrence of earthquakes in and around Japan is due
to such a geographical environment.
Figure 1.1.6 indicates the distribution of the depth ofearthquakes taking place in the Japanese archipelago
and surrounding areas. Most of these earthquakes can
be classified into three types according to place ofoccurrence and mechanism (figure 1.1.7).
As indicated in figure 1.1.5, at least three plates exist
on the periphery of the Japanese archipelago, and it issaid that the earthquakes occur by very complicatedmechanisms.

(Fig. 1.1.4) World interplates
Reprint from the website of the Headquarters for Earthquake
Research Promotion(Fig. 1.1.5) Bottom topography and interplates
on the periphery of Japan
Dotted line indicates unclear interplates (touched up reprint fromthe website of the Headquarters for Earthquake Research
Promotion).

This can be roughly simplified as seen in figure 1.1.7,
and types of earthquakes can be classified as A, B andC.

6Chapter 1 Earthquakes and Buildings in Japan

Section 1 Seismic Risk in Japan(Fig. 1.1.6) Distribution of the depth of earthquakes taking place in the Japanese archipelago
from 1970 to 2018 (M5.5 or higher)
Created from GEM Foundation and the International Seismological Centre data

A. Earthquakes taking place in land plates

B. Earthquakes taking place at interplates

Ａ．陸域の浅い地震

Ｂ．プレート境界の地震

Sea plates
海のプレートLand plates
陸のプレートC. Earthquakes taking place inside sunken plates

Ｃ．プレート内部の地震(Fig. 1.1.7) Types of earthquakes grouped by place of occurrence

A. Earthquakes taking place in land plates
The sea plate is moving in the direction of the land
plate several centimeters per year, though the speed isdifferent among the areas, as shown in figure 1.1.7. It
can be said that the land plate on which the Japanesearchipelago is riding is in a state of being continuously
pushed by the sea plate. Therefore, strong
compressive force is working in the range of A, andwhen the plates come to be unable to withstand theforce, a portion of the plates is destroyed and cracks(faults) form. Earthquakes occur at such times.
Earthquakes such as the 1995 Hyogo-ken Nanbu
Earthquake, the 2004 Niigata Chuetsu Earthquake andthe 2016 Kumamoto Earthquake are classified as thistype of earthquake. Since faults are the weak parts ofplates that are destructible, it is considered that when
the deformation again reaches its limit after a long
period--from a thousand to several tens of thousandsof years--the same boundary of a fault will be
destroyed. In other words, earthquakes are considered
to take place repeatedly on the faults.
In many cases, since the destruction of faults occurs ina range of from several kilometers to several tens ofkilometers underground, faults cannot be found fromthe surface ground. However, as a fault causing agreat earthquake is of a large size itself, there aretimes when a portion of the fault will reach the surface
ground. It is said that there are about 2,000 active

7

Chapter 1 Earthquakes and Buildings in Japan

Section 1 Seismic Risk in Japan

faults existing in and around Japan and these could betermed traces of past great earthquakes. Theirlocations, amounts of slide, age of surrounding
geological layers, etc., constitute precious clues for
specifying the places of occurrence and scales of greatearthquakes that have been taking place repeatedly,along with the history that caused these earthquakes.
Therefore, investigation of active faults is vitally
important for earthquake disaster prevention.

active faults is generally a period of as long as fromseveral thousand years to several tens of thousands ofyears, that of earthquakes occurring repeatedly atinterplates is considered to be comparatively shortperiods of from several tens of years to several
hundred years. For example, as for the type ofearthquake that has occurred off the shore of Miyagi
Prefecture, according to historic records, suchoccurred on extremely short intervals averaging 36
years (table 1.1.1). Additionally, in the case of thistype of earthquake, it is not rare for such to be M8class or more in size and bring the risk of causing
massive damage. Earthquakes such as the 2011 off the
Pacific coast of Tohoku Earthquake are classified as
this type of earthquake.

B. Earthquakes taking place at interplates
The land plates and sea plates are contiguous in thearea of B in figure 1.1.7. Ordinarily, high pressure isoperating between these and both plates are firmly
fixed against one another. Since the sea plates are
moving so as to sink down beneath the land plates, theland plates are pushed down as if being drawn into thesea plates. When deformation reaches the limit of theforce sticking the plates together, sliding takes placein the area of B and deformation energy of land plates
is released with a rush, causing earthquakes. In manycases this type of earthquake is concurrent with tidal
waves, as crustal deformation in the area of sea
bottoms is massive.
Due to sea plate subduction, deformation energy is
supplied to land plates continuously. Thus, likeearthquakes from active faults, this type of earthquake
also occurs repeatedly in the same area. However,while the activity cycle of earthquakes taking place on

C. Earthquakes taking place inside sunken plates
These are earthquakes that take place due to thedestruction of the interiors of sunken sea plates. As
recognizable in figures 1.1.6 and 1.1.7, this type ofearthquake takes place even at fairly deep locations,with the depth sometimes exceeding 500 kilometers.
In addition, in case such takes place in a shallow
location, crustal deformation at the sea bottom portion
becomes massive and there are some cases of such
becoming an earthquake concurrent with a tidal wave.
The 1993 Kushiro-oki Earthquake, the 1994 Hokkaido
Toho-oki Earthquake, the 2001 Geiyo Earthquake, etc.,
fell under this type of earthquake.

(Table 1.1.1) Occurrence history of Miyagi-ken-oki
Earthquake
Earthquake
Scale
Intervaloccurrence year
1897
M7.4
39 years
1936
M7.4
42 years
1978
M7.4
27 years
2005
M7.2
Created from Long-term Evaluation of Seismic Activities along
the Japan Trench (Headquarters for Earthquake Research
Promotion; 2019)

1.2 Seismic Risk Evaluation
1.2.1 Seismic risk
What is the risk indicated by “seismic risk?” Themeaning of such differs depending on the situation of
those requesting risk evaluations. For example, for theowners of a building, such will be the possibility of
causing losses to the target objects, and for those whoare investigating site locations for factories or those8Chapter 1 Earthquakes and Buildings in Japan

Section 1 Seismic Risk in Japanadvancing city planning, there may be cases where
they will request information about the possibility ofthe occurrence of earthquakes, or the expected
intensity of ground motion. When it comes to “seismic
risk,” as for the specific indices under consideration,
primarily the following things can be named:
a. place of occurrenceb. scale of earthquakec. time and probability of occurrenced. size of seismic motion
e. size of predicted damage
Among these indices, a. to c. are indices with regard
to the occurrence of earthquakes themselves, and such
could be termed a sort of earthquake prediction
information. On the basis of these, d. “strength ofseismic motion at the evaluation point” (earthquake
hazardnote) and e. “damage to the target objects”(earthquake risknote) are calculated. However,depending on the case, earthquake hazard andearthquake risk, sometimes mean different things.
Earthquake hazard is defined here as “evaluation of
the possibility of being hit by strong seismic motion,”and earthquake risk is defined as “direct economic
loss incurred due to earthquake.”occur in Tokyo within 72 hours” (short-term
prediction). The other is prediction of the occurrenceof earthquakes over a long period from the present,from several years to 50 or 100 years, or longer(long-term prediction).
Though the boundary between these two kinds ofpredictions is not clear, their characters are completely
different. Since short-term prediction is information
given just before the occurrence of an earthquake, it ishighly effective in arousing the disaster prevention
consciousness in people, even if just temporarily.
Additionally, it is possible to perform some measures
such as evacuating dangerous buildings or not using
trains, so such can be said to be extremely effective
information for protecting human lives.
On the other hand, in long-term prediction, there is atendency to think that there will be some delay before
the occurrence of an earthquake, and the effect is low
on improving disaster prevention consciousness
compared to short-term prediction. However,
earthquake-resistance remodeling of buildings orinfrastructure, reinforcement of disaster prevention
facilities, etc., is conducted politically, and reductions
not only of loss of human life, but also of economic
loss can be expected. When it comes to earthquake
prediction, many people visualize short-term
prediction, but long-term prediction is very important
information as well for earthquake disaster prevention.

1.2.2 Earthquake prediction
Earthquake prediction can be roughly divided into two
kinds. One is prediction of future earthquakes fromabout several weeks to immediately before theoccurrence of said, as in “an M7 class earthquake will

(Note) Earthquake hazard expresses occurrence probability of earthquakes, the largest seismic motion expected at a given
point, the probability of occurrence there, or the activity cycle, and in many cases it indicates the risk of inflicting
damage, the intensity of phenomena and the probability of occurrence. On the other hand, seismic risk is used in themeaning of “occurrence probability of uncertain damage or expected loss.” In many cases damage and loss here
especially indicate economic loss. Sometimes it is expressed by the following formula:
Risk = Value of the target object × Degree of damage × Occurrence probability.
In such cases, value of the target object times the degree of damage indicates the size of damage (strength), and risk isquantified by multiplying the occurrence probability (uncertainty) by such. Quantification of seismic risk is extremely
important for determination of premium rates of earthquake insurance, and in addition, it is used in the field of risk
management, etc., for companies.

9Chapter 1 Earthquakes and Buildings in Japan

Section 1 Seismic Risk in Japan(1) Short-term prediction
It has long been said that great earthquakes areconcurrent with precursor phenomena. For example,
at the time of the Great Kanto Earthquake, manystories of experiences of precursor phenomena werereported, as in ‘thunder like gunfire was heard,

Consideration of How to Respond to a Disaster basedon Earthquake Observation and Assessment along the
Nankai Trough under the Cabinet Office, “How to
Respond to a Disaster based on Earthquake
Observation and Assessment along the Nankai Trough(Report)” published in September 2017 indicated that
“There is no established scientific technique to highly
accurately predict the time of occurrence, location, or
scale of an earthquake at present and so accurate
earthquake prediction presumed in the existing
earthquake disaster response control measures basedon the Large Scale Earthquake Countermeasures Act
is not possible. Therefore, the existing earthquake
disaster response control measures based on the Large
Scale Earthquake Countermeasures Act needs to beamended.” In response to these remarks, thegovernment is currently considering how to respond toa disaster when an abnormal event has been observed
along the Nankai Trough and a mechanism for
implementing a disaster response.

huge schools of sardines retraced the rivers,
wells dried out, fireballs were seen, etc.’ At thetime of the Hyogo-ken Nanbu Earthquake, there werereports of anomalous radio wave transmission, withhigher levels of noise at locations closer to Kobe.
These are considered to occur as a result of various
phenomena in the critical situation just before an
earthquake, and short-term prediction mainly treatsthese phenomena as precursor phenomena, and isconducted on the basis of said. This type ofearthquake
prediction
researchisveryinterdisciplinary in nature, and studies are being
conducted in many places around the world including
Greece, China, Russia, Italy, and Taiwan.
In Japan, disaster prevention countermeasures for justprior to the occurrence of the Tokai Earthquake are
stipulated by the Large Scale Earthquake
Countermeasures Act (Law No.73 of 1978) set forthin 1978. In the area where damage of the Tokai
Earthquake
isconcerned,
systemsarein operation to detect abnormalities just prior to theoccurrence of earthquakes using observationequipment such as seismometers, strain meters and tilt
meters, and it had been thought that the occurrence of
the Tokai Earthquake was the only instance for which
short-term prediction is possible. In the event
abnormalities are seen in crustal deformation, etc., andwhen such are judged to be Tokai Earthquake
precursor phenomena, under this Act, various social
activities are supposed to be regulated in the area
covering the eight prefectures centered on Shizuoka
Prefecture (areas under intensified measures against
earthquake disasters, including Mie, Aichi, Gifu,
Nagano, Yamanashi, Kanagawa and Tokyo). However,a report published by the Working Group on(2) Long-term prediction
If we include ones of similar type, long-term
prediction has been conducted since relatively ancient
times. It is possible to find articles in Japan on past
great earthquakes in ancient documents, and it ispossible to observe historic earthquakes over a very
long period. The oldest earthquake article concerns
one in 416 A.D., and from that time on, overapproximately 1600 years, it is possible to grasp thelocation and scale of the earthquakes that haveoccurred in the past. The listing up of past earthquakes
chronologically based on this information is called the“earthquake catalog,” and this is being used in various
ways in the field of earthquake disaster prevention. It
was in 1899 that the practical earthquake catalog wascompiled in Japan for the first time. Using said,
Fusakichi Omori (Professor in the Seismology Dept.,
Tokyo Imperial University) counted the numbers of
occurrences of earthquakes and indicated them on amap (figure 1.2.1). Though the probability of10

Chapter 1 Earthquakes and Buildings in Japan

Section 1 Seismic Risk in Japan(President of Earthquake Research Institute,
University of Tokyo) announced the theory in 1970
that the “occurrence periodicity of strong groundmotion in the southern part of Kanto region is 69±13
years.” According to this theory, the probability ofoccurrence of a great earthquake reached its peak in
1992, 69 years after the Great Kanto Earthquake in
1923, and that such would occur by 2005. It caused a
response from society at the time as the earthquake
disaster prevention plan for Tokyo was planned basedon it.
Earthquakes that occur at the boundaries between
tectonic plates, or interplate earthquakes, haverelatively short cycles of activity. As a result, in manycases, their past occurrences can be determined from
historical records. One interplate earthquake which
has the potential to recur in the near future, causing
damage over a relatively large area, is an earthquake
in the Nankai Trough. Historical documents revealthat earthquakes have occurred at intervals of 90 to
150 years after 1361 in this area. The Headquarters for
Earthquake Research Promotion has been conducting
long-term evaluations of earthquake activities, which
predict the size of earthquakes and the probability ofoccurrence of them within a certain period, based on
historical records and observations.
After the 1995 Hyogo-ken Nanbu Earthquake, whichbrought about a renewed awareness of the dangers ofearthquakes taking place on active faults, greater
efforts have been focused on the investigation ofactive faults. There are approximately 2,000 active
faults in Japan, and among them, long-term
evaluations have been conducted for those having ahigh level of potential earthquake damage withresearching their locations, records of past activity,and other attributes by the Headquarters for
Earthquake Research Promotion. In recent years, as
the initial evaluations of these active faults have been
completed, the Headquarters has begun introducing
new evaluation techniques for greater accuracy andreliability and conducting regional evaluations that

(Fig. 1.2.1) Distribution map of great earthquakes in JapanThe great earthquakes from 416 to 1860 are counted. Great
earthquakes here are defined as “those with collapse of basin,cracking, significant housing damage, loss of human lives, etc.”(Created from Omori (1899) with limiting areas where
earthquake records were available at that time.)

occurrence of earthquakes in the future is not
mentioned here, average activity cycles were obtained
statistically and frequency of earthquakes dependingon the regions was referred, and this was theforerunner of long-term prediction.
Akitsune Imamura (Professor in the Seismology Dept.,
Tokyo Imperial University) closely examined theearthquake catalog and discovered that there isperiodicity in the great earthquakes besetting Tokyo.
In 1905, he issued the thesis that there was a
possibility of the occurrence of a great earthquake inTokyo in the future within 50 years. It is said that thislong-term prediction was an attempt to promote
countermeasures against earthquakes in Tokyo andhad no definite grounds in a seismological sense;
however, since the Great Kanto Earthquake occurredin 1923 after this thesis, it became a topic ofdiscussion for predicting said.
As a theory similar to this, Hiroshi Kawasumi

11Chapter 1 Earthquakes and Buildings in Japan

Section 1 Seismic Risk in Japan

cover seismic activity at multiple active faults
distributed within a region, in addition to evaluationsof individual active faults as in the past.
Besides what has been stated up to this point, there isa way of thinking with regard to long-term prediction
called seismic gap. As earthquakes are phenomena of
the release of deformation energy accumulated inplates, earthquakes should not occur in the areas untilenergy is sufficiently accumulated. In other words, inan area in which great earthquakes have occurred
historically, but where an earthquake has not occurred
for a long period (seismic gap), the energy isaccumulated and thus an earthquake is thought to be
impending in this concept.
This concept is easy to understand for earthquakes atinterplates whose activity cycles are relatively short,and there is a research report stating that an
earthquake occurred off the eastern shore of Hokkaidothat filled in the seismic gap. Additionally, as there
have been no great earthquakes that have taken placein the area from Suruga Bay to Enshu nada (area A in
figure 1.2.2) since the Ansei Tokai Earthquake in
1854, such is considered to be a seismic gap.
Newly acquired knowledge concerning topography,
historical records, and seismic activity is being used torefine the determination of potential hypocentral
regions and seismic risk.

Earthquake
occurrence
year

Activated fault location
D

C

B

A
?

684

?

887
1096
1099
1361
1498
(Tsunami)

1605
1707

?

?

1854
1944
1946
Definitely or certainly activated.

?
(T sunami)

Possibly activated.
Highly likely to have triggered a tsunami earthquake(an earthquake with a tsunami significantly greaterthan that is expected from its ground motion).

(Fig. 1.2.2) History of massive earthquakes taking place
along the Nankai TroughCreated from Long-term Evaluation of Seismic Activities in the
Nankai Trough (2nd Edition) (Headquarters for Earthquake
Research Promotion; 2013)[Reference] Characteristics and estimated damage of massive
earthquakes that occurred along the Nankai Trough.
M8 class great earthquakes have occurred repeatedly at shortintervals of 100 to 200 years in the area along the Nankai
trough (A, B, C and D in the figure). It is thought that at least
5,000 people died, 59,000 houses were destroyed and 18,000
houses were swept away in total by the 1707 Hoei Earthquake(M8.6, the estimations are taken from Chronological Scientific
Table), in which it is believed three earthquakes hit areas A to
C simultaneously. In addition, it is estimated that if earthquakes
occur in areas A to D simultaneously, the magnitude of theearthquakes will be in the M9 class, with up to 320,000 deaths
and up to 2.4 million buildings and houses completely
destroyed or burned (Damage Assumption for Nankai Trough
Huge Earthquake (Preliminary Report) by Central Disaster
Management Council; 2012).

1.2.3 Earthquake hazard evaluation
The first example of practical earthquake hazard
evaluation in Japan is the so-called Kawasumi map(figure 1.2.3) created by Hiroshi Kawasumi in 1951.
Using the distance-seismic motion strength theorem,
Kawasumi calculated the distribution of force ofseismic motion of earthquakes that occurred from 679
to 1948, and by the frequency of such, mapped out theearthquake hazards all over Japan. This was the firstearthquake hazard map created in Japan. Though the
Kawasumi map was created to set up regional seismic
coefficients for building design in the Building

12Chapter 1 Earthquakes and Buildings in Japan

Section 1 Seismic Risk in Japan

Standards Act of the time, afterwards it greatly
influenced research with regard to earthquake hazard
evaluation, and this method was developed so thatnumerous earthquake hazard maps were created.
Exemplified by the Kawasumi map, until the 1980s
earthquake hazard maps were statistical obtainmentsof average hazards from the earthquake record of thepast. It is considered that one of the reasons why study
in this field has developed is that since the history ofJapan is long and records of past earthquakes were left
over, it was possible to set up a long statistical period.
However, earthquakes taking place at interplates, ofwhich the activity cycles are short, are one thing, but
the activity cycles of earthquakes at active faults islong, normally from 1000 years to several tens of
thousands of years, and it is difficult to evaluate
correctly the earthquake hazards with just historicalmaterials from 1600 years. Additionally, not only theaverage hazard from the past earthquake record, butalso the necessity of consideration of the imminenceof earthquake have become recognized, and hazard
evaluation using the above stated long-term prediction
information has begun to be used. For example, theProperty and Casualty Insurance Rating Organizationof Japan (present General Insurance Rating
Organization of Japan) has created earthquake hazard
maps of the probability of maximum instrumental
seismic intensity for the 50 years from 2000 being 5.5
or higher, with consideration of the imminence ofearthquakes using the seismicity history of active
faults and interplates (figure 1.2.4).
Based on the above-mentioned long-term assessment,
the Headquarters for Earthquake Research Promotion
published earthquake hazard maps (Probabilistic
Seismic Hazard Maps, 2005 Edition) including the“Distribution map of areas with probability of groundmotions greater than or equal to seismic intensity
6-lower (instrumental seismic intensity 5.5) occurring
within 30 years” in March 2005. The maps wererenewed every year till the 2010 Edition. However,many problems with the probabilistic approach to(Fig. 1.2.3) Kawasumi map
Peak acceleration distribution expected to occur once in
100 years on average (gal)
Reprinted from Osaki (1983), original figure from Kawasumi (1951)(Fig. 1.2.4) Probability of maximum instrumental seismic
intensity for the 50 years from 2000 being 5.5 or higher(intensity 6-lower or higher)
Reprinted from Property and Casualty Insurance Rating
Organization of Japan (2000)

13

Chapter 1 Earthquakes and Buildings in Japan

Section 1 Seismic Risk in Japan

seismic hazard maps came into focus after the 2011
off the Pacific coast of Tohoku Earthquake, andpublication of the 2011 Edition was postponed. The
Headquarters examined issues and published a reportsummarizing the interim examination results up to thatpoint in December 2012 and 2013. Then, theHeadquarters published the 2014 Edition of theProbabilistic Seismic Hazard Maps which reflected all
the examination results in light of the 2011 off the
Pacific coast of Tohoku Earthquake in December
2014. The maps have been revised even after the 2014
Edition (the latest edition is the 2020 Edition (figure
1.2.5)) and are expected to be further revised.
1.2.4 Evaluations of seismic risk
In recent years, seismic risk management has come tobe widely conducted not only by companies overseas
but also inside Japan as well. Seismic risk
management evaluates the seismic risk to which abuilding (or factory, company, etc.) is exposed, andthen takes some sort of countermeasures for it. For
example, for a building in an area where there is a fearof the occurrence of a great earthquake, it predicts thedamage due to an earthquake and sets appropriate
earthquake
insuranceor
implements
earthquake-resistancereinforcement
upon
consideration of cost-effectiveness. The important
thing is recognizing the seismic risk correctly and to
performing effective countermeasures. Therefore,
seismic risk evaluation is important for conducting
seismicrisk
management.
Reflecting
suchcircumstances, consulting firms dealing in seismic risk
are very aggressive in Japan and major construction
companies, etc., are developing seismic risk
evaluation software as well.
As for seismic risk evaluation, though it has been
widely put to practical use, many uncertainties remain
regarding earthquake hazards and risks. The
continuous research is indispensable for improving
accuracy of the evaluation.

(Fig. 1.2.5) Distribution map of probabilities of suffering anearthquake with an intensity 6-lower or higher within thenext 30 years from 2020 (an example of the Probabilistic
Seismic Hazard Maps)
Touched up reprint from National Seismic Hazard Maps forJapan, 2020 Edition (Headquarters for Earthquake Research
Promotion; 2021)

14

Chapter 1 Earthquakes and Buildings in Japan

Section 1 Seismic Risk in Japan

Property and Casualty Insurance Rating Organizationof Japan. “Research on Seismic Risk Evaluation with
the Consideration of Active Fault and Historical
Earthquakes.” Jishin Hoken Chosa Kenkyu, 47,(2000).
Central Disaster Management Council.
http://www.bousai.go.jp/kaigirep/chuobou/
Rikitake, Tsuneji. Prediction and Precursor—Scienceof the Earthquake “Macroscopic Anomalous
Phenomena.” Kinmiraisha, (1998).
Central Disaster Management Council. Report ofSurvey Committee on the Predictability of a
Large-Scale Nankai Trough Earthquake. (2013).
Central Disaster Management Council. Damage
Assumption for Nankai Trough Huge Earthquake(Preliminary Report). (2012).
Central Disaster Management Council. Disaster
Prevention Response Based on Earthquake
Observation and Assessment along the Nankai
Trough. (2017).
Council of the Seismological Society of Japan. 2012
Action Plan to Reform the Seismological Society ofJapan. (2012).
GEM Foundation and the International SeismologicalCentre.
http://www.isc.ac.uk/iscgem/index.php
Headquarters for Earthquake Research Promotion.
National Seismic Hazard Maps for Japan, 2020
Edition. (2021).

<References>
Imamura, Akitsune. An Easy Method for Lightening
the Loss of Life and Property due to Earthquakes in
Urban Areas. Taiyo, Hakubunkan, (1905).
Usami, Tatsuo. Materials for Comprehensive List of
Destructive Earthquakes in Japan, 599-2012.
University of Tokyo Press, (2013).
Osaki, Yorihiko. Earthquakes and Construction.
Iwanami Shoten, (1983).
Omori, Fusakichi. “Research on Japan Earthquakes
Historical Materials Catalog.” Report of Imperial
Earthquake Investigation Committee, 26, (1899).
Kawasumi, Hiroshi. “Measures of Earthquake Danger
and Expectancy of Maximum Intensity throughout
Japan as Inferred from the Seismic Activity inHistorical Times.” Bull. Earthq. Res. Inst., 21, (1951).
Kawasumi, Hiroshi. “Verification of 69-year
Periodicity of the Kanto Nanbu Earthquake and the
Imminence of its Occurrence and the Emergency inCountermeasures and Problematic Points.” Chigaku
Zasshi, 79, (1970).
Japan Meteorological Agency.
https://www.data.jma.go.jp/svd/eqdb/data/shindo/inde
x.htmlNational Astronomical Observatory of Japan, ed.
Chronological Scientific Table. Maruzen, (2021).
Headquarters for Earthquake Research Promotion.
https://www.jisjin.go.jp/
Headquarters for Earthquake Research Promotion.
Long-Term Evaluation Techniques for Active Faults(Preliminary version). (2010).
Headquarters for Earthquake Research Promotion.
Long-term Evaluation of Seismic Activities in the
Nankai Trough (2nd Edition). (2013).
Headquarters for Earthquake Research Promotion.
Long-term Evaluation of Seismic Activities along theJapan Trench. (2019).
Headquarters for Earthquake Research Promotion.
Report of the “National Seismic Hazard Maps forJapan.” (2005).

15

Section 2 Earthquake Damage of Buildings in Japan
Japan is elongated and has a variety in weather andclimate from north to south, with disasters frequently
occurring all over the country. It has suffered fromvarious disasters in the past, due to fire, as a matter ofcourse, but also to earthquakes, volcanic eruptions,tidal waves, heavy rain, floods, windstorms, heavy
snow and cold, etc. Due to this kind of environment, it
is difficult to avoid disaster no matter what kind ofarea is used for building sites.
It’s necessary to take on these disasters squarely inorder to secure safe and reliable buildings in Japan,
with various types of disaster countermeasures being
required. Even if disasters are suffered, devices are
required to secure safety and to prevent the expansionof damage.

tiled roofs in 1872; as a result, the prevention of major
fires in cities was vastly improved.
2.1.2 Buildings with steel structure or reinforced
concrete structure
It is said that the first full scale building using a steel
frame in Japan was a three-story factory built in 1894.
The use of steel as a structural material had begun
earlier in the fields of civil engineering andshipbuilding than in construction, and though steel
materials were at first imported.
The civil engineering field was the forerunner for steel
reinforced concrete structures as well, just as it had
been for steel structures. The manufacturing of
concrete in Japan commenced in 1875, at first being
only used as mortar for joints or as foundation
concrete for brick or stone construction. Later on,
reinforced concrete structures, that are concrete
reinforced by steel frames, were introduced in Japan,
and the first building with a reinforced concrete
structure was built in 1905. It became clear in the San
Francisco Earthquake of 1906 that steel reinforced
concrete
structuresaresuperiorin
theirearthquake-resistance capacity and fireproofing, andthe full-scale study of steel reinforced concrete
structures commenced in Japan.

2.1 Modernization of Buildings
2.1.1 Characteristics of wooden structure buildings
Wood is used for many of Japan’s small-scalebuildings, such as residences. Though wood has
shortcomings, such as being combustible, decayable,rife with such things as knots in timber, inconsistent
strength and cases of deformation over long periods,
wooden buildings in Japan have positive air
ventilation and are suitable for the summer weather ofmoisture and high temperatures. Additionally, woodenbuildings have created a characteristic wooden culture
for each region with a long tradition.
The things that have been feared in connection withwooden buildings from ancient times are earthquakes,
lightning and fires. The first things to be attempted forwooden buildings historically were fire prevention
countermeasures, and this was in the latter half of the
19th century, when Japan was becoming a modern
nation and scientific investigation had started. To
prevent major fires, Tokyo Prefecture at that timeadvanced the promotion of mud walled structure in
1870, road reconstruction and a change to brickconstruction for buildings in Ginza, and a change to

2.2 Earthquake Damage of Buildings
Brick and stone buildings were introduced in urban
construction as a part of modernization during the
Meiji period, in the latter half of the 19th century.
Although these buildings were fire resistant anddurable, they lacked earthquake resistance and wereheavily damaged in the 1891 Nobi Earthquake.
Wooden buildings were also heavily damaged becauseof the weight of roof tiles, which were recommended
for fire prevention, combined with the relative lack ofbraces or other structural members that resist
horizontal forces.
17

Chapter 1 Earthquakes and Buildings in Japan

Section 2 Earthquake Damage of Buildings in Japan

Intensive research on earthquake resistance forbuildings was begun after that earthquake. With
additional knowledge concerning the behavior ofbrick and stone buildings in earthquakes, architecturaldesign began to reflect the situation in Japan. After thelessons of the San Francisco Earthquake of 1906,
reinforced concrete construction and steel construction
became the central focus of government policies.
Research was also promoted on the earthquake
resistance of wooden buildings. The Earthquake
Disaster Prevention Survey Group, which was
founded in the year after the Nobi Earthquake, issued
structural guidelines for the reconstruction of housingin Sakata, Yamagata Prefecture after the 1894 Shonai
Earthquake, setting course toward the modern
approach of ensuring earthquake-resistance capacity
in framework construction.
In the Great Kanto Earthquake which occurred in
1923, fires following the quake caused particularly
serious losses. This disaster left approximately
105,000 persons dead or missing, 211,000 houses
completely or partially destroyed, and 212,000 houses
burned down. It also demonstrated the effectiveness of
the approach taken to earthquake resistance after the
Nobi Earthquake, as reinforced concrete buildings
survived relatively intact while brick and stonebuildings suffered catastrophic damage. The Urban
Building Act was amended in 1924, a year after theGreat Kanto Earthquake, resulting in the first buildingcode in Japan to specify earthquake-resistance design.
In the 1948 Fukui Earthquake, damage to woodenbuildings was extremely severe, while reinforced
concrete buildings remained standing except for a
department store, confirming the earthquake
resistance of reinforced concrete construction.
In the 1964 Niigata Earthquake, liquefaction damage
in the sandy soil was prominent. Nearly all of thereinforced concrete buildings in the city of Niigata
collapsed when their foundations were damaged bysoil liquefaction. This drew attention to thephenomenon of liquefaction, a different mode ofearthquake damage than the previously experienced
direct structural damage to buildings due toearthquake shaking motions.
In the 1968 Tokachi-oki Earthquake and the 1978
Miyagi-ken-oki Earthquake, a great deal of shear
failure occurred in reinforced concrete buildings.
The Building Standards Act was amended in 1971 and1981 with major changes in earthquake-resistancestandards, based on the lessons learned from damage
in these major earthquakes as well as researchfindings in the advancing field of seismic engineering.
The Hyogo-ken Nanbu Earthquake in 1995, which
was the first major earthquake after the rapid growthof the economy with the epicenter in a city, caused
many buildings and structures to collapse. The
earthquake caused great damage not only to woodenbuildings, but also to reinforced concrete structures,
which were thought to be highly resistant toearthquakes. Damage to many buildings and structures,
both wooden buildings and reinforced concrete
structures built before 1981, was observed in adamage survey, which clarified that earthquake
resistance differs depending on the age of construction.
It was also found that the presence of termite damage
or decay affected the damage to buildings andstructures in wooden buildings.
In the 2011 off the Pacific coast of Tohoku Earthquake,the tsunami completely washed away many wooden
houses and other buildings in municipalities along the
Pacific coast. Soil liquefaction also caused damage informer river channels and reclaimed land over a very
wide area ranging from the Tohoku region to the
Kanto region. It is said that the earthquake damage tobuildings directly caused by the ground motion was
relatively light, considering the scale of theearthquake and seismic intensity measurements at
various locations. Many buildings that had received
proper seismic retrofitting and renovation escaped
damage; however, in buildings that were designed
according to earthquake-resistance standards before
1981, damage was caused by reasons such as
18

Chapter 1 Earthquakes and Buildings in Japan

Section 2 Earthquake Damage of Buildings in Japaninsufficient yield strength.
In the 2016 Kumamoto Earthquakes, Kumamoto andOita Prefectures were hit by large shocks multiple
times, including two earthquakes with a maximum
seismic intensity of 7 observed in Mashiki-machi.
Although the earthquake-resistance standards set after
1981 were recognized as effective in preventing
collapse damage, collapse damage was also seen inbuildings and structures built after the introduction of
the standards.
The 2018 Hokkaido Eastern Iburi Earthquake caused
significant subsidence of the ground in Kiyota-ku,
Sapporo due to liquefaction, and buildings andstructures were tilted regardless of their structure or
year of construction due to differential settlement intheir foundations.
As discussed above, building damage in pastearthquakes has shown various characteristics inrelation to seismic movements, tsunamis, soilliquefaction and other factors, and necessary measures
have been considered. In recent years, technologies toreduce damage, such as seismically isolated structures,
have also been developed and becoming popular.

<References>
Ohashi, Yuji. History of Transition of Japan’s Building
Structural Standards. Building Center of Japan,(1993).
Architectural Institute of Japan. Study materials forConstruction Laws. Maruzen, (2001 rev.).
Kajima Urban Disaster Prevention Study Group.
Earthquake Damage in Buildings. Kajima Publishing,(1996).
Osaki, Yorihiko. Earthquakes and Construction.
Iwanami Shoten, (1983).
Architectural Institute of Japan. The 2011 off the
Pacific Coast of Tohoku Earthquake Disaster
Research Bulletin. Architectural Institute of Japan,(2011).
Editorial Board of Report on the Great Hanshin-Awaji
Earthquake Survey. Report on The Great Hanshin
Earthquake Survey. Maruzen, (1998).
Committee to analyze the causes of building damage
in the Kumamoto Earthquake. Report on analyzing thecauses of building damage in the Kumamoto
Earthquake. (2016).
National Institute for Land and InfrastructureManagement, Building Research Institute, Center for
Better Living, Hokkaido Research Organization.
Survey report on damage to building foundations andsoil caused by the Hokkaido Eastern Iburi
Earthquake. (2018).
National Astronomical Observatory of Japan, ed.
Chronological Scientific Table. Maruzen, (2021).

19










&KDSWHU(DUWKTXDNH,QVXUDQFH6\VWHPLQ-DSDQSection 1 Difficulties of Making Seismic Risk Insurable

Every time a great earthquake disaster occurred after
the latter half of the 19th century in Japan,
establishment of insurance compensating for losses
due to earthquake was talked about and there wereconcrete suggestions made as well for insurance
systems. However, due to the uniqueness of theseismic risk, etc., there was difficulty in arriving at therealization of them. This was due to such facts as that itis difficult to use the occurrence frequency and scale ofloss of destructive earthquakes in the “law of large
numbers,” that there is a possibility that earthquake
disaster will at times cause huge amounts of loss, andthere is a large fear of adverse selection.

than one. Figure 2.1.1 is a graph of frequency groupedby occurrence numbers for destructive earthquakes per
year for these approx. 500 years. According to thisfigure, the years with not even one earthquake
occurring occupy more than half of this period.
Meanwhile, there is one year in which destructive
earthquake occurred as many as six times. Thus,
there’s a wide data spread for the occurrence ofdestructive earthquakes every year. Observing Japan asa whole and using a long period of several hundredyears, the approximate frequency of occurrence can be
estimated; however, it is very difficult to guess whether
or not a destructive earthquake will occur in a certain
single year.

1.1 Non-Applicable Law of Large Numbers
General insurance premiums are generally computed
according to the law of large numbers. Large amountsof data are compiled and analyzed by statisticalmethods to determine appropriate and stable insurance
premium rates. For example, in recent years, there areabout 20,000 building fires in Japan each year. On theother hand, the number of destructive earthquakes
occurrences is, even in Japan, one of the world’s top
countries for earthquakes, is very low compared toother disasters. According to Chronological Scientific
Table, in which appear the major destructive
earthquakes that have occurred in the past in Japan,that number is less than 500. This is the record for the
past approx. 1,600 years, and the further back on therecord we go, the fewer the destructive earthquakes are.
We consider that this is because as we go back further,
there is less and less population, and moreover since
the residential areas are limited, even whenearthquakes occurred, there is no damage and thus norecord.
So, if we take the approx. 500 years from the past to
the present, about 400 destructive earthquakes haveoccurred, and if the average occurrence number per
year is obtained for this period, the result is even less(Fig. 2.1.1) Frequency distribution of occurrences ofearthquakes per year for the past approx. 500 years
Created from Chronological Scientific
Astronomical Observatory of Japan; 2021)

Table(National

Next, when we consider the damage due toearthquakes, that damage differs greatly due to suchthings as place of earthquake occurrence, scale(magnitude), seasons and times. For example, theextent of the damage varies tremendously dependingon whether an earthquake occurs in a metropolitan area
or in a region with small population, or whether the
scale is large or small. Additionally, since the numberof outbreaks of fire at times of earthquake hassomething to do with the usage status of burner

23Chapter 2 Earthquake Insurance System in Japan

Section 1 Difficulties of Making Seismic Risk Insurable

equipment, such differs as well largely depending on
the seasons and times of the earthquake occurrence.
The spread of fire also largely differs depending on thedensity of buildings or fireproofing rate of cities, etc.;
and, moreover, tsunamis sometimes occur in cases ofearthquakes where the hypocenters are in maritime
areas, and there are cases where coastal areas suffer
great damage. Such characteristics make it difficult tograsp earthquake damage statistically.
It is possible to predict to some extent the number ofoccurrences of earthquake disasters over the long run,but difficult over the short run, and besides the scale ofdamage differs greatly due to such things as place ofearthquake occurrence, scale, seasons and times. Due
to such reasons, it is assumed that seismic risk is thekind of risk to which it is difficult to apply the law oflarge numbers, which is a precondition for generalinsurance.

this the scale of cities has become gigantic. Therefore,
the accumulation of risk from earthquakes becomeslarger and larger year by year. If a large-scale
earthquake should occur in such a big city, there is apossibility for the losses to be massive, and thepayment capability of privately owned insurancecompanies alone would never be enough tocompensate all.

1.3 Fear of Adverse Selection
In order to operate the earthquake insurance systemstably over the long run, standardization anddecentralization of risk must be attempted through theparticipation of a large number of policyholders. Whenso-called “adverse selection” occurs, that is, when only
people from some regions participating in theinsurance, or participation in insurance is concentrated
only during certain period, operation and managementof the insurance system have come to experience
impediments.
Japan is located in the Circum-Pacific seismic belt, andin the past many destructive earthquakes have occurred
there. In the future there is a possibility as well of theoccurrence of earthquakes in any of the regions
nationwide, from Hokkaido to Okinawa.
However, if we observe Japan more precisely, due tosuch things as the circumstances of the occurrence ofdestructive earthquakes of the past, and the location ofinterplates or active faults, it cannot necessarily be said
that Japan is uniform overall in terms of seismic risk.
On the Pacific side, in particular from the Kanto to the
Shikoku regions, huge earthquakes have occurredmany times in the past, inflicting massive damage
every time.
Because of such factors, the consciousness of thehabitants towards seismic risk is different in every
region. Therefore, there is a possibility that only
habitants who feel there is a high seismic risk willcontract earthquake insurance. Or, it is also considered

1.2 Losses of Possibly Huge Amounts
When a great earthquake occurs, since the afflicted
area covers a very wide range, sometimes the losses
can be huge. The area afflicted by the Great Kanto
Earthquake, which occurred in 1923, covered seven
prefectures centering on Tokyo and Kanagawa, withthe approximate number of dead and missing reaching
105,000, and massive damage to housing, of which
211,000 were totally or partially destroyed and 212,000
were burned down approximately. The insured amountfor fire insurance by general insurance companies thatcovered the damaged buildings at that time was a totalof about ¥1,600 million; however, the net assets of thegeneral insurance companies were only about ¥200
million. If the general insurance companies had borne
the obligation to pay insurance claims, most of thegeneral insurance companies could not have completed
the payment.
The number of big cities has increased together withthe development of Japan’s economy, and on top of
24

Chapter 2 Earthquake Insurance System in Japan

Section 1 Difficulties of Making Seismic Risk Insurable

that people will contract earthquake insurance only inperiods when seismic risk is high, such as whenearthquake swarm are ongoing or the imminence of anearthquake occurrence is loudly proclaimed. In thisway, there is very high possibility that regional or
temporal adverse selection will occur concerning
earthquake insurance, and there is a fear of
concentrations of seismic risk. These things make theoperation of insurance systems difficult.

<References>
General Insurance Association of Japan. All about
Earthquake Insurance. Hoken Mainichi Shinbun,(1980).
National Astronomical Observatory of Japan, ed.
Chronological Scientific Table. Maruzen, (2021).
Fire and Disaster Management Agency. White Paper
on Fire Service. (2022).
Japan Earthquake Reinsurance Company.
https://www.nihonjishin.co.jp/disclosure.html

25

Section 2 Needs and Concepts of Earthquake Insurance
People in the ancient times in Japan had no otherrecourse but to give up on countermeasures against
earthquakes as “earthquake disaster is a naturalcalamity.” An earthquake of which the hypocenter was
Yokohama occurred in 1880 with numerous chimneys
being broken and houses also suffering damage. Using
this earthquake as an impetus, the “SeismologicalSociety” was established and scientific research on
earthquakes commenced. The magnitude 8.0 Nobi
Earthquake, of which the hypocenter was the Minoand Owari regions (present Gifu and Aichi
Prefectures) occurred in 1891, and there wasextremely serious damage with more than 7,000 dead,approximately
140,000
completely
destroyedbuildings and approximately 80,000 partiallydestroyed buildings, etc. With this earthquake disasteras a start, opinion began to emerge in the constructionindustry about improvement of construction methods
for the earthquake-resistance capacity of woodenbuildings. The Imperial Earthquake Investigation
Committee was established in the following year andinvestigations began of the earthquake-resistancecapacity of wooden buildings.
In parallel with such movements, loud proclamationcommenced of the necessity of earthquake insurance
systems in order to expedite swift restoration fromearthquake disasters. The following specificsuggestions were made afterwards concerning theconcept of earthquake insurance; however, due tofinancial problems, etc., none of the suggestions wererealized.

world had situations of mere governmental oversightand not interference in their insurance systems, this
proposal was not adopted.
The Commerce and Industry Agency’s Outline
Draft of an Earthquake Insurance System
Taking the advantage afforded by the event of theGreat Kanto Earthquake in 1923, the issue of theestablishment of an earthquake insurance system wastaken up again. The Commerce and Industry Agencyof the Japanese Government put together in 1934 its“Outline Draft of an Earthquake Insurance System,”in which earthquake insurance was to be incidental tofire insurance compulsorily. Concerning this outline
draft, since the insurance industry disapproved of suchcompulsory attachment of incidental earthquake
insurance to fire insurance, the Commerce andIndustry Agency didn’t submit the bill to the Diet andit wasn’t realized.
Earthquake Insurance by the Wartime Specific
General Insurance Act
An earthquake insurance system was implemented in
1944, in the middle of WWII, constituted in order tocalm the public mind and for the maintenance of orderunder the Wartime Specific General Insurance Act.
However, the period for implementation was short, at
one year and eight months.
While the income from insurance premiums for theperiod when this system was implemented was¥87,500,000, since major earthquake disasters
occurred one after another, such as the Tonankai
Earthquake in 1944 and the Mikawa Earthquake in
1945, ¥239,000,000 was paid out in insurance claims.

Paul Mayet’s Government-Operated Insurance
TheoryA German economics doctor, Paul Mayet, was invitedby the Japanese Government, and he proposed anational compulsory insurance system in 1878,
referring to the public insurance system in Germany
and adjusting that to the actual situation of Japan
concerning the five disasters of earthquake, fire, storm,
flood and war. However, since other countries in the

The Earthquake Insurance Bill After the Fukui
Earthquake
The magnitude 7.1 Fukui Earthquake with the Fukui
Plain as its hypocenter occurred in 1948, and hugedamage was suffered due to this earthquake, with
3,769 dead, 36,184 houses completely destroyed,
27Section 2 Needs and Concepts ofEarthquake Insurance

Chapter 2 Earthquake Insurance System in Japan

11,816 houses partially destroyed and 3,851 burned
down.
As a consequence of this earthquake disaster, theMinistry of Finance in 1949 mapped out the“Earthquake Insurance Act Summary Draft,” acompulsory attachment of earthquake insurance to fire
insurance. However, the general insurance industry
submitted dissenting opinions against this compulsory
insurance system, and on top of this there were
financial problems in the Government, so a Cabinet
decision could not be made, and it could not berealized.

<References>
Ogihiro, Kiyoshi. “Background of Establishment of an
Earthquake Insurance System and Outline of the
System.” Insurance Study Magazine, 434, (1966).
Tsuchiya, Takao. “On Paul Mayet.” General insurance
Research, 4:2, (1938).
General insurance Business Research Institute.
“Abstract of Wartime Specific General insurance.”
General insurance Research, 10:2-3, (1944).
National Astronomical Observatory of Japan, ed.
Chronological Scientific Table. Maruzen, (2021).

Earthquake Insurance System Study by theGeneral Insurance Industry
A study for an earthquake insurance system was
performed by Japan’s general insurance industry. In
1952, the insurance industry created a tentative
proposal in which earthquake insurance coveringresidences and households was to be incidentally
attached to fire insurance optionally, with theGovernment doing reinsurance. However, since theGovernment could not find a way to perform thereinsurance, this tentative proposal was not realized.
Later on, the general insurance industry advanced
study by establishing expert committees, and in 1964,
they mapped out two plans, one of which was toattach it automatically and the other to attach it
optionally at a fixed insured amount to comprehensive
householders insurance, and started the investigationof reinsurance. At this point (1964), the Niigata
Earthquake occurred. Due to this earthquake, thestudy of an earthquake insurance system greatly
advanced to another stage, from the fundamental
research stage to concrete investigations for
implementation.

28

Section 3 Establishment of the Earthquake Insurance
System
3.1 Background of Establishment

3.2 Implementation of the Earthquake Insurance
SystemThe Niigata Earthquake (M 7.5) occurred on June 16,
1964, around 1:00 pm, with a hypocenter off the shoreof Niigata Prefecture. The damage from thisearthquake spread nine prefectures including
Yamagata Prefecture, Akita Prefecture and centeringon Niigata Prefecture, with 26 dead, 447 injured. As
for damage to residences, 1,960 were completely
destroyed, 6,640 were half destroyed, 15,297 were
flooded and 67,825 were partially damaged. As forbuildings other than residences, 16,283 suffereddamage, and ships, roads, bridges, railways, banks,etc., suffered great damage. Additionally, the damage
due to ground liquefaction inside Niigata City was
also significant.
This earthquake disaster was focused on in at the Diet
and a resolution was passed that the establishment ofan earthquake insurance system should be swiftly
investigated.
In such a situation, Kakuei Tanaka, the Minister ofFinance at that time, convened a general meeting of
the Insurance Council and consulted with themconcerning concrete measures in order to contribute to
the stabilization of the livelihood of the nation at timesof earthquake disasters without notice.
The Insurance Council performed deliberations
concerning to cover or not to cover earthquake
disaster, insurable property and losses to be covered,prevention of adverse selection, ways for the nation to
be involved, the amount to be insured, the limit of
total payments, the sharing of liability between the
Government and private insurance companies, etc.
The Insurance Council discussed such with great
deliberations and in 1965 made its report on anearthquake insurance system.
In order to attempt the commencement of an actuallyachievable system, it was unavoidable that the
specifics of the insurance system in the reportcontained various restrictions, due to various problems
such as the financial burden of the Government.

Specifics of the earthquake insurance established in1966 were as follows:(1) Losses to be covered
Losses due to earthquakes, volcanic eruptions or
tsunami, and only in case of total loss (including
economically total loss) shall such be covered.
(2) Insurable property
Buildings used for residential use and movables forliving (household goods).
(3) Method of contract
Contract shall be made incidental to householders’comprehensive
insuranceandstorekeepers’
comprehensive insurance (automatic attachment).
(4) Amount insured and limit amount to be paid
Such shall be 30% of the amount insured ofhouseholders’comprehensive
insuranceandstorekeepers’ comprehensive insurance; however,¥900,000 for buildings and ¥600,000 for household
goods shall be the limit amount to be paid.
(5) Premium rate
The premium rates and figures of Zone are as
displayed in table 2.3.1 and figure 2.3.1.
(6) Limit of total payment amount for insurance
claims due to a single earthquake, etc., shall be¥300 billion.

3.3 Enactment of the Act on Earthquake Insurance
Upon the implementation of an earthquake insurance
system, the Government announced officially the “Acton Earthquake Insurance, Enforcement Order,
Regulation for Enforcement” and “Earthquake
Reinsurance Special Accounting Act, Enforcement
Order, Regulation for Enforcement,” and came into
force in 1966.

29

Chapter 2 Earthquake Insurance System in Japan

Section 3 Establishment of the Earthquake Insurance System(Table 2.3.1) Premium rates and Zone at the time of establishment of earthquake insurance(yen per 1,000 yen amount insured)

Zone

Zone 1

Zone 2

Zone 3Structural classification of buildings
Hokkaido, Aomori, Iwate, Miyagi, Akita, Yamagata,
Fukushima, Ibaraki, Tochigi, Gumma, Niigata, Toyama,
Ishikawa, Yamanashi, Tottori, Shimane, Okayama,
Hiroshima, Yamaguchi, Tokushima, Kagawa, Ehime,
Kochi, Fukuoka, Saga, Nagasaki, Kumamoto, Oita,
Miyazaki, Kagoshima, Okinawa*
Tokyo (excluding Zone 3), Kanagawa (excluding Zone 3),
Saitama, Chiba, Fukui, Nagano, Gifu, Shizuoka, Aichi,
Mie, Shiga, Kyoto, Osaka, Hyogo, Nara, Wakayama
Sumida-ku,

Koto-kuandArakawa-ku

ofClass A bldgs

Class B bldgs

0.60

2.10

1.35

3.60

2.30

5.00

Tokyo,

Tsurumi-ku, Naka-ku and Nishi-ku in Yokohama City of
Kanagawa, and Kawasaki-shi area east of Tokaido Line
* Okinawa was added in 1972 after reversion to Japanese administration.
(Note) “Class A buildings” refer to fireproof buildings and semi-fireproof buildings.
All other buildings are classified as “class B buildings.”

The earthquake insurance system was subject to thebacking of the nation, and because of the necessity toperform stable management of the system, and forcontribution to the stabilization of the lives of thevictims, the coverage details, payment standards,
amounts of underwriting limit, reinsurance,accounting treatment, etc., were specifically stipulated
in laws.

Zone 1
Zone 2
Zone 2 orZone 3<References>
General Insurance Association of Japan. All about
Earthquake insurance. Hoken Mainichi Shinbun,(1980).
National Astronomical Observatory of Japan, ed.
Chronological Scientific Table. Maruzen, (2021).
Property and Casualty Insurance Rating Organizationof Japan. 50 Years’ History of Property and Casualty
Insurance Rating Organization of Japan. (1999).
Usami, Tatsuo. Materials for Comprehensive List of
Destructive Earthquakes in Japan, 599-2012.
University of Tokyo Press, (2013).

(Fig. 2.3.1) Map of Zone at the time of establishment ofearthquake insurance

30Section 4 Transition of Earthquake Insurance System
The earthquake insurance system established in 1966
was quite restricted due to the uniqueness of theseismic risk. However, owing to changes in the socialand economic circumstances afterwards, along withthe experiences from several great earthquake
disasters, etc., policyholders expressed various needs.
In order to deal with these, many revisions were made,such as raising the limit of insurable amount,improving the coverage, raising the limit of the total
amount of insurance claims to be paid, changes inpremium rates, etc. (refer to the appendix).

buildings, in addition to total loss, half loss wascovered, and as for movables for living, in addition tototal loss, losses which were not total, but rather were
movables for living contained in buildings that werethemselves more than half loss, was to be covered as
half loss.
It was determined that the payment method for half
loss was 50% of the amount insured for buildings, and
10% of the amount insured for movables for living tobe paid respectively.
(2) Changes of attachment method and attachment
target contracts
Out of consideration of policyholder convenience, theattachment method was changed to “automatic
attachment in principle,” in which if the policyholder
desired not to attach the earthquake insurance, they
could do so, for all fire insurance types that were thetargets of attachment of earthquake insurance.
(3) Raising of proportion insured and limit amountinsuredThe proportion insured, which had been uniformly
30% of the amount of fire insurance, was extended to
be in the range of from 30% to 50%, and the amountof earthquake insurance was determined to be set
within that range. Concurrent with this, the limit ofamount insured was raised, from ¥2,400,000 to¥10,000,000 for buildings, and from ¥1,500,000 to¥5,000,000 for movables for living.
(4) Revision of premium rates
According to the outlines of the Insurance Council’s
Report ((1) concerning differences between areas, etc.,
as earthquake insurance had been an automatic
attachment up to then, the public position had been
not to make the difference so great; however,concurrent with the changes in the underwriting
method, seismic risk needed to be reflected in therates as fully as possible, (2) buildings and movables
for living were to be on separate systems), Zone waschanged to a five-class system from three, and therates for buildings and movables for living wereseparated.

Major revisions concurrent with changes in thepremium rates are as follows:

4.1 1980 Revision
The Miyagi-ken-oki Earthquake (M 7.4) occurred onJune 12, 1978. Huge damage was wreaked by thisearthquake, centered on Miyagi Prefecture, with 1,183
houses completely destroyed, 5,574 partiallydestroyed, and a large amount of partial damage
occurred. Since the damage of partial destruction andpartial damage, which occurred massively in thisearthquake, was not covered by the earthquake
insurance, policyholders requested improvement of
the coverage. There was even discussion in the Diet
concerning the coverage of this earthquake insurance.
Additionally, there was an investigation by the
Insurance Council, and the report entitled“Concerning the Revision of the Earthquake Insurance
System” was submitted in 1979 (refer to theattachment). In accordance with this report, broad
revision of the earthquake insurance system wasexpedited.
A summary of the revision is as follows. Note that theinsurance premium rates were increased by 14.7%
nationwide on average in this revision.
(1) Introduction of half-loss coverage
In addition to total loss coverage, half loss coverage
was newly introduced into the coverage. As for31

Chapter 2 Earthquake Insurance System in Japan

Section 4 Transition of Earthquake Insurance System

4.2 1991 Revision

on January 17, 1995, centered on Hyogo Prefecture,and causing massive damage. According to theannouncement by the Fire Defense Agency, damages
reached as high as 6,437 dead and missing, more than
40,000 injured, more than 240,000 houses totally orhalf destroyed, more than 7,000 houses totally or halfburned down. This earthquake occurred on active
faults close to a big city with highly developed urban
functions and dealt a severe shock to the society andthe economy.
Interest in earthquakes in the Kansai region was very
low at that time, but, stimulated by this earthquake,interest in earthquake insurance became higher andthe number of the earthquake insurance policies
increased vastly.
After the Hyogo-ken Nanbu Earthquake, subject torequests by policyholders, improvement of coveragedetails, raising of the limit amount of participation andreconsideration of premium rates were performed andthese revisions was made in 1996.
In order to pay the insurance claims quickly tosuffering policyholders, the method was employed inearthquake insurance of making loss assessment formovables for living (cases of half or partial loss) andloss assessment of buildings the same. Therefore, eventhough they suffered serious damage to their movables
for living due to this earthquake, there were cases inwhich victims could not get sufficient amount forearthquake insurance claims paid because there waszero or only slight damage to their buildings, and thiscreated confusion among policyholders. In order toavoid such a situation, there was a request that loss
assessment for movables for living should be by themethod of using the degree of damage to movables forliving themselves.
Additionally, there were many opinions that the limitof participation at that time of ¥10,000,000 forbuildings and ¥5,000,000 for movables for living, andthat the configuration of payments for half loss of
movables for living being 10% of the amount insured
were insufficient and such should be raised.

The Chiba-ken Toho-oki Earthquake (M6.7) occurredon December 17, 1987 causing massive damage
centering on Chiba Prefecture, bringing aboutcomplete destruction of 16 houses, and approximately
70,000 with partial damage. Additionally, at the timeof the Izuhanto-oki Earthquake Swarm, which had
occurred from July to August 1989, a large amount ofpartial damage occurred. However, since partial
damage was not covered by the earthquake insurance,
policyholders requested that partial damage should
also be covered. Subject to said, an investigation was
performed, and revision was implemented in 1991.
A summary of the revision is as follows. Note that theinsurance premium rates were decreased by 9.1%
nationwide on average in this revision.
(1) Introduction of partial loss coverage
In addition to total and half loss coverage, partial loss
coverage was newly introduced for the coverage. As
for buildings, total loss, half loss and partial loss werecovered, and as for movables for living, in addition tototal loss, losses which were not total, but rather were
movables for living contained in buildings that werethemselves more than half lost, were to be covered as
half, and movables for living contained in buildingsthat were partially lost, were to be covered as partialloss.
It was determined that the payment method for partial
loss was 5% of the amount insured both for thebuildings and for the movables for living, and it was
to be paid respectively.
(2) Revision of premium rates
Since partial loss coverage was introduced as an
improvement for the coverage, premium rates forearthquake insurance were revised.

4.3 1996 Revision
The Hyogo-ken Nanbu Earthquake (M7.3) occurred
32

Chapter 2 Earthquake Insurance System in Japan

Section 4 Transition of Earthquake Insurance System

Subject to these requests, improvement of coveragedetails for movables for living, raising of the limit
amount of participation and reconsideration ofpremium rates were performed in January 1996.
A summary of the revision is as follows. Note that theinsurance premium rates were increased by 0.6%
nationwide on average in this revision.
(1) Changes in loss assessment standards for movables
for living
Concerning loss assessment for movables for living,as for half and partial losses, the assessment methodof using the degree of damage to buildings waschanged to an assessment method using the degree ofdamage to movables for living themselves.
(2) Changes in payments for half loss of movables forliving
The payment rate for half loss of movables for living
was raised from 10% to 50% of the amount insured.
(3) Raising of participation limit amountThe participation limit amount was raised and as forbuildings, such was changed to ¥50,000,000 from
¥10,000,000, and for movables for living, to¥10,000,000 from ¥5,000,000.
(4) Revision of premium rates
Concurrent with the improvement in coverage details
for movables for living, premium rates were revised,and rates for buildings and movables for living wereset as the same. Zone was unchanged.

Damage to movables for living in the Hyogo-ken nanbu
Earthquake

Damage to houses in the Hyogo-ken Nanbu Earthquake

more fully reflected in premium rates or earthquake
insurance from such groups as the “Association ofDiet Members to Protect Japan from Earthquakes,”
formed after the Hyogo-ken Nanbu Earthquake (later
renamed the “Association of Diet Members to Protect
the Nation from Natural Disasters,” with about 140
members) and the “Investigation Committee
concerning the System of Residence Rebuilding
Support for Victims” in the National Land Agency,
and from the Government’s “Three Year Deregulation
Promotion Plan (re-revised).”On the other hand, in October 2000, the Ministry ofConstruction (present the Ministry of Land,
Infrastructure and Transportation) began enforcing the
Housing Performance Indication System under the

4.4 2001 Revision
Exceedingly many buildings suffered damage in the
Hyogo-ken Nanbu Earthquake. As a result of researchand study by numerous scholars and experts
concerning the damage situation, it was verified thatthe degree of damage clearly differs depending on
differences in earthquake-resistance capacity ofbuildings.
Due to such facts, there was a request thatearthquake-resistance capacity of residences should be
33

Chapter 2 Earthquake Insurance System in Japan

Section 4 Transition of Earthquake Insurance System

the building is confirmed with documents such asbuilding registration certificates. This discount rate
was 10%.
b. Earthquake-resistance class discount rate
The earthquake-resistance performance of buildings isindicated as earthquake-resistance class (prevention ofcollapse, etc. of the structural frame)(note 1) in thebuilding performance appraisals by the Housing
Performance Indication System of the Quality
Assurance Act(note2), or in earthquake-resistance
performance appraisals by seismic evaluation. The
earthquake-resistance class discount rate, a discounton the premium rate on the basis of these, wasintroduced. The applicable discount rate was 30% for
the earthquake-resistance class of 3, the highest
earthquake-resistance performance, 20% for class 2,
the second highest earthquake-resistance performance,and 10% for class 1.

Houses destroyed and houses safe from destruction in the
Hyogo-ken Nanbu Earthquake

Housing Quality Assurance Act (hereinafter referred
to as the “Quality Assurance Act”). Through this,earthquake-resistance capacity of residences began tobe evaluated properly by the “earthquake-resistanceclass” index.
On the basis on these situations, two kinds of discountsystems in accordance with earthquake-resistancecapacity of residences were newly introduced andadditionally, basic rates were lowered.
A summary of the revision is as follows. Note that theinsurance premium rates were decreased by 15.9%
nationwide on average in this revision.
(1) Basic rates
The basic rates were revised while Zone wasunchanged.
(2) Discount rates
As a discount system for residences with highearthquake-resistance capacity, the construction age
discount rate and the earthquake-resistance classdiscount rate were introduced. However, in case of theearthquake-resistance class discount rate being applied,
the application of the construction age discount rate
could not be applied.
a. Construction age discount rate
The construction age discount rate was introduced, adiscount on premium rates for houses newly
constructed under the ongoing the Building Standards
Act, in other words, for houses newly constructed
after June 1, 1981, in case the construction period of

(Note

1)

Earthquake-resistanceclass bythe

Housing

Performance Indication System under the Quality Assurance
Act is appraised in the following 3 classes according to thecapacity against seismic force.
Class 3: Earthquake-resistance capacity of a degree so as not to
be destroyed or collapsed, etc., by force 1.5 times greater than
the seismic force provided in the Building Standards Act.
Class 2: Earthquake-resistance capacity of a degree so as not to
be destroyed or collapsed, etc., by force 1.25 times greater than
the seismic force provided in the Building Standards Act.
Class 1: Earthquake-resistance capacity of a degree so as not to
be destroyed or collapsed, etc., by the seismic force provided in
the Building Standards Act.
(Note 2) Earthquake-resistance capacity certificates onbuildings issued by designated residence capacity certificate
organizations set forth in the Quality Assurance Act ordesignated confirmation inspection organizations set forth in
the Building Standards Act.

4.5 2005 Revision
At that time, the premium rates calculated by theGeneral Insurance Rating Organization of Japan were34

Chapter 2 Earthquake Insurance System in Japan

Section 4 Transition of Earthquake Insurance System

limited to those applied to the policies with insurance
periods (policy periods) of one year. Those forpolicies with insurance periods of two to five years(long-term policies) were calculated by each insurancecompany separately.
In response to the growing needs of policyholders forlong-term policies, for ensuring soundness of theearthquake insurance system and protection of theinterests of policyholders, the General Insurance
Rating Organization of Japan calculated the long-term
coefficients applied to the premium rates for the
long-term policies (coefficients multiplied by thepremium rates for one year insurance contracts; asshown in table 2.4.1) and filed it to the Commissionerof the Financial Services Agency in 2004. The
coefficients came into effect in 2005.
In conjunction with this, the General Insurance Rating
Organization of Japan also computed coefficients forunexpired rates for use in premium calculations whererefunds or charges may be required for unexpired
long-term policies.
No change was made to the insurance premium rates
for one year insurance contracts.

responsibility for the survey and research on
earthquakes that should be directly linked toadministrative policies based on the Act and topromote an integrated survey and research.
As one of the present surveys and research subjects
that should be promoted, the Headquarters for
Earthquake Research Promotion focused on preparing
the Probabilistic Seismic Hazard Maps intended tomake full use of the maps for disaster management
and published the results of the survey and research in
March 2005. The Probabilistic Seismic Hazard Maps
are maps on which the intensity of earthquake motions(tremors) and the probability of earthquake motion
occurrence in the subject area are predicted and shown(figure 2.4.1).
The Probabilistic Seismic Hazard Maps are compiled
with a nationwide uniform standard after discussion ofmany researchers. Though Chronological Scientific
Table had been used to calculate the insurance rates
since the establishment of the earthquake insurance
system, in this revision, the insurance rates wererevised based on the data regarding earthquake source
models used in preparing the maps.
The Government placed the seismic retrofitting ofbuildings as one of the top priorities ofanti-earthquake measures and amended the Act on
Promotion of Seismic Retrofitting of Buildings inNovember 2005 to improve environments for
aggressive promotion of the earthquake-resistancediagnoses of buildings that were constructed before
the Building Standards Act was amended to thecurrent earthquake-resistance standards.
The whole concept of an earthquake insurance
discount system inaccordance with theearthquake-resistance diagnoses and the seismic
retrofitting of buildings was given in the Policy for
Urgent Countermeasures for Seismic Retrofitting of
Buildings decided by the Central Disaster
Management Council in September 2005 and in the
proposal advanced by the Council for Promotion ofEarthquake Disaster Prevention of Buildings of the(Table 2.4.1) Long-term coefficientat the time of the revision in 2005

Policy period
2 years
3 years
4 years
5 years

Long-termcoefficient
1.90
2.75
3.60
4.45

4.6 2007 Revision
The Government enacted the Act on Special Measuresfor Earthquake Disaster Countermeasures in July 1995,
when the Hyogo-ken Nanbu Earthquake struck. The
Headquarters for Earthquake Research Promotion wasestablished with the objective of elucidating the35

Chapter 2 Earthquake Insurance System in Japan

Section 4 Transition of Earthquake Insurance System(Fig. 2.4.1) Distribution map of probabilities of suffering
an earthquake with an intensity 6-lower or higher within
the next 30 years from 2005
Reprint from National Seismic Hazard Maps for Japan, 2005
Edition (Headquarters for Earthquake Research Promotion;
2005)

earthquake resistance to the properties that had
already been subjected to the discount for theconstruction age and the discount for theearthquake-resistance class (Class 1), it was decided
to expand the discount system and add the discountfor seismically isolated buildings and theearthquake-resistance diagnosis.
A summary of the revision is as follows. Note that theinsurance premium rates were decreased by 7.7%
nationwide on average in this revision.
(1) Basic rates
The basic rates were revised, and Zone was changed.
Note that measures to avoid drastic changes, which
limit the maximum increase rate for prefectures where
insurance premium rates sharply change, have been
implemented, which means basic rates may bedifferent in the same Zone.
(2) Discount rates
The seismically isolated buildings discount rate andthe earthquake-resistance diagnosis discount rate were
newly added. However, these two types of discount,the construction age discount rate and theearthquake-resistance class discount rate cannot beapplied together.
a. Seismically isolated buildings discount rate
For residential buildings assessed to be seismicallyisolated in the housing performance evaluation report,
and contents in such residential buildings, this
discount rate was 30%.
b. Earthquake-resistance diagnosis discount rate
For residential buildings confirmed throughearthquake-resistance diagnoses or seismic retrofitting
to comply with the current earthquake-resistancestandards (Ministry of Land, Infrastructure andTransport Public Notice No. 185 of 2006) provided in
the Building Standards Act, and contents in such
residential buildings, this discount rate was 10%.

Ministry of Land, Infrastructure and Transport (inJune 2005), and the earthquake insurance system was
expected to play a certain role in society. Further, a
proposal to study the earthquake insurance discountsystem for seismically isolated buildings, in addition
to the seismic retrofitting of buildings, was advanced
at the meeting of the Ministry in June 2005.
Under these circumstances, the Ministry gave theofficial notice in September 2006 to add seismicallyisolated buildings to the Japanese Housing
Performance Indication System from April 2007
onward, which allows seismically isolated buildings to
be checkable from the System. In addition, theMinistry presented to local public authorities thestandard form of the report on the results ofearthquake-resistance diagnoses of buildings carriedout by local public authorities in September 2006.
Following the fact that it was made possible toobjectively check if buildings had equivalent level of36

Chapter 2 Earthquake Insurance System in Japan

Section 4 Transition of Earthquake Insurance System

4.7 2010 Revision
The growing use of new types of construction
materials sometimes made it difficult to clearlyclassify building structures in a manner that reflected
the actual risk, based on the conventional criteria forstructural classification of buildings. For greater
clarity in the classification process, the basis forstructural classification of buildings was changed
from the materials and specifications of major
structural components (pillars, outer walls, roofs, etc.)
to the types of buildings (concrete structure, steel
structure, wooden structure, etc.) and the legally
mandated building performance standards (fireproof
buildings, semi-fireproof buildings and ordinancesemi-fireproof buildings).
To mitigate the rise in costs for policyholders whose
insurance premiums would rise sharply under the new
approach to structural classification, a policy was
introduced to limit basic rate increases to 30% of theprevious basic rate. This limit does not apply to new
fire insurance policies; it is for fire insurance policies
that are renewed after the revision with continued
earthquake coverage.

Hazard Maps based on existing methodology, which
include a new earthquake source model for the off the
Pacific coast of Tohoku Earthquake and other revised
earthquake source models in the area of the Japan
Trench. The insurance premium rates were revised
based on these changes.
A summary of the revision is as follows. Note that theinsurance premium rates were increased by 15.5%
nationwide on average in this revision.
(1) Basic rates
The basic rates were revised, and Zone was changed.
Note that measures to avoid drastic changes, which
limit the maximum increase rate for prefectures where
insurance premium rates sharply change, have been
implemented, which means basic rates may bedifferent in the same Zone.
(2) Discount rates
After reevaluation of the relationship between seismic
shaking and damage to buildings in light of actual
damage, the discount rate for seismically isolatedbuildings and earthquake-resistance Class 3 buildings
was raised from 30% to 50%, and the discount rate forearthquake-resistance Class 2 buildings was raised
from 20% to 30%.

4.8 2014 Revision

4.9 2017 Revision

The Ministry of Finance formed a Project Team toconsider changes to be made in the earthquake
insurance system (robustness and marketability) basedon the aftermath of the 2011 off the Pacific coast of
Tohoku Earthquake. In November 2012, the Project
Team issued a report on its findings. The report's
recommendations
concerning
rates
includedequalizing the differences among premiums in Zones
and clarifying the earthquake-resistance class discountsystem.
The Headquarters for Earthquake Research Promotion
issued a report in December 2012. Part of this report
was the 2012 Edition of the Probabilistic Seismic

In December 2014, the Headquarters for
Earthquake Research Promotion published the 2014
Edition of the Probabilistic Seismic Hazard Maps
reflecting a series of examination results in light of the2011 off the Pacific coast of Tohoku Earthquake, inwhich earthquake source models have beensignificantly revised.
In order to follow up on the status of measures, etc.,
pertaining to issues summarized in the Report of the
Project Team for the Earthquake Insurance System,
follow-up meetings of the “Project Team for the
Earthquake Insurance System” had been held at the
Ministry of Finance starting from November 2013. In
37

Chapter 2 Earthquake Insurance System in Japan

Section 4 Transition of Earthquake Insurance System

June 2015, a report summarizing the examination
results entitled, “Brief Summary of Discussions in the
Follow-up Meetings by the ‘Project Team for the
Earthquake Insurance System’” (hereafter, a“Discussion Summary”) was published.
The Discussion Summary mentioned that “half loss”
should be divided so that the three damage
classifications will be subdivided into four damage
classifications in order to enhance compensation forpolicyholders who seriously suffered damage while
reducing the differences in the insurance payment
rates. In addition, because there is a concern that thesense of burden among policyholders may increase
due to a significant increase in insurance premium
rates, some commented that “it should be possible toincrease insurance premium rates in stages to obtainthe understanding of policyholders, from theviewpoint of ensuring earthquake insurance signup
rates.” In response, the compensation details were
improved, and the insurance premium rates wererevised.
As a result of the update of the earthquake source
models used for the calculation of insurance premium
rates to the 2014 Edition of the Probabilistic Seismic
Hazard Maps, etc., the insurance premium rates
needed to be increased by 19.0% nationwide on
average. Therefore, in light of the comments in the
Discussion Summary, it was determined to increase
the insurance premium rates in three stages, resulting
in a 5.1% increase in the nationwide average in thefirst revision.
A summary of the revision is as follows.
(1) Subdivision of damage classifications (table 2.4.2)“Half loss” has been divided into “large half loss” and“small half loss,” creating four classifications, “total
loss,” “large half loss,” “small half loss” and “partial
loss.”The payment rates were determined to be 60% and
30% of the insurance amount for large half loss andsmall half loss, respectively.
(2) Basic rates

The basic rates were revised, and Zone was changed.
Note that measures to avoid drastic changes, which
limit the maximum increase rate for prefectures where
insurance premium rates sharply change, have been
implemented, which means basic rates may bedifferent in the same Zone.
(Table 2.4.2) Damage classifications and payment rates
Before revision100%
Total loss
Half loss

50%

Partial loss

5%

After revision
Total loss
100%
Large half loss
60%
Small half loss
30%
Partial loss
5%

4.10 2019 Revision
The revision in 2017 was the first revision after it wasdetermined that the insurance premium rates would be
increased in three stages. Although the Probabilistic
Seismic Hazard Maps were revised thereafter, theinsurance premium rates and the long-term
coefficients were revised in response to the persistentsituation where the insurance premium rates needed to
be increased and the situation where a revision of theinterest rate (assumed interest rate) used for
calculating the long-term coefficients needed to berevised in light of the recent interest rate situation.
Due to update of data including the earthquake source
models used for the calculation of the insurance
premium rates, the required increased rate in thenationwide average during the remaining two
revisions in the three staged revision was reduced to
8.7% compared to 13.2%, which had been expected at
the time of the revision in 2017. As a result, thenationwide average rate was increased by 3.8% in thesecond revision. In addition, the long-term coefficientswere increased for long-term contracts with a policy
period of 3 to 5 years.
A summary of the revision is as follows.
(1) Basic rates
The basic rates were revised while Zone was38

Chapter 2 Earthquake Insurance System in Japan

Section 4 Transition of Earthquake Insurance System

unchanged.
Note that measures to avoid drastic changes, which
limit the maximum increase rate for prefectures where
insurance premium rates sharply change, have been
implemented, which means basic rates may bedifferent in the same Zone.
(2) Long-term coefficients
The long-term coefficients were revised (table 2.4.3).

addition, the long-term coefficients were increased forlong-term contracts with a policy period of 3 to 5
years.
A summary of the revision is as follows.
(1) Basic rates
The basic rates were revised while Zone wasunchanged.
Note that measures to avoid drastic changes, which
limit the maximum increase rate for prefectures where
insurance premium rates sharply change, have been
implemented, which means basic rates may bedifferent in the same Zone.
(2) Long-term coefficients
The long-term coefficients were revised (table 2.4.4).

(Table 2.4.3) Long-term coefficientat the time of the revision in 2019

Policy period
2 years
3 years
4 years
5 years

Long-termcoefficient
1.90
2.80
3.70
4.60

(Table 2.4.4) Long-term coefficientat the time of the revision in 2021

Policy period
2 years
3 years
4 years
5 years

4.11 2021 Revision
The revision in 2019 was the second revision after it
was determined that the insurance premium rates
would be increased in three stages. The revision of theProbabilistic Seismic Hazard Maps, etc., were madeand the situation where the insurance premium rates
needed to be increased persisted thereafter. Theinterest rate (assumed interest rate) used for
calculating the long-term coefficients also needed tobe revised in light of the recent interest rate situation.
In response to the above, the insurance premium rates
and the long-term coefficients were revised.
Due to update of data including the earthquake source
models used for the calculation of the insurance
premium rates, the required increased rate in thenationwide average at the final revision of the threestaged revision was increased to 5.1% compared to
4.7% which had been expected at the time of therevision in 2019. In contrast, the nationwide averageincreased rate through the three staged revision in
total was decreased to 14.7% compared to 19.0%. In

Long-termcoefficient
1.90
2.85
3.75
4.65

4.12 2022 Revision
The insurance premium rates were increased in threestages from the revision in 2017. Due to thisincremental process, the insurance premium deficit
was generated during 2017 to 2020. Based on the
Discussion Summary, an amount equivalent to thedeficit was determined to be added to the future
insurance premium rates. The addition of premium is
expected to last approximately 10 years.
In response to the revision of the Probabilistic Seismic
Hazard Maps, etc., and the situation where the interest
rate (assumed interest rate) used for the calculation of
the long-term coefficients needed to be revised in lightof the recent interest rate situation, the insurance
premium rates and the long-term coefficients were39

Chapter 2 Earthquake Insurance System in Japan

Section 4 Transition of Earthquake Insurance Systemrevised.
As a result of the addition of the premium tocompensate for the premium deficit generated during
the three staged revision and update of data including
the earthquake source models used for the calculationof the insurance premium rates, the nationwide
average rate was decreased by 0.7%. In addition, thelong-term coefficient was increased for long-term
contracts with a policy period of 5 years.
A summary of the revision is as follows.
(1) Basic rates
The basic rates were revised, and Zone was changed.
Note that measures to avoid drastic changes, which
limit the maximum increase rate for prefectures where
insurance premium rates sharply change, have been
implemented, which means basic rates may bedifferent in the same Zone.
(2) Long-term coefficients
The long-term coefficients were revised (table 2.4.5).

<References>
General Insurance Association of Japan. All about
Earthquake Insurance. Hoken Mainichi Shinbun,(1980).
National Astronomical Observatory of Japan, ed.
Chronological Scientific Table. Maruzen, (2021).
Property and Casualty Insurance Rating Organizationof Japan. 50 Years’ History of Property and Casualty
Insurance Rating Organization of Japan. (1999).
Headquarters for Earthquake Research Promotion.
Report of the “National Seismic Hazard Maps forJapan.” (2005).
The Ministry of Finance. Report of the Project Teamfor the Earthquake Insurance System. (2012).
Headquarters for Earthquake Research Promotion,
National Seismic Hazard Maps for Japan, 2014
Edition. (2014).
The Ministry of Finance, Brief Summary of
Discussions in the Follow-up Meetings by the“Project Team for the Earthquake Insurance System.”(2015).

(Table 2.4.5) Long-term coefficientat the time of the revision in 2022

Policy period
2 years
3 years
4 years
5 years

Long-termcoefficient
1.90
2.85
3.75
4.70

40

Section 5 Specifics of Earthquake Insuranceetc.”), and, moreover, the degree of loss is total loss,
large half loss, small half loss or partial loss.
Total loss, large half loss, small half loss and partial
loss are defined in earthquake insurance as follows:

Since the Government is undertaking the reinsurance
for the earthquake insurance, necessary laws havebeen constituted, such as the “Act on Earthquake
Insurance.” Pursuant to these laws, object of insurance,
losses to be covered, payment methods of insurance
claims, participation method, amounts insured, etc.,
are set forth.
Specifics of earthquake insurance as of October 2022
are as follows.

(1) Total loss
Buildings:
Cases in which the amount of loss of major structuralparts of the building (framework (pillars, beams, etc.),
foundations, roofs, outer walls, etc.) comes to no lessthan 50% of the market value of the relevant building,or cases in which floor space burned and lost or
washed away comes to no less than 70% of the total
floor space of the relevant building. The amount ofloss includes minimum expenses considered to be
directly necessary for the recovery of foundations, etc.,
for the restoration of the building (land re-grading

5.1 Object of Insurance
The coverage of earthquake insurance policies islimited to buildings for residential use and/or
movables for living (households and personal
properties) pursuant to the Act on Earthquake
Insurance. Specifically, the scope of the object of
insurance is set forth as follows:a. Buildings for residential use
This shall consist of buildings, all of or part of which
are provided for residential use.
b. Movables for living
This shall consist of furniture, equipment and clothingused for living and other movables usually necessary
for living; provided, however, that gemstones,
semiprecious, noble metals, pearls and the products ofsaid, products of tortoiseshell, coral, amber, ivory,
cloisonné enamel, calligraphic works and paintings,
antiques, artworks and crafts with the value of one
piece or one pair exceeding ¥300,000 are excluded.

Debris flow disaster due to volcanic eruption of
Mt. Unzen-Fugendake

5.2 Losses to Be Covered
Losses to be covered in earthquake insurance arelosses arising concerning the object insured due to fire,
destruction, burial or flood directly or indirectly
caused by earthquake, volcanic eruption or tsunami
due to said (hereinafter referred to as the “Earthquake,

Tsunami damage due to the off the Pacific coast of Tohoku
Earthquake

41

Chapter 2 Earthquake Insurance System in Japan

Section 5 Specifics of Earthquake Insurance

than 20% of the market value of the building, or whena building for residential use is flooded above thefloor level or flooded in excess of 45 centimeters fromthe ground because of water damage due to floods,
etc., caused by Earthquake, etc., shall also be deemed
to be partial loss.
Movables:Cases in which the amount of loss of movables cometo no less than 10% and no more than 30% of themarket value.

expenses, etc.) (same as large half loss, small half loss
and partial loss). Additionally, in case buildings forresidential use become incapable of being lived inbecause of the occurrence of imminent dangers due tolandslide or other disasters cause by Earthquakes, etc.,
the buildings shall be deemed to be total loss.
Movables:Cases in which the amount of loss of movables comesto no less than 80% of the market value.
(2) Large half loss
Buildings:
Cases in which the amount of loss of major structuralparts of the building comes to no less than 40% and no
more than 50% of the market value of the relevantbuilding, or cases in which floor space burned and lostor washed away come to no less than 50% and no
more than 70% of the total floor space of the relevantbuilding.
Movables:Cases in which the amount of loss of movables cometo no less than 60% and no more than 80% of themarket value.

5.3 Payment Method of Insurance Claims
Payment methods of insurance claims shall be as
follows, the same for both buildings for residential use
and movables for living.
(1) Total loss
The entire amount insured of earthquake insurance(100%) shall be paid; provided, however, that suchshall be limited to the insurable value.
(2) Large half loss
An amount equivalent to 60% of the amount insured
shall be paid; provided, however, that such shall belimited to an amount equivalent to 60% of insurable
value.

(3) Small half loss
Buildings:
Cases in which the amount of loss of major structuralparts of the building comes to no less than 20% and no
more than 40% of the market value of the relevantbuilding, or cases in which floor space burned and lostor washed away come to no less than 20% and no
more than 50% of the total floor space of the relevantbuilding.
Movables:Cases in which the amount of loss of movables cometo no less than 30% and no more than 60% of themarket value.

(3) Small half loss
An amount equivalent to 30% of the amount insured
shall be paid; provided, however, that such shall belimited to an amount equivalent to 30% of insurable
value.
(4) Partial loss
Amount equivalent to 5% of the amount insured shallbe paid; provided, however, that such shall be limited
to an amount equivalent to 5% of insurable value.

(4) Partial loss
Buildings:
When the amount of loss of major structural parts ofthe building comes to no less than 3% and no more

42

Chapter 2 Earthquake Insurance System in Japan

Section 5 Specifics of Earthquake Insurance

5.4 Participation Method

calculated from the following formula:

Earthquake insurance policies shall be participated inthrough policies incidental to fire insurance forresidences covering buildings for residential use or
movables for living (hereinafter referred to as the “theprincipal contract”).
Additionally, when a warning statement against
earthquake disaster under the Large Scale Earthquake
Countermeasures Act (Law No.73 of 1978) targeting
the Tokai Earthquake (hereinafter referred to as the“Warning Statement”) has been issued, concerning theobject of insurance located in the area designated as
the Area under Intensified Measures against
Earthquake Disaster under the said Act during theperiod from the time when the Warning Statement wasissued till the day of issuance of the statement ofwithdrawal of the warning against the earthquake
disaster, no new earthquake insurance policies may beentered into; provided, however, that earthquake
insurance policies that had been entered into by thetime the Warning Statement was issued and expired
after the Warning Statement, can be renewal, if the
Insured and object insured are the same, and if theamount is the same or lower.

premium rates = basic rates
× discounts (100% - discount rates)
× long-term coefficients(in case of long-term contracts).
(1) Basic rates
The basic rates and Zone are shown in table 2.5.1 andfigure 2.5.1, respectively.
(2) Discount rates
a. Seismically isolated buildings discount rate
In case residential buildings assessed to be seismicallyisolated in the housing performance evaluation report,
a 50% discount is applied to the buildings or movables
for living contained in the relevant buildings.
b. Earthquake-resistance class discount rate
In case the earthquake-resistance class in the residence
capacity certificates by the Housing Performance
Indication System of the Quality Assurance Act, or theearthquake-resistance capacity certificates by seismic
evaluation fall under the following, the following
discounts are applied to the buildings or movables forliving contained in the relevant buildings.

5.5 Amount Insured<Earthquake-resistance class>
Class 3
Class 2
Class 1

The amount insured for the earthquake insurance
policies is set forth under the Act on Earthquake
Insurance as being equivalent to an amount no lessthan 30% and no more than 50% of the amountinsured of the principal contract, and said amount is
set forth in the enforcement ordinance as limited to 50
million yen for buildings for residential use and 10
million yen for movables for living.

<discount rate>
50%
30%
10%

c. Earthquake-resistance diagnosis discount rate
In case residential buildings confirmed throughearthquake-resistance diagnoses or seismic retrofitting
to comply with the earthquake-resistance standards(Ministry of Land, Infrastructure and Transport Public
Notice No. 185 of 2006 or No. 1061 of 2013)provided in the Building Standards Act, a 10%
discount is applied to the buildings or movables forliving contained in the relevant buildings.

5.6 Earthquake Insurance Standard Rates
The premium rates of the earthquake insurance are43Chapter 2 Earthquake Insurance System in Japan

Section 5 Specifics of Earthquake Insurance(Table 2.5.1) Basic rate(yen per 1,000 yen amount insured)

Structural classification of buildings

Class A bldgs

Class B bldgs
Rates with atransitional
measureZone

Hokkaido, Aomori, Iwate, Akita, Yamagata, Tochigi, Gumma,
Niigata, Toyama, Ishikawa, Fukui, Nagano, Gifu, Shiga, Kyoto,
Hyogo, Nara, Tottori, Shimane, Okayama, Hiroshima,
Yamaguchi, Fukuoka, Saga, Nagasaki, Kumamoto, Oita,
Kagoshima
Fukushima

Zone
1

Zone

Miyagi, Yamanashi, Aichi, Mie, Osaka, Wakayama, Kagawa,
Ehime, Miyazaki, Okinawa
Ibaraki, Tokushima, Kochi

2
Zone
3

0.73

1.12

1.12

1.16

1.95

1.63

1.16

1.95

1.95

2.30

4.11

2.97

Saitama

2.65

4.11

3.43

Chiba, Tokyo, Kanagawa, Shizuoka

2.75

4.11

4.11

(Note 1) “Class A buildings” refer to fireproof buildings, semi-fireproof buildings, ordinance semi-fireproof buildings, etc. All other buildings areclassified as “class B buildings.”(Note 2) The rates with a transitional measure are applied to buildings reclassified as "class B buildings" from "class A buildings" based on the
new criteria for structural classification of buildings revised on January 1, 2010, provided that the buildings are covered by existing
earthquake insurance riders on fire insurance policies that were in place before the revision.

d. Construction age discount rate
In case a building was constructed newly after June 1,
1981, a 10% discount is applied to the buildings or
movables for living contained in the relevantbuildings.

Zone 1
Zone 2
Zone 3

However, no more than one discount from above a.-d.
can be applied at one time.
(3) Long-term coefficients
The long-term coefficients shall be as in table 2.5.2
concerning insurance periods of two-to-five year.
(Table 2.5.2) Long-term coefficient

Policy period
2 years
3 years
4 years
5 years(Fig. 2.5.1) Map of Zone

44

Coefficient
1.90
2.85
3.75
4.70

Section 6 Reinsurance and Liability Reserves
6.1 Reinsurance

only handles reinsurance of earthquake insurance, wasestablished in 1966 together with the establishment ofearthquake insurance.

Normally, reinsurance contracts are made between
private insurance companies; however, in theearthquake insurance systems of Japan, reinsurance
contracts are performed not only with private
insurance companies, but also with the Government.
The major reasons for such are the following two
points:(1) Earthquakes have a possibility to cause extremely
massive losses and it is difficult for private insurancecompanies to share the risk alone.
(2) In order to standardize the risk for greatearthquakes, which occur at a low frequency, theincome and outgo of insurance in the extraordinarily
long run must be considered, and it is difficult for
private insurance companies alone, which consider the
short-term balance of insurance, to manage stably.
In order for the Government to undertake reinsurance
contracts for earthquake insurance, the Act on
Earthquake Insurance has been constituted. This Act
sets forth that the reinsurance partners for theGovernment shall be reinsurance companies.
Therefore, Japan Earthquake Reinsurance Company,
Ltd. (hereinafter referred to as the “J.E.R.”), which

6.1.1 Reinsurance structure
The earthquake insurance systems in Japan are
operated subject to the undertaking of reinsurance by
the Government. The mechanism of this reinsurance is
as in figure 2.6.1.
(1) Reinsurance agreement from private insurancecompanies to the J.E.R.
Private insurance companies selling earthquake
insurance inside Japan in accordance with the Act on
Earthquake Insurance execute the Earthquake
Reinsurance Treaty (A) (hereinafter referred to as the“A Reinsurance Treaty”) with the J.E.R.
In accordance with this A Reinsurance Treaty, private
insurance companies shall have the J.E.R. performreinsurance of all the insurance liability of theundertaken earthquake insurance contracts and the
J.E.R. shall undertake it.

(Fig. 2.6.1) Structure of earthquake reinsurance

45

Chapter 2 Earthquake Insurance System in Japan

Section 6 Reinsurance and Liability Reserves(2) Reinsurance agreement from the J.E.R to theprivate insurance companies
Of the reinsurance liability undertaken pursuant to the
A Reinsurance Treaty in above (1), the J.E.R.
performs reinsurance for respective private insurancecompanies of a part of the remainder of the liability
after the Government performs reinsurance. This partis executed between J.E.R. and each private insurancecompanies for the risk diversification of the J.E.R.,
and is called Earthquake Reinsurance Treaty (B)(hereinafter referred to as the “B Reinsurance
Treaty”).

6.1.2 Liability sharing of insurance companies andJapanese Government
Burden sharing and the total maximum liability of
insurance companies (the J.E.R. and the private
insurance companies, etc.) and the Government for
insurance claims to be paid due to a single Earthquake,etc., are stipulated in the Enforcement Order and theRegulation for Enforcement of the Act on Earthquake
Insurance. Figure 2.6.2 illustrates the liability of shareof insurance companies and the Government as ofApril 2021, and this is called the “earthquake
reinsurance scheme.” The horizontal axis of this figureis the amount of the payment of insurance claims due
to a single Earthquake, etc., and the vertical axis is the
proportion of burden of insurance companies and theGovernment. That is, in accordance with this scheme,
payment of up to 125.9 billion yen shall be borne
100% by the insurance companies and concerning thepayment amount of 125.9 billion yen and up to 266.1
billion yen, insurance companies and the Government
shall each bear 50% of the payment of insurance
claims. Moreover, the Government shall bear about
99.8% (117050/117339) and insurance companies theremaining about 0.2% (289/117339) of payments foramounts exceeding 266.1 billion yen.
Noted that two or more Earthquakes, etc., having
occurred within 72 consecutive hours shall be deemed
collectively to be a single Earthquake, etc., provided,(3) Reinsurance agreement from the J.E.R. to theJapanese Government
The J.E.R., under the reinsurance agreement with theGovernment, performs reinsurance again with theGovernment of part of the reinsurance liability which
was undertaken from the direct insurance company
pursuant to the A Reinsurance Treaty in above (1).
This reinsurance agreement with the Government iscalled “Excess of Loss Reinsurance” (hereinafterreferred to as the “C Reinsurance Treaty”) and is themethod by which reinsurance claims are to be paid incase the total payment of insurance claims due to asingle Earthquake, etc., exceeds a certain amount.

B=Billion
T=Trillion¥0¥125.9B¥70.1B¥12T¥266.1B

About 99.8%
11705011733950%¥11.7050T¥125.9B¥70.1B

50%

Insurance Claim Total Payment Limit

About 0.2%289
117339¥12T¥28.9B(breakdown)
Liability of Government
Liability of J.E.R andprivate insurance companies¥11.7751T¥224.9B(¥70.1B + ¥11.7050T)(¥125.9B + ¥70.1B + ¥28.9B)(Fig. 2.6.2) Liability sharing of insurance companies and Japanese Government

46

Chapter 2 Earthquake Insurance System in Japan

Section 6 Reinsurance and Liability Reserves

however, that this shall not apply to the situation
where the areas affected do not overlap at all.
As indicated in figure 2.6.2, the insurance claim total
payment limit (the Aggregate Limit) due to a single
Earthquake, etc., is stipulated to be 12 trillion yen asof April 2021. This payment limit is determined sothat “there should be no obstacle to payment of
insurance claims even in case a huge earthquake of theGreat Kanto Earthquake class should occur,” and theburden of share of insurance companies for thisamount is 224.9 billion yen, while the burden of shareof the Government for this amount is 11.7751 trillionyen.
It is stipulated that in case the total amount of
insurance claims to be paid due to a single Earthquake,etc., exceeds 12 trillion yen, the Aggregate Limit, therespective insurance claims can be reduced and paidin accordance with the proportion of the Aggregate
Limit to the total amount of insurance claims to be
paid.

insurance claims quickly to the victims of earthquake
disasters.
The Government is accumulating the reinsurance
premiums obtained and all the investment profits fromthe liability reserves as liability reserves. Theseliability reserves are accumulated separately fromgeneral accounting, under the Act on Special
Accounts.

6.2 Liability Reserves
As for insurance premiums paid by policyholders,both insurance companies and the Government are
obligated by the Act to accumulate the total amount ofsuch, excluding the portion of necessary expenses forcontracts, as liability reserves in preparation for futureearthquake disasters. Additionally, it is obligated that
all the investment profits from the accumulated
liability reserves also be accumulated as liability
reserves.
Insurance companies are respectively accumulating
the insurance premiums distributed in accordance withthe respective burden of share as liability reserves, andare also accumulating all the investment profits fromthe accumulated liability reserves as liability reserves.
The J.E.R. is managing and performing investment ofthese liability reserves in lump sum so as to pay

47Chapter 2 Earthquake Insurance System in Japan

Section 6 Reinsurance and Liability Reserves<References>
General Insurance Association of Japan. All about
Earthquake Insurance. Hoken Mainichi Shinbun,(1980).
Japan Earthquake Reinsurance Company. 50 Years’
History of Japan Earthquake Reinsurance. (2016).
Japan Earthquake Reinsurance Company.
https://www.nihonjishin.co.jp/disclosure.html
The Ministry of Finance. The February 2017 issue of
The Finance. (2017).

48

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Section 1 Requirements for Premium Rates and Rating
1.1 Requirements and Procedures of Earthquake
Insurance Rate

(3) Definition of “not be unfairly discriminatory”
The risk category and level associated with the rate
are appropriately set based on the actual risk
difference and expenses expected to be incurredfollowing underwriting of the contract.

Premium rates for earthquake insurance are stipulated
as “Standard Full Rates” in the Act on Non-life
Insurance (General Insurance) Rating Organizations(Law No. 193 of 1948, hereinafter referred to as the“Rating Organization Act”). There are two lines of
insurance having Standard Full Rates: earthquake
insurance under the Act on Earthquake Insurance andautomobile liability insurance under the Automobile
Liability Security Act (Law No. 97 of 1955). Since
these kinds of insurance have the strong social andpublic nature, the principle of each Standard Full Rateis stipulated by those laws.
Premium rates for earthquake insurance must meet the“three principles of premium rates” (the rating by arating organization must be reasonable and adequate,
and must not be unfairly discriminatory) provided in
Article 8 of the Rating Organization Act. The specificrequirements of the three rating principles areprovided in Article 5 of the Cabinet Office Ordinanceon Non-life Insurance (General Insurance) Rating
Organizations (hereinafter referred to as the “Cabinet
Ordinance”) as follows:

Premium rates for earthquake insurance are set forth
additionally, in the Act on Earthquake Insurance, as“the premium rates for earthquake insurance contracts
covered by the Government reinsurance shall be
required to be as low as possible to the extent ofequilibrium of income and outgo being maintained”
and “the reinsurance premium rates for theGovernment reinsurance operation shall be required tobe reasonably established so as to have thereinsurance premium income compensate forreinsurance claims paid in the long run.”1.1.1 Standard Full Rates
The Standard Full Rates are calculated by Non-life
Insurance (General Insurance) rating organizations(hereinafter referred to as the “Rating Organizations”)
filed with the Financial Services Agency under the
Rating Organization Act and determined through suchprocedures as examinations. Insurance companies thatare members of Rating Organizations can use theseStandard Full Rates and, additionally, procedures with
the Financial Services Agency can be simplified.
Rating of the Standard Full Rates and provision ofsuch for the use of members by the Rating
Organizations is in principle an exemption of
application of the Act on Prohibition of Private
Monopoly and Maintenance of Fair Trade(Anti-Monopoly Act; Law No. 54 of 1947).

(1) Definition of “reasonable”
Insurance statistics and other basic data used for rating
is objective, accurate and sufficient, and the rating
calculation method is scientific as it is based on
actuarial science.
(2) Definition of “adequate”
The rating is at a level that enables a person who isattempting to apply for the insurance contract toconclude the contract and that allows the soundness ofthe operation at the insurance company that uses theStandard Full Rates to be maintained.

1.1.2 Procedures from calculation of Standard Full
Rates to use of themProcedures from calculation of Standard Full Rates by
the Rating Organizations to use of them by members
are performed in the following procedural steps,

51Section 1 Requirements for Premium Rates
and Rating

Chapter 3 Rating Method of Earthquake Insurance

which are all set forth in the Rating Organization Act
and the Cabinet Ordinance.

(hereinafter referred to as the “Conformity
Examination”). When it is judged that filed Standard
Full Rates are not in conformance with the threeprinciples of premium rates, the Commissioner of the
Financial Services Agency must order the withdrawalof the filing or the filing of an amendment with theRating Organizations.
The examination period in principle is ninety days
from the day filing is accepted; however, theCommissioner of the Financial Services Agency may
reduce or extend to a period judged appropriate.
When receiving an order for reduction or extension of
the above stated examination period, or forwithdrawal of the filing or the filing of an amendment,
the Rating Organizations must notify their members
promptly.

(1) Filing of Standard Full Rates
When a Rating Organization calculates Standard Full
Rate, such Standard Full Rates must be filed with theCommissioner of the Financial Services Agency. The
details of filing are as follows, and cases of changing
filed Standard Full Rates will be the same.
a. Standard Full Rates
b. pure premium rates relating to Standard FullRates
c. expense loading relating to Standard Full Rates
d. rating methods for Standard Full Rates
e. reasons for filingf. projected loss ratio
g. projected operating cost ratio
h. other matters for reference in the examination ofwhether or not the relevant Standard Full Rates
are in conformance with the stipulations ofArticle 8 of the Rating Organization Act(5) Official announcement
Concerning the filed Standard Full Rates, when the
period of Conformity Examination in above (4) lapses
without issuance of an order for withdrawal of filingor filing of amendment, the Commissioner of the
Financial Services Agency must make an official
announcement promptly of the relevant Standard Full
Rates in an official gazette.

(2) Public announcement and notification of members
When performing filing of Standard Full Rates,
Rating Organizations must announce promptly thedetails of them publicly in official gazette, and notify
the members of such. All members shall also be
notified together the day filing is accepted by theCommissioner of the Financial Services Agency.

(6) Filing of use and deemed permission
When attempting to use Standard Full Rates after thelapse of the period of Conformity Examination inabove (4), the members of Rating Organizations may
file the use of the rates with the Commissioner of the
Financial Services Agency.
When members of Rating Organizations attempt toutilize Standard Full Rates, they must file with theCommissioner of the Financial Services Agency by
the utilization commencement day of the documents
in which are inscribed the types of insurance of theStandard Full Rates and planned utilizationcommencement date.
Additionally, members are deemed to have acquired
permission under the Insurance Business Act as of the(3) Notification to the Fair Trade Commission
When accepting a filing of Standard Full Rates, theCommissioner of the Financial Services Agency must
notify the Fair Trade Commission.
(4) Examination
The Commissioner of the Financial Services Agency
examines as to whether filed Standard Full Rates arein conformance with the “three principles of premium
rates” stipulated in the Rating Organization Act

52

Section 1 Requirements for Premium Rates
and Rating

Chapter 3 Rating Method of Earthquake Insurance

day of performing this filing. By this “deemed
permission” system, member insurance companies canutilize Standard Full Rates through easy procedures.

of the filed Standard Full Rates Schedule anddocuments in which the calculation methods for the
rates are inscribed, and Rating Organizations must
provide access to the documents by Interested Parties.
Rating Organizations must also provide facilities forhearing Interested Parties’ opinions on the calculationof the relevant Standard Full Rates.

1.1.3 Security of openness and transparency
From the viewpoint that this insurance has strongsocial and public nature, there are provisions for the
security of openness and transparency of Standard
Full Rates in the Rating Organization Act, etc. Details
are as follows:(3) Official announcement
Concerning filed Standard Full Rates, when the periodof Conformity Examination lapses, the Commissionerof the Financial Services Agency must announce
promptly the relevant Standard Full Rates (publishingthem in official gazettes).

(1) Public announcement
When performing filing of Standard Full Rates with
the Commissioner of the Financial Services Agency,
Rating Organizations must publicly announce
promptly the following matters in official gazette:
a. filed Standard Full Ratesb. date of filing of Standard Full Rates with theCommissioner of the Financial Services Agency
c. place for access to the schedule in which theStandard Full Rates is inscribed (hereinafterreferred to as the “Standard Full Rates
Schedule”) and basic materials for the
calculation of the Standard Full Rates
d. place for acceptance of request for issuance of
the Standard Full Rates Schedule and the amount,in case of charging actual expenses for it
As well as placing official announcements in official
gazette,RatingOrganizations
place
the
announcements in the nationwide editions of daily
newspapers, and thus attempt to inform not only
policyholders, the insured and other interested parties(hereinafter referred to as the “Interested Parties”) but
also the general public of such thoroughly.
The Rating Organizations also provide information
concerning the filing details of reason for filing, etc.,
through press release.

(4) Preparation of announcement details
When there is an announcement in above (3), themembers of the Rating Organizations must be ready attheir head office or branch office, etc., for documents
which inscribe the details of the announcement, andprovide access to them by Interested Parties.
(5) Proposal of objections by Interested Parties
In case of holding objections concerning Standard Full
Rates for which there has been the official
announcements in above (1) or the announcements inabove (3), the Interested Parties may raise an
objection in writing to the Commissioner of the
Financial Services Agency. In case that an objection
raised, the Commissioner of the Financial Services
Agency must ask for an appearance by the person
rising it and the Director of the Rating Organizations
filing the Standard Full Rates, and perform open
hearings.
Additionally, as for the open hearings, detailed
provisions are given in the “Cabinet Office Ordinanceon Open Hearings.”(2) Access to materials
Interested Parties may make a request for inspection

53Section 1 Requirements for Premium Rates
and Rating

Chapter 3 Rating Method of Earthquake Insurance

1.2 Composition of Earthquake Insurance Rateand Rating

long-term hypocenter nationwide data with certain
accuracy and objectivity.
Seismological study in Japan developed into anationwide scale in the wake of the 1995 Southern
Hyogo Prefecture Earthquake. In March 2005, theHeadquarters for Earthquake Research Promotion
released Probabilistic Seismic Hazard Maps reflecting
the latest findings.
The Probabilistic Seismic Hazard Maps are compiled
with a nationwide uniform standard after discussion ofmany researchers. Since the revision of premium rates
in 2007, therefore, the earthquake source models usedin preparing the Maps (figure 3.1.2) have been used to
calculate pure premium rates for earthquake
insurance.
In rating pure premium rates, it is necessary toestimate losses in the case of the occurrence ofearthquakes. The estimation of losses due toearthquakes is a very difficult operation, since there
are various factors concerned such as scale, place ofoccurrence, seasons and times of occurrence ofearthquakes, and building status, urban structures andfireproofing rate, and moreover these are in acomplicated relation to each other. Thus, in case theabove stated destructive earthquakes used for the
preparation of the Probabilistic Seismic Hazard Maps
should occur in the present situation, in the sameplaces and in the same scale, approximately how
much the insurance claims to be paid from earthquake
insurance would be is estimated through damage
estimation simulation from respective earthquakes.
Pure premium rates for earthquake insurance arecalculated by computing the estimated insurance
claims to be paid per year from this data.

1.2.1 Composition of premium rates forearthquake insurance
As in figure 3.1.1, a premium rate for earthquake
insurance is, like other insurance, composed of a purepremium rate and an expense loading.
Pure premium rates are to be appropriated to theinsurance claims to be paid arising from earthquake
disasters, etc., which will occur in the future.
Expense loading is to be appropriated to the expenses
of operating the earthquake insurance, and thepaperwork cost of insurance policies, adjustment costsat the time of payment of insurance claims, and thecommissions to be paid to agencies.
Pure premium rate
Premium rate
Expense loading(Fig. 3.1.1) Composition of premium rate

1.2.2 Rating of pure premium rates
Even in Japan, which is recognized around the world
as a country of earthquakes, the number ofoccurrences of earthquake disasters is very small,compared to other disasters. According to the “Tableof eras of major destructive earthquakes on the
periphery of Japan” appearing in Chronological
Scientific Table, the number of occurrences ofdestructive earthquakes per year is about one in themost recent 100 years. Therefore, from the data on
short periods, the “law of large numbers,” the basic ofrating method, is not applicable. So, from 1966, whenthe earthquake insurance system was established, purepremium rates for earthquake insurance were
calculated using Chronological Scientific Table as

1.2.3 Calculation of expense loading
To participate in an earthquake insurance, the methodof participation by attaching to fire insurance has been
adopted. Concerning the paperwork for earthquake
insurance policies, through adoption of the method of
attaching earthquake insurance to fire insurance, the54Section 1 Requirements for Premium Rates
and Rating

Chapter 3 Rating Method of Earthquake Insurance(Fig. 3.1.2) Example of earthquake source faults
Created by excerpting earthquake source models of “Probabilistic Seismic Hazard Maps, 2020 Edition”(Example of earthquakes at active faults and trench-type earthquakes for which long-term evaluations have been conducted by the
Headquarters for Earthquake Research Promotion)

The operating expense of earthquake insurance iscalculated on the basis of actual condition surveys forthe time each general insurance company contract.
Loss adjustment costs are calculated in conformity
with the calculation methods for pure premium rates.
Specifically, by performing damage assumption
simulations in the case where the destructive
earthquakes used for the preparation of theProbabilistic Seismic Hazard Maps are repeated in thepresent, the estimated number of payment cases ofearthquake insurance due to the respective
earthquakes is obtained. The loss adjustment costs arecalculated by accumulating the expenses relating toportion overlapping with fire insurance can be reduced,
so it becomes possible to decrease the cost of
paperwork. In addition, it is natural for insurancecompanies, privately owned companies, to build-in
profits to the insurance they sell, but since earthquake
insurance has the strong social and public nature, andmoreover since the Government is acceptance thereinsurance, profits are not included into earthquake
insurance rates.
The loading for earthquake insurance is composed ofoperation expenses, loss adjustment costs and agency
commissions, as in figure 3.1.3. The method of
calculating these is as follows.

55

Section 1 Requirements for Premium Rates
and Rating

Chapter 3 Rating Method of Earthquake Insurance

this adjustment.
Agency commissions are to be paid as commissions
when agencies that have consignment contracts withinsurance companies sell insurance policies, andcalculated on the basis of actual condition surveys foragencies.

<References>
National Astronomical Observatory of Japan, ed.
Chronological Scientific Table. Maruzen, (2021).
Fire and Disaster Management Agency. White Paper
on Fire Service. (2022).
Headquarters for Earthquake Research Promotion.
National Seismic Hazard Maps for Japan, 2020
Edition. (2021).

Operation expense

Expense loading

Loss adjustment cost

Agency commission(Fig. 3.1.3) Composition of expense loading

56Section 2 Estimation of Earthquake Damage for Rating
for Earthquake Insurance
2.1 Factors and Forms of Earthquake Damage

With regards to local governments, the Tokyo
Metropolitan Government released damage estimatesfor earthquakes directly striking the capital in 2022.
A variety of factors affect the extent of earthquake
damage. These include the scale and location of theearthquake, the seasons and times of the day, building
structure, the proportion of fireproof structures in acity, distance from the waterfront, elevation, etc.
Generally, when predicting earthquake damage,various events, such as the predicted earthquake
tremor, liquefaction and tsunami, and the resulting
physical and human damage including destruction,
fire, etc., of buildings and facilities, are systematized
as shown in figure 3.2.1, and damage is quantitatively
assessed in order using these various factors as
parameters.
The concept of the damage prediction in the rating ofpure premium rates for earthquake insurance isessentially the same as that of the estimation ofearthquake damage performed by the Government and2.1.1 Earthquake damage estimation
Grasping quantitatively what kind and how muchdamage will occur in the case of the occurrence ofearthquake is called “earthquake damage estimation,”and in Japan it has been performed as one link in thedisaster prevention countermeasures of governing
bodies.
Especially, after the Hyogo-ken Nanbu Earthquake,
most prefectures and cabinet ordinance designatedcities started forecasting earthquake damage. They
make full use of the results in regional disasterprevention measures and release them to local
residents. In recent years, as for the national
Government, the Working Group on Measures
Against Great Earthquakes Along the Chishima
Trench and the Japan Trench of the Central Disaster
Prevention Council released damage estimates forlarge-scale earthquakes in these trenches in 2021.

Fire

Building damage
Liquefaction

TsunamiSurface ground

Hypocenter

Bedrock
Land plates

Sea plates(Fig. 3.2.1) Image for estimation of earthquake damage

57Section 2 Estimation of Earthquake Damage
for Rating for Earthquake Insurance

Chapter 3 Rating Method of Earthquake Insurance

to do with the place of occurrence. Even if a greatearthquake should occur, if there are few residents andbuildings, etc., the damage will be small; however, if
such should occur near a big city, there have beencases of even an M6 class earthquake causing hugedamage. As in the Hyogo-ken Nanbu Earthquake, incase of the occurrence of an M7 class earthquake neara big city, the damage could be extremely massive.
As stated in Chapter 1, Section 1, the land of Japan isformed along an interplates-area where there are many
earthquakes, and the southern Kanto region, including
the metropolitan area in particular, is a place wheremultiple plates are contiguous to each other, and in thepast as well great earthquakes have numerous times
occurred along the lines of the Great Kanto
Earthquake. The southern Kanto region is not only aconcentration of populations or buildings, etc., butalso a center of politics and the economy, and should agreat earthquake menace this area, the damage of such
would be beyond measure.
Earthquakes having epicenters in ocean areas are
sometimes accompanied by tsunamis. The tsunami of
the 2011 off the Pacific coast of Tohoku Earthquake
caused extensive damage in the Pacific coastal
regions.

local governments.
In the following sections, factors intimately related toearthquake damage and forms of earthquake damage
are organized.
2.1.2 Factors in earthquake damage
Here, the following factors are discussed: the scaleand location of an earthquake, differences in the
ground that affect the amplification of tremors andliquefaction, building structure and construction age
that affect the destruction of a building, seasons andtimes of occurrence of an earthquake as well as thebuilding usage in terms of how it affects the outbreakof fire, city structures related to the spread of fire, andthe distance from the waterfront and elevation that
affect whether buildings are swept away by tsunami.
Magnitude of earthquakes
JMA magnitude is used in Japan for indicating thescale of earthquakes, and generally speaking, if themagnitude is M5 or lower class, there are few cases ofdamage being caused, while if magnitude is M6 orhigher class, such is in many cases concurrent withdamage, although it also depends on the location of
occurrence of earthquakes. As a difference of 1
magnitude means about 32 times difference in termsof energy, M8.0 huge earthquakes are equivalent to1,000 times the scale of M6.0 earthquakes.
By looking at the number of occurrences ofearthquakes grouped on a scale, there is a tendency
that the smaller the magnitude is, the more frequent
the occurrence becomes and the greater the magnitudeis, the less frequent. According to past earthquake data,
in approximate terms, M6 class earthquakes occur inJapan about several ten times per year, M7 class
earthquakes occur about once a year and M8 or higher
class earthquakes occur about once in ten years.

Geometry of earthquake source faults
The process of an earthquake starts with the rupture ofa certain point within a fault (hypocenter); the rupture
gradually progresses along with the fault, ending in awide range of fault offset. This fault causing theearthquake is called an earthquake source fault. The
earthquake source fault of earthquakes of large
magnitude is considered to be large.
The damage of earthquakes is closely related to a
distance from the earthquake source fault; for example,
if the Nankai Trough Earthquake hypothesized by the
Headquarters occurred concurrently, the earthquake
source fault would extend as long as 700 km, causing
extensive damage. Therefore, it is necessary toevaluate the geometry of a hypocenter appropriately.

Place of occurrence
Damage from earthquakes differs largely due to thescale of them, as well as having something intimately
58Section 2 Estimation of Earthquake Damage
for Rating for Earthquake Insurance

Chapter 3 Rating Method of Earthquake Insurance

Types of groundAs indicated in figure 3.2.1, it can be considered thatground can be roughly separated into the surface
ground and the bedrock below it. Generally, thesurface ground is soft, and the bedrock is hard.
Seismic waves occurring at the hypocenter passthrough the bedrock and reach the surface layer
directly under the observation point. When seismic
waves pass from the hard bedrock to the soft surface
ground, these waves are amplified. Depending on thetype of this surface ground, the way in which seismic
waves are amplified differs greatly, and generally thesofter the surface ground is, the greater theamplification rate will be. This is the reason why
earthquake tremor at the surface ground is larger insoft ground than in hard ground, even though the
distances from the hypocenter are almost the same.
Additionally, the occurrence of liquefaction has a lot
to do with the type of ground. Disaster due toliquefaction of ground occurs due to the fact that theforce supporting structures is lost, since water and soil
particles included inside the ground are mixed andfluidized by seismic ground motion. Because of this,the entire building sometimes sinks, or subsidence,transfer or tumbling, etc., of it will occur.
Liquefaction is likely to occur in such artificial land asmanmade land, and buildings are likely to suffer
damage. Large-scale liquefaction took place in the2011 off the Pacific coast of Tohoku Earthquake,damaging many dwellings.

Additionally, the relation of a building’s construction
age to damage has become clear from earthquake
damage research, etc. In particular, the fact has
become clear from the damage data from theHyogo-ken Nanbu Earthquake and the Kumamoto
Earthquake, etc., that buildings from after the newearthquake-resistancestandards
which
were
introduced
in
1981
have
superior
earthquake-resistance capacity compared to previous
ones.
Seasons and times of the day of earthquake
occurrence
Earthquake damage also differs by seasons and timesof the day, etc., of earthquake occurrence, and thething most affected is fire caused by earthquake. Incase an earthquake occurs in winter, when moreheating equipment are used, the number of fires will
be greater compared to summer, etc., and in case anearthquake occurs in the evening, when more burner
equipment is being used for the preparation of meals,
etc., it is anticipated that the number of fires will begreater compared to such times as dawn. Moreover,concerning the danger of the spread of fire, weather
conditions such as wind speed are also importantfactors having deep relevance.
Building usage
Building usage is considered to be a factor affecting
the outbreak of fires during earthquakes. For example,
when considering the outbreak of fire differentiated bybuilding usage, the outbreak rate from eating house
where fire instrument usage frequency is high isanticipated to be higher than from offices where fire
instrument usage frequency is low. Therefore, it isconsidered that the outbreak of fires from busy streets
will be great.

Structure of buildings and construction age
As for damage grouped by building structure,compared with non-wooden buildings such as steel
reinforced concrete structures or steel frame structures,
damage is greater for wooden buildings. This can bestated as a general tendency; however, there are,among wooden structure buildings, buildings highearthquake-resistance capacity for which sufficientdesign and execution against earthquakes have
performed.

Building structure and density in urban areas
The building structure and density in urban areas as awhole greatly affects the spread of fire there. In the59Section 2 Estimation of Earthquake Damage
for Rating for Earthquake Insurance

Chapter 3 Rating Method of Earthquake Insurance

Hyogo-ken Nanbu Earthquake, the area damaged bylarge-scale fire spread was packed with old wooden
houses. Although the possibility of the destructive
fires of a decade ago has been decreased, areas whereland readjustment delays the expansion of roads andthe rebuilding of old wooden houses remain
vulnerable to fires in Japan. This means the risk oflarge-scale earthquake fires still exists.

earthquake disasters.

2.2 Estimation of Earthquake Damage
In rating pure premium rates for earthquake insurance,since earthquake insurance has fewer examples of
insured events than other kinds of insurance coveringother disaster such as fire insurance, damage datafrom the past alone is insufficient. Therefore, damage
is estimated by performing simulations of earthquakesthat may occur in the future occurring in the presentday. An outline of the estimation method is stated herein accordance with figure 3.2.2.
First, based on the assumption that earthquakes used
for the preparation of the Probabilistic Seismic Hazard
Maps should occur now, the size of the seismic
ground motion in the estimated damage area (for eachmunicipality) will be forecast considering thecharacteristics of the ground. The destruction rate ofbuildings due to the seismic ground motion andliquefaction is then estimated. Additionally, thenumber of outbreaks of fire in the damage area isobtained from the size of seismic ground motion, andthen, calculation of the spread of fire is performed andthus the ratio of fire destruction due to earthquake fireis estimated. On top of this, in case of earthquakes
occurring in maritime areas, the ratio of wash away
due to tsunami is also estimated. Calculations ofestimated insurance claims to be paid is performed by
combining these damage rates with the present
earthquake insurance policy status in the damage area,and from such the estimated insurance claims to be
paid per year is obtained. The pure premium rate is
obtained by dividing it by the insured amount ofearthquake insurance.
Damage estimation simulation in the rating forearthquake insurance is explained in detail in thefollowing.

Distance from the waterfront and elevation
In the coastal areas where a tsunami hits, the closer tothe waterfront and the lower the areas, the more likely
flooding and damage will occur when a tsunami
strikes land. In addition, the distance tsunami can run
up on land varies depending on conditions such as theconfiguration, etc. of rivers and bayside.
2.1.3 Forms of earthquake damage
The size of earthquake damage differs due to the placeof occurrence, the scale of the earthquake, etc., andmoreover the forms of damage appear to vary. Suchthings are named as:- deformation or destruction of buildings and civilengineering structures such as roads, bridges anddams- collapse or movement of the landforms (soil fall,earth-fall, landslide)- subsidence due to the liquefaction of ground- occurrence of tsunami.
Among these, the following three are considered to be
the risk factors with the greatest effect among theforms of physical disaster that earthquake insurance
policyholders are anticipated to suffer:(1) risk of destruction of buildings due to seismic
ground motion and liquefaction(2) risk of burning down of buildings due to firecaused by earthquake(3) risk of washing away of buildings due totsunamiDamage estimation is performed in earthquake
insurance focusing on these three as risk factors in
60Section 2 Estimation of Earthquake Damage
for Rating for Earthquake Insurance

Chapter 3 Rating Method of Earthquake Insurance(Fig. 3.2.2) Flow of pure premium rate calculations in earthquake insurance

2.2.1 Assumed earthquakes
It is difficult to accurately predict where and when an
earthquake will happen and how big it will be evenwith modern science. Meanwhile, it is known that an
earthquake that occurs near a large plate boundary oran active fault repeatedly occurs at the same location,and so it is thought that predicting the size andrecurrence interval of an earthquake for a long period
is possible to some extent. The earthquake source
models used for the Probabilistic Seismic Hazard
Maps published by the Headquarters for Earthquake
Research Promotion can be thought of as models thatare compiled based on nationwide unified standards
through discussions on such long-term predictions
regarding the occurrence of earthquakes among many
researchers. These earthquake source models are used
to calculate pure premium rates for earthquake
insurances.

2.2.2 Estimation of seismic ground motion
Attenuation relationship formula
The greater the magnitude is, the greater the seismic
ground motion becomes. Additionally, seismic groundmotion becomes greater as it gets closer to the
hypocenter and lesser as it gets further from the
hypocenter. The formula displaying these relations iscalled the “attenuation relationship formula,” andfigure 3.2.3 shows it with the vertical axis being thesize of seismic ground motion and horizontal axis
being the distance from the hypocenter. Through useof this, the size of the seismic ground motion atarbitrary points can be obtained.
In earthquake insurance, estimation of seismic groundmotion is performed using the attenuation relationshipformula in which the magnitude and type ofearthquakes (crustal, intraplate, or interplate), etc., arereflected.

61Section 2 Estimation of Earthquake Damage
for Rating for Earthquake Insurance

Chapter 3 Rating Method of Earthquake Insurance

pure premium rates for earthquake insurance,
therefore, the frequency of loss is calculated based ona relation (damage function) between the intensity ofseismic ground motion obtained in 2.2.2 and thefrequency of loss of buildings.
As stated before, previous studies show thatearthquake damage to buildings differs depending not
only on their structure but also on their construction
period, so the damage function is given by structure
and by construction period.
(Fig. 3.2.3) Example of attenuation relationship formula

Estimation of damage due to liquefaction ofgroundAdvancing urbanization has resulted in the shortage ofland for housing; more houses are being built on soft
ground and artificial ground. This may increaseliquefaction damage when an earthquake occurs.
As stated before, liquefaction of the ground has aclose relationship with the microtopography at the
point. Therefore, in accordance with methods used inresearch papers focusing on this relationship, the dataof the nationwide microtopography used in the
Probabilistic Seismic Hazard Maps is used for the
calculation of the frequency of loss due toliquefaction.

Seismic ground motion and ground characteristics
The magnitude of seismic ground motion obtainedwith the attenuation relationship formula does not take
into consideration the tendency of ground tremors.
The harder the ground is, the smaller the tremors willbe, and the softer the ground is, the larger the tremors
will be. The tendency of ground tremors is said to beclosely linked with the classification of the surface
terrain; for example, the ground of mountainous land
and hilly land is hard, which makes it unlikely to besusceptible to tremors. The ground of such terrain
tends to be less susceptible to tremors than that oflowlands and reclaimed land even with the same
distance from the hypocenter. The simulation
evaluates the tendency of ground tremors with focus
on surface terrain and other elements, and computes
the intensity of tremors at each point by reflecting thetendency in the seismic ground motion obtained withthe attenuation relationship formula.

2.2.4 Estimation of loss due to burnout of property
One of the things of greatest concern among thevarious forms of disaster taking place at the time ofearthquakes is earthquake fire. Since there are many
wooden buildings in Japan, large fires have been
happened several times in the past, and table 3.2.1
gives examples of major earthquake fires that
occurred in the past.
Estimation is performed here by dividing earthquake
fire into two processes: “outbreak process” and “firespread process.”

2.2.3 Estimation of loss due to destruction ofproperty
Estimation of damage directly caused by seismic
ground motion
Tremor-caused building destruction and damage, aphenomenon where buildings and contents aredestroyed directly by seismic ground motion, shows ahigh correlation between the frequency of loss and theintensity of seismic ground motion. Upon the rating of

Outbreak process
Upon the earthquake insurance rating, fire outbreakrate is calculated in accordance with the method usedby the Tokyo Fire Department for fire outbreaks

62

Section 2 Estimation of Earthquake Damage
for Rating for Earthquake Insurance

Chapter 3 Rating Method of Earthquake Insurance

caused by fire appliances/electric heating appliances,electric appliances/wirings, and leaked gas, which aremajor causes of fire for general residences.
In this method, fire outbreak rate is calculated basedon experiments and actual cases in Hyogo-ken Nanbu
Earthquake for assumed fire outbreaks due to theoverturning and falling of fire appliances, etc., interior
wiring short circuits and other causes. In accordancewith this method, fire outbreak rate is calculated basedon the intensity of seismic ground motion obtained in
2.2.2, together with rate of fire outbreak per buildingthat leads to the expansion of fire spread.

fire outbreak rate. In this model, a higher density ofbuildings with a narrower road width and a higher
ratio of wooden buildings lead to a higher ratio of fire
destruction.
2.2.5 Estimation of loss due to washing away ofproperty
Earthquakes taking place in maritime areas sometimes
are concurrent with tsunami and cause damage. Table
3.2.2 is of earthquakes in the past concurrent withgreat tsunami damage in Japan.
As is understandable from table 3.2.2, many of theearthquakes concurrent with tsunami have been oflarge magnitudes, mostly M8 or higher class
earthquakes.
Tsunami occurrence is due to the occurrence of rapidchanges in the ocean floor by earthquakes. Upon therating of pure premium rates for earthquake insurance,
the distribution of upheaval and subsidence of ocean
floors by fault movement is first calculated forearthquakes assumed to cause tsunami. Then, theFire spread process
The distance between adjacent buildings is calculated
by using map data from which the shape of individual
buildings across Japan can be identified. The damage
ratio (ratio of fire destruction) of an earthquake fire is
calculated by determining whether the fire will spreador not by taking into account the building structure
based on the identified distance while applying the(Table 3.2.1) Example of earthquakes concurrent with notable fires in Japan (after the Meiji period)

Name of earthquake

Occurrence date

Great Kanto Earthquake

September 1，1923

M7.9

11:58 a.m.

Kita Tajima Earthquake

May 23，1925

M6.8

11:09 a.m.

Kita Tango Earthquake

March 7，1927

M7.3

6:27 p.m.

Nankai Earthquake

December 21，1946

M8.0

4:19 a.m.

Fukui Earthquake

June 28，1948

M7.1

4:13 p.m.

Hyogoken-Nanbu Earthquake

January 17，1995

M7.3

5:46 a.m.

Damage status
More than 105,000 dead or missing, 109,000 residences completely
destroyed, 102,000 half destroyed and 212,000 completely burned
down (including those with completely or half destroyed) as a whole.
428 dead, 1,295 houses completely destroyed and 2,180 completely
burned down.
2,925 dead and 12,584 houses completely destroyed (5,106 residences
and 7,478 others) as a whole. 3,647 completely burned down inKyoto.
1,330 dead, 11,591 houses completely destroyed, 23,487 half
destroyed, 1,451 washed away and 2,598 completely burned down.
3,769 dead, 36,184 houses completely destroyed, 11,816 half
destroyed and 3,851 completely burned down.
6,437 dead or missing, 104,906 residencies completely destroyed,
144,274 half destroyed and 7,132 completely or half burned down.

Created from Materials for Comprehensive List of Destructive Earthquakes in Japan, 599-2012 (2013), and Chronological Scientific Table (2021)

63

Chapter 3 Rating Method of Earthquake Insurance

Section 2 Estimation of Earthquake Damage
for Rating for Earthquake Insurance

initial tsunami water level is obtained on the basis on
the distribution being consistent with the fluctuationsof the sea level. Based on this initial water level,
Tsunami propagation, including run-up onto land, iscalculated based on land elevation data combined withocean water depths around the islands of Japan inorder to determine the inundation depth at eachlocation (figure 3.2.4). The rate of damage due to atsunami (rate of loss due to washing away of property)
is calculated according to the ratio of actual damage toinundation depths in the 2011 off the Pacific coast of
Tohoku Earthquake.

(Table 3.2.2) Example of earthquakes concurrent with tsunami in Japan (after the Meiji period)
Name of earthquake and tsunami
Meiji Sanriku Earthquake

Occurrence date

Damage area and details

June 15, 1896

Tsunami struck from Hokkaido to Miyagi. 21,959 dead, 8,000 to 9,000
houses washed away or completely or half destroyed.

M8.2
Showa Sanriku Earthquake

March 3, 1933

M8.1

Tsunami struck the Pasific coast and caused significant damage along
the Sanriku Coast. 3,064 dead or missing, 4,034 houses washed away,
1,817 destroyed and 4,018 flooded.

Tsunami struck Shizuoka, Aichi, Mie, etc. 1,223 dead or missing,
December 7, 1944 17,599 residences completely destroyed, 36,520 half destroyed and
3,129 washed away.

Tonankai Earthquake
M7.9

Tsunami struck from Shizuoka to Kyushu. 1,330 dead, 11,591 houses
December 21, 1946 completely destroyed, 23,487 half destroyed, 1,451 washed away and2,598 burned down.

Nankai Earthquake
M8.0
Chile Earthquake Tsunami

May 23, 1960
Mw9.5
Nihonkai Chubu Earthquake

May 26, 1983

M7.7
Hokkaido Nansei-oki Earthquake

Tsunami caused damage especially along the south coast of Hokkaido,
the Sanriku Coast and the Shima Peninsula. 142 dead or missing, morethan 1500 houses completely destroyed and 2,000 half destroyed.
Akita was most severely damaged. Distant areas such as Shimane
were also damaged. 104 dead, 934 houses completely destroyed, 2,115
half destroyed and 52 washed away in Japan.

July 12, 1993

Tsunami caused severe damage. 230 dead or missing, 601 residencescompletely destroyed and 455 flooded.

March 11, 2011

Most damage caused by massive tsunami. 22,303 dead or missing,
122,005 residences completely destroyed and 11,275 flooded.

M7.8
Off the Pacific Coast of Tohoku
Earthquake
M9.0
Created from Materials for Comprehensive List of Destructive Earthquakes in Japan, 599-2012 (2013), Chronological Scientific Table (2021) andWhite Paper on Fire Service (2022)(Fig. 3.2.4) Tsunami height and inundation depth
Touched up reprint from the website of the Japan Meteorological Agency

64Section 2 Estimation of Earthquake Damage
for Rating for Earthquake Insurance

Chapter 3 Rating Method of Earthquake Insurance<References>
Institute for Fire Safety & Disaster Preparedness.
Comprehensive List of Area Disaster Prevention Data,
Earthquake Disaster and Volcano Disaster Section(new revised edition). (1998).
Usami, Tatsuo. Materials for Comprehensive List of
Destructive Earthquakes in Japan, 599-2012.
University of Tokyo Press, (2013).
Central Disaster Management Council. Estimation ofdamage for large-scale earthquakes in the Chishima
Trench and the Japan Trench. (2021).
Tokyo Metropolitan Government. Estimation ofdamage in the event of an earthquake directly hitting
Tokyo. (2022).
General Insurance Rating Organization of Japan.
Earthquake Insurance Study 6 “Development of
Evaluation Methods for Earthquake Fire Spread Risks
Considering Urban Area Characteristics.” (2005).
Shuto, Nobuo. “Tsunami damage trends and issues indisaster reduction.” Coastal Engineering Conference
Proceedings, 35, 237-241, (1988).
Yamamoto, Akio. “A study of Liquefaction Potential
and Damage Ratio of Dwelling Houses in a WideArea using an Engineering Geomorphologic
Classification Database.” Journal of social safety
science, 11, 275-285, (2009).
National Astronomical Observatory of Japan, ed.
Chronological Scientific Table. Maruzen, (2021).
Fire and Disaster Management Agency. White Paper
on Fire Service. (2022).
Japan Meteorological Agency.
https://www.jma.go.jp/jma/kishou/know/faq/faq26.ht
ml

65

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Section 1 Laws and Regulations for Buildings
1.1 Building Standards Act

introducing the concept of “performance-based
provision,” where required structural performance forbuildings is specified. Note that this revision had noeffect on the earthquake-resistance standards
introduced in 1981.

Because of the fact that the quality of buildings had
declined after WWII, the Building Standards Act (Law
No. 201) was constituted in 1950 in order to attempt
the improvement of quality and disaster prevention,and thus protect the health and property of the nation,and through this the reinforcement of structural safety
standards of buildings was attempted.
In addition, through the experience of major urban
fires, which had been frequently occurring, along withthe threat of major fires in urban areas due to thebombing during WWII, the prevention of major urban
fires, for which there had been no protection until then,was required. With such as a background, thepromotion of fire preventive wooden structure andpolicies on fireproofing of roofs and outer walls werefactored into the Building Standards Act. As a result,fireproof wooden buildings spread nationwide, withroofs covered with incombustible materials, and outerwalls made of such difficult-to-burn materials as
mortar.
Later on, from research on damage by greatearthquakes in the past such as the Miyagi-ken-oki
Earthquake of 1978, the insufficiency of theearthquake-resistance capacity of buildings up to thenwas pointed out. Thereupon, based on research related
to seismic engineering, the Building Standards Act
were revised in 1981, and major revisions to theearthquake-resistance standards were introduced.
The provision of the Building Standards Act before
the 1981 revision is generally described as a“specification provision,” that specifies permitted
building materials and structures. Any construction ofbuildings using other materials and structures used tobe required the authorization of the minister for eachof the materials and structures. However, it was
becoming difficult to specify all the materials andstructures due to the progress of technologies, and therevised Building Standards Act was enacted in threestages: in June 1998, May 1999 and June 2000,

1.2 Act on Promotion of Seismic Retrofitting of
Buildings
The effectiveness of the earthquake-resistancestandards that had been implemented in 1981 wasproved in the results in the Hyogo-ken Nanbu
Earthquake of 1995. However, the fact that old
buildings constructed before the introduction of theearthquake-resistance standards in 1981 suffered greatdamage in this earthquake became an issue and theearthquake-resistance capacity of existing buildings
was highlighted. As a result, in order to improve safety
against earthquakes of existing buildings that havehighly public character and are used by many andunspecified persons, the Act on Promotion of Seismic
Retrofitting of Buildings (Law No. 123) was enacted in
October 1995.
Then, the earthquake-proofing of buildings was also
considered as one of the main components in theoutlines of measures formulated for each major
earthquake (the Tokai Earthquake (May 2003), theTonankai/Nankai Earthquake (December 2003), theTokyo Metropolis Direct Earthquake (September2005), etc.) and the Policy for Emergency Measuresfor Earthquake-Proofing of Buildings formulated by
the Central Disaster Management Council in
September 2005. Meanwhile, this Act was revised in
November 2005 (enacted in January 2006), with focus
on Promotion of Planned Earthquake Resistance,
Strengthening of Guidance, etc. for Buildings andExpansion of Support Measures.
Another revision was made in November 2013 tofurther promote the improvement of the safety ofbuildings and structures for earthquakes in preparation

69

Chapter 4 Laws and Regulations for Buildings
and Disaster Victim Support

Section 1 Laws and Regulations for Buildings

for large scale earthquakes. This revision provided thatlarge buildings such as hospitals and schools that wereused by large numbers of the general public were
subject to earthquake-resistance diagnoses anddisclosure of the test results. The revision also
provided that houses, small buildings, etc. including
condominiums were additionally required to be carriedout earthquake-resistance diagnoses and retrofitting asnecessary, on a best effort basis.

guidelines for earthquake-resistance evaluation
formulated by the Ministry of Land, Infrastructure andTransport was also implemented in October 2001,
limited to earthquake-resistance class.
Furthermore, seismically isolated buildings were added
to the Japanese Housing Performance LabelingStandards, which stipulate the operation of the
Housing Performance Indication System, in April
2007.

1.3 Housing Quality Assurance Act

1.4 Long-Life Housing Promotion Act

In Japan, defective housing or destruction of buildings
due to shoddy construction has been viewed as an issue,
and the incident in which defective houses were soldby “Akita-ken Wooden Housing Corporation” in Chiba
Prefecture, in particular, became a major social issue.
In the context of these circumstances, in 1999, theHousing Quality Assurance Act (Law No. 81) wasconstituted to promote the quality guarantee of housing,to protect the interests of homebuyers, and to settle theout-of-court disputes regarding housing promptly andappropriately. The following measures were
determined in this Act:(1) establishment of residential performance
display standards, and introduction ofevaluation system based on the standards(2) preparation of an out-of-court disputesettlement system solely for residences(3) fulfillment of defect warranty systems withregard to contracting agreements and sale andpurchase agreements for the acquisition of
newly built residences
In October 2000, Housing Performance Indication
System for newly built residences were implemented,
and the level of earthquake resistance became subject
to assessment as the earthquake-resistance class. Thenin December 2002, the system was implemented
additionally for existing houses.
For existing houses, an evaluation system based on the

The Basic Act for Housing (Law No. 61), which wasenacted in June 2006, promotes a transition to a
stock-oriented housing policy. Its goal is to reduce thecost burden of housing and stabilize and improve social
welfare through the long-term use of housing, which
can reduce waste generated from the demolition andremoval of housing, reduce the environmental burden,
and reduce expenses from rebuilding homes.
To that end, the Long-Life Housing Promotion Act(Law No. 87) was enacted in June 2009, creating acertification program for plans concerning theconstruction and maintenance of stable housing, or
quality long-term housing that can be used in goodcondition for many years.
This certification system was initially targeted at newly
built residences. In April 2016, long-life quality
housing certification standards pertaining to additions
and betterments were established to promote long-term
use of housing through repair and maintenance,
allowing existing housing to be certified as long-life
quality housing.
The long-life quality housing is promoted by tax
breaks, preferential mortgage interest rates, detailed
housing records that enable appropriate repair andrenovation planning, etc.

70

Chapter 4 Laws and Regulations for Buildings
and Disaster Victim Support

Section 1 Laws and Regulations for Buildings<References>
Ohashi, Yuji. History of Transition of Japan’s Building
Structural Standards. Building Center of Japan,(1993).
Architectural Institute of Japan. Study materials forConstruction Laws. Maruzen, (2001 rev.).
Ministry of Land, Infrastructure, Transport andTourism. Guide to Durable Housing. Center for Better
Living, (2009).
Ministry of Land, Infrastructure, Transport andTourism.
https://www.mlit.go.jp/71Section 2 System for Disaster Victim Support
2.1 Disaster Victim Support System
In the Hyogo-ken Nanbu Earthquake, an enormous
number of houses suffered damage, forcing 320,000
people to live as evacuees at more than 1,200
evacuation sites including schools. Afterwards,
48,300 emergency temporary houses wereconstructed for the victims. These temporary houses
were used for five years after the earthquake.
On the other hand, many donations for the relief ofthe victims were collected from all over the nation,
the amount of which exceeded 170 billion yen.
Because of the number of victims, however, theamount of distribution per victim was small. It was
not enough to compensate each victim, and this oneof the reasons for delayed housing reconstruction.
This prolonged the stay of the victims at temporary
houses, resulting in solitary deaths among theelderly a few years after the earthquake.
To cope with these situations, local government,
various organizations, and political parties discussed
measures for supporting disaster victims in houserebuilding and in restoring their lives.
At present, Japan provides tax relief, credit measuresand various financing programs. This section gives
an overview of the Act on Support for
Reconstructing Livelihoods of Disaster Victims(Law No. 66) established in May 1998.

2.2 Act on Support for
Livelihoods of Disaster Victims

Reconstructing

2.2.1 Enforcement (November 1998)
After the occurrence of the Hyogo-ken Nanbu
Earthquake, through subsequent discussions bypolitical parties and citizens’ groups, including billdrafting, the Act on Support for Reconstructing
Livelihoods of Disaster Victims was enacted as
legislation by the Diet members in May 1998 andput into force in November of the same year.
This Act stipulates that disaster victims whose househas been totally destroyed or suffer similar damage
are entitled to support grants of not more than one
million yen as expenses for purchasing household
goods necessary for reconstructing their lives.
Although the Act limits the purpose for which suchsupport grants were used, it was still epoch-making
in providing financial support, not loans.
2.2.2 Revision of April 2004
Although the Act was epoch-making in providing
financial support, not loans as stated above, it was
criticized for the strict requirements for designationof the areas covered and for provision of support
grants based on annual income. In addition, it had
been also argued that residences were essential tovictims’ return to normal life. Therefore, Article 2 ofthe supplementary provisions of the Act stipulated
how the rebuilding of houses should be supported.
The Special Committee on Measures against
Disasters at the House of Representatives also statedin a supplementary resolution that “the government
should take necessary measures based oncomprehensive consideration of the enforcement
status of the Act within five years after its
enactment.”
In response to these developments, the Committeeon House Rebuilding Support for Disaster Victims(a committee established under the National Land
Agency, chaired by Prof. Osamu Hiroi, theUniversity of Tokyo) and the Federation of Diet
Members for Protecting People against Natural
Disasters held various discussions. In July 2002, theCentral Disaster Management Council approved the
Recommendations for the Reinforcement of theDisaster Prevention System made by the Expert
Examination Committee on Basic Disaster
Prevention Plans.

73Chapter 4 Laws and Regulations for Buildings
and Disaster Victim Support

Recommendations for the Reinforcement of theDisaster Prevention System (excerpts)
For support for reconstructing livelihoods of disastervictims, the national government and local
government should, based on their own roles, further
improve support measures so as to meet the needs ofdisaster victims, including the review of the Act on
Support for Reconstructing Livelihoods of Disaster
Victims.
The stable supply of housing is one of the mostimportant issues in support for the restoration ofself-sufficient lives of disaster victims.
However, if individual houses owned as private
property collapse partially or totally, compensating
the damage of such property from public funds
involves problems: for example, whether it will
ensure the equity between households that own theirhouse and those that rent their house, and whether itwill not undermine people’s motivation forpreserving their own property through self-help
efforts. Basically, the solution is to subscribe anearthquake insurance policy or participate in amutual aid program.
From the viewpoint of supporting the restoration of
the lives of disaster victims, it is important for public
administrative bodies to provide those in desperateneed for support, whether they own a house or not,with comprehensive support for securing housing,including the reduction of financial burden forrebuilding, repairing, or renting houses. The national
government should, in coordination with prefectural
governments and related organizations, take support
measures to secure the stable supply of housing, inaddition to current support for procurement ofhousehold goods necessary for livelihood
reconstructing.
The National Governors’ Association adopted theEmergency Resolution on the Establishment of a
System for Supporting Natural Disaster Victims in

Section 2 System for Disaster Victim Support

July 2003 and formed the Agreement on theContribution of Operating Funds for the
Establishment of the House Rebuilding Support
System in October of the same year. As a result, therevised Act was approved in March 2004 andenacted in the following month.
This revision introduced the system for supporting
the stable supply of housing. This system provides
support grants of not more than two million yen for
demolition expenses for rebuilding houses, houserents and other expenditure that are actually borneby disaster victims who lose their residence(including those who live in a rented house), in
addition to support already offered by the old Act
regarding living expenditures to be allocated for thepurchase of necessary contents.
2.2.3 Revision of December 2007
In April 2004 when the Act was revised, the Special
Committee on Measures against Disasters at theHouses of Representatives and Councilors stated ina supplementary resolution that “the government
should comprehensively review the Act based on
consideration of its enforcement status within four
years after its enactment.” Furthermore, majordisasters took place after the revision, including the
Niigata Chuetsu Earthquake in 2004 and theearthquake that originated offshore westward of
Fukuoka Prefecture in 2005. Accordingly, theCommittee on Support System for Reconstructing
Livelihoods of Disaster Victims (a committee
established under the Cabinet Office, chaired byExtraordinary Professor Shigeru Ito, Waseda
University) was established in March 2007 forreview of the Act. In addition, in accordance withthe draft submitted by the governing and opposition
parties to modify the requirements for support grants,
the Act was revised in November 2007 and enacted
in the next month.
The revised Act abolished the support grants

74

Chapter 4 Laws and Regulations for Buildings
and Disaster Victim Support

requirements regarding annual income and the ageof householders and adopted a flat-rate provision of
support grants according to the degree of housedamage and manner of house reconstruction.
Furthermore, the use of support grants is not
restricted. This revision was significant in providing
a solution to the issues involved in covering loss ofprivate property with public funds which had beenlong
discussed(forexample,inthe
Recommendations for the Reinforcement of theDisaster Prevention System as aforementioned).
The summary of the system after the revision isshown below:
Natural disasters covered by the Act(1) Cities, towns, and villages suffering damage
that falls under Item 1 or 2 of Paragraph 1 of
Article 1 of the Order for Enforcement of theDisaster Relief Act(2) Cities, towns, and villages where 10 or morehouseholds have had their house totally
destroyed(3) Prefectures where 100 or more households
have had their house totally destroyed(4) Cities, towns, and villages (limited to thosewith a population of less than 100,000) in aprefecture that has a city, town or village
specified in item (1) or (2) above, where 5 ormore households have had their house totally
destroyed(5) Cities, towns, and villages (limited to thosewith the population of less than 100,000)
where 5 or more households have had theirhouse totally destroyed, next to any of themunicipalities and prefectures specified in
items (1) through (3) above
Households entitled to support grants(1) Households which have had their house totally
destroyed(2) Households which have had their house

Section 2 System for Disaster Victim Support

partially destroyed or have had the land on
which their house is built damaged and havetheir house demolished for any unavoidable
reason(3) Households which are expected to remain
unable to live in their house for a long time due
to prolonged hazardous conditions caused bydisaster(4) Households which have had their housepartially destroyed and find it difficult to live in
it without large-scale repairs (households witha largely-destroyed house)
Support grants will be provided in sum total of
items (1) and (2) below, up to 3,000,000 yen, or, forsingle-person households, an amount equivalent tothree-fourths of items (1) and (2) below.
(1) Support grants based on the degree of housedamageAmount of
Degree of house damage
support grant
Totally-destroyed house (i.e.,households specified in items 1,000,000 yen(1) through (3) above)
Largely-destroyedhouse(i.e., households specified in
500,000 yen
item (4) above)(2) Support grants based on the manner of housereconstruction*
Manner of house
Amount ofreconstruction
support grant
Construction or purchase2,000,000 yen
Repair1,000,000 yen
House rent (excluding public
500,000 yen
housing)*For a household which constructs or purchases ahouse (or repairs an existing one) after
temporarily renting, 2,000,000 yen (or 1,000,000yen) will be provided in total.
2.2.4 Revision of August 2011
After the 2011 off the Pacific coast of Tohoku

75

Chapter 4 Laws and Regulations for Buildings
and Disaster Victim Support

Earthquake, it became clear that disaster victims
could be vulnerable to seizure of monies received
from the Support System of Disaster Victims, a fundthat provides assistance for people whose
livelihoods have been significantly impaired bynatural disasters to rebuild their lives, because there
were no provisions prohibiting seizure. To ensurethat such payments go to help people reconstructtheir livelihoods, the Act was amended to prohibit
seizure, etc. of support grants from the Support
System for Disaster Victims.
The Act was also amended to prohibit seizure, etc.
of disaster condolence grants and disaster disability
condolence grants under the Act on Provision ofDisaster Condolence Grants.
2.2.5 Revision of December 2020
After the Heavy Rain Event of July 2020, in order toprovide assistance for people whose livelihoods had
been significantly impaired by natural disasters torebuild their lives by ensuring stable housing,households whose houses had been partiallydestroyed and had difficulty living without
considerable repairs (households with amediumly-destroyed house) were added to thoseentitled to support grants of the Support System forDisaster Victims.
The Act was revised in November 2020 and enacted
in the next month. The revised Act applies
retroactively to the support grants for the disastervictims by natural disasters occurred after July 3rd,
2020.
The summary of the revision is shown below:
Households entitled to support grants(1) Households which have had their house totally
destroyed(2) Households which have had their housepartially destroyed or have had the land on
which their house is built damaged and havetheir house demolished for any unavoidable

Section 2 System for Disaster Victim Support

reason(3) Households which are expected to remain
unable to live in their house for a long time due
to prolonged hazardous conditions caused bydisaster(4) Households which have had their housepartially destroyed and find it difficult to live in
it without large-scale repairs (households witha largely-destroyed house)(5) Households which have had their housepartially destroyed and find it difficult to live in
it without considerable repairs (householdswith a mediumly-destroyed house)
Support grants will be provided in sum total of
items (1) and (2) below, up to 3,000,000 yen, or, forsingle-person households, an amount equivalent tothree-fourths of items (1) and (2) below.
(1) Support grants based on the degree of housedamageAmount of
Degree of house damage
support grant
Totally-destroyed house (i.e.,households specified in items 1,000,000 yen(1) through (3) above)
Largely-destroyedhouse(i.e., households specified in
500,000 yen
item (4) above)(2) Support grants based on the manner of housereconstruction*
For totally- and largely-destroyed houses (i.e.,households specified in items (1) through (4)above)
Manner of house
Amount ofreconstruction
support grant
Construction or purchase2,000,000 yen
Repair1,000,000 yen
House rent (excluding public
500,000 yen
housing)
For mediumly-destroyed houses (i.e., households
specified in item (5) above)76

Chapter 4 Laws and Regulations for Buildings
and Disaster Victim Support

Manner of house
Amount ofreconstruction
support grant
Construction or purchase1,000,000 yen
Repair500,000 yen
House rent (excluding public
250,000 yen
housing)* For a household which constructs or purchases ahouse (or repairs an existing one) after
temporarily renting, the highest amount among
the above will be provided.

Section 2 System for Disaster Victim Support<References>
Cabinet Office. Summary of the Programs
Concerning Disaster Victim Support. (2022).
Cabinet Office. Summary of the Bill to Amend the
Act on Support for Reconstructing Livelihoods ofDisaster Victims. (2020).

77

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&RQFHUQLQJ,QVXUDQFH&RXQFLO Attachment

Attachment 1-1 The Act on Earthquake Insurance

THE ACT ON EARTHQUAKE INSURANCE
Law No. 73, May 18, 1966
as amended by Law No. 45, June 2 of 2017
(Objective)
ARTICLE 1. The objective of this act is to promote the diffusion of earthquake insuranceby having the Government reinsure the earthquake insurance liabilities of insurancecompanies, etc. thereby helping to stabilize the livelihoods of the victims of earthquake, etc.
(Definitions)
ARTICLE 2. Under this act, “Insurance Companies, etc.” shall refer to persons granted a
non-life insurance business licence under Paragraph 5 of Article 3 of the Insurance BusinessAct (Law No. 105 of 1995) or a foreign non-life insurer’s business license under Paragraph 5of Article 185 of the same act or employees of persons granted a licence under Paragraph 5 of
Article 219 of the same act (referred to as “Insurance Companies” in Article 9-2), or suchjuridical persons carrying on the business of mutual aid related to fires in conformity withother acts and designated by the Minister of Finance.
2. Under this act, “Earthquake Insurance Contracts” shall refer to non-life insurance
contracts (including mutual aid contracts related to fires, as described below) conforming to
the requirements mentioned below.
(1) The object of the insurance is a building for residential use and/or household andpersonal goods only.
(2) Loss or damage (limited only to that those prescribed under the Cabinet Orders) due
to fire, destruction, burial or being carried away in s flood, resulting directly or
indirectly from an earthquake or volcanic eruption, or tsunami following the event(hereinafter referred to as “earthquake, etc.”) is covered by the amount prescribedunder the Cabinet Orders.
(3) The contract is incidental to specific non-life insurance contracts.
(4) The insured amount is equivalent to an amount no less than 30% and no more than
50% of the insured amount in the principal non-life insurance contract (when thatamount exceeds the amount prescribed under the Cabinet Orders, then the insured
amount shall be the amount prescribed under the Cabinet Orders).
3. Under this act, “insurance”, “insurance claims” and “insurance liability” shall bechanged to read respectively “mutual aid”, “mutual aid claims” and “mutual aid liability” inrespect of mutual aid contracts.
(Reinsurance by Government)
ARTICLE 3. The Government shall be able to enter into a reinsurance agreement with theinsurance companies, etc. as the third party reinsuring insurance the liabilities undertaken by
insurance companies, etc. under earthquake insurance contracts.
81

Attachment

Attachment 1-1 The Act on Earthquake Insurance

2. The reinsurance agreement described the preceding paragraph provides for payment,
when the total amount of insurance claims to be paid for single earthquake, etc. under all
earthquake insurance contracts held by the other party exceeds the amount prescribed under
the Cabinet Orders, in such proportions applicable to each layer of that excess amountprescribed under The Cabinet Orders.
3. The total amount of reinsurance claims to be paid by the Government for any one
earthquake, etc. shall be required to be within the limit not to exceed the amount set bydecision of the Diet for each year.
4. Two or more earthquakes, etc. occurring within 72 consecutive hours shall be deemed to
be one earthquake, etc. This, however, shall not apply when the situation where the affectedareas do not overlap at any point.
(Reduction in the Insurance Claims to Be Paid)
ARTICLE 4. When the total amount of the insurance claims to be paid for any one
earthquake, etc. under all earthquake insurance contracts covered by the reinsurance
agreement of the Government under the stipulations of Paragraph 1 of the preceding article
exceeds the total of the amount to be borne by all of the insurance companies, etc. theinsurance companies shall be able to reduce the amount of insurance claims to be paid bythem, under the prescriptions of the Cabinet Orders. This shall be in accordance with thereinsurance agreement and the amount contributed by the Government under the stipulationsof Paragraph 3 of the same article.
(Suspension of Signing New Earthquake Insurance Contracts When an Earthquake
Warning Statement Has Been Issued)
ARTICLE 4-2. When a warning statement about an impending earthquake disaster isissued under the stipulations of Paragraph 1 of Article 9 of the Large Scale Earthquake
Countermeasures Act (Law No.73 of 1978, hereafter called “warning statement” in thisarticle), the insurance companies, etc. shall not enter into any new earthquake insurance
contracts for object located in the area (designated as an Area under Intensified Measuresagainst Earthquake Disaster under the stipulations of Paragraph 1 of Article 3 of the same act
covered by the warning statement) that are covered by the reinsurance agreement of theGovernment (except those prescribed by the Cabinet Orders) from the time the warningstatement is issued until the day warning statement is withdrawn under the stipulations ofParagraph 3 of Article 9 of the same act. (Should the large-scale earthquake referred to in thewarning statement occur, the suspension shall end on the day designated by the Minister ofFinance through a public notice after consultation with the Earthquake Insurance Council).
2. Matters relating to the suspension of signing new earthquake insurance contracts when awarning statement have been issued (including the occurrence of the large-scale earthquake
referred to in the warning statement), in addition to those matters stipulated in the preceding
paragraph, shall be prescribed under the Cabinet Orders.

82Attachment

Attachment 1-1 The Act on Earthquake Insurance(Insurance Premium Rates and Reinsurance Premium Rates)
ARTICLE 5. The premium rates for earthquake insurance contracts covered by theGovernment reinsurance shall be required to be as low as possible while maintaining
equilibrium between income and expenses.
2. The reinsurance premium rates for the Government reinsurance operation shall be
required to be reasonable in order to ensure adequate reinsurance premium income tocompensate for reinsurance claims paid over the long term.
(Application for Inquisition)
ARTICLE 6. Insurance companies, etc. shall be able to apply for inquisition to the Ministerof Finance for inquisition of complaints regarding the matters concerning the Government
reinsurance.
2. When the application for inquisition is made under the stipulations of the preceding
paragraph, the Minister of Finance shall make inquires at the Earthquake Insurance Council
and come to a decision.
3. An application for inquisition under Paragraph 1 shall be deemed to be a juridical
demand in respect of interruption of prescription.
(Earthquake Insurance Council)
ARTICLE 7. The Earthquake Insurance Council may be established under the Ministry of
Finance in accordance with the Cabinet Orders.
2. In addition to dealing with the matters falling under its jurisdiction as stipulated under
Article 4-2 and Paragraph 2 of the preceding article, the Earthquake Insurance Council shall,in a situation where reinsurance claims are to be paid, investigate and deliberate on thematters regarding the amount of the reinsurance claims and reduction in the amount ofreinsurance claims to be paid under the stipulations of Article 4, in response to an inquiry by
the Minister of Finance.
3. In addition to the matters stipulated in the two preceding paragraphs, matters for theorganization and management of the Earthquake Insurance Council shall be prescribed under
the Cabinet Orders.
(Measures to Be Taken by the State)
ARTICLE 8. Upon recognizing that there is especially necessary for the purpose of payment
of insurance claims under the earthquake insurance contracts, the Government shall endeavor
to assist insurance companies, etc. in arranging for or accommodating them with funds.
(Report and Inspection)
ARTICLE 9. When recognizing necessity for securing sound operation of the Government
reinsurance undertaking stipulated in this act, the Minister of Finance shall be able to require
the insurance companies, etc. carrying on earthquake insurance business to submit the reportson that business or to make his staff enter the offices of the insurance companies, etc. to83Attachment

Attachment 1-1 The Act on Earthquake Insurance

inspect the books, documents and other items.
2. The staff of the Minister of Finance entering and inspecting under the stipulations of thepreceding paragraph shall be required to carry a certificate identifying their status and to
exhibit the same to the persons concerned.
3. The authority for entry and inspection under the stipulations of Paragraph 1 shall not be
construed as approved for criminal investigation.
(Consultations)
Article 9-2. When attempting to perform the dispositions indicated in each items of
Paragraph 1 of Article 311-2 of the Insurance Business Act, the Prime Minister shall consult
with the Minister of Finance in advance, regarding reinsuring insurance liabilities undertaken
by insurance companies, etc. under earthquake insurance contracts.
(Notices)
Article 9-3. The Prime Minister shall notify the Minister of Finance in advance of the facts
and details when the case falls under Clause (1), and without delay when the case falls under
any one of Clauses (2)-(4).
(1) When issuing orders for changes, and besides with regard to earthquake insurance
contracts relating to the reinsurance by the Government, due to the provisions ofArticles 131, 203 or 229 of the Insurance Business Act.
(2) When a license application is submitted as set forth in Paragraph 1 of Article 4,
Paragraph 1 of Article 187, or Paragraph 1 of Article 220, of the Insurance Business
Act, and there is a description with regard to the earthquake insurance contracts
relating to the reinsurance by the Government in the Business Plan attached thereto.
(3) When an application submitted for authorization of the changes set forth underParagraph 1 (including cases where it is applied mutatis mutandis by Article 207 of
said Act) of Article 123 or Paragraph 1 of Article 255, of the Insurance Business Act,with regard to the earthquake insurance contracts relating to the reinsurance by theGovernment.
(4) When the filing due to the provisions in Paragraph 1 of Article 9-3 of the Act on the
Non-Life Insurance Rating Organizations (Law No. 193 of 1948) is submitted andsuch is in regard to the earthquake insurance contracts relating to the reinsurance by
the Government.
2. After receiving the notification under the preceding Paragraph, when recognizing thenecessity for securing sound operation of the Government reinsurance undertaking stipulated
in this act, the Minister of Finance shall be able to state his opinion to the Prime Minister.
3. The Prime Minister shall respect the opinion when the Minister of Finance states his
opinion as stipulated under the preceding Paragraph.
(Delegation of Authority to the Commissioner of Financial Services Agency)
Article 9-4. The Prime Minister shall delegate the authority under this act (except those84

Attachment

Attachment 1-1 The Act on Earthquake Insurance

prescribed by the Cabinet Orders) to the Commissioner of the Financial Services Agency.
(Enforcement Stipulations)
ARTICLE 10. The procedures for enforcing this act and other matters necessary for its
execution shall be prescribed in Finance Ministry Ordinances.
(Penal Stipulations)
ARTICLE 11. Persons failing to report or falsifying the report stipulated in Paragraph 1 of
Article 9 or having refused, hindered or evaded the inspection stipulated in the same
paragraph shall be subject to a penal fine of not more than ¥30,000.
2. When a representative or proxy, employee or other worker of insurance companies, etc.
has committed the illegal acts, stipulated in the preceding paragraph with regard to thebusiness of the insurance company, etc., in addition to penalizing the person who committed
the illegal act, the insurance companies, etc. shall be subject to the penalty stipulated in thepreceding paragraph.

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Attachment 1-2 Enforcement Order for the Act on Earthquake Insurance

ENFORCEMENT ORDERFOR THE ACT ON EARTHQUAKE INSURANCE
Cabinet Order No.164, May 31, 1966
as last amended by
Cabinet Order No. 91, March 31, 2021
(Amount and Loss or Damage to Be Covered)
ARTICLE 1. Listed below are the categories of loss or damage prescribed in the Cabinet
Orders stipulated in Item (2) of Paragraph 2 of Article 2 of the Act on Earthquake Insurance(hereinafter referred to as “the act”). and the amount prescribed in the Cabinet Orders
stipulated under Item (2) of the same paragraph shall be the amount prescribed in the same
item, in accordance with the classification of loss or damage mentioned in the same item.
(1) Total loss of a building for residential use (hereinafter referred to as “residentialbuilding”) (when the amount of loss of or damage to the main structural part of theresidential building is 50% or more of the current value of the residential building or
when 70% or more of the residential building of the floor space has been lost by fire or
carried away in flood): the total insured amount(2) Large half loss of a residential building (when the amount of loss of or damage to themain structural part of the residential building is equivalent to 40% or more but lessthan 50% of the current value of the residential building or when 50% or more but lessthan 70% of the total floor space has been lost by fire or carried away in flood): 60%of the insured amount(3) Small half loss of a residential building (when the amount of loss of or damage to themain structural part of the residential building is equivalent to 20% or more but lessthan 40% of the current value of the residential building or when 20% or more but lessthan 50% of the total floor space has been lost by fire or carried away in flood): 30%of the insured amount(4) Partial loss of a residential building (when the amount of loss of or damage to themain structural part of the residential building is equivalent to 3% or more but lessthan 20% of the current value of the residential building): 5% of the insured amount(5) Total loss of the household and personal goods (when the amount of loss or damage
to the household and personal goods is 80% or more of the current value of thehousehold and personal goods): the total insured amount(6) Large half loss of the household and personal goods (when the amount of loss ordamage to the household and personal goods is 60% or more but less than 80% of thecurrent value of the household and personal goods): 60% of the insured amount(7) Small half loss of the household and personal goods (when the amount of loss ordamage to the household and personal goods is 30% or more but less than 60% of thecurrent value of the household and personal goods): 30% of the insured amount(8) Partial loss of the household and personal goods (when the amount of loss or damage

87

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Attachment 1-2 Enforcement Order for the Act on Earthquake Insurance

to the household and personal goods is 10% or more but less than 30% of the current
value of the household and personal goods): 5% of the insured amount
2. “The current value” within each item of the preceding paragraph is the value of theinsured object at the time immediately before the loss or damage occurred and at the place it
is located.
3. The amount of loss of or damage to the main structural part of the residential building
stipulated in Item (1) to Item (4) of Paragraph 1 includes the minimum expenses directly
necessary for restoring the ground, etc. for the purpose of the restoring the residential building
to its condition before it was damaged by the earthquake, etc. stipulated in Item (2) of
Paragraph 2 of Article 2 of the act (hereinafter referred to as “earthquake, etc.”).
4. When a residential building has become uninhabitable because of the imminent threat oflandslide or other hazards resulting directly or indirectly from an earthquake, etc., theresidential building shall be deemed to a total loss as prescribed in Item (1) of Paragraph 1.
5. When a residential building has suffered a damage from being submerged above thefloorboards or the similar damage provided in Ministry of Finance Ordinances due to water
disaster related to flood, etc. resulting directly or indirectly from an earthquake, etc.
(excluding the situation where the residential building has suffered a total loss, large half loss,
small half loss or partial loss as prescribed in Item (1) to Item (4) of Paragraph 1), theresidential building shall be deemed to have suffered a partial loss as prescribed in Item (4) of
Paragraph 1.
(Limits of the Amount Insured)
ARTICLE 2. The amount to be prescribed in the Cabinet Orders stipulated in Item (4) of
Paragraph 2 of Article 2 of the act shall be ¥50,000,000 for a residential building and¥10,000,000 for the household and personal goods. However, when an earthquake insurance
contract is already in force for the residential building or household and personal goods, theinsured amount shall be calculated by subtracting, respectively, from these amounts, theinsured amount from the earthquake insurance contract already in force.
(Reinsurance Agreement)
ARTICLE 3. The amount prescribed in the Cabinet Orders stipulated in Paragraph 2 ofArticle 3 of the act shall be ¥125.9 billion when the other party of the agreement stipulated in
the same paragraph is a non-life insurance company stipulated in Paragraph 4 of Article 2 ofthe Insurance Business Act (Law No. 105 of 1995), that accepts the reinsurance of insurance
liabilities stipulated in Paragraph 1 of Article 3 of the act. Out of the total amount of insurance
claims stipulated under the same paragraph, the proportions for each layer prescribed in the
Cabinet Orders stipulated under Paragraph 2 of the same article shall be, 50/100 for the partexceeding ¥125.9 billion but not more than ¥266.1 billion and 117050/117339 for the partexceeding ¥266.1 billion (The proportions are established in the Ministry of FinanceOrdinances for cases where the amount of the excess part exceeds the amount provided in the
Ministry of Finance Ordinances giving consideration to the limit of the liability to be borne by
the Government stipulated in Paragraph 3 of the same article).
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Attachment 1-2 Enforcement Order for the Act on Earthquake Insurance(Reducing the Insurance Claims)
ARTICLE 4. Reducing the insurance claims stipulated in Article 4 of the act shall be donein the case of a single earthquake, etc., by multiplying the insured amount in each contract by
the proportion of the sum of the amount to be borne by all insurance companies, etc. and theamount of the limit of the Government contribution stipulated in the same article to the total
amount of insurance claims paid stipulated under the same article as the insurance claim to be
paid.
(Exception for Entering into an Earthquake Insurance Contract When a Warning
Statement Is Issued, etc.)
ARTICLE 5. The earthquake insurance contracts prescribed in the Cabinet Orders
stipulated under Paragraph 1 of Article 4-2 of the act shall be those to be contracted
continuously upon expiry of the policy periods of earthquake insurance contracts having beenentered into prior to the warning statement stipulated under the same paragraph which
conform to the requirements listed below.
(1) The insured and the object of insurance are the same as those of previous contract.
(2) The amount insured does not exceed that of the previous contract.
2. In a situation where the Minister of Finance revokes or alters the date it has designatedthrough the public notice under the stipulations of Paragraph 1 of Article 4-2 of the act, it
shall make a public notice to that effect after consulting with the Earthquake Insurance
Council.
3. The public notice by the Minister of Finance under the stipulations of Paragraph 1 of
Article 4-2 of the act and the prescription of the preceding paragraph shall be made in theofficial gazette.
(Establishing an Earthquake Insurance Council, etc.)
ARTICLE 6. An Earthquake Insurance Council (hereinafter referred to as “the Council”)
shall be established to handle any of the matters described below.
(1) When the large-scale earthquake related to the warning statement stipulated in
Paragraph 1 of Article 4-2 of the act occurs; the Council will be established todeliberate on the date to be designated by the Minister of Finance as the last day of theperiod during which entering into new earthquake insurance contracts covered by theGovernment reinsurance is to be prohibited.
(2) When insurance companies, etc. have applied to the Minister of Finance forinquisition under the stipulations of Paragraph 1 of Article 6 of the act: the Council
will be established to examine for application.
2. In addition to the matters mentioned in each item of the preceding paragraph, theMinister of Finance shall establish and consult with the Council on the matters relating to theamount of the reinsurance claims and a reduction in the amount of insurance claims to be paid
under the stipulations of Article 4 of the act.
3. While the Council is established, if there arises a need to dispose of matters stipulated
under Paragraph 2 of Article 7 of the act other than those that existed at the time of the89Attachment

Attachment 1-2 Enforcement Order for the Act on Earthquake Insurance

Council’ establishment, the Council shall also dispose of these other matters.
4. The Council shall be abolished when it has disposed of the matters given to it under theprescriptions of the preceding three paragraphs.
5. When the Council is to be established under the prescriptions of Paragraph 1 andParagraph 2 or is to be abolished under the prescriptions of the preceding paragraph, theMinister of Finance shall make a public notice to that effect in the official gazette.
ARTICLE 7. The Council shall be consisted of ten or fewer members.
2. The members shall be appointed by the Minister of Finance from among persons oflearning and experience or from among experts in field of non-life insurance.
3. The members shall be relieved of their positions when the Council is abolished under theprescriptions of Paragraph 4 of the preceding article.
4. The members shall serve on a part-time basis.
ARTICLE 8. The council shall have a chairperson.
2. The chairperson shall be elected by the council from among its members and shallpreside over the affairs of the Council.
3. When unavoidable circumstances prevent the chairperson from performing his or her
duties, a member previously designated by the chairperson shall act as a proxy.
4. The Council shall neither commence proceedings nor adopt any resolutions without thepresence of the chairperson or the member acting as chairperson’s proxy under theprescriptions of the preceding paragraph and the majority of the members.
5. The proceedings of the Council shall be decided by the majority of the members present,
and in case of a tie, the decision by chairperson shall prevail.
6. The general administrative matters of the Council shall be disposed of by the Financial
System Stabilization Division of the Minister’s Secretariat of the Ministry of Finance.
7. The procedure of the proceedings and other necessary matters for managing the Council,
in addition to those prescribed under each of the preceding paragraphs, shall be determined by
the chairperson after consulting with the Council.
(The Powers Not Entrusted to the Commissioner of the Financial Services Agency)
ARTICLE 9. The powers stipulated under Article 9-4 of the act shall be the powers
pursuant to the stipulations of Article 9-2 of the act relating to the dispositions mentioned in
Item (3) of Paragraph 1of Article 311-2 of the Insurance Business Act.

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Attachment

Attachment 1-3 Regulation for Enforcement of the Act on Earthquake Insurance

REGULATION FOR ENFORCEMENT OF THE ACT ON
EARTHQUAKE INSURANCE
Ministry of Finance Ordinance No. 35, June 1, 1966
as last amended by
Ministry of Finance Ordinance No. 14, March 31, 2019
The Regulation for Enforcement of the Act on Earthquake Insurance shall be enacted as
described below to conform with the stipulations of Article 10 of the Act on Earthquake
Insurance (Law No. 73 of 1966) and Paragraph 3 of Article 88 of the Insurance Business Act(Law No. 41 of 1939).
(Scope, etc. of the Insurable Property)
ARTICLE 1. A building for residential use (hereinafter referred to as a “residentialbuilding”) as stipulated in Item (1) of Paragraph 2 of Article 2 of the Act on Earthquake
Insurance (hereinafter referred to as "the act") shall be defined as a building used forresidential purpose in its entirety or in part, while the household and personal goods stipulated
in the same item shall refer to household furniture, appliances, clothing and other movable
goods necessary for ordinarily living, the household and personal goods do not include
precious stones, semiprecious stones, precious metals, pearls and products made from thesematerials, nor do they include tortoiseshell works, coral works, amber works, ivory works,
cloisonne works, as well as paintings, writings, curios and artistic handicrafts, with a values
exceeding ¥300,000 per item or each set.
2. The specific non-life insurance contracts stipulated in Item (3) of Paragraph 2 of Article
2 of the act include the falling type of insurance.
(1) Fire insurance(2) Fire mutual insurance(3) Building endowment insurance(4) Long term refund in expire insurance(Residential Building Submerged, etc. Above the Floorboards)
ARTICLE 1-2. The damage to residential buildings that is covered by the Ministry of
Finance Ordinances stipulated in Paragraph 5 of Article 1 of the Enforcement Order for the
Act on Earthquake Insurance (Cabinet Order No. 164 of 1966, hereinafter referred to as “theOrder”) shall be defined as damage due to submersion above the floorboards (including floors
made of tatami or of wood.) of that part of the building used as a residence or damage due toflooding in excess of 45 cm above the ground directly under the residential building.
(Reinsurance Agreement)
ARTICLE 1-3. The Ministry of Finance Ordinances stipulated in Article 3 of the Ordershall be ¥11.7339 trillion, and the proportion to be provided in Ministry of Finance91Attachment

Attachment 1-3 Regulation for Enforcement of the Act on Earthquake Insurance

Ordinances stipulated in the same article shall be the proportion of the amount calculated bysubtracting ¥28.9 billion from the part exceeding ¥266.1 billion out of the total amount of
insurance claims stipulated under Paragraph 2 of Article 3 of the act to the amount of theexcess.
(Time of Occurrence of Tsunami)
ARTICLE 2. With respect of tsunami, the time of the occurrence of earthquake, etc.
stipulated in Paragraph 4 of Article 3 of the act shall, be the time at when it strikes theJapanese land.
(Reduction, etc. in the Insurance Claims to Be Paid)
ARTICLE 3. When the circumstances stipulated under Article 4 of the act have occurred,
the Minister of Finance shall make a public notice to that effect as well as announce theproportion of the amount of each individual contract that is paid.
2. When the circumstances provided in the preceding paragraph occur, the insurancecompanies, etc. shall be able to make payments based on rough estimates for insurance claims
covered by the Government reinsurance.
(Application for Inquisition)
ARTICLE 4. The application for inquisition stipulated in Paragraph 1 of Article 6 of theact must include following information.
(1) The name and address of the insurance company, etc.
(2) A description of the matters relevant to reinsurance for which the application forinquisition is made(3) The purport of the application for inquisition(4) The reason for the application for inquisition(5) The evidence(6) The date of the application for inquisition
2. Insurance companies, etc. shall be required to attach documentary evidences, if any, tothe application form prescribed under the preceding paragraph.
(Withdrawal of Application for Inquisition)
ARTICLE 5. The insurance companies, etc. shall be required, when intending to withdraw
the application for inquisition, to make it in writing.
(Certificate of Identification for Inspection)
ARTICLE 6. The form of the certificate stipulated under Paragraph 2 of Article 9 of the act
shall be shown separately.
(Method of Calculating Underwriting Reserves of Earthquake Insurance)
ARTICLE 7. As regards the underwriting reserves for earthquake insurance, insurancecompanies, etc. shall be required, in each business year, to set aside cumulatively, as92

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Attachment 1-3 Regulation for Enforcement of the Act on Earthquake Insurance

contingency reserve, the total amount of the amount (hereinafter referred to as “net purepremiums”) subtracted the amount mentioned in Item (2) from the amount mentioned in Item
(1) and the amount (hereinafter referred to as “the investment income”) of investment income
accruing from the assets relating to the earthquake insurance.
(1) The total amount of premiums income and reinsurance return premiums in eachbusiness year
(2) The total amount of reinsurance premiums and cancellation return premiums paid
during the business year, and the operating expenses in the business year from which
the loss adjustment cost and the expenses disbursed for advertising or publicity forpromoting the diffusion of earthquake insurance (hereinafter referred to as “expenses
for advertising/publicity”) and reinsurance commission received are subtracted
2. In a situation where there are earthquake insurance contracts with unexpired insurance
periods exceeding one year at the end of each business year, the insurance companies, etc.
shall set aside, as an unearned premium reserve, an amount corresponding to the unexpired
periods from the total amount of the net pure premiums and the expected interest (theinvestment income expected to accrue during the insurance periods in computing thepremiums of insurance contracts with the insurance period exceeding one year) that has
accrued by the end of the business year. The amount of the risk reserve to be set aside under
the stipulations of the preceding paragraph shall be the total amount of the net pure premiums
and the investment income in the business year with the addition of unearned premium
reserve at the end of the last preceding business year, minus the amount to be set aside as theunearned premium reserve at the end of the business year.
3. When there is an agreement to refund all or part of a premium at the maturity of theinsurance period, a reserve for the refund shall be set aside. The refund reserve is in addition
to the risk reserve provided in Paragraph 1 and the unearned premium reserve provided in thepreceding paragraph. In computation of the risk reserve provided in Paragraph 1, the amountto be allocated for the refunds shall be subtracted from the premium income provided in Item(1) of the same paragraph and the already paid maturity refunds shall be added to the total
amount prescribed in Item (2) of the same paragraph.
4. When the insurance companies have paid the insurance claims and the loss adjustment
cost, set aside an outstanding payment reserve, disbursed expenses for advertising/publicity or
investment losses (the losses of working asset of earthquake insurance, hereinafter referred toas “investment losses”) during each business year, they shall withdraw the total amount of the
net insurance claims paid (the insurance claims paid during the business year from which
reinsurance claims recovered during the business year are deducted, same below), the reservefor outstanding claims (excluding the net insurance claims paid and the reserve foroutstanding claims both corresponding to the reserve for outstanding claims set aside during
the preceding business year, same below), the loss adjustment cost and the expenses foradvertising/publicity and investment losses from the contingency reserve brought forwardfrom the preceding business year. The same shall apply to the amount of interest paid on any
debt for payment of insurance claims and loss adjustment cost.
5. Concerning the preceding paragraph, if the total amount of the net insurance claims paid,
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Attachment 1-3 Regulation for Enforcement of the Act on Earthquake Insurance

the loss adjustment cost, the reserve for outstanding claims, the expenses foradvertising/publicity, the investment losses and the interest paid exceeds the amount of thecontingency reserve, the excess amount shall be subtracted from the amount of thecontingency reserve to be set aside during the business year under the stipulations ofParagraph 1. In such a situation, if the amount of the contingency reserve to be set aside isless than the excess, the deficit shall be subtracted from the amount of contingency reserve
to be set aside in the following and subsequent business years under the stipulations of thesame paragraph.
6. If, part of the amount of the net insurance claims paid and the amount of the reserve foroutstanding claims set aside in each business year corresponding to the reserve foroutstanding claims set aside in the preceding business year falls short of the amount of thereserve for outstanding claims set aside in the preceding business year, the deficit shall be
added to the contingency reserve to be set aside under the stipulations of Paragraph 1.
7. The amount of that part having become unnecessary to be refunded out of the reserve forrefunds provided under Paragraph 3 shall be transferred to the contingency reserve.

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Attachment

Attachment 2-1 Report Concerning the Earthquake Insurance System (1965)

Report Concerning the Earthquake Insurance System
April 23, 1965
To: Kakuei Tanaka, Minister of FinanceTaizo Ishizaka,
Chairman of the Insurance Council
Concerning the detailed measures for the establishment of earthquake insurance systems about
which the Council was consulted on July 13, 1964, the opinions of the Council are summarized as in
the Exhibit, and We are hereby reporting such.
In Japan, which has experienced great societal and economic damage due to earthquakes, theestablishment of earthquake insurance is one of the most important concerns for insurance systems,
and investigation and discussion about such have been performed since the commencement of such
systems. However, since the frequency and damage levels, etc., of earthquakes are difficult to grasp
statistically, and moreover since there is a possibility that the scale of the losses due to such cansometimes be extraordinarily huge, there are countless difficulties in adopting earthquake insurance
into the insurance systems, and notwithstanding the general requests, except for the special case ofduring wartime, no universal earthquake insurance system capable of contributing to thestabilization of the livelihood of the general people has been realized up to this day.
However, when this is viewed over a long period, the total amount of damage by repeatedearthquakes is considered to be not necessarily that much greater than damage by fire, it would notnecessarily be impossible to incorporate such into the insurance systems if the state, which canconsider the income and outgo on the basis of long periods exceeding the normal company base isinvolved, and moreover measures to avoid so-called adverse selection are performed, along withmeasures to avoid excess accumulation of losses from earthquakes, and the like.
This Council has discussed various problems concerning the establishment of earthquake insurance
systems from the above point of view and reached the following approximate conclusions.
There are still numerous problems to be solved in this insurance that have been of concern for many
years; however, concerning this insurance, which by its essence embraces difficult problems, it isconsidered that the urgent task is first to attempt the commencement of actually feasible systems,
rather than wishing for ideal ones from the beginning. In the future, we would wish to have
Government and non-life insurance companies implement the specifics more fully as well with evenmore enthusiasm, meeting the needs of society.

95Attachment 2-1 Report Concerning the Earthquake Insurance System (1965)

Attachment

Summary of Earthquake Insurance System(1) Insurable Property (Scope of Object)
The objective of this system is considered to be to contribute toward the stabilization of thelivelihood of general people at times of earthquake disaster, so it is appropriate that the property
insurable be residences (including simultaneous use residences with stores, etc.) and household
goods.
(2) Covered Risks
a. Concerning the cause of losses, not only earthquakes, but also tsunami and volcanic eruptions,arising due to causes similar to earthquakes should be included.
b. Among the events befalling the objects of the insurance due to said reasons, as for events otherthan fire, loss adjustment is considered to be difficult; however, taking into consideration therequests of the general public, not only fire risks, but also the risks of destruction, burying andwashing-away should be covered.
c. As for the losses to be covered, from the problem of actual business, that is, the difficulty ofloss adjustment at the time of earthquakes, and from the point of view of freedom from small
losses, partial losses should not be covered and coverage should be for total losses only;
however, cases that are not total losses physically but are economically equivalent to total losses
should be total losses.
(3) Method of Underwriting
Considering the characteristics of earthquake disasters, the public position should be automatic
attachment. In such cases, following the recent general insurance trend of generalization, suchshould be automatically attached to householders’ comprehensive insurance or storekeepers’
comprehensive insurance handled by non-life insurance companies; however, on the other hand, itwould be reasonable if a way were opened to be able to take out fire insurance with earthquake
insurance attached as an option.

96

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Attachment 2-1 Report Concerning the Earthquake Insurance System (1965)(4) Premium Rates
a. As for premium rates, considering the character of this insurance, it would be desirable for suchto be as low as possible, by such means as squeezing the expense rates to the utmost.
b. From the principle of determination of premium rates, it is natural that there should be quite adifference between rates in accordance with the area, ground or structure; however, due to thecharacter of this insurance, it would be appropriate to make that difference not so large.
(5) Complementary Measures by the Governmenta. The Government would underwrite reinsurance by the excess of loss reinsurance method inorder to cover huge earthquake losses that cannot be covered by the funds of private insurancecompanies.
b. As for the burden of private insurance companies, endangering the ability of companies to meettheir liabilities concerning other existing insurance should be avoided; however, in the light ofsociety's request for this insurance and the public nature of the non-life insurance business, asmuch as possible of the burden should be taken up.
c. On the other hand, when there is a special necessity arising in private insurance companies forthe payment of insurance claims, such as the difficulty of converting owned assets into cash, theGovernment should pay special consideration concerning the procuration, accommodation, etc.,of the required funds.
(6) Payment of Claimsa. The amount of insurance claims to be paid has little social relevance unless such contributes toa reasonable extent to the restitution of things suffering losses due to earthquake; but on theother hand, the burden of insurance premiums on policyholders subject to automatic attachment
and the burden of the insurance claims on the state and insurance companies must be considered.
Additionally, considering the sociality of this system, and for avoiding the accumulation oflosses due to a single disaster, an insurability limit for each property should be established.
Taking into consideration these points, for the time being, at the commencement of thesesystems, policy should be that the amount of claims to be paid should be at least 30% of thecontracted amount of the attached insurance, and moreover, the payment limit for each97

Attachment 2-1 Report Concerning the Earthquake Insurance System (1965)

Attachment

contracted property should be 900,000 yen for residences and 600,000 yen for households,
totaling about 1.5 million yen.
b. In case of the occurrence of extraordinarily huge earthquake disasters, the total amount of
insurance claims to be paid should be limited as determined in advance, and in case the total
amount of losses exceeds the limit, the insurance claims to be paid under the respective
contracts should be reduced in accordance with the proportion exceeded.
The limit of the amount of total insurance claims to be paid should be determined bycomprehensively taking into consideration the diffusion status of the insurance, the burden of
insurance premiums on policyholders, the burden capacity of insurance companies, the financial
status of the nation, and so forth; however, considering the purpose of the establishment of theearthquake insurance system, it would be desirable that such be an amount of an extent that
reduction of claims to be paid would not occur, even in the case of the great earthquake disasters
that could be foreseen for Japan.
(7) Other
Concerning whether or not the associations performing the mutual aid business similar to fire
insurance under special laws should cover earthquake risk in the future, or what kind of measureswould be required in such cases, etc., as the characters and coverage capacity, etc. of theassociations differ from each other, and such is an issue relating to the forms of regulations relevant
to associations, it is not appropriate to discuss said categorically, so taking into consideration theenforcement status of earthquake insurance according to this plan, and as necessary, while paying
attention to a balance with the above stated contents, such should be investigated respectively anddeliberately in the Government.
Contents of Primary Discussions Concerning
Issues for the Investigation of Earthquake Insurance System(1) The Possibility of Earthquake Insurance
The reasons why universal earthquake insurance has not yet been capable of realization until
today, except for the example of the one under the Wartime Specific Non-Life Insurance Law,

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Attachment 2-1 Report Concerning the Earthquake Insurance System (1965)

which ended after an extremely short life, even though Japan has been said to be an earthquake
country, are, first of all, that it’s difficult to use the law of large numbers on such things as
earthquakes in the frequency, in the scale of losses. Secondly, there is a possibility that the losses
caused can sometimes be extraordinarily huge. Incidentally, among the earthquakes that occurred in
the 97 years from the first year of the Meiji era (1868) to 1964, there are 72 occasions for which
damage records are existent, and by estimating the amount of losses that the insured ordinary
properties (residence, store, office, etc.) would suffer at present, supposing such should recur today,
the total loss amounts for said period would be about 2.4 trillion yen, and out of this, it is assumed
that a loss of about 2 trillion yen would arise from a Great Kanto Earthquake recurrence alone. In
other words, compared to fire, which is almost leveling off in frequency and amount of loss, it ischaracteristic of earthquakes that on the one hand there are years without any damage, and on theother hand once earthquakes do occur, extraordinarily huge damages are caused suddenly, so thecoverage capacity of private non-life insurance companies alone could never ever deal with such.
Therefore, earthquake insurance has been a concern since the introduction of modern insurance
systems in Japan, and solutions for said problem have been attempted several times up to the present.
Additionally, using the recent Niigata Earthquake as a positive stimulus, the necessity of earthquake
insurance has become a social concern again, and the realization of such is strongly desired in theDiet as well, where there was a resolution that the establishment of said should be fundamentallyinvestigated and that further preparations and enhancement of the non-life insurance systems inJapan should be attempted.
This Council was consulted for deliberations on concrete measures concerning earthquake
insurance, and we could not help investigating the question of whether it would be possible to coverearthquake disasters with insurance systems. Needless to say, this poses extremely difficult issues.
However, when viewing such over a long period, since the total amount of damage by earthquakes
is not necessarily considered to be so much larger than the amount of damage from fires, evenprivate insurance could sufficiently deal with such if huge earthquake disasters were excluded.
Therefore, it would not necessarily be impossible to incorporate such into the insurance systems if
the state, which can consider the income and outgo on the basis of long periods exceeding thenormal company base is involved, and moreover measures to avoid so-called adverse selection are
performed, along with measures to avoid excess accumulation of losses from earthquakes, and the99Attachment

Attachment 2-1 Report Concerning the Earthquake Insurance System (1965)

like.
Thereupon we performed investigation of issues concerning the design of the insurance as follows,on the basis of the recognition that the objective of the establishment of this insurance system would
be to contribute to the stabilization of the livelihood of the general people at times of earthquake
disasters.
(2) The Insurable Property
Concerning the insurable property, that is, the objects to be insured, though there is an opinion
that these should be areas that contribute directly to the recovery of production facilities that
suffered damage (industrial risks) but, at present, in the field of fire insurance for business as well,
as for industrial risks such as factories or storehouses, it is determined that the risk due toearthquakes is covered by special clause for earthquake risk coverage, and from the point of viewthat the objective of the establishment of this system is to contribute to the stabilization of
livelihood of the general people at times of earthquake disasters, as for the objects to be insured,
residential buildings and so-called simultaneous use residences, which are used simultaneously withstores, etc., should be considered first.
As for movables, there was an opinion that such should be excluded since loss adjustment isdifficult; however, from the present situation in which there are many who do not possess houses,
and also the possibility that disasters could become even more massive in human terms since atightfisted mentality concerning trying to save households would operate at such times, wereconciled our opinions to include households among the insurable property.
(3) Risk Covereda. As for the causes of losses, there was an opinion that such should be limited to earthquakes andan opinion that volcanic eruptions and tsunami by earthquake should be included. The grounds
for the opinion that such should be limited to earthquakes were that the risk of volcanic
eruptions and tsunami are regionally determined, so depending on the method of underwriting,there is a fear of adverse selection; however, at present both are exempted in ordinary insurance,
and also since these are disasters arising due to the same cause as earthquakes, we reached theconclusion also that such should not be excluded from the viewpoint of an even societal

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Attachment 2-1 Report Concerning the Earthquake Insurance System (1965)

balance.
(Note) When classifying the estimated amount of damages (converted to market value) to generalrisks due to the earthquakes from 1868 to 1964, grouped by cause, damages due to volcanic
eruptions in this period were extremely slight, with washing-away damage due to tsunami at
about 11 billion yen, the amount of fire damage due to earthquakes at about 1.5 trillion yen, anddestruction damage, etc., due to earthquake at about 800 or so billion yen.
b. Next, the scope of risks covered, that is, concerning losses befalling the objects of insurance
due to the causes indicated in a., there was an opinion that such should be limited to fire, and an
opinion that not only fire, but also destruction, burying and washing-away should be included.
The grounds for the opinion that such should be limited to fire were that making correct loss
adjustments is considered to be difficult for damage by destruction and burying, etc. Thus it
wouldn’t be appropriate for this insurance, which would be concurrent with major disasters, that
if said were limited to fire risks, the rates could be relatively low, and that from the viewpoint of
the coverage capacity of the insurer, if it were limited to fire, the claims to be paid could bemade large, etc. On the other hand, there was the counter argument that if only fire risks werecovered, there would be such problems as that fire fighting by the people themselves would be
passive and moreover there would be a danger of creating moral hazard. And, additionally loss
by fire after destruction could not be an insurable event. Finally, from the point of view ofattempting a balance among the victims due to the same disaster, and also from the request by
the general public toward this insurance, there was a strong opinion that to cover fire risks alone
would be an inept solution and merely a half-fulfillment of society’s demands, and we arrived at
the conclusion that the scope of coverage should not be limited to fire but should include
destruction, burying and washing-away.
c. As for the losses that are to be covered, whether or not total loss such as total loss by fire orcomplete collapse alone should be covered, or whether or not a particular loss such as half loss
by fire or half collapse should be covered became an issue. One of the reasons for the opinion
that partial loss should be excluded was the actual problem of the difficulty of loss adjustment,
and taking into consideration that partial loss coverage is not so meaningful, considering thefact that the payment amounts themselves for this insurance would be small because of theinsuring conditions or payment conditions which are stated later, it was determined that only101

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Attachment 2-1 Report Concerning the Earthquake Insurance System (1965)

total loss would be covered. However, handling of cases in which a physically less than total
loss is equivalent to a total loss in economic terms became an issue, and there were no
objections to such being included under total loss. At any rate there were strong opinions thatsince loss adjustment at the time of earthquakes would be concurrent with many difficulties in
actuality, performance of joint adjustment by all of the companies may be necessary.
d. In relation to the insurable risks, we performed investigation concerning establishment of
natural disaster insurance, including wind or water damage due to typhoons, etc., together withearthquakes; however, since there is specificity as for the time and area for wind and water
damage, there is an extremely strong fear of adverse selection, and then the amount of payments
could be huge due to such. And in addition there are many problems from the viewpoint ofmethods of underwriting or rates, etc. We considered it to be appropriate to make efforts
towards the establishment of earthquake insurance for the time being, and as for wind and water
damage insurance, to await future investigation.
(4) Methods of Underwriting
As for the methods of underwriting the insurance contracts, it would be difficult for such to beestablished as insurance through a voluntary and independent insurance system due to thecharacteristics of earthquake disasters, and since it would be necessary to have many participants
universally, it would be necessary to adopt the method of attaching such automatically to existing
fire insurance for dwellings. The problem is to what existing insurance such should be attached. At
present, in the field of fire insurance for dwellings there are ordinary fire insurance andcomprehensive insurance (householder’s comprehensive insurance, storekeeper’s comprehensive
insurance), the latter of which has a wider scope of coverage compared to the former, and whether
said should be automatically attached to both of these or automatically attached only tocomprehensive insurance became an object of discussion.
The first method of said being automatically attached to both ordinary fire insurance andcomprehensive insurance (i.e., the method of deleting the immunity clause due to earthquakes in fire
insurance policy conditions) is as it were a method of leaving no selection for policyholders, andthough the most participants universally could be obtained, it would not be appropriate to take away
the freedom of general policyholders and have them bear such an expense of additional insurance

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Attachment 2-1 Report Concerning the Earthquake Insurance System (1965)

premiums, and also the more universal the policyholders were, the greater the amount of loss thatwould accumulate due to a single risk, and thus such would create more and more problems for
insuring conditions and payment conditions as stated later.
Therefore, the method of leaving room for selection, that is, the plan to attach said automaticallyto comprehensive insurance is considered to be the most appropriate. In this case, due to the evenmore serious request for a public aspect because of the involvement of the state in this insurance, wemust consider the problem of automatic attachment to specific insurance; however, generalization of
insurance is at present the world trend, and since so-called all-risk insurance is considered to be thegoal to which non-life insurance should strive in the future, there is no particular issue here.
However, on the other hand, since it would be inappropriate to ignore policyholders who desire
coverage of earthquake risk only, exclusive or fire risks, there was a strong opinion that we must
think out separately the method for opening a way for voluntary attachment to ordinary fire
insurance. However, the method of voluntary attachment has problems since it would cause thescale of insurance groups to be unstable, and thus make the prediction of income and outgo difficult,and there is the problem remaining that if the premium rate in such cases were to be higher than therate of automatic attachment to comprehensive insurance due to the problem of adverse selection,etc., opening the way for voluntary attachment would be meaningless, so it is necessary to be
sufficiently deliberate about implementation.
(Note) Concerning the internal and external examples with regard to methods of undertaking, inthe case of Japan’s Wartime Specific Non-Life Insurance Law, policies were capable of being
made both by the method of automatic attachment to fire insurance and by voluntary andstandalone earthquake insurance, and from examples of foreign countries, it has been reported
that in countries where serious disaster insurance systems have been adopted (Spain, New
Zealand), there is a public position that such is automatically attached to fire insurance andcomprehensive insurance, etc., without any room for selection, while in countries where
voluntary systems such as standalone earthquake insurance or seismic risk expanded coverage,
have been adopted (US, Canada, etc.), there are problems such as the vicious cycle of increasing
premium rates and the arbitrariness of participants, along with the difficulty of prediction ofincome and outgo.

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Attachment 2-1 Report Concerning the Earthquake Insurance System (1965)(5) Premium Rates
a. Concerning premium rates, even if the state does the reinsurance, rates should have a rational
basis in terms of commercial profit, and from the character of this insurance, for example as for
expense rates, it is desired that such should be squeezed to as low as possible without being
trapped by the computation of ordinary rates.
b. From the principle of determination of premium rates, it is natural that there should be quite adifference between rates in accordance with the area, ground or structure; however, due to thecharacter of this insurance, it would be appropriate to make that difference not so large.
c. In any event, the opinion was strong that it is proper that the increased proportion of insurance
premium burden of the policyholders due to automatic attachment of earthquake insurance
should be limited to within at most about 50%.
(6) Insurance Organizations
Concerning insurance organizations, though there was the opinion that due to the characteristics
of earthquake insurance, we should not be corralled in by the common examples of businessinsurance, and that such should be handled under national management and be compulsory
insurance, there are various issues in compulsory insurance systems, and rather than a purely
national insurance, it would be more efficient socially and economically to activate the existing
private non-life insurance organizations, and moreover taking into consideration that private
insurance companies, etc., have a reasonable extent of coverage ability along with the positive
attitude to take on earthquake insurance, it is considered that it would be more reasonable to fulfill
the objective in a form in which the state would complement the private lack of capacity from a
position of being able to consider long-term income and outgo.
These methods of complement by the state were considered: a. state perform reinsurances, b. thestate loans to the insurance companies, c. the state performs loss compensation to the insurancecompanies, d. a semi-official special corporation performs earthquake insurance, e. insurancecompanies cover losses up to a certain amount and for losses exceeding such, the state would offer
support in some form, etc.
The last method is the one adopted in Laws on Compensation for Nuclear Damage, and as it isproblematic to perform financial support to policyholders only at the time of disaster, in addition, in

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Attachment 2-1 Report Concerning the Earthquake Insurance System (1965)

the case of said Law, there are special circumstances such as the liability without fault imposed oncommercial nuclear operators, the policy to foster the nuclear business, and the contents of support
by the state being uncertain, etc., and it was determined that it would not be appropriate to adopt thismethod for earthquake insurance.
In the plan for establishing a special corporation, the private insurance companies and the state
would perform joint investment, and the insurance companies would function as deputies in thebusiness of underwriting policies; however, the problem is that the coverage capacity is for the time
being limited to their capital, and it would be difficult to secure equity participation in advance tothe extent sufficient to be able to perform the payments expected in earthquake insurance, so thisplan was not adopted.
Next, the method of the state performing loss compensation was the one used in the Wartime
Specific Non-Life Insurance Law, and it is superior to the plan for a special corporation since priorequity participation is not required; however, it could be equivalent to nationally-managed insurance
depending on how it is handled, and additionally there is the difficult problem of how single-year
losses and profits could be incorporated into earthquake insurance, which has in an actual sense thecharacter of long-term insurance.
Therefore, as result of comparison and investigation of the merits and demerits of each method,
we came to the conclusion that the method of having the state perform reinsurance at a fair charge
would be most the rational. Of course, even though it is subject to the collection of reasonable
reinsurance fees by the state, since the occurrence of losses due to earthquake is unpredictable, thepayment of reinsurance preconditioned by collections that are never correctly predictable isproblematic from the standpoint of taxpayers, so there was an opinion that rather than this, themethod of long-term, low interest loans might be more appropriate. However, the fact of insurancecompanies bearing a huge amount of loan debts for long periods would make their coveragecapacity toward general insurance contracts extremely weak, and it would also be recognized to be
problematic for international credibility since the insurance industry had not been a borrower, so
after all it was determined that the method of the having the state perform reinsurance would be
most appropriate. However, even in the case of the reinsurance method by the state, as a situation
expected to occur of the difficulty of exchanging company owned assets into cash concerning theprivately borne portion, it is going to be necessary to think the special loan method out.

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Attachment 2-1 Report Concerning the Earthquake Insurance System (1965)

For the method in the case of reinsurance by the state, a. the method of reinsurance of a certain
proportion all the time, and b. the method of reinsurance of losses exceeding a certain amount wereconsidered, and as for the proportional reinsurance method in a., the Government having to makepayment for all small losses would be cumbersome, and since support by the Government would not
be necessary for losses within the scope of private coverage capacity even in earthquake disasters, it
was recognized that the excess loss reinsurance method of b., in which the retention limit of private
insurance companies is obvious, would be more appropriate. Additionally, concerning the specificsof the excess loss reinsurance method, various methods can be considered, and there was also a
concept in which the reinsurance would be separated into two stages, with the state covering acertain proportion in the first stage and the state underwriting the reinsurance of the entire amount in
the second stage.
(7) The Payment Conditions and the Amount of Insurance Claims
How to decide insurance claims to be paid was the point with the largest number of issues in the
progress of the deliberations, in relation to expected amounts of losses, coverage capacity of private
insurance companies, financial capacity of the nation, rates, etc.
a. Since earthquake damage can sometimes be extraordinarily huge, for example, paying thewhole of the insured amount of attached comprehensive insurance is considered to be
impossible, even with the financial capacity of the nation, so there is the problem that arises ofcoverage proportions or payment proportions concerning earthquake disasters. However, when
considering a fixed rate insurance claim payment proportion for all cases preconditioned on the
return of an extraordinarily great earthquake such as the Great Kanto Earthquake, it would
naturally be unavoidable to set the proportion low; however, then there is the problem that such
does not accommodate society’s request for earthquake insurance. Therefore, recognizing theactual fact that in the case of extraordinarily great disasters, it can be expected that neither theGovernment nor insurance companies have sufficient capacity to deal with said, and for thegreater protection of policyholders in the case of earthquake disasters of the normally possible
extent, it is possible to consider a method of setting stages of payment proportions inaccordance with the degree of disaster, and to heighten the payment proportion in the case of
relatively small scale losses. However, such a method poses numerous difficulties such as: it106Attachment

Attachment 2-1 Report Concerning the Earthquake Insurance System (1965)

would harm fairness among the policyholders, there being no precedent examples among
existing kinds of insurance, payment to each policyholder would become impossible unless all
loss adjustments were finished, it would not be realistic since the right relationship between
policyholder and insurer would become muddled concerning losses arising near the boundary of
the loss amounts for which payment proportions are different, and it would be almost
impossible to set up rational premium rates, etc.--so this was not adopted.
b. Accordingly, it was determined that the payment proportion should be a fixed rate, and in suchcases, even if such were set as low, it would not necessarily be possible to say that an
extraordinary disaster would not occur, so it is inescapable to consider a system in which, in
preparation for such an extraordinary disaster, the limit of burden would be determined inadvance, and in case of the occurrence of an extraordinary disaster exceeding such a limit, theinsurance claims to be paid under the respective contracts would be reduced in accordance withthe proportion of the total amount of loss to the limit amount, in other words, a system ofpeaking-out of the total amount of insurance claims to be paid. There were dissenting opinions
toward this concept if it were preconditioned by the involvement by the nation, such as that aneffective remedy should be displayed in the very case of occurrence of extraordinary huge
losses, and that for policyholders the possibility of reduction of insurance claims to be received,
the key of insurance, is perhaps persuasive at the time of taking the policies out but not at thetime of suffering a disaster, and there is a possibility of a fear of causing an unpredictablesituation for insurers, and that such would harm fairness among policyholders; however, wecame to the conclusion that this peaking-out system would be unavoidable since there is a limit
to the burden capacity of the non-life insurance companies and the financial capacity of thenation. However, needless to say, such a system is not desirable for a purpose of earthquake
insurance after all, and it should rather be said to be unavoidable that the limit should be as highas possible and also that deliberate consideration would desirable so policyholders could gain
sufficient understanding in advance.
c. Next, concerning how to determine the amounts of insurance claims to be paid specifically,society’s request for this insurance and premium rates became issues. In the case of thisinsurance as well, in order to consider that insurable interest is in the compensation of
proprietary loss, there would be no objection to the point that insurance claims to be paid would107

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Attachment 2-1 Report Concerning the Earthquake Insurance System (1965)

be meaningless in a social sense unless such could contribute a reasonable extent to therestoration of the things suffering damages due to earthquake. However, in the other aspects,
considering the fact that the burden capacity of the insurers has limits, and that it would beinappropriate to force policyholders to bear an excess burden of insurance premiums forearthquake insurance, since the public position is automatic attachment, it would be
unavoidable that the payment rates, etc., should be by themselves restricted. Moreover, becauseof the fact that it would not be necessary to remedy extremely large amounts of personal assets
by insurance in which the nation is involved, and it would be necessary to avoid theaccumulation of losses due to a single disaster as much as possible, it would be necessary to set
up the limit for the insuring amount for each contracted object.
Taking into consideration the above points, we came to the conclusion that the public position
for the amount of insurance claims to be paid would be no less than 30% of the amount insuredof the principle insurance contract to which such is incidental, and besides, it was determinedthat an insuring restriction of about 3 million yen for buildings and 2 million yen for households
would be performed, and it seems appropriate to set up a payment limit of 900,000 yen forresidences, and 600,000 yen for households, for a total about 1.5 million yen.
d. Though there is the extremely difficult problem of what we should consider to be extent of thecoverage capacity of the Government and private companies, we came to the following
conclusion with regard to such. For non-life insurance companies, endangering their liability forother existing insurance by performance of this insurance should be avoided, and though wehave to consider the increase of payments due to maritime insurance and business properties
earthquake insurance, etc., in the case of the occurrence of earthquake disaster, at the same time,in the light of society’s requests for this insurance and the public character of the non-life
insurance business, as much burden should be borne as possible. On the other hand, as for theburden limit of the Government in the case of the occurrence of extraordinarily huge disasters,
since huge amounts of funding are required for disaster restoration of communal facilities, theprocurement of financial funds in such cases can be problematic, and the amount of the limit ofburden by the Government and reinsurance premium rate should be reasonably stipulated byhaving these mutually related.
However, if this insurance is adopted, effort should be made so that a situation of reduction of108

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Attachment 2-1 Report Concerning the Earthquake Insurance System (1965)

insurance claims to be paid would not occur even in the case of the return of an event of at least
the size of Great Kanto Earthquake.
(Note) It is reported that even in the case of the return in 1966 of an earthquake disaster of thesize of Great Kanto Earthquake, the total amount of insurance claims to be paid under theabove conditions would not reach 300 billion yen, and non-life insurance companies would
make efforts to cover about 30 billion yen for the time being.
However, it would be necessary to raise the limit of the total insurance claims to be paid inaccordance with increases in the predicted payment amounts after the improvement ofdiffusion of the insurance, and also to raise the limit of burden by the insurance companies
in accordance with increases in the coverage capacity.
(8) Other
Concerning whether or not associations performing the mutual aid business similar to fire
insurance under special laws are to cover earthquake risk in the future, and if so, whether or not
such should be accepted, and what kind of measures would be required in such cases, etc., were
issues at this Council.
Concerning this, as the character or coverage capacity, etc. of the associations are different, it
would not be appropriate to discuss them categorically; however, at least, for these associations tocover earthquake risk, such should be preconditioned on maintenance of soundness of theassociations, sufficient legal regulations and supervision being performed from the point of view ofprotection of policyholders, methods for risk diffusion to all over the nation being taken, having
reasonable coverage capacity for the predicted accumulation of losses, etc.
On the other hand, it would be natural for systematic adjustment concerning the system for which
the Government performs reinsurance to be attempted between the insurance business and themutual aid business, which is similar to insurance; however, preparations have been insufficient at
the present stage and this Council decided not to come to any conclusion on this occasion.
It is considered that these problems should be respectively and deliberately investigated on thepart of the Government, taking into consideration the actual development of the plans in the abovethat we investigated, and considering balance in the contents in accordance with necessity.

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Attachment 2-2 Report of the Insurance Council [extract]

Report of the Insurance Council [extract]
June 14, 1979
To: Ippei Kaneko, Minister of FinanceShuzo Hayashi, Chairman of the Insurance Council
In response to the recent changes in the environment of the insurance business, the Council
determined to perform deliberations from a new point of view concerning system for future
insurance business at the 39th General Meeting on November 7, 1978, and as results of theaccumulated of investigations since then, the opinions of the Council are summarized as in the
Exhibit, and We are hereby reporting such.
Section 2 Concerning Earthquake Insurance System Revisions
The earthquake insurance system was commenced in 1966, and in the approximately 10 several
years since then, partial improvement concerning the details has been performed as necessary;
however, until now overall reconsideration has not been conducted for the systems. Nonetheless,from recent trends of public opinion, etc., we have recognized that fundamental reconsideration isnecessary; the Council has discussed concerning various issues since last year and reached thefollowing conclusions.
Outline of Earthquake Insurance System Revisions
Among the ongoing system, concerning the “insurable properties” (scope of objects), “coveredrisks” (causes of events and forms of risk) and “insurance mechanisms” (reinsurance by theGovernment by the excess of loss reinsurance method), there are no systemic issues for thecontinuation of these; however, revisions should be performed on the following points.

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Attachment 2-2 Report of the Insurance Council [extract]

1. Matters requiring revisions and the details of the revisions(1) Concerning the losses to be covered
It is stipulated in the ongoing system that only total loss shall be covered; however, partial
loss coverage should be introduced in some form for the enhancement of the system.
The primary reason why the ongoing system originally stipulated that coverage should be
only for total loss is the quantitative and qualitative difficulty of loss adjustment at the time ofearthquake disasters. In other words, it is actually impossible to say that making payments on
insurance claims in accordance with the respective loss ratios in the case of earthquake
disasters, and even if we introduced partial loss coverage, it is judged that there would be noother way but to make payments at a certain rate in accordance with the approximate stage ofthe damage.
It is desirable that loss adjustment standards of the non-life insurance companies andnational damage certification standards be consistent concerning this type of insurance;
however, as for the latter, at present integrated standards have been created with regard to total
destruction, total burn down, washing away and half destruction and half burn down ofresidences, and there are no specific standards set up for partial loss. Moreover, as forhousehold goods, the national damage certification standards do not at all refer to such atpresent.
As stated later, in the deliberations on this occasion, the measure of having different
insurance handling for cases of huge earthquakes and for cases of mid-to-small earthquakes
was not adopted, assuming the case of earthquake disasters covering large areas andconsidering the loss adjustment ability of non-life insurance companies on such occasions, due
to such requests as mass disposition, rapidity of adjustment, and fairness. If there are certifying
documents with regard to the affliction issued generally by public organizations on the basis of
the national damage certification standards, it will be unavoidable to adopt the method, etc., ofreferring to said, and taking into consideration these situations concerning the buildings forresidential use and household goods, a realistic policy should utilize the following method.
a. Concerning buildings for residential use, partial losses that are to be covered should be
limited to cases of half loss (cases equivalent to partial destruction and partial burn down of thenational damage certification standards), and while the entirety of the amount insured of the112

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Attachment 2-2 Report of the Insurance Council [extract]earthquake insurance is paid in the case of total loss, in the case of half loss, half the amount ofsuch should be paid. Additionally, concerning the coverage of partial losses as well, which are
not to the extent of half loss, various measures were discussed; however, we came to theconclusion that said is impossible in the present situation where we cannot attain an
appropriate means of solution concerning adjustment capability and fairness among thevictims.
b. Concerning the household goods, the difficulty of loss adjustment is even greater,
qualitatively and quantitatively, compared to cases of buildings, and we recognize that it would
be impossible to introduce half loss coverage on the basis of individual adjustments. As for the
possible methods of adjustment, we recognize that there is no other way but to pay some kindof benefits in accordance with the loss certification of the buildings containing the household
goods. On the other hand, the damage level of the household goods does not necessarily
correspond to the damage level of buildings containing such, and excluding special cases suchas destruction by fire and washing-away, it is recognized that the loss proportion of thehousehold goods as a whole is relatively light.
Therefore, in case the household goods is not in the status of total loss but the building
containing such has damage of more than half loss, it is reasonable to pay flat benefits at a low
rate such as

about 10% of the amount insured of the earthquake insurance also in the sense of

avoiding unfair results among the insured of the household goods.
(2) Concerning the payment of insurance claims (restrictions on contracted amounts)
As stated later, from the characteristics of earthquake disasters, earthquake insurance iscontracted incidental to the fire insurance for dwelling; however, it is impossible to pay theentire amount insured of the principal contracts even with the financial capacity of the nation,and moreover we recognize that it is not necessary to go so far as to remedy an extremely large
amount of personal assets using insurance in which the state is involved, and likewise in theongoing systems, there should be a limit set to the insuring proportion and insuring amount foreach of the contracted objects.
As for the insuring proportion, there is a general criticism that the ongoing 30% gives too
small a compensation, and the raising of said is recognized to be necessary; however, since
there is a limit to the coverage capacity of the private insurance companies and financial

113

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Attachment 2-2 Report of the Insurance Council [extract]

capacity of the nation, it is appropriate to set 50% as the upper limit. At the same time,
considering the point of the burden of premiums on policyholders, it should be determined that
more space for selection be left for policyholders as for the amount insured, it should bedetermined that an amount within a scope of 30% to 50% of the amount insured of theprincipal contract can be selected as the amount insured for the earthquake insurance.
The reason why the lower limit is 30% is that amounts of earthquake insurance of less than
30% are recognized to make little sense in terms of society.
As for the limit of the insuring amount, such makes little sense in terms of society unless it
contributes greatly to the restoration of the buildings and household goods suffering losses due
to earthquake, and at that time the weight of the number of contracts undergoing insured
amount restrictions due to the limit amount, present day standard construction costs per
dwelling and the amount of household goods retained in the standard family, etc., should beconsidered. At the same time, as for restrictions on insurance in which the state is involved, theburden of insurance claims on the state and non-life insurance companies, etc. should beconsidered. Comparing these points, it is desirable that such should be ten million yen forbuildings for residential use, and such should be five million yen for household goods.
(3) Concerning undertaking methods
From the characteristics of earthquake insurance, arbitrary and independent insurance
systems are difficult to establish, so the adoption is unavoidable of the method of earthquake
insurance incidental to the existing fire insurance for dwelling as is presently done; however, as
stated above, by expanding the scope of losses to be covered and raising the insuring
proportion and the limit of the insuring amount, it is expected that the burden of insurance
premiums on policyholders will increase, so the method of ongoing automatic attachment tocomprehensive insurance is a problem. However, to make such completely arbitrary is notrealistic either from the standpoint of the diffusion rate and predictions of income and outgo,
etc., so the method of automatic attachment in principle to all fire insurance for dwellingshould be adopted.
Additionally, as stated above, as for the amount insured of earthquake insurance, as it ispermitted to select between 30% to 50% of the amount insured of fire insurance to which suchis incidental, the selective undertaking method of total loss only coverage or partial loss only114

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Attachment 2-2 Report of the Insurance Council [extract]coverage concerning the loss to be covered should not be adopted since quite a deal of turmoil
can be expected at the time of undertaking as well as when damage is suffered.
(4) Concerning premium rates
Concerning premium rates, it is needless to say that, due to the nature of this insurance, suchshould be as low as possible by squeezing operating cost to the utmost. Concerning thedifferences, etc., among the areas, at present, the principle is not to make the difference solarge, considering the point of automatic attachment; however, concurrent with the changes in
the undertaking method, it is desirable that calculations should be made so that the degree ofrisk will be reflected in the rates as fully as possible. Additionally, at such time, buildings andhousehold goods should be under separate systems.
2. Other matters deliberated(1) The Council again discussed concerning the handling of extraordinarily great disasters thatwas mentioned as an issue in the Report Concerning Earthquake Insurance Systems in 1965. Inother words, when preconditioned by the re-occurrence of extraordinarily great earthquakes
such as the Great Kanto Earthquake and setting up a fixed rate insurance claims payment ratio
for all cases, setting such ratio low would be unavoidable as a matter of course, so wedeliberated on the possibilities concerning measures for greater protection of policyholders in
the case of earthquake disasters of the normally possible extent, compared to cases of hugedisasters.
However, the conclusion was the same as the result of the previous discussions: such method,
first of all, does not go well with the original purpose of earthquake insurance systems, and in
addition, there are various difficulties in actual issues such as that stipulation clear standards forseparating huge disasters and mid-to-small disasters is difficult, and thus this was not adopted.
Additionally, there was a discussion that huge disasters of the Great Kanto Earthquake classshould be handled separately, outside of the insurance systems, but this was a discussion ofhoping for infinite financial capacity in the nation, and the Council was unable to approve suchan idea.In conclusion, we will follow the idea and method of peaking-out in ongoing systems.
(2) Private non-life insurance companies should share their roles as much as possible in response
to society’s requests concerning this insurance; however, at the same time, the situation of them115

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Attachment 2-2 Report of the Insurance Council [extract]

being incapable of fulfilling their liabilities concerning other insurance should be avoided, andimposing burdens that would make difficult the continuation of business activity after theoccurrence of huge disasters would be problematic. Therefore, it is necessary that the limit
amount of liability of private non-life insurance companies should be stipulated according to acertain standard so that burdens exceeding the balance of liability reserves of earthquake
insurance will be accepted socially in the character of private business, and coverage will be of
the amount judged to be generally expected.
Additionally, concerning the funds for payment of insurance claims, when payments
exceeding the balance of the liability reserves of earthquake insurance must be made as a matterof course, even within the scope of the balance, and when there is a special necessity arising inprivate insurance companies, such as difficulty of conversion of owned assets into cash, theGovernment should pay special consideration concerning the procurement, accommodation,etc., of the required funds.
(3) In the progress of the deliberations, the insufficiency of the methods for ensuring
comprehension among policyholders concerning this insurance in the non-life insurance
business sector became a frequent issue. As there are more matters that will be left to the choiceof policyholders in the future, the whole business sector should make the utmost efforts towards
thorough comprehension, and especially, concerning the details of total loss and half loss,
explanations should be made on the basis of documentation at the time of underwriting policies
so that sufficient comprehension be ensured.
(4) In the case of the occurrence of unfortunate trouble with policyholders at the time of suffering
disasters, in order to attempt early settlement of such, preparations should be advanced innormal times so that, as soon as a disaster happens, a claim disposition organization can beinstalled in each region, including fair third parties, with the right timing.
(5) Finally, we recognize that it is necessary to take some measures so that in a situation where awarning statement against earthquake disaster under the stipulations of the Large Scale
Earthquake Countermeasures Act (Law No. 73 of 1978) has been issued, insurance companies
can reject the undertaking of contracts.

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Attachment 3-1 Report of the Project Team for the Earthquake Insurance System [extract]

Report of the Project Team for
the Earthquake Insurance System [extract]
November 2012Conclusion
To conclude this report, we will note the issues for revising the earthquake insurance system whichmust be addressed in three stages: first, the most pressing issues; second, other issues that require
prompt attention; and third, issues that will require further debate.
First, the most pressing issue is that private reserves were severely depleted in the Great East Japan
Earthquake, while other massive earthquakes are anticipated in the future. Urgent steps should betaken to improve the resilience of the earthquake insurance system.
Next, insurance premium rates and marketability are issues that require prompt attention although
their solutions will require more time. The source models of the Headquarters for Earthquake
Research Promotion, which provide the basis for computation of earthquake insurance premium
rates, are currently undergoing revision, as stated earlier; and insurance premium rates will need tobe revised according to the new source models. The effects of revised source modeling cannot yet
be foreseen, and there are still elements of uncertainty; however, the project team's report indicatesthe framework and general directions of the revision in relation to premium rates and marketability.
The details of premium rate revisions and marketability will need to be worked out in the futureusing the revised source models, based on this report.
The project team has been able to determine certain directions for the most pressing issue, which isthe need for ways to make up for the shortfall during the period after private reserves are exhausted
and before a supplementary budget is provided; and for other issues requiring prompt attention,
namely equalizing the differences among premium rates in earthquake insurance zones andclarifying the earthquake resistance class discount system. However, continued debate will beneeded on other issues such as discounting or augmenting rates based on location and introducing
an option for 100% coverage with benefits payable only in the event of a total loss. The
administration will need to work intensively to improve earthquake insurance as a source of peaceof mind in earthquake-prone Japan, based on this report. Also, in revising the earthquake insurance

117Attachment

Attachment 3-1 Report of the Project Team for the Earthquake Insurance System [extract]system, it will be necessary for both the public sector and the private sector to make every effort toobtain the understanding of the general public by means of thorough explanations, including thevery purpose and spirit of the earthquake insurance system, from the standpoint of promoting morewidespread use of earthquake insurance.

118

Attachment

Attachment 3-2 Brief Summary of Discussions in the Follow-up Meetingsby the “Project Team for the Earthquake Insurance System” [extract]

Brief Summary of Discussions in the Follow-up Meetings by
the “Project Team for the Earthquake Insurance System” [extract]
June 2015
Introduction
The “Project Team for the Earthquake Insurance System” (hereafter, the “Earthquake InsurancePT”) was established under the Ministry of Finance in April 2012 to consider points to be revisedwith regard to the earthquake insurance system in light of the Great East Japan Earthquake. After
having 12 discussions, the Earthquake Insurance PT compiled a report (hereafter, the “Report of the
Earthquake Insurance PT”) in November of the same year.
The Report of the Earthquake Insurance PT summarized various issues for a future review of theearthquake insurance system while stating in its general remarks that “the current system could ingeneral be considered to have effectively functioned even for the Great East Japan Earthquake.
While maintaining the basic framework of the current system, necessary revisions should be madeso that it will be improved to serve its role providing a sense of security.”
Since November 2013 when about one year had passed from the publication of the Report of the
Earthquake Insurance PT, the PT has held three follow-up meetings, in which the situations, etc.
surrounding the issues summarized in the report, issues that have already been dealt with, and thestatus of progress of issues that have continued to be dealt with in the non-life insurance industry
were confirmed and the chairman summed up the meetings.
The chairman's summary indicated that another follow-up meeting should be held mainly to
discuss issues such as “simplification of claim assessment,” “subdivision of the damage
classification” and “claim assessment of appurtenances to the condominium.” Because there wasprogress in consideration of these issues in the non-life insurance industry, the PT resumed thefollow-up meeting in February 2015 and has discussed the issues seven times since its fourth
meeting.
This abstract briefly summarizes the outcome of the discussions in the follow-up meetings about
the four topics of “simplification of claim assessment,” “claim assessment of appurtenances to thecondominium,” “subdivision of the damage classification” and “earthquake insurance premium
rates.”The non-life insurance industry, the General Insurance Rating Organization of Japan, theFinancial Services Agency, the Ministry of Finance, and other parties concerned are expected toproceed with consideration based on this brief summary.

119Attachment

Attachment 3-2 Brief Summary of Discussions in the Follow-up Meetingsby the “Project Team for the Earthquake Insurance System” [extract]

IV. Earthquake insurance premium rates
Earthquake insurance premium rates were revised in July 2014 in light of the issues related toearthquake insurance zone, location premium, location discount, and discount forearthquake-resistant construction summarized in the Report of the Earthquake Insurance PT.
The General Insurance Rating Organization of Japan conducted verification based on the newhazard map published by the Headquarters for Earthquake Research Promotion in December 2014
and as a result reported the need for a significant rise in earthquake insurance premium rates.
Accordingly, the Earthquake Insurance PT discussed matters to be noted when revising earthquake
insurance premium rates and remaining issues.
According to the framework for earthquake insurance premium rates, the General Insurance
Rating Organization of Japan calculates the rates, and the Financial Services Agency examines therates upon receipt of a notification from the Organization. The revision of the rates to be made isalso required to be appropriately considered and conducted by both parties in light of the summaryin the Report of the Earthquake Insurance PT and recent discussions.
(1) Impact of the update of earthquake source models, etc. on earthquake insurance premium rates
The General Insurance Rating Organization of Japan verified the earthquake insurance rates basedon the update of earthquake source models, etc. and reported results that indicate the need for a 28%
rise in premium rates on a nationwide average assuming the current damage classification.
Meanwhile, the Organization indicated that implementing Plan (3) (Note from editor) with regard to thesubdivision of the damage classification will result in a reduction of the rise in earthquake insurance
premium rates to 19% on a nationwide average.

120

Attachment

Attachment 3-2 Brief Summary of Discussions in the Follow-up Meetingsby the “Project Team for the Earthquake Insurance System” [extract]

Note from editor: In the Follow-up Meetings by the “Project Team for the Earthquake Insurance System,” the non-life
insurance industry reported that Plans (1) to (3) below were plausible with regard to the division of thecurrent “half loss” into “large half loss” and “small half loss.”
Classification
Plan (1)Plan (2)Total
50% or more
loss
Proportion
Large
30% to 50%
35% to 50%
of damage tohalf loss
the mainSmallstructural
20% to 30%
20% to 35%
half loss
parts
Partial
3% to 20%
loss
Buildings
Total
70% or more
loss
Proportions
Large
40% to 70%
45% to 70%
of floor area
half loss
burned down
Smallor washed
20% to 40%
20% to 45%
half loss
away
Partial
―
loss
Total
80% or more
loss
Large
Proportion
50% to 80%
55% to 80%
Household of damage to half loss
goods
householdSmall
30% to 50%
30% to 55%
goods
half loss
Partial
10% to 30%
loss

Plan (3)40% to 50%
20% to 40%

50% to 70%
20% to 50%

60% to 80%
30% to 60%(2) The revision of earthquake insurance premium rates to be madeRisks of earthquake damage should be reflected in earthquake insurance premium rates swiftly
and appropriately in terms of actuarial science. In addition, from the viewpoint of robustness of theearthquake insurance system, it is pointed out that a rise in earthquake insurance premium rates
should be done once and that the earthquake insurance system and earthquake insurance premium
rates should be as simple as possible.
On the other hand, there is a concern that the sense of burden on the policyholders will increase
because while the earthquake insurance premium rates were just increased by 15.5% on anationwide average in July 2014, the raise to be made this time will increase that level even when
the damage classification is subsidized. Accordingly, from the viewpoint of ensuring the earthquake
insurance signup rate, it is possible that the rates may be raised gradually to obtain theunderstanding of policyholders.
The non-life insurance industry must carefully give easy-to-understand explanations topolicyholders and consumers about the reasons behind the revision of the rates as well as the121Attachment

Attachment 3-2 Brief Summary of Discussions in the Follow-up Meetingsby the “Project Team for the Earthquake Insurance System” [extract]

purpose of raising the rates in stages, if that happens.
(3) Matters to be noted when raising the earthquake insurance premium rates in stages
If the earthquake insurance premium rates are to be raised in stages, the following issues need to
be noted:
1) Until the earthquake insurance premium rates are raised to the level that is appropriate in termsof actuarial science, there will be a premium income shortage for the predicted risk ofearthquake damage (the expected value for claims paid per year; there will be an uncovered
portion). If this situation persists, there is a risk that the robustness of the earthquake insurance
system may be lost.
2) To secure revenue generation covering the expenditures of the earthquake insurance system forthe long term, at least the portion with insufficient premium income needs to be eliminated byadding the corresponding amount to the earthquake insurance premium rates for the following
years. This will place the burden of the uncovered portion that existed before the newpolicyholders signed up for earthquake insurance on the new policyholders. If it takes a longtime until the earthquake insurance premium rates have been raised to a level that is
appropriate in terms of actuarial science, the burden of the uncovered portion will be large, andas a result, the period in which a corresponding amount is added to the insurance premium
rates will be long, which may increase the sense of unfairness among policyholders.
3) If earthquake insurance premium rates are raised in several stages, the period over which
earthquake insurance premium rates are raised will be longer, which may damage the trust ofpolicyholders and consumers toward the earthquake insurance system and earthquake
insurance premium rates.
(4) Matters to be noted regarding differences within an earthquake insurance zone
For the current earthquake insurance premium rates, differences are provided for the threeearthquake insurance zones (groups of the same insurance premium rates) among prefectures
according to the risk of earthquake damage. However, measures to avoid drastic changes where theincrease rate is limited to 30% for each prefecture have been taken to avoid a significant increase inearthquake insurance premium rates, and accordingly, several different earthquake insurance
premium rates are applied even in the same zone.
If, as a result of the revision to be made this time, the number of prefectures where earthquake
insurance premium rates that are different from the original rate for the respective zone increases
further, the premium rate system will become more difficult to understand and the reliability of therisk information communication function held by earthquake insurance premium rates may be lost,as mentioned in the Report of the Earthquake Insurance PT. In addition, it is necessary to note that a
reduction in premium income as a result of the measures to avoid drastic changes also affects thelevels of earthquake insurance premium rates in other regions.

122

Attachment

Attachment 3-2 Brief Summary of Discussions in the Follow-up Meetingsby the “Project Team for the Earthquake Insurance System” [extract]

Therefore, before making a final revision to the earthquake insurance premium rates this time, it
is required that the measures to reviewed to avoid drastic changes so that the existing number ofearthquake insurance premium rates applicable to the same zone will not increase further (that is,the differences within an earthquake insurance zone will not expand).
In addition, it is necessary to remember to consider the direction for reducing the number ofearthquake insurance premium rates applicable to the same zone from the current one (that is,reducing the differences within an earthquake insurance zone) in the future.
(5) Remaining issues regarding earthquake insurance premium rates
1) Differences between earthquake insurance zones
Differences in insurance premium rates between earthquake insurance zones (hereafter,“insurance premium rate differences between zones”) have thus far been dealt with throughintegration of zones, etc. However, the differences may increase through a reflection of a revision,etc. of the hazard maps in earthquake insurance premium rates.
Handling of insurance premium rate differences is summarized as follows in the Report of the
Earthquake Insurance PT:
・Different earthquake insurance premium rates are given by classifying prefectures into
earthquake insurance zones according to a risk such as proximity to a fault.
・Earthquakes causing major damage have been frequently occurring in zones with low
earthquake insurance premium rates, and so in the short term the zone classification does notnecessarily match the actual damage. While there is a limitation in earthquake source models,
making fine differences only in insurance premium rates lacks rationality.
・For earthquake insurance, which is expected play a role as a mechanism of social solidarity,
making extreme differences in the rates is not appropriate.
・Insurance premium rate differences should be reviewed in the direction of leveling them to theextent a rational explanation can be given. However, this leveling of insurance premium rate
differences needs to be considered along with encouraging people to consider earthquake
proofing by providing a discount for earthquake-resistant construction and campaigns for
signing up for earthquake insurance.
Meanwhile, risks of large earthquakes have the characteristic of being leveled over the extreme
long-term, which does not necessarily match the insured period of policyholders, and so there aresome persons who point out that extreme insurance premium rate differences are not desirable.
As for the handling of a discount for earthquake-resistant construction, the discount rate wasincreased to up to 50% in an attempt to enhance the incentive to consider earthquake proofing
when the earthquake insurance premium rates were revised in July 2014. As a result, even forcontracts signed in an earthquake insurance zone with a high earthquake insurance premium rate,etc., if a discount for earthquake-resistant construction is applied as a result of making
earthquake-proof houses, the premium rate differences with other contracts signed in an123Attachment

Attachment 3-2 Brief Summary of Discussions in the Follow-up Meetingsby the “Project Team for the Earthquake Insurance System” [extract]earthquake insurance zone with a low earthquake insurance premium rate will be compensatedfor.
In addition, if a location premium or location discount to be described later can be applied,even for contracts signed in a zone with a high earthquake insurance premium rate, if the locationof the contracts is on land with low location risk, the premium rate differences will be reduced
thanks to a discounted premium rate.
Therefore, it is necessary to consider this matter in terms of not only superficial differences
between zones, but also the mechanism of a discount for earthquake-resistance construction.
2) Location premium and location discountIn order to improve the risk control functionality of the earthquake insurance system, it is bestfor location risks such as tsunami risks in coastal areas, etc. to be reflected in earthquake
insurance premium rates. However, there is an issue regarding whether the reliability of risk
calculation can be enhanced to the extent policyholders can be satisfied with insurance premium
rate differences depending on the location.
This issue also needs to be considered from the viewpoint of clarifying variations in theearthquake insurance premium rates in circumstances where revisions to the earthquake insurance
premium rates can continue to be considered due to updates of the earthquake source models usedin hazard maps, etc.
The General Insurance Rating Organization of Japan has been conducting “research on thereliability of risk calculation” for this matter for two years from 2014, and whether this item
should be put into practice needs to be considered based on the results of the research.

124

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Appendix

Appendix 1. Transition of Earthquake Insurance System

Transition of Earthquake Insurance System
June 1, 1966 (established)
Property insured

Buildings for residential use
Household and personal goods

May 1, 1972

April 1, 1975

Same as to the left

Same as to the left

Insured event

Earthquake, volcanic eruptions,tsunamiSame as to the left

Same as to the left

Coverage condition

Total loss onlySame as to the left

Same as to the leftPayment proportion of
insurance claim(for the amount insured)

Total loss: 100%Same as to the left

Same as to the left

Attachment proportion

30% of amount insured of fire
insurance to which it is attached

Same as to the left

Same as to the left

Limit amount ofparticipation

Buildings: 900 thousand yen
Households: 600 thousand yen

Buildings: 1.5 million yen
Households: 1.2 million yen

Buildings: 2.4 million yen
Households: 1.5 million yen

Method of attachment
and target insurance

Automatically attached to thefollowing insurances:

In addition to left, in principle
automatically attached to thefollowing insurances:

In addition to left, voluntarily
attached to the following
insurances:

Householders’ comprehensive
insurance (including monthly premium)
Storekeepers’ comprehensive insurance(including monthly premium)Long-term comprehensive insurance
Building renewal insurance

Monthly residence insurance
Monthly commercial insurance

Ordinary fire insurance (including
monthly premium)Residential fire insurance (including
monthly premium)
Dwellers’ comprehensive insurance(including monthly premium)
Postal life fire insurance, fire mutual
insurance
Long-term insurance with maturity
refundReinsurance scheme
Burden charge of Government
Burden charge of insurancecompanies

5%800 billion yen
400 billion yen

300 billion yen

50%

150 billion yen

100 billion yen
50%50%
50 billion yen
20 billion yen

10 billion yen

Limit of total amount of
insurance claims to be
paid due to a single
earthquake, etc.

30 billion yen

300 billion yen

400 billion yen

Breakdown

Breakdown

800 billion yen
Breakdown

Government:

270 billion yen

Government:

340 billion yen

Government:

677.5 billion yen

Private sector:

30 billion yen

Private sector:

60 billion yen

Private sector:

122.5 billion yen

126Appendix

Appendix 1. Transition of Earthquake Insurance System

April 1, 1978

July 1, 1980

April 1, 1982

Property insured

Same as to the left

Same as to the left

Same as to the left

Insured event

Same as to the left

Same as to the left

Same as to the left

Coverage condition

Same as to the left

Buildings: total loss, half loss

Same as to the left

Households: total loss, half loss
Payment proportion of(for the amount insured)

Same as to the left

Total loss: 100%
Half loss: Buildings 50%
Households 10%

Same as to the left

Attachment proportion

Same as to the left

30% to 50% of amount insuredof fire insurance to which it is
attached

Same as to the left

Limit amount ofparticipation

Same as to the left

Buildings: 10 million yen
Households: 5 million yen

Same as to the left

Method of attachment
and target insuranceSame as to the left

In principle automaticallyattached to the fire insuranceSame as to the left

Reinsurance scheme

Same as to the left

5%5%

1.5 trillion yen

1.2 trillion yen

280 billion yen
225 billion yen

50%

50%
55 billion yen
45 billion yen

Limit of total amount of
insurance claims to be
paid due to a single
earthquake, etc.

1.2 trillion yen

Same as to the left

Breakdown

1.5 trillion yen
Breakdown

Government:

1.01625 trillion yen

Government:

1.2715 trillion yen

Private sector:

183.75 billion yen

Private sector:

228.5 billion yen

127Appendix

Appendix 1. Transition of Earthquake Insurance System

April 1, 1991

October 19,
1995

June 24, 1994

January 1, 1996

Property insured

Same as to the left

Same as to the left

Same as tothe left

Same as to the left

Insured event

Same as to the left

Same as to the left

Same as tothe left

Same as to the left

Same as to the left

Same as tothe left

Same as to the left

Same as tothe left

Total loss: 100%
Half loss: 50%
Partial loss: 5%Same as tothe left

Same as to the left

Same as tothe left

Buildings:
50 million yen

Coverage condition

Buildings: total loss, half loss,
partial loss
Households: total loss, half loss,
partial loss

Payment proportion of(for the amount insured)

Total loss: 100%
Half loss: Buildings 50%
Households 10%
Partial loss: 5%Same as to the left

Attachment proportion

Same as to the left

Same as to the left

Limit amount ofparticipation

Same as to the left

Same as to the left

Households:
10 million yen
Method of attachment
and target insuranceSame as to the left

Reinsurance scheme

Same as to the left

Same as to the left

Same as tothe left

Same as to the left

5%
3.1 trillion yen

5%
1.8 trillion yen

468 billion yen
336 billion yen

50%
50%

92 billion yen

66 billion yen

Limit of total amount of
insurance claims to be
paid due to a single
earthquake, etc.

1.8 trillion yen

Same as to the left
Breakdown

3.1 trillion yen
Breakdown

Government:

1.5258 trillion yen

Government:

2.6884 trillion yen

Private sector:

274.2 billion yen

Private sector:

411.6 billion yen

128Appendix

Appendix 1. Transition of Earthquake Insurance System

April 1, 1997

April 1, 1999

April 1, 2002

Property insured

Same as to the left

Same as to the left

Same as to the left

Insured event

Same as to the left

Same as to the left

Same as to the left

Coverage condition

Same as to the left

Same as to the left

Same as to the leftPayment proportion of
insurance claim(for the amount insured)

Same as to the left

Same as to the left

Same as to the left

Attachment proportion

Same as to the left

Same as to the left

Same as to the left

Limit amount ofparticipation

Same as to the left

Same as to the left

Same as to the left

Method of attachment
and target insuranceSame as to the left

Same as to the left

Same as to the left

Reinsurance scheme

5%
5%
5%

4.5 trillion yen

4.1 trillion yen

3.7 trillion yen

1.0774 trillion yen
818.6 billion yen
579 billion yen

50%
50%

50%

114 billion yen
75 billion yen

Limit of total amount of
insurance claims to be
paid due to a single
earthquake, etc.

3.7 trillion yen
Breakdown

75 billion yen

4.1 trillion yen
Breakdown

4.5 trillion yen
Breakdown

Government:

3.19745 trillion yen

Government:

3.48913 trillion yen

Government:

3.75267 trillion yen

Private sector:

502.55 billion yen

Private sector:

610.87 billion yen

Private sector:

747.33 billion yen

129Appendix

Appendix 1. Transition of Earthquake Insurance System

April 1, 2005

April 1, 2008

April 1, 2009

Property insured

Same as to the left

Same as to the left

Same as to the left

Insured event

Same as to the left

Same as to the left

Same as to the left

Coverage condition

Same as to the left

Same as to the left

Same as to the leftPayment proportion of
insurance claim(for the amount insured)

Same as to the left

Same as to the left

Same as to the left

Attachment proportion

Same as to the left

Same as to the left

Same as to the left

Limit amount ofparticipation

Same as to the left

Same as to the left

Same as to the left

Method of attachment
and target insuranceSame as to the left

Same as to the left

Same as to the left

Reinsurance scheme
5%5%

5.5 trillion yen

5%
5.5 trillion yen

5.0 trillion yen

1.925 trillion yen

1.73 trillion yen

1.3118 trillion yen

50%
50%

50%
115 billion yen

110 billion yen
75 billion yen

Limit of total amount of
insurance claims to be
paid due to a single
earthquake, etc.

5.0 trillion yen
Breakdown

5.5 trillion yen
Breakdown

5.5 trillion yen
Breakdown

Government:

4.12219 trillion yen

Government:

4.3915 trillion yen

Government:

4.30125 trillion yen

Private sector:

877.81 billion yen

Private sector:

1.1085 trillion yen

Private sector:

1.19875 trillion yen

130Appendix

Appendix 1. Transition of Earthquake Insurance System

May 2, 2011

April 6, 2012

May 16, 2013

Property insured

Same as to the left

Same as to the left

Same as to the left

Insured event

Same as to the left

Same as to the left

Same as to the left

Coverage condition

Same as to the left

Same as to the left

Same as to the leftPayment proportion of
insurance claim(for the amount insured)

Same as to the left

Same as to the left

Same as to the left

Attachment proportion

Same as to the left

Same as to the left

Same as to the left

Limit amount ofparticipation

Same as to the left

Same as to the left

Same as to the left

Method of attachment
and target insuranceSame as to the left

Same as to the left

Same as to the left

Reinsurance scheme*1 about 1.6%5%

6.2 trillion yen*2 about 0.4%
6.2 trillion yen

5.5 trillion yen

871 billion yen

50%

50%

691 billion yen

348.8 billion yen
115 billion yen

Limit of total amount of
insurance claims to be
paid due to a single
earthquake, etc.

104 billion yen

5.5 trillion yen
Breakdown

50%

85 billion yen

6.2 trillion yen
Breakdown

6.2 trillion yen
Breakdown

Government:

4.77555 trillion yen

Government:

5.712 trillion yen

Government:

5.9595 trillion yen

Private sector:

724.45 billion yen

Private sector:

488 billion yen

Private sector:

240.5 billion yen

*1

131

905
55090

*2

236
58512

Appendix

Appendix 1. Transition of Earthquake Insurance System

*3

304
66380

*4

132

332
108621*5332
111173

Appendix

Appendix 1. Transition of Earthquake Insurance System

*6

133

168
110756*7

168111610Appendix

Appendix 1. Transition of Earthquake Insurance System*8134115463

*9

134

289
117339Note: See p. 46 for details of
the reinsurance scheme as of April 1, 2021.

Appendix

Appendix 2．Transition of Earthquake Insurance Premium Rate

Transition of Earthquake Insurance Premium Rate
Enforcement
date

Contents(yen per 1,000 yen amount insured)
Structural classification of buildings
Zone

Zone 1

Zone 2June 1, 1966
(established)
Zone 3

Class A bldgs

Class B bldgs

Hokkaido, Aomori, Iwate, Miyagi, Akita, Yamagata,
Fukushima, Ibaraki, Tochigi, Gumma, Niigata, Toyama,
Ishikawa, Yamanashi, Tottori, Shimane, Okayama,
Hiroshima, Yamaguchi, Tokushima, Kagawa, Ehime, Kochi,
Fukuoka, Saga, Nagasaki, Kumamoto, Oita, Miyazaki,
Kagoshima, Okinawa*

0.60

2.10

Tokyo (excluding Zone 3), Kanagawa (excluding Zone 3),
Saitama, Chiba, Fukui, Nagano, Gifu, Shizuoka, Aichi,
Mie, Shiga, Kyoto, Osaka, Hyogo, Nara, Wakayama

1.35

3.60

2.30

5.00

Sumida-ku, Koto-ku and Arakawa-ku of Tokyo, Tsurumi-ku,
Naka-ku and Nishi-ku in Yokohama City of Kanagawa, andKawasaki-shi area east of Tokaido Line

* Okinawa was added in 1972 after reversion to Japanese administration.
＜Structural classification of buildings＞“Class A buildings” refer to fireproof buildings and semi-fireproof buildings.
All other buildings are classified as “class B buildings.”

Enforcement
date

Contents(yen per 1,000 yen amount insured)
Structural classification of buildings

Zone

July 1, 1980

Class A bldgs

Class B bldgs

Buildings

Households

Buildings

Households

Hokkaido, Fukushima, Gumma, Toyama, Tottori,
Shimane, Okayama, Hiroshima, Yamaguchi,
Tokushima, Kagawa, Ehime, Fukuoka, Saga,
Nagasaki, Kumamoto, Oita, Miyazaki, Kagoshima,
Okinawa

0.70

0.50

2.30

1.70

Zone 2

Aomori, Iwate, Miyagi, Akita, Yamagata, Ibaragi,
Tochigi, Niigata, Ishikawa, Yamanashi, Kochi

0.80

0.60

2.90

2.00

Zone 3

Fukui, Nagano, Gifu, Mie, Shiga, Kyoto, Osaka,
Hyogo, Nara, Wakayama

1.40

1.00

3.70

2.60

Zone 4

Saitama, Chiba, Aichi

1.60

1.10

4.20

3.00

Zone 5

Tokyo, Kanagawa, Shizuoka

1.80

1.30

4.80

3.40

Zone 1＜Structural classification of buildings＞
Same as above

136

Appendix

Appendix 2．Transition of Earthquake Insurance Premium Rate

Enforcement
date

Contents(yen per 1,000 yen amount insured)
Structural classification of buildings

Zone

Class A bldgs

Class B bldgs

Buildings

Households

Buildings

Households

Hokkaido,
Fukushima,
Shimane,
Okayama,
Hiroshima, Yamaguchi, Kagawa, Fukuoka, Saga,
Kagoshima, Okinawa

0.50

0.35

1.60

1.20

Aomori, Iwate, Miyagi, Akita, Yamagata, Ibaragi,
Tochigi, Gumma, Niigata, Toyama, Ishikawa,
Yamanashi, Tottori, Tokushima, Ehime, Kochi,
Nagasaki, Kumamoto, Oita, Miyazaki

0.70

0.50

2.20

1.55

Zone 3

Saitama, Chiba, Fukui, Nagano, Gifu, Aichi, Mie,
Shiga, Kyoto, Osaka, Hyogo, Nara, Wakayama

1.40

0.95

3.10

2.20

Zone 4

Tokyo, Kanagawa, Shizuoka

1.80

1.30

4.75

3.30

Zone 1

Zone 2
April 1, 1991

＜Structural classification of buildings＞
Same as above

Enforcement
date

Contents(yen per 1,000 yen amount insured)
Structural classification of buildings
Zone

Class A bldgs

Class B bldgs

Zone 1

Hokkaido, Fukushima, Shimane, Okayama, Hiroshima,
Yamaguchi, Kagawa, Fukuoka, Saga, Kagoshima, Okinawa

0.50

1.45

Zone 2

Aomori, Iwate, Miyagi, Akita, Yamagata, Ibaragi,
Tochigi, Gumma, Niigata, Toyama, Ishikawa, Yamanashi,
Tottori, Tokushima, Ehime, Kochi, Nagasaki, Kumamoto,
Oita, Miyazaki

0.70

2.00

Zone 3

Saitama, Chiba, Fukui, Nagano, Gifu, Aichi, Mie, Shiga,
Kyoto, Osaka, Hyogo, Nara, Wakayama

1.35

2.80

Zone 4

Tokyo, Kanagawa, Shizuoka

1.75

4.30

January 1,
1996＜Structural classification of buildings＞
Same as above137

Appendix

Appendix 2．Transition of Earthquake Insurance Premium Rate

Enforcement
date

Contents
１．Basic rate(yen per 1,000 yen amount insured)
Structural classification of buildings
Zone

October 1,
2001

Class A bldgs

Class B bldgs

Zone 1

Hokkaido, Fukushima, Shimane, Okayama, Hiroshima,
Yamaguchi, Kagawa, Fukuoka, Saga, Kagoshima, Okinawa

0.50

1.20

Zone 2

Aomori, Iwate, Miyagi, Akita, Yamagata, Ibaragi,
Tochigi, Gumma, Niigata, Toyama, Ishikawa, Yamanashi,
Tottori, Tokushima, Ehime, Kochi, Nagasaki, Kumamoto,
Oita, Miyazaki

0.70

1.65

Zone 3

Saitama, Chiba, Fukui, Nagano, Gifu, Aichi, Mie,
Shiga, Kyoto, Osaka, Hyogo, Nara, Wakayama

1.35

2.35

Zone 4

Tokyo, Kanagawa, Shizuoka

1.75

3.55

＜Structural classification of buildings＞
Same as above
２．Discount rate
Following discount rates are applied to basic rate above.
(1) Construction age discount rate
10% discount, in case a building was constructed newly after June 1, 1981
(2) Earthquake resistance class discount rateearthquake resistance class 3: 30% discountearthquake resistance class 2: 20% discountearthquake resistance class 1: 10% discount(Note: discount rate cannot be applied together.)

Enforcement
date

Contents
１．Basic rate
Same as above
２．Discount rate
Same as above
３．Coefficient(1) Long-term coefficient

April 1, 2005

Policy period

Coefficient

2 years

1.90

3 years

2.75

4 years

3.60

5 years

4.45(2) Return premium coefficient*
Omitted* The return rate of an unearned premium in a lump-sum premium for a long-term policy in the case of modification orcancellations.

138

Appendix

Appendix 2．Transition of Earthquake Insurance Premium Rate

Enforcement
date

Contents
１．Basic rate(yen per 1,000 yen amount insured)
Structural classification of buildings
Zone

Zone 1

Zone 2

Zone 3

Zone 4

Class A bldgs

Class B bldgs

Iwate, Akita, Yamagata, Fukushima, Tochigi, Gumma,
Toyama, Ishikawa, Fukui, Tottori, Shimane, Yamaguchi,
Fukuoka, Saga, Nagasaki, Kumamoto, Kagoshima

0.50

1.00

Hokkaido, Aomori, Miyagi, Niigata, Nagano, Gifu,
Shiga, Kyoto, Hyogo, Nara, Okayama, Hiroshima, Oita,
Miyazaki, Okinawa

0.65

1.27

Kagawa0.65

1.56

Ibaraki, Yamanashi, Ehime

0.91

1.88

Saitama, Osaka

1.05

1.88

Tokushima, Kochi

0.91

2.15

Chiba, Aichi, Mie, Wakayama

1.69

3.06

Tokyo, Kanagawa, Shizuoka

1.69

3.13

(Note) Rate increases are capped in order to avoid drastic increases in rates. Because of this, rates may differ among theprefectures that belong to the same Zone.
October 1,
2007＜Structural classification of buildings＞
Same as above

２．Discount rate
Following discount rates are applied to basic rate above.
(1) Construction age discount rate
10% discount, in case a building was constructed newly after June 1, 1981
(2) Earthquake resistance class discount rateearthquake resistance class 3: 30% discountearthquake resistance class 2: 20% discountearthquake resistance class 1: 10% discount(3) Seismic isolated buildings discount rate
30% discount(4) Seismic resistance diagnosis discount rate
10% discount(Note: discount rate cannot be applied together.)
３．Coefficient
Same as above139

Appendix

Appendix 2．Transition of Earthquake Insurance Premium Rate

Enforcement
date

Contents
１．Basic rate(yen per 1,000 yen amount insured)
Structural classification of buildings
Zone

Zone 1

Zone 2

Zone 3

Zone 4January 1,
2010

Class A bldgs

Class B bldgs

Iwate, Akita, Yamagata, Fukushima, Tochigi, Gumma,
Toyama, Ishikawa, Fukui, Tottori, Shimane, Yamaguchi,
Fukuoka, Saga, Nagasaki, Kumamoto, Kagoshima

0.50

1.00

Hokkaido, Aomori, Miyagi, Niigata, Nagano, Gifu,
Shiga, Kyoto, Hyogo, Nara, Okayama, Hiroshima, Oita,
Miyazaki, Okinawa

0.65

1.27

Kagawa0.65

1.56

Ibaraki, Yamanashi, Ehime

0.91

1.88

Saitama, Osaka

1.05

1.88

Tokushima, Kochi

0.91

2.15

Chiba, Aichi, Mie, Wakayama

1.69

3.06

Tokyo, Kanagawa, Shizuoka

1.69

3.13

(Note 1) Rate increases are capped in order to avoid drastic increases in rates. Because of this, rates may differ among theprefectures that belong to the same Zone.
(Note 2) For buildings covered by existing earthquake insurance riders on fire insurance policies that were in place before theJanuary 1, 2010 revision of the criteria for structural classification of buildings, the increase in premium rates due toreclassification from “class A buildings” to “class B buildings” based on the new criteria is capped at 30%.
＜Structural classification of buildings＞“Class A buildings” refer to fireproof buildings, semi-fireproof buildings, ordinance semi-fireproof buildings, etc.
All other buildings are classified as “class B buildings.”
２．Discount rate
Same as above
３．Coefficient
Same as above140

Appendix

Appendix 2．Transition of Earthquake Insurance Premium Rate

Enforcement
date

Contents
１．Basic rate(yen per 1,000 yen amount insured)
Structural classification of buildings
Zone

Zone 1

Zone 2

Zone 3

Class A bldgs

Class B bldgs

Iwate, Akita, Yamagata, Tochigi, Gumma, Toyama,
Ishikawa, Fukui, Nagano, Shiga, Tottori, Shimane,
Okayama, Hiroshima, Yamaguchi, Fukuoka, Saga, Nagasaki,
Kumamoto, Kagoshima

0.65

1.06

Fukushima

0.65

1.30

Hokkaido, Aomori, Miyagi, Niigata, Yamanashi, Gifu,
Kyoto, Hyogo, Nara, Kagawa, Oita, Miyazaki, Okinawa

0.84

1.65

Ibaraki, Ehime

1.18

2.44

Tokushima, Kochi

1.18

2.79

Saitama, Osaka

1.36

2.44

Chiba, Tokyo, Kanagawa, Shizuoka, Aichi, Mie, Wakayama

2.02

3.26

(Note 1) Rate increases are capped in order to avoid drastic increases in rates. Because of this, rates may differ among theprefectures that belong to the same Zone.
(Note 2) For buildings covered by existing earthquake insurance riders on fire insurance policies that were in place before theJanuary 1, 2010 revision of the criteria for structural classification of buildings, the increase in premium rates due toreclassification from “class A buildings” to “class B buildings” based on the new criteria is capped at 30%.
July 1, 2014
＜Structural classification of buildings＞
Same as above
２．Discount rate
Following discount rates are applied to basic rate above.
(1) Construction age discount rate
10% discount, in case a building was constructed newly after June 1, 1981
(2) Earthquake resistance class discount rateearthquake resistance class 3: 50% discountearthquake resistance class 2: 30% discountearthquake resistance class 1: 10% discount(3) Seismic isolated buildings discount rate
50% discount(4) Seismic resistance diagnosis discount rate
10% discount(Note: discount rate cannot be applied together.)
３．Coefficient
Same as above141

Appendix

Appendix 2．Transition of Earthquake Insurance Premium Rate

Enforcement
date

Contents
１．Basic rate(yen per 1,000 yen amount insured)
Structural classification of buildings
Zone

Zone 1

Zone 2

Zone 3January 1,
2017Class A bldgs

Class B bldgs

Iwate, Akita, Yamagata, Tochigi, Gumma, Toyama,
Ishikawa, Fukui, Nagano, Shiga, Tottori, Shimane,
Okayama, Hiroshima, Yamaguchi, Fukuoka, Saga,
Nagasaki, Kumamoto, Kagoshima

0.68

1.14

Hokkaido, Aomori, Niigata, Gifu, Kyoto, Hyogo, Nara

0.81

1.53

Fukushima

0.74

1.49

Miyagi, Yamanashi, Kagawa, Oita, Miyazaki, Okinawa

0.95

1.84

Ehime

1.20

2.38

Osaka

1.32

2.38

Aichi, Mie, Wakayama

1.71

2.89

Ibaraki

1.35

2.79

Saitama

1.56

2.79

Tokushima, Kochi

1.35

3.19

Chiba, Tokyo, Kanagawa, Shizuoka

2.25

3.63

(Note 1) Rate increases are capped in order to avoid drastic increases in rates. Because of this, rates may differ among theprefectures that belong to the same Zone.
(Note 2) For buildings covered by existing earthquake insurance riders on fire insurance policies that were in place before theJanuary 1, 2010 revision of the criteria for structural classification of buildings, the increase in premium rates due toreclassification from “class A buildings” to “class B buildings” based on the new criteria is capped at 30%.
＜Structural classification of buildings＞
Same as above

２．Discount rate
Same as above
３．Coefficient
Same as above

142

Appendix

Appendix 2．Transition of Earthquake Insurance Premium Rate

Enforcement
date

Contents
１．Basic rate(yen per 1,000 yen amount insured)
Structural classification of buildings
Zone

Zone 1

Zone 2

Zone 3

Class A bldgs

Class B bldgs

Iwate, Akita, Yamagata, Tochigi, Gumma, Toyama,
Ishikawa, Fukui, Nagano, Shiga, Tottori, Shimane,
Okayama, Hiroshima, Yamaguchi, Fukuoka, Saga,
Nagasaki, Kumamoto, Kagoshima

0.71

1.16

Hokkaido, Aomori, Niigata, Gifu, Kyoto, Hyogo, Nara

0.78

1.35

Fukushima

0.85

1.70

Miyagi, Yamanashi, Kagawa, Oita, Miyazaki, Okinawa

1.07

1.97

Ehime

1.20

2.24

Osaka

1.26

2.24

Aichi, Mie, Wakayama

1.44

2.47

Ibaraki

1.55

3.20

Saitama

1.78

3.20

Tokushima, Kochi

1.55

3.65

Chiba, Tokyo, Kanagawa, Shizuoka

2.50

3.89

(Note 1) Rate increases are capped in order to avoid drastic increases in rates. Because of this, rates may differ among theprefectures that belong to the same Zone.
(Note 2) For buildings covered by existing earthquake insurance riders on fire insurance policies that were in place before theJanuary 1,
2019

January 1, 2010 revision of the criteria for structural classification of buildings, the increase in premium rates due toreclassification from “class A buildings” to “class B buildings” based on the new criteria is capped at 30%.
＜Structural classification of buildings＞
Same as above

２．Discount rate
Same as above

３．Coefficient(1) Long-term coefficient
Policy period

Coefficient

2 years

1.90

3 years

2.80

4 years

3.70

5 years

4.60(2) Return premium coefficient*
Omitted* The return rate of an unearned premium in a lump-sum premium for a long-term policy in the case of modification orcancellations.

143

Appendix

Appendix 2．Transition of Earthquake Insurance Premium Rate

Enforcement
date

Contents
１．Basic rate(yen per 1,000 yen amount insured)
Structural classification of buildings

Class A bldgs

Class B bldgs
Rates with atransitional
measureZone

Zone 1

Zone 2

Hokkaido, Aomori, Iwate, Akita, Yamagata,Tochigi,
Gumma,
Niigata,Toyama,Ishikawa, Fukui, Nagano, Gifu, Shiga,
Kyoto, Hyogo, Nara, Tottori, Shimane,
Okayama, Hiroshima, Yamaguchi, Fukuoka,
Saga, Nagasaki, Kumamoto, Kagoshima

0.74

1.23

1.23

Fukushima

0.97

1.95

1.26

1.18

2.12

1.63

Aichi, Mie, Osaka, Wakayama, Ehime

1.18

2.12

2.12

Ibaraki

1.77

3.66

2.29

Saitama

2.04

3.66

2.64

Tokushima, Kochi

1.77

4.18

2.29

Chiba, Tokyo, Kanagawa, Shizuoka

2.75

4.22

3.93

Miyagi,
Yamanashi,
Miyazaki, Okinawa

Zone 3

Kagawa,Oita,(Note 1) Rate increases are capped in order to avoid drastic increases in rates. Because of this, rates may differ among theprefectures that belong to the same Zone.
January 1,
2021(Note 2) The rates with a transitional measure are applied to buildings reclassified as “class B buildings” from “class A
buildings” based on the new criteria for structural classification of buildings revised on January 1, 2010, provided thatthe buildings are covered by existing earthquake insurance riders on fire insurance policies that were in place before
the revision.
＜Structural classification of buildings＞
Same as above
２．Discount rate
Same as above

３．Coefficient(1) Long-term coefficient
Policy period

Coefficient

2 years

1.90

3 years

2.85

4 years

3.75

5 years

4.65(2) Return premium coefficient*
Omitted* The return rate of an unearned premium in a lump-sum premium for a long-term policy in the case of modification orcancellations.

144

Appendix

Appendix 2．Transition of Earthquake Insurance Premium Rate

Enforcement
date

Contents
１．Basic rate(yen per 1,000 yen amount insured)
Structural classification of buildings

Class A bldgs

Class B bldgs
Rates with atransitional
measureZone

Zone 1

Zone 2

Zone 3

Hokkaido, Aomori, Iwate, Akita, Yamagata,Tochigi,
Gumma,
Niigata,Toyama,Ishikawa, Fukui, Nagano, Gifu, Shiga,
Kyoto, Hyogo, Nara, Tottori, Shimane,
Okayama, Hiroshima, Yamaguchi, Fukuoka,
Saga, Nagasaki, Kumamoto, Oita, Kagoshima

0.73

1.12

1.12

Fukushima

1.16

1.95

1.63

Miyagi, Yamanashi, Aichi, Mie, Osaka,
Wakayama, Kagawa, Ehime, Miyazaki,
Okinawa

1.16

1.95

1.95

Ibaraki, Tokushima, Kochi

2.30

4.11

2.97

Saitama

2.65

4.11

3.43

Chiba, Tokyo, Kanagawa, Shizuoka

2.75

4.11

4.11

(Note 1) Rate increases are capped in order to avoid drastic increases in rates. Because of this, rates may differ among theprefectures that belong to the same Zone.
October 1,
2022(Note 2) The rates with a transitional measure are applied to buildings reclassified as “class B buildings” from “class A
buildings” based on the new criteria for structural classification of buildings revised on January 1, 2010, provided thatthe buildings are covered by existing earthquake insurance riders on fire insurance policies that were in place before
the revision.
＜Structural classification of buildings＞
Same as above
２．Discount rate
Same as above

３．Coefficient(1) Long-term coefficient
Policy period

Coefficient

2 years

1.90

3 years

2.85

4 years

3.75

5 years

4.70(2) Return premium coefficient*
Omitted* The return rate of an unearned premium in a lump-sum premium for a long-term policy in the case of modification orcancellations.

145

Appendix

Appendix 3. Explanation of the Seismic Intensity Scale of the Japan Meteorological Agency

Explanation of the Seismic Intensity Scale of the Japan Meteorological Agency(March 2009)
Notes on using this table:
1.

The seismic intensity values reported by the Meteorological Agency are measured
by seismometers, which are generally placed at ground level or on the ground floorof buildings. This explanation describes what happens and what kinds of damage
occur in the area where a certain seismic intensity is measured. Seismic intensity
levels are not determined according to the situations described.

2.

Seismic motions are highly dependent on ground and topography. Seismic intensity
is a value measured by a seismometer at a certain location, and seismic intensity
values may vary from place to place, even within the same municipality. Even
within the same building, the strength of shaking depends on the story and location,and shaking is generally stronger for the upper stories of a mid- to high-risebuilding than the ground floor.

3.

Even when the seismic intensity is the same, the amount of damage may varybecause of differences in the amplitude (amount of shaking), frequency (periodicityof repeated shakes), and duration (length of shaking) of seismic motions, as well as
differences in the building or structure and differences in the ground.

4.

The descriptions in this explanation are based on the kinds of damage that are
typically observed when a certain seismic intensity is measured, but the actual
damage may be more or less than described. Also, not all of the situations describedfor a seismic intensity level may necessarily occur in each case.

5.

This explanation is primarily based on observed damage from earthquakes in recent
years. It is reviewed approximately every five years and revised if necessary; forexample, if new observations show that the descriptions of damage are no longer
valid because of improved earthquake resistance in buildings and structures.

146

Appendix

Seismic
intensity

Appendix 3. Explanation of the Seismic Intensity Scale of the Japan Meteorological Agency

How it feels

What happens
indoorsWhat
happens
outdoors

Wooden buildings (housing)

Reinforced(housing)

concretebuildings

Low earthquake
resistanceHigh earthquake
resistance

Low earthquake
resistanceHigh earthquake
resistance0

Nothing is felt, but
seismographs
record a tremor.

-

-

1

Some people
sitting quietly
indoors feel aslight tremor.

-

-

2

Most people sitting
quietly indoors feela tremor. If asleep,some areawakened.

Hanging objects
such as light
fixtures swayslightly.

-

3

Most people inbuildings feelshaking. If walking,some people feelshaking. If asleep,
most areawakened.

Dishes incupboards may
rattle.

Electric wires
swing slightly.

4

Most people arestartled. If walking,most feel shaking.
If sleeping, nearly
all are awakened.

Hanging objects
such as light
fixtures swing
widely, anddishes incupboards rattle
noisily. Unstableobjects may fall
over.

Electric wires
swing widely.
Some notice
shaking whiledriving vehicles.

5-lower

Most people arefrightened and holdonto something for
support.

Hanging objects
such as light
fixtures swing
violently. Dishes
in cupboards
and books onshelves may fall.
Most unstableobjects fall over.
Furniture that is
not fixed in place
may move, andunstablefurniture may
fall.

Some windows
may break.
Electric poles
sway. Streets may
be damaged.

-

Slight cracks
may be seen inwalls, etc.

5-upper

It is difficult tomove around, andmost people find it
impossible to walkwithout holding
onto something.

Many dishes incupboards andbooks onshelves fall. TV
sets may fall off
their stands.
Furniture that is
not fixed in place
may fall.

Window panes
may break andfall. Unreinforced
concrete block
walls maycollapse. Poorly
installed vending
machines may
topple. Driving isdifficult and somedrivers stop theirvehicles.

-Cracks may beseen in walls,
etc.

-

Cracks may beseen in walls,
beams, pillars,
and othermembers.

6-lower

It is difficult toremain standing.

Most furniturethat is not fixedin place moves
and may fall.
Some doors
cannot be
opened.

Wall tiles andwindow panes
may break andfall.

Slight cracks
may be seen inwalls, etc.

Many cracks areseen in walls,
etc., and somecracks may belarge. Roofing
tiles may fall.
Buildings maylean, and some
may collapse.

Cracks may beseen in walls,
beams, pillars,
and othermembers.

Many cracks areseen in walls,
beams, pillars,
and othermembers.

6-upperStanding is
impossible, andpeople can only
crawl. Shaking is
so strong thatpeople cannot
move about andmay be thrown.

Almost all
furniture that is
not fixed in placemoves, andmuch of it falls.

Wall tiles andwindow panes inmany buildings
are broken andfall. Almost all
unreinforced
concrete block
walls collapse.

Cracks may beseen in walls,
etc.

Many large
cracks are seen
in walls, etc.
Many buildings
lean or collapse.

Many cracks areseen in walls,
beams, pillars,
and othermembers.

Walls, beams,
pillars, and othermembers maylean and show Xshaped cracks.
Ground-level andmiddle story
pillars may
collapse.

Almost all
furniture that is
not fixed in placemoves and falls,
and some isthrown.

Wall tiles andwindow panes ineven morebuildings arebroken and fall.
Even some
reinforced
concrete block
walls maycollapse.

Many cracks areseen in walls,
etc. Somebuildings may
lean.

Even morebuildings lean orcollapse.

Even morecracks are seen
in walls, beams,
pillars, and othermembers.
Ground-level andmiddle stories
may bedeformed andsome may lean.

Many walls,
beams, pillars,
and othermembers leanand show Xshaped cracks.
Many groundlevel and middle
story pillars
collapse.

7147

Earthquake Insurance in Japan
Published:

March
October

2003
2022(1st Edition)(4 th Edition)

Publisher: General Insurance Rating Organization of Japan (GIROJ)SHINJUKU PARK TOWER 28-29F
3-7-1, Nishi-shinjuku, Shinjuku-ku,
Tokyo 163-1029
Tel: 03-6758-1300 (Pilot Number)
https://www.giroj.or.jp/english/

印刷

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