Japan’s
Insurance
Market2020

Japan’s Insurance Market 2020
ContentsPage

To Our Clients
Masaaki Matsunaga
President and Chief Executive
The Toa Reinsurance Company, Limited

1

1. The Risks of Increasingly Severe Typhoons
How Can We Effectively Handle Typhoons?
Hironori Fudeyasu, Ph.D.
Professor
Faculty of Education, Yokohama National University

2

2.	Modeling the Insights from the 2018 and 2019 Climatological Perils in Japan
Margaret Joseph
Model Product Manager, RMS

14

3.	Life Insurance Underwriting Trends in Japan	Naoyuki Tsukada, FALU, FUWJ
Chief Underwriter, Manager, Underwriting Team, Life Underwriting & Planning Department
The Toa Reinsurance Company, Limited

20

4. Trends in Japan’s Non-Life Insurance Industry
Underwriting & Planning Department
The Toa Reinsurance Company, Limited

25

5. Trends in Japan's Life Insurance Industry
Life Underwriting & Planning Department
The Toa Reinsurance Company, Limited

32

Company Overview

37

Supplemental Data: Results of Japanese Major Non-Life Insurance Companies for Fiscal 2019,
Ended March 31, 2020 (Non-Consolidated Basis)

40©2020 The Toa Reinsurance Company, Limited. All rights reserved.
The contents may be reproduced only with the written permission of The Toa Reinsurance Company, Limited.

To Our Clients

It gives me great pleasure to have the opportunity to welcome you to our brochure,‘Japan’s Insurance Market 2020.’ It is encouraging to know that over the years our brochures have been
well received even beyond our own industry’s boundaries as a source of useful, up-to-date
information about Japan’s insurance market, as well as contributing to a wider interest in andunderstanding of our domestic market.
During fiscal 2019, the year ended March 31, 2020, despite a moderate recovery trend in the first
half, uncertainties concerning the world economy surged toward the end of the fiscal year, affected by
the spread of COVID-19.
In Japan, significant impacts on inbound demand, exports and production, and personal
consumption became evident once the spread of COVID-19 gained traction, posing a challenge to theJapanese economy.
In the reinsurance industry, whereas the trend toward softening of reinsurance premium
rates and conditions has continued in recent years, reinsurance premium rates showed an upward trend
for lines of business for which large amounts of reinsurance claims were paid, such as for contracts
covering large-scale natural disasters, which are occurring frequently in Japan and overseas.
Going forward, it will be necessary to respond appropriately to various impacts of the spread of
the infectious disease on the reinsurance business. We also need to prevail in fierce competition to win
contracts amid changes in the business environment, such as the frequent occurrence of natural
disasters and the increasing complexity of risks. We forecast that the business environment will remainchallenging.
In accordance with the “Mission 2020” medium-term management plan, the Group will provide
clients with higher quality reinsurance solutions and value-added services while further strengthening
the management foundation to deal with future issues, in order to achieve sustainable growth.
Everyone at the Toa Re Group will do their utmost so that the Group can fulfill its mission as areinsurance company “Providing Peace of Mind,” as articulated in the Toa Re Mission Statement.
In conclusion, I hope that our brochure will provide a greater insight into the Japanese insurance
market and I would like to express my gratitude to all who kindly contributed so much time and effort
towards its making.

Masaaki Matsunaga
President and Chief Executive
The Toa Reinsurance Company, Limited

1

1.

The Risks of Increasingly Severe Typhoons
How Can We Effectively Handle Typhoons?
Hironori Fudeyasu, Ph.D.
Professor
Faculty of Education, Yokohama National University

Typhoon Faxai, also known as Reiwa 1 Boso Peninsula Typhoon, made landfallin the Kanto region in September 2019. It was the strongest typhoon to makelandfall in the region since 1991, the year the Japan Meteorological Agency (JMA)
began to keep such records. The extreme winds of this typhoon left scars that
exposed the vulnerabilities of the metropolitan area in Japan. A year earlier, theextremely powerful Typhoon Jebi in 2018 passed through western Japan, causing
devastation to the Kinki area. According to the General Insurance Association ofJapan (GIAJ), the damage caused by Typhoon Jebi resulted in the highest claims
ever paid for wind and flooding damage in Japan. Typhoons remain a serious threat
despite recent advances in science and technology.
Typhoons Faxai and Jebi share several characteristics. Both made landfall inJapan without weakening, both featured powerful winds that set records in various
places, and both caused severe damage to large cities. We meteorologists are working
on the new challenges highlighted by typhoons in recent years. This paper
introduces the latest research results while elucidating three themes: (1) whether
typhoons have intensified in recent years; (2) how risks related to typhoons arechanging; and (3) new tools for handling typhoons.

1. Are Typhoons
Becoming More
Devastating?

2

Observation data based on historical records has enabled insights into thecharacteristics of typhoons in recent years. However, the typhoon data available
from JMA is from 1951 onward, so we can only track trends for about half acentury. Therefore, we reconstructed available typhoon data by aggregating pastobservation data with a focus on only typhoons that made landfall in Japan islands(Reference 1). Figure 1 shows the number of typhoons that have made landfall inJapan since 1900. The number of landfalls varies from year to year, but there
doesn’t appear to be a long-term trend indicating an increase or decrease in number.
On the other hand, a trend in the intensity of typhoons at landfall is evident. Figure
2 shows intensity distribution in five-year averages, classified by typhoon central
atmospheric pressure at landfall. The proportion of strong typhoons below 970 hPaat landfall has increased sharply since the year 2000. The average for these typhoons
in all analyzed periods is about 30%, but the average is about 50% since the year
2000. The data indicates that the proportion of typhoons having that strength atlandfall has trended upward in that period.
Observation data over the ocean from 100 years ago is not available, so whether
typhoons have gained strength over the ocean or whether they have come northwithout weakening until landfall in Japan is not clear. However, Typhoon Faxai in2019 was at the peak of its strength at landfall, so the research available on it isThe Toa Reinsurance Company, Limited — Japan’s Insurance Market 2020

relevant here. On September 5, 2019, Typhoon Faxai formed offshore of
Minamitorishima (Figure 3). It then proceeded northwest and approached the mainislands of Japan, and on September 8 grew into a very strong typhoon over theocean near Kozushima with a central pressure of 955 hPa and a maximum windspeed of 45 m/s. Typhoons usually weaken as they approach the Japanese islands,
but Typhoon Faxai passed over the Miura Peninsula in the early hours of September
9 without weakening, then passed over the narrow Tokyo Bay and made landfall in
Chiba City, Chiba Prefecture before 5:00 AM JST (Japan Standard Time).
Atmospheric and oceanic environmental factors led to Typhoon Faxai making
landfall at full strength. Figure 4 shows a statistical prediction of the intensity,
meaning central pressure, of Typhoon Faxai six hours ahead by JMA and the actual
central atmospheric pressure at the actual time. The predicted central atmosphericpressure is in alignment with the actual central atmospheric pressure, indicating thehigh accuracy of this statistical method. Figure 4 also shows the environmental
factors helping the storm strengthen that were used to predict intensity. Ocean
surface temperature (effect: -2.8 hPa/6hr), ocean temperature (effect: -2.7 hPa/6hr),
and upper-level wind (effect: -2.2 hPa/6hr) as the storm developed helped thetyphoon intensify (negative numbers indicate intensification). The actual ocean
surface temperature distribution is as high as 28°C to 30°C in the ocean offshore
southern Japan, which on average is 2°C higher than in usual years. Statistically,
2°C difference exceeds two standard deviations, or 95%, of past data. Looking atenvironmental factors prior to landfall in Chiba, upper-level wind (effect: -2.7
hPa/6hr) more than offset the weakening influence of ocean surface temperature(effect: +0.7 hPa/6hr) and ocean temperature (effect: +0.8 hPa/6hr). In other words,
proximity to land mitigated the effect of the ocean, but abnormally weak upperlevel wind kept the typhoon from weakening at landfall.
Figure 1: Typhoons Making Landfall Annually – 1900 to 2014
(Typhoons)
11
10
9
8
7
6
5
4
3
2
1
0

1900

1910

1920

1930

1940

1950

1960

1970

1980

1990

2000

2010 (Year)

3

1. T
 he Risks of Increasingly Severe Typhoons
How Can We Effectively Handle Typhoons?

Figure 2: Distribution of Typhoon Central Atmospheric Pressure at Landfall – 1900 to 2014
(%)
100

(%)
100

(hPa)

90

90

80

80

70

70

60

60

960-97050

50

950-96040

40

940-950

30

30

20

20

10

10

990-1000
980-990970-980930-940920-930
910-920001900-2014

1900

1910

1920

1930

1940

1950

1960

1970

1980

1990

2000

2010 (Year)

Note: Shows the mean percentage over a 115-year period and its transition in 5-year intervals.
  The solid line indicates percentage of typhoons below 970 hPa.

Figure 3: The Path of Typhoon Faxai
60N

50N
9/11

40N

Becomes extratropical cyclone

9/9
30N
36N

9/7
9/6

Sept. 9, 06:00:
960hPa9/5

Typhoon forms
9/2

Sept. 9, 03:00:
960hPaSept. 9, 0:00: 960hPa

34N
Sept. 8, 18:00: 955hPa

140E

150E

Note: Passage over a wide area marked every 9 hours.
  All notations are in Japan time.

4

160E

170E

180E

The Toa Reinsurance Company, Limited — Japan’s Insurance Market 2020

Figure 4: ‌JMA Statistical Mechanical Strength Prediction for Central Pressure of Typhoon Faxai in 6-hour Change
in Contributing Factors over Time(Contribution to typhoon development (decrease in pressure) and decay (increase in pressure) (hPa/6 hr))
15
Formation period

Development period

(hPa)
1,020
Peak period

Decay period

Typhoon genesis
10

1,000

5

980

0

960

-5

940

-10

9/2 9/2 9/2 9/3
6:00 12:00 18:00 0:00

Upper-level wind
Ocean temperature

9/3 9/3 9/3 9/4 9/4 9/4 9/4 9/5
6:00 12:00 18:00 0:00 6:00 12:00 18:00 0:00

Ocean surface temperature
IRP
SST^2 or Sea surface temperature

2. Recent Changes
in Typhoon Risk

9/5 9/5 9/5 9/6 9/6 9/6 9/6 9/7
6:00 12:00 18:00 0:00 6:00 12:00 18:00 0:00

9/7 9/7 9/7 9/8
6:00 12:00 18:00 0:00

850 vor or 850 vorticity
RH
Shear x latitude
OHC^2 or Ocean heat content

9/8 9/8 9/8 9/9
6:00 12:00 18:00 0:00

9/9 9/9 9/9 9/10
6:00 12:00 18:00 0:00

920

Actual central atmospheric pressure
Predicted central atmospheric pressure

Statistics indicate that typhoons making landfall in Japan are getting stronger,
which has also influenced recent changes in typhoon risk. The damage that typhoons
inflict directly on people has decreased markedly compared to the mid twentiethcentury, when single typhoons inflicted damage affecting up to several thousandpeople (Table 1). Reasons include improved public infrastructure such as flood
control, or more resilient housing. In fact, no typhoon has resulted in more than 100
dead or missing since the 1980s. However, damage inflicted on people has increased
since the 2000s. Typhoon Tokage in 2004 resulted in 98 dead or missing, Typhoon
Talas in 2011 resulted in 98 dead or missing, and Typhoon Hagibis, also known as
Reiwa 1 East Japan Typhoon, in 2019 finally resulted in 107 dead or missing (as ofApril 2020).
Regarding economic damage, recent typhoons dominate in terms of insurance
claims paid from wind and flooding (Table 2). Claims paid due to Typhoon Jebi in2018 topped 1 trillion yen, and the claims paid for two typhoons in 2019 were also
very large. These amounts cannot be ignored when compared with the finances ofnational and local governments. As such, the economic impact of typhoon damage isincreasing.
Typhoon Faxai in 2019 is representative of the damage caused when a typhoon
hits a city. Experts conduct a comprehensive survey whenever a typhoon causes serious
damage to elucidate its mechanisms and analyze the human and physical damage.
According to the report prepared for Typhoon Faxai (Reference 2), Faxai resulted in

5

1. T
 he Risks of Increasingly Severe Typhoons
How Can We Effectively Handle Typhoons?

various kinds of damage to a large number of structures. Partial damage included
damage to tiled roofs, while other kinds of damage included damage to houses causedby the collapse of steel poles from a golf driving range and solar panel fires that started
when solar panels were blown away in the typhoon. Building damage included 391
houses completely destroyed, 4,204 partially destroyed, and 72,279 partially damaged,
with inundation above floor level at 121 properties and inundation below floor level at
109 properties. In essential infrastructure, electric power facilities suffered the greatest
damage. A large-scale power outage affecting approximately 930,000 homes occurred
mainly in Chiba Prefecture, and this extraordinary long-term outage took half amonth to resolve. In addition, downed trees and landslides cut off roads andtransportation facilities in various places, which hindered a broad range of household,industrial and economic activities. An ancillary problem involved approximately
10,000 passengers stranded at Narita Airport, which was isolated due to the plannedsuspension of many railway lines in preparation for the approaching typhoon. The factthat a single typhoon could cause these critical situations revealed the vulnerability ofthe metropolitan area to typhoons.
Table 1: Typhoons with a Large Number of Dead or Missing

6

Rank

Year

Typhoon Name

Dead or Missing

1

1959

Isewan Typhoon

5,098

2

1945

Makurazaki Typhoon

3,756

3

1934

Muroto Typhoon

3,036

4

1947

Typhoon Kathleen

1,930

5

1954

Toya Maru Typhoon

1,761

6

1958

Kanogawa Typhoon

1,296

7

1942

Suonada Typhoon

1,162

8

1951

Typhoon Louise

943

9

1948

Typhoon Ione

838

10

1950

Typhoon Jane

539

The Toa Reinsurance Company, Limited — Japan’s Insurance Market 2020

Table 2: Major Claims Paid Due to Wind and Flooding Damage
Rank

Disaster Name

RegionDate1Typhoon No. 21, 2018
(Typhoon Jebi)

Osaka, Kyoto,
Hyogo and elsewhere2

Typhoon No. 19, 2019
(Typhoon Hagibis)

3

Claims Paid (Billion yen)
Fire

Motor

Marine

Total

September 3-5, 2018

936.3

78.0

53.5

1,067.8

East Japan

October 6-13, 2019

518.1

64.5

−

582.6

Typhoon No. 19, 1991
(Typhoon Mireille)

Nationwide

September 26-28, 1991

522.5

26.9

18.5

568.0

4

Typhoon No. 15, 2019
(Typhoon Faxai)

Kanto

September 5-10, 2019

439.8

25.8

−

465.6

5

Typhoon No. 18, 2004
(Typhoon Songda)

Nationwide

September 4-8, 2004

356.4

25.9

5.1

387.4

6

Heavy Snowfall, February
2014

Mainly Kanto

February, 2014

298.4

24.1

−

322.4

7

Typhoon No. 18, 1999
(Typhoon Bart)

284.7

21.2

8.8

314.7

8

Typhoon No. 24, 2018
(Typhoon Trami)Tokyo, Kanagawa
and elsewhere

September 28October 1, 2018

294.6

11.5

−

306.1

9

Heavy Rain, July 2018

Okayama, Hiroshima,
Ehime and elsewhere

June 28-July 8, 2018

167.3

28.3

−

195.6

10

Typhoon No. 15, 2015
(Typhoon Goni)

Nationwide

August 24-26, 2015

156.1

8.1

−

164.2

Kumamoto, Yamaguchi,
September 21-25, 1999
Fukuoka and elsewhere

Note: Figures after 2016 are in red.
Source: GIAJ website; as of March 31, 2020; includes predictions

3. New Tools for
Predicting
Typhoon Threats

In a few days before Typhoon Faxai made landfall in Japan, JMA’s predictions
regarding its course and strength had proven accurate, and as a result JMA called forthe highest-level precautions by various parties. While there is more time to prepare
for typhoons than earthquakes and volcanoes, complacency and inadequate
countermeasures can still result in enormous damage. In that regard, the provisionof information that creates a critical sense of urgency among the populace isessential, but so too is robust urban development. Leading-edge applied research has
given society the following two new tools to help prevent disasters.

(1) Typhoon Soragram: Which Typhoon Path is Most Dangerous toYour City?
Both Typhoon Jebi in 2018 and Typhoon Faxai in 2019 caused severe damage
in many locales due to violent wind. However, a survey of the damage (Reference 2)
reveals a clear contrast between areas where damage was significant and areas where
damage was relatively limited. The strong winds that typhoons generate are heavily
influenced by surrounding landforms, particularly mountains. As a result, typhoon

7

1. T
 he Risks of Increasingly Severe Typhoons
How Can We Effectively Handle Typhoons?

paths that may cause a dangerous typhoon in a particular area vary regionally.
In your city, which path will cause a dangerous typhoon? Answering thatquestion requires data for the various paths a typhoon may take, but pastobservation data is insufficient. We have therefore created Typhoon-Path Ensemble
Simulation (Reference 3). We incrementally shifted the positional relationshipbetween atmospheric phenomena – including typhoons – and the Japanese islands
from east to west in a computer-based virtual world to generate any number oftyphoon paths. This approach creates many clones of a typhoon striking theJapanese islands. Figure 5 shows the path of Typhoon Vera in 1959, and clones ofthat typhoon created using Typhoon-Path Ensemble Simulation. Also known as the
Isewan Typhoon, it was the most damaging typhoon in the modern history ofJapan. The clone typhoons move along routes just like the real typhoon, so many
courses are parallel from east to west against the original path. The simulation can
generate virtual scenarios, such as having the typhoon hit Tokyo instead of making
landfall in Wakayama Prefecture as it actually did. Thus we have been able tosimulate the landfall of more than 1,000 typhoon clones in Japan and successfully
obtain extensive wind data from all over the country. The amount of data we haveobtained is equivalent to about 300 years of real-world typhoon observation.
Figure 5: Paths of Multiple Isewan Typhoon Clones Created Using Typhoon
Path Ensemble Simulation
48N

Isewan Typhoon

45N
42N
39N
36N
33N
30N
27N
24N
21N
18N

Clone Typhoons
15N
120E

125E

130E

135E

140E

145E

150E

155E

160E

Note: Selected data indicating the actual path of the Isewan Typhoon with the red line in the centerand black lines to the east and west showing clones of that typhoon. This figure shows limited
results only.

8

The Toa Reinsurance Company, Limited — Japan’s Insurance Market 2020

Figure 6: Typhoon Nomograms of Various Regions in Japan

Tottori
100
90

Kanazawa

80

100

50
35°N

40

90
40°N

70

30
32.5°N80

60

37.5°N

50

20

40

10
30°N

130°E

132.5°E

135°E

137.5°E

140°E

35°N

0

30

Aomori

20

100

10

32.5°N132.5°E

135°E

137.5°E

140°E

142.5°E

90

45°N

0

80

Fukuoka70

42.5°N

60
100

50
40°N

90

37.5°N

40

80

30

70
60
50
32.5°N40

20

37.5°NWind Ratio[%]

35°N

Wind Ratio[%]60

Wind Ratio[%]70

37.5°NWind Ratio[%]

40°N

10
135°E

137.5°E

140°E

142.5°E145°E

0147.5°E

30
20

30°N

10
125°E

127.5°E

130°E

132.5°E

135°E

Yokohama

0

100
40°N

90
80

60
50

35°N

40

Wind Ratio[%]70

37.5°N30
32.5°N

Naha

20
10

30°N
100

135°E

137.5°E

140°E

142.5°E

145°E

0

90

30°N

80

40

Wakayama
Miyazaki100

10122.5°E

125°E

127.5°E

130°E

132.5°E

37.5°N902022.5°N

90

100

30

80
70

80

35°N

70

0

60

32.5°N

50
40
30°N

60

35°N

50
40
32.5°N

30
20

30
20
10

27.5°N
127.5°E

130°E

132.5°E

135°E

137.5°E

Wind Ratio[%]50

Wind Ratio[%]

60

25°N

Wind Ratio[%]70
27.5°N

30°N

10
130°E

132.5°E

135°E

137.5°E

140°E

0

0

9

1. T
 he Risks of Increasingly Severe Typhoons
How Can We Effectively Handle Typhoons?

We made a typhoon nomogram, which is a type of typhoon hazard map, ateach location, using results of Typhoon-Path Ensemble Simulation. Figure 6 shows
typhoon nomograms at various locations in Japan. Consider the typhoon
nomogram of Yokohama City (middle right of Figure 6) as an example of how toread a typhoon nomogram. A circle with a radius of 500 km around Yokohama,represented by the small circle in the center, is divided into 71 segments. Eachsegment has a color-coded value from the Wind Ratio scale on the right, indicating
wind strength. A typhoon center entering the segments with red colors indicatesstronger wind. A typhoon path that passes through a segment with a high wind ratio
is a dangerous path because it means strong winds will be generated. In the typhoon
nomogram of Yokohama, compared to a typhoon with a path to the east throughChiba or over the Pacific Ocean, a typhoon with a path to the west or northwest
through Shizuoka or Yamanashi will cause stronger winds in Yokohama. Even atyphoon passing through more distant places to the west or northwest such as Gifu
and Toyama will increase wind impact in Yokohama. A multiregional comparisonof typhoon nomograms clearly shows that dangerous typhoon paths vary by region.
The typhoon hazard maps we developed are distributed for free under thebrand name “Typhoon Soragram” as part of the comprehensive weather service,
Liferanger (Note 1). Users can select their city to see which path increases typhoonrisk where they live. Knowledge of the risk for the city in which a person lives is avery important typhoon countermeasure.

(2) CMAP: A Hazard Map That Predicts the Number of Damaged
Buildings
CMAP real-time damage prediction is available at the website, cmap.dev (Note 2).
It predicts the number of buildings that heavy rainfall and winds, or an earthquake
will damage in a given municipality and discloses predictive data in real time should
the disaster strike. This building damage prediction is an area-specific function of
the number of buildings and a building damage rate derived from past damage data
(Reference 4). When Typhoon Faxai passed through Japan, CMAP predicted andpublished the number of damaged buildings in real time (Figure 7). CMAP
predicted damage to approximately 220,000 buildings in Chiba Prefecture from thistyphoon, which was almost three times the 80,000 damaged residential properties
reported by a survey after the typhoon (Reference 2). However, CMAP’s predictionaligned closely with the roughly 220,000 aggregate claims received for property
damage reported by GIAJ (Note 3) (Reference 5). Moreover, the correlation
coefficient between the number of damaged buildings in 54 municipalities in Chiba
Prefecture reported by the survey after the typhoon (Reference 2) and CMAP’s
predicted number was 0.68, indicating a strongly positive relationship with damage
distribution (Figure 8). CMAP provides specific damage prediction information
relevant to users; for example predicting a thousand buildings will be damaged in
the town in which they live. Hopefully, this tool will help in the evacuation of
overly optimistic people who would like to regard natural disaster prediction
information as having nothing to do with themselves, and encourage them to think

10The Toa Reinsurance Company, Limited — Japan’s Insurance Market 2020

more critically about impending disasters.
CMAP also has a simulation function that predicts building damage for pasttyphoons with hypothetical scenarios (Note 4). For example, it can use the
Typhoon Path Ensemble Simulation results discussed earlier to look at outcomes if
the Isewan Typhoon of the past were to strike today, or if it were to directly hitother areas such as Kanto or Kyushu today. Global warming virtually ensures thattyphoons with the intensity of the Isewan Typhoon will strike in the future.
Advance knowledge of the extent of damage has many uses, such as for disasterprevention measures by local residents, evacuation information and shelters
prepared by local governments, and national disaster prevention plans for flood
control by the government.

Figure 7: CMAP Building Damage Prediction for September 9, 2019, at 03:00

Yamagata
Num of damaged bldg. 11,098 (1.89%)
Num of all bldg. 588,524

Fukushima
Num of damaged bldg. 3,053 (0.30%)
Num of all bldg. 1,030,454

TochigiNum of damaged bldg. 5,354 (0.50%)
Num of all bldg. 1,065,260

IbarakiNum of damaged bldg. 4,672 (0.28%)
Num of all bldg. 1,668,987

SaitamaNum of damaged bldg. 50,827 (2.12%)
Num of all bldg. 2,398,877

Chiba
Num of damaged bldg. 65,494 (2.99%)
Num of all bldg. 2,187,394

Tokyo
Num of damaged bldg. 8,407 (0.33%)
Num of all bldg. 2,584,329

Kanagawa
Num of damaged bldg. 18,118 (0.83%)
Num of all bldg. 2,190,653

Shizuoka
Num of damaged bldg. 2,572 (0.16%)
Num of all bldg. 1,645,785

Yamanashi
Num of damaged bldg. 5,780 (1.26%)
Num of all bldg. 460,045

NaganoNum of damaged bldg. 11,668 (0.92%)
Num of all bldg. 1,261,615

Ishikawa
Num of damaged bldg. 6,924 (1.33%)
Num of all bldg. 520,557

ToyamaNum of damaged bldg. 20,469 (3.39%)
Num of all bldg. 603,274

Niigata
Num of damaged bldg. 112,289 (9.32%)
Num of all bldg. 1,204,299

11

1. T
 he Risks of Increasingly Severe Typhoons
How Can We Effectively Handle Typhoons?

Figure 8: Correlation between CMAP Prediction of the Number of Buildings
Damaged in Real Time and Damaged Buildings Reported by the
Chiba Prefecture Disaster Risk Management Department on May
14, 2020(Number of damaged buildings reported by Chiba Prefecture)
10,000Minamiboso City
y=x

Approximate Line: y=0.24x+586

Chiba City

5,000

0
0

4. Conclusion

References

5,000

10,00015,00020,00025,00030,000(CMAP prediction of number of damaged buildings)

Although the number of typhoons that have made landfall in Japan has notchanged significantly during the past 100 years, the intensity of the typhoons at thetime of landfall in Japan has increased in recent years. Consequently, the risks
associated with such typhoons have changed. As in the case of Typhoon Faxai,
typhoons that hit a vulnerable city throw societal functions into crisis. Society has
an urgent need to help make cities resilient to natural disasters by fully deploying
modern science and technology to evolve information and new tools for disasterprevention and mitigation.

1.Rie Kumazawa; Hironori Fudeyasu; Naoyuki Kubota. Tropical Cyclone Landfall inJapan during 1900-2014. Tenki, 63, 855-861.
2.Ministry of Education, Culture, Sports, Science and Technology Grant-in-Aid for
Scientific Research (19K24677): Comprehensive survey on the effects of prolonged
blackouts caused by Typhoon 15 in 2019 and wind and flooding damage. http://ares.
tu.chiba-u.jp/typhoon15/
3.S hota Yamasaki; Hironori Fudeyasu; Masaya Kato; Tetsuya Takemi; Yasutomo
Kiyohara. Assessing Typhoon Wind Hazard: Development of Typhoon Nomogram.
Japan Association for Wind Engineering. 42, 121-133.
4.Takeshi Okazaki; Oriol Gaspa Rebull. Identifying building characteristics by deeplearning and a method of assessing typhoon losses. The 31st Annual Conference of theJapanese Society for Artificial Intelligence, 2017.
5.Totals for members of the General Insurance Association of Japan and the Foreign
Non-Life Insurance Association of Japan (as of Monday, March 9, 2020).
https://www.sonpo.or.jp/news/release/2019/ctuevu000000rde1-att/ctuevu000000rdhx.pdf

12The Toa Reinsurance Company, Limited — Japan’s Insurance Market 2020

Notes

1. MTI Ltd. distributes Liferanger and other lifestyle information to mobile phones.
Liferanger Typhoon Soragrams are available to users in Japan for their area via
smartphone and are color coded for easy understanding. Access Liferanger as follows: 1)
Search for Liferanger Tenki on smartphone; 2) Select Typhoon Soragram under
Disaster Preparedness from the Menu icon in the upper left corner. Select the city tocheck from Other Locations in the center of the screen to display the local Typhoon
Soragram.
2. CMAP is the world’s first website for predicting the number of buildings affected by anatural disaster in real time for a given location by municipality, and is the product ofindustry-academia joint research among Aioi Nissay Dowa Insurance Co., Ltd., Aon
Benfield Japan Ltd. (currently Aon Group Japan Ltd.), and Yokohama National
University. Available at https://cmap.dev/, it was released in June 2019 and received the
grand prize at the 29th Global Environment Award in February 2020.
3.In terms of the number of buildings damaged in natural disasters other than typhoons,
there is significant difference between reports prepared by the Fire and Disaster
Management Agency and the number of claims paid reported by GIAJ members.
CMAP was developed using the number of claims paid, so it is consistent with thenumber of claims submitted to GIAJ member companies.
4.CMAP can simulate the number of buildings affected in a hypothetical scenario. 1) Click
Past on the right panel; 2) Select “Vera in 1959” (Isewan Typhoon) from the paths oftyphoons; 3) Click “Shift the Track” at the bottom right and select the path to simulate.

13

2.
1. Foreword

2. Twenty-Five Yearsof ModelingTyphoons, andthe 2018 and2019 Events

Modeling the Insights from the 2018and 2019 Climatological Perils in Japan
Margaret Joseph
Model Product Manager, RMS

In 2018 and 2019 Japan experienced record high insurance losses fromtyphoons. However, losses were not caused solely by typhoons in these years; there
were also high losses from non-typhoon climate catastrophes. These two years oflosses underline the risk that Japan faces from typhoon and non-typhooncatastrophes alike. This article reviews the risk modeling work that RMS undertook
in response to events during 2018 and 2019 and discusses how we are incorporating
what we learned into our view of risk for Japan.

RMS has been modeling typhoon risks in Japan for over 25 years.
In the autumn of 2016, RMS released an updated model for typhoon risk inJapan – the RMS® Japan Typhoon HD Model. This represented a complete model
rebuild, with significant updates to all aspects of typhoon modeling: from thestochastic track model through to hazard and vulnerability, as well as exposure andfinancial modeling. The update incorporated newly available data, scientificadvancements, and innovative modeling advances – leading to a superior modeled
representation of typhoons over Japan and how they affect insured assets.
Since 2016, and most notably in the last couple of years, Japan has been impacted
by typhoons that resulted in significant insured losses. Table 1 shows the paid claims
as reported by the General Insurance Association of Japan (GIAJ) for Typhoons Jebi
and Trami in 2018 and Typhoons Faxai and Hagibis in 2019. However, market
estimates for global insured losses from the typhoons in Japan approach 20 billion
U.S. dollars for both 2018 and 2019. In the immediate weeks after landfall, RMS
released global industry loss estimates for Typhoon Faxai of 5 billion to 9 billion U.S.
dollars and for Typhoon Hagibis of 7 billion to 11 billion U.S. dollars.
Table 1: GIAJ Total Claims, including Fire, Automobile, and Miscellaneous, andfor Jebi includes Marine (yen to U.S. dollar exchange rate at time of
GIAJ release)
JMA Event – Year

Number ID

Paid Claims (Billion U.S. dollars)

Typhoon Jebi (2018)

1821

9.8

Typhoon Trami (2018)

1824

2.8

Typhoon Faxai (2019)

1915

4.1

Typhoon Hagibis (2019)

1919

5.1

High insurance loss in Japan in 2018 also resulted from a non-typhoon event:flooding caused by a stationary frontal system over the southwest of the country in July.
The GIAJ reported 1.8 billion U.S. dollars in paid claims from this event, with theinsurance market indicating total insured losses could approach 3 billion U.S. dollars.
Following these events, RMS modelers comprehensively reviewed allcomponents of the Japan Typhoon HD Model. As part of the review, RMS received

14

The Toa Reinsurance Company, Limited — Japan’s Insurance Market 2020

a significant body of Typhoon Jebi claims from the primary market in Japan thatwere used for a detailed claims analysis, working with companies that provided thedata to aid in the analysis and interpretation. In addition to claims, other key data
sources included insights from multiple field reconnaissance in the affected regions
after the events and work undertaken with academics and engineers in Japan.
Separately, RMS also received claims from the flooding in July 2018, within adataset of non-typhoon flood events in Japan since 2000.
RMS has incorporated the insights from the 2018 and 2019 events into an update to
the 2016 Japan Typhoon HD Model. So, what did we learn?

3. A Complete View
of Flood Risk

In July 2018, a stationary front over southwestern Japan, within an atmosphericsetup that drew in moisture-laden air masses, brought multiple rounds of heavy
precipitation. The widespread and severe flooding caused by this event led tosignificant insured loss. As a consequence, the risk from non-typhoon precipitation
flooding in Japan was brought to the forefront. Furthermore, since the event, an
increase in flood coverage has been offered in insurance policies in Japan, which
increases the importance of understanding the future loss potential from such events.
Figure 1 shows what RMS reconnaissance teams saw in the immediate
aftermath of the flooding.
RMS includes probabilistic non-typhoon loss modeling in 2020 offerings forJapan to provide a complete view of flood risk, both typhoon and non-typhoon.
Together with the existing wind component of the typhoon model, this constitutes
our Japan Typhoon and Flood HD Model.
Based on our latest modeling of typhoons and of non-typhoon flooding inJapan, flood contributes around 30% of the total loss at the nationwide perspective.
When looking at the local level, particularly for certain lines of business, flood canbe a higher proportion of the loss or, indeed, the driver of the loss, and flood losses
can also be significant for individual events, as seen in recent years.
Figure 1: RMS Field Reconnaissance following Non-Typhoon Flooding in July 2018

15

2. M
 odeling the Insights from the 2018 and 2019 Climatological Perils
in Japan

4. Learning from
Recent Typhoons

16

The typhoon events of 2018 and 2019 were a reminder that typhoon risk is notconfined to wind, with storm surge-driven coastal flood impacts observed in Jebi
and Faxai and significant precipitation-driven inland flooding in Hagibis. In 2018,
Typhoon Jebi brought coastal flooding to property lines in Osaka Bay, impacted
marine cargo in the ports of Kobe and Osaka, and inundated Kansai International
Airport. Notably, observed coastal flooding was in advance of the significant“mainland” coastal defenses that exist in Osaka Bay (in Ise Bay and in Tokyo Bay);it highlighted the vulnerability of exposures in advance of these defenses, including
exposures on reclaimed land.
Tokyo Bay is the only other area of reclaimed land with higher exposure thanOsaka Bay – within a year, Typhoon Faxai was tracking over Tokyo Bay. Faxai
made landfall during a receding tide, which served to limit coastal flooding. Where
coastal flooding did occur, however, RMS reconnaissance teams deemed the defense
breaching likely to have been caused by wind-induced waves riding on top of thestorm surge. Similarly, in Typhoon Jebi, at Kansai International Airport (situatedon reclaimed land in the center of Osaka Bay) the coastal flooding was
predominantly a result of waves on top of storm surge. Waves increase the energy ofthe storm surge and its height, and they can significantly increase the damage at anaffected location. Waves are important to consider for coastal defense failure in
Japan as they present a significant factor for defense performance where deep water
abuts defenses, as seen during Typhoon Jebi at Kansai International Airport in
Osaka Bay and during Typhoon Faxai in the southwest of Tokyo Bay in Kanagawa
Prefecture.
In 2019, Typhoon Hagibis brought heavy precipitation over central and easternJapan for several days that resulted in widespread flooding, which consisted of many
individual areas of flooding across a large swath of Japan. The Ministry of Land,
Infrastructure, Transport and Tourism (MLIT) reported more than 100 levee
breaks along 64 rivers and almost 200 separate instances of rivers overtopping theirlevees or banks. Looking at the extensive levee system in Japan, RMS reconnaissancenoted that most instances of flooding were from levee breaches rather thanovertopping. This reflected what RMS modelers observed in the field in theimmediate days after the July 2018 flooding. Levee breaches are typicallyaccompanied by high-velocity flows that contribute to increased structural damage
from foundation scour, even at low flood depths. RMS observed significant
structural damage in areas close to the levees where levees had failed in bothTyphoon Hagibis and the non-typhoon flooding in July 2018.
In the flooding associated with Typhoon Hagibis, RMS also observed instanceswhere the levee systems built to protect property were found to exacerbate flooding.
In a few locations visited in field reconnaissance, water from an upstream levee
failure was prevented from draining into the river by the levee, and accumulated
behind the levee structure.
The high precipitation levels from Hagibis that fell over Japan are, in part,
explained by the storm’s asymmetrical pattern development as it approached Japan.
This pattern displaced precipitation to the north of the storm’s center, leading toThe Toa Reinsurance Company, Limited — Japan’s Insurance Market 2020

the occurrence of precipitation days in advance of landfall. Another factor was the
sheer size of the system. Hagibis was a typhoon with very large atmosphericcirculation; its wind field at landfall was three times that of Faxai (the typhoon that
had made landfall the month previous). A large geographic area was therefore under
the wind field and the precipitation extent.
Both these factors were influenced by the fact that Hagibis was undergoing
extratropical transitioning at landfall. This is a process that alters the shape of thetyphoon wind field, the precipitation field, and the storm surge and wave fields(Bruneau et al., 2017), and therefore has profound impacts on the loss potentialfrom such storms. A significant number of typhoons that impact Japan do soundergoing or having undergone extratropical transitioning. Typhoon Jebi began
this process as it tracked over the Sea of Japan, off the coast of northern Japan. For
Jebi, this meant that its wind field extended to the east to the extent that its winds
impacted northern Honshu and Hokkaido, even when tracking up to 80 miles
offshore.
The RMS Japan Typhoon HD Model explicitly models the flood component
from typhoons, and does so through a sophisticated methodology that enables
capturing flood inundation both in the model and when the model is used in event
response, as in Typhoon Hagibis. The model includes defense failure from both
overtopping and breaching of defenses, and it captures high-velocity flows andmovement of water across the landscape to include accumulating behind levees –features observed in 2018 and 2019 events. The RMS model physically models theimpact of waves and, following what was observed at Kansai International Airport
in Typhoon Jebi, has been updated to allow for wave attack at more angles from thenorth. Further, the RMS model well replicates the extratropical transitioning
process using the most advanced transitioning model on the market (Loridan et al.,2014; Loridan et al., 2015), the importance of which has been seen in recent events.
RMS analysis of recent events also informed the vulnerability component of themodel. RMS conducted an extensive review to ensure the model is well calibrated
and continues to reflect both the latest market conditions and local building
performance typhoon hazards. Typhoon Jebi claims provided additional data for
specific regions and wind speed ranges to the claims pool used by RMS in the 2016
model development. In addition to claims, RMS used insights from fieldreconnaissance along with extensive analytical modeling to recalibrate wind andflood vulnerability functions across Japan for all lines of business.
Field reconnaissance provided clear examples of the unique characteristics anddifference in performance of traditional and western-style wood frame structures inJapan. RMS modelers were able to validate major damage mechanisms based onfield observations, including extensive damage to tiled roofs on traditionalbuildings. Clean-up and repair operations, with restoration practices andredundancies unique to Japan, also aided in updating facility and lifeline businessinterruption functions.
RMS has also updated the post-event loss amplification (PLA) module based on
insights from recent events, both in Japan and globally. PLA updates in the 2020

17

2. M
 odeling the Insights from the 2018 and 2019 Climatological Perils
in Japanmodel consider recent changes in the Japanese insurance market – mandatory
training of loss adjusters as stipulated by government regulations after the 2018
events, and GIAJ initiatives to improve fraud detection and the claims settlement
process following Faxai and Hagibis in 2019. The unique elements of Japanesesocietal and systemic resilience in reconstruction and disaster preparedness were also
considered.
The Japan Typhoon HD Model also benefits from extensive research conductedby RMS and our understanding of PLA impacts observed after intense losses in
specific regions, such as the recent California (U.S.) wildfires, major Atlantic
hurricanes (including Harvey, Irma, and Michael), the Elbe (central Europe) andLouisiana (U.S.) floods, and the New Zealand Earthquake Sequence. As in the New
Zealand Earthquake Sequence, in recent years in Japan the impacts of overlapping
events has been seen, most notably in 2019 when Typhoon Hagibis tracked overTokyo Bay just over a month after Typhoon Faxai. The compounding impacts ofthese events on PLA was considered in the recent model update.

5. Commitment toField Learning

Field reconnaissance in the immediate aftermath of an event can be challenging,but RMS modelers in the field provide details about the peril hazard that cannot
solely be ascertained from media photographs of the severest damage. Modelers areable to view first hand the type, extent, and severity of damage to property andinfrastructure and then review these details in the context of learning about theevent. RMS invested significantly in reconnaissance in the immediate days after the2018 and 2019 events in Japan – particularly for Typhoon Hagibis given its
complexity, which included flooding across large areas of Japan and overlapping
impacts from the previous typhoon. Figure 2 shows what RMS reconnaissanceteams saw following Hagibis.
Figure 2: RMS Field Reconnaissance following Typhoon Hagibis in 201918

The Toa Reinsurance Company, Limited — Japan’s Insurance Market 2020

Not only does RMS conduct field reconnaissance immediately after the event,modelers often revisit the impacted areas in the months and years following events
to evaluate repair and restoration efforts. This was the case with Faxai and Hagibis,
when RMS modelers from our Tokyo office revisited areas around Tokyo Bay
following the initial reconnaissance. Similarly, RMS modelers returned to the Osaka
region a year after Jebi. In addition to field surveys, they spoke to claims adjusters
and met with local engineers and academics to gather information on the various
nuances of the event and details on model development.
The RMS commitment to ground truth – not just in the immediate aftermath
but over time to evaluate repairs and rebuilding – is important in evaluating andmodeling typhoon and flood risk in Japan.

6. Summary

References

The events in 2018 and 2019 highlighted features that are important to risk
modeling, and RMS is committed to incorporating insights and learning into ourview of risk, thereby ensuring the models continue to represent the state of thescience in understanding the risk to insured assets in Japan.
The RMS Japan Typhoon and Flood HD Model was released this year on Risk
Modeler™ (the modeling application on the RMS platform Risk Intelligence™) andincorporates lessons learned from recent typhoon events, and includes explicit
coverage of non-typhoon flood losses.
After the last two significant loss years for typhoon and flood in Japan, 2020 will
give the catastrophe modeling community and (re)insurance markets a lot to consider.

Bruneau N., Grieser J., Loridan T., Bellone E., & Khare S. (2017). The impact
of extra-tropical transitioning on storm surge and waves in catastrophe risk
modeling: application to the Japanese coastline. Natural Hazards, 85, 649–667.
Loridan T., Khare S., Scherer E., Dixon M., & Bellone E. (2015). Parametricmodeling of transitioning cyclone wind fields for risk assessment studies in theWestern North Pacific. Journal of Applied Meteorology Climatology, 54, 624–642.
http://journals.ametsoc.org/doi/abs/10.1175/JAMC-D-14-0095.1
Loridan, T., Scherer E., Dixon M., Bellone E., & Khare S. (2014). Cyclone
wind field asymmetries during extratropical transition in the Western North Pacific.
Journal of Applied Meteorology Climatology, 53, 421–428. http://journals.ametsoc.
org/doi/abs/10.1175/JAMC-D-13-0257.1
About RMS : For over 30 years, RMS has shaped the world’s view of risk. RMS leads thecatastrophe risk industry that we helped to pioneer. We marry data and advanced model
science with leading-edge technology to create the most comprehensive catastrophe risk
models, applications, and APIs. Leaders across multiple industries can address the risks of
tomorrow with RMS Risk Intelligence™, our open, unified cloud platform for global risk.
Insurers, reinsurers, financial services organizations, and the public sector trust RMS tohelp them better manage and navigate the risks of natural and man-made catastrophes.

193.
1. Foreword

2. The Origins ofLife Insurance
Medicine

3. The History ofUnderwriting
Requirements

20Life Insurance Underwriting Trends
in Japan
Naoyuki Tsukada, FALU, FUWJ
Chief Underwriter, Manager, Underwriting Team,Life Underwriting & Planning Department
The Toa Reinsurance Company, Limited

The term “life insurance” is generally associated with benefits paid due to thedeath of a person, but in fact life insurance also provides benefits for living needs
including health insurance, long-term care, critical illness, disability income, andtotal permanent disability. Medicine, healthcare technology, information
technology, socioeconomics, lifestyles, life insurance products, and many otherissues are now very different from when I became involved in life insurance
underwriting in 1998. This paper covers the transition of life insurance in general,from a product that covers the death of a person to a product for living needs, aswell as underwriting trends in Japan.

In 1706, the Amicable Society was established in England as the world’s first life
insurance company. Moreover, in 1762 the Equitable Life Assurance Society(“Equitable Life”) laid the foundation for modern life insurance companies because it
was the first to employ a scientific approach to underwriting: setting base premiumsby age, identifying risk on the basis of age and medical underwriting, and setting
premiums based on mortality tables. Equitable Life also employed actuaries, set
maximum sum assurance, and paid cash surrender value and policyholder dividends.
Risk selection is at the very heart of life insurance, and Oscar H. Rogers played
an important part in its history and evolution. Known as the father of life insurance
medicine, he served as Medical Director of New York Life Insurance Company at theend of the nineteenth century and worked with fellow actuary Arthur Hunter on
impairment studies using a life table methodology. They published a paper titled The
Scientific Valuation of Human Lives for Insurance, which presented a revolutionary
numerical rating system that is now commonly used worldwide. In the twentiethcentury, U.S. life insurance companies collaborated in intercompany impairment
studies that involved medico-actuarial studies using large groups of insured persons.
This methodology is still used today. Subsequently, Richard D. Singer worked with
The Association of Life Insurance Medical Directors of America (ALIMDA) and theSociety of Actuaries (SOA) to recalculate mortality ratios and extra mortality ratioswith clinical data categorized by age and time elapsed as a method for risk selection.
They presented Medical Risks: Patterns of Mortality and Survival in 1976, launching a
new approach to life insurance medicine. This study was then revised in Medical
Risks: Trends in Mortality by Age and Time Elapsed. Volume 1 and 2.

The history of the life insurance industry and risk selection in Japan began with
Meiji Life Insurance Company, which was founded in 1881. Life insurancecompanies handled risk selection at that time by employing full-time doctors(company doctors) to examine applicants. The first medical examination in Japan
took place on July 9, 1881, the day Meiji Life was established. Life insurancecompanies subsequently contracted with clinical doctors so that professionals otherthan company doctors could provide applicants with medical examinations. Medical
examinations at that time checked height, weight, chest measurement, auscultation,

The Toa Reinsurance Company, Limited — Japan’s Insurance Market 2020

palpation, and vital capacity of the lungs.
Urinalysis was then introduced in 1889, blood pressure measurement in 1891,
and chest X-rays and electrocardiograms in the 1930s. A rise in deaths fromtuberculosis likely led to the pronounced increase in the use of chest X-rays, which
many life insurance companies no longer require due to the sharp decrease in the
tuberculosis mortality rate. On the other hand, electrocardiograms, which havebecome lighter, more compact and more accurate to the extent that they can beused when a doctor makes a home visit, have become more important in line withincreased emphasis on cardiovascular diseases. In Japan, company doctors anddoctors under contract visit the homes of people applying for life insurance policies,
which is not common practice in other countries.
Blood glucose tests were introduced in the 1960s, and blood tests including
complete blood counts and biochemical examinations became widespread in the
1980s. Blood tests are now fundamental components of health examinations, andwith their introduction the foundation of current underwriting requirements was
firmly established. Current common blood tests are AST, ALT, GGT, TB, TP, HDL,
LDL, TG, FBS, HbA1c, Cre, BUN, UA, WBC, RBC, Hb, Ht, and platelet count.
Some companies have included tumor markers such as CEA and PSA in their
medical examinations since the 1990s, but few life insurance companies maketumor marker testing mandatory due to issues with sensitivity, specificity, costs, andexplaining these tests to applicants. Questionnaires and or testing for HIV andrecreational drug use are included in some countries, but are not currently used inhealth examinations in Japan because these issues have not reached high levels.
In Japan, medical examinations, which are not necessarily conducted by adoctor, include an applicant’s declaration (non-medical), data collected by healthinterviewers, and the results of health checkups. The latter originated when theemployers of applicants replaced actual medical examinations with a certification of
examination results, due to the shortage of doctors in Japan following World War
II. This system is not common internationally and is also increasingly less common
in Japan, where applicants now typically submit the results of medical examinations
to life insurers. Health checkups are advantageous for risk selection because they
cover more issues than medical examinations. They also cost less, do not require thelabor of a medical examination, and incur no risk of legal liability for medical
examination mishaps. Moreover, more than 60% of people in Japan receive routine
health checkups, so it has become common since the late 1990s for Japanese life
insurance companies to only use the results of health checkups.
Health checkups can identify an applicant to be sub-standard because they
check for a large number of issues and may therefore uncover disorders that the
medical examination process does not. Insurance salespeople and agents therefore
tend to prefer medical examinations over health checkups, so to cover themselves
life insurance companies have in place measures such as paying higher sales fees (anincentive) to salespeople and adopting lower mortality ratios for health checkups.
They typically credit the mortality ratio for health checkups by 25 to 50 points orby multiplying it by 0.85 to 0.95.

21

3.Life Insurance Underwriting Trends in Japan

Consequently, policies underwritten through health checkups have achieved agood record for several reasons. One, applicants who have routine health checkups
are generally more aware of their health, which supports the early detection ofillness and outcomes that are better than for other groups in terms of clinical andpreventive medicine. Two, health checkups can identify sub-standard risk because
they cover a large number of issues, which can lead sub-standard applicants togravitate to other companies, resulting in established pools of policyholders that
tend to be completely standard risk. However, accurate health checkup data for
applicants with illnesses enables more accurate underwriting, leading in many cases
to policy conditions that are favorable rather than conservative. More favorable
conditions, such as lower insurance premiums, are key for selling policies, and theability to offer favorable conditions to applicants even if they are sub-standard risks
keeps those applicants from taking their business to other companies.
Doctor shortages and medical examination issues after wars were similar outside
Japan. Canada began issuing insurance based on non-medical examinations (adeclaration only) rather than a medical examination in 1921 in response to theshortage of doctors because of their deployment during World War I, and nonmedical examinations subsequently became a common means for risk selection inindustrial insurance in the United States. Non-medical examinations first came into
use in Japan in 1943 during World War II.
The use of health interviewers has evolved as a unique Japanese risk selection
method. Inspired by exams for paramedics in the United States, health interviewers
came into use in 1973. Health interviewers do not need nursing qualifications andare certified as health interviewers if they pass a test conducted by the Life Insurance
Association of Japan. They do not measure blood pressure or perform urinalysis, butthey do obtain a declaration from applicants and confirm abnormalities inappearance. However, many life insurance companies have discontinued the use ofhealth interviewers due to limited risk selection, cost and efficiency issues including
the time and effort required to educate them. Conversely, the life insurancecompanies that still employ health interviewers make sure interviewers are highly
educated and have positive cost benefits.

4. ProductEvolution andUnderwriting

22

Whole life insurance was the primary product during the early years of the life
insurance industry in Japan. However, endowment insurance subsequently became
the primary product as the need for savings increased. Life insurance initially only
handled standard risks, but began handling sub-standard risks in 1953. Initially, life
insurance companies generally used the lien method for sub-standard risks, but
increasingly employed the extra premium method and the exclusion of total
permanent disability method as their understanding of sub-standard risks increased.
The lien method for handling sub-standard risk is unique to Japan. Life insurancecompanies use this approach for diseases including malignant neoplasms for which
the risk of death gradually decreases with the passage of time because this method
reduces the sum insured should an insured event occur within a specified period

The Toa Reinsurance Company, Limited — Japan’s Insurance Market 2020

after the policy goes into force. As high-risk applicants are treated as postponedgroups, who cannot purchase life insurance until they meet certain conditions, thelien method is only applicable to them after the specified period to meet suchconditions has passed. The lien method is more attractive to Japanese people as they
prefer a reduced sum insured over a short period to the burden of higher insurance
premiums because few applicants think they will die during the lien period specified
by the life insurance company. Postponed groups with high-risk of death are alreadyexcluded from such applicants. The table below details the lien method. Figuresrefer to the percentage of sum insured paid under the lien method.
Table 1: The Lien Method
Lien Period

1st Policy Year

2nd Policy Year

3rd Policy Year

4th Policy Year

5th Policy Year

1 year

50%

100%

100%

100%

100%

2 years

30%

60%

100%

100%

100%

3 years

25%

50%

75%

100%

100%

4 years

20%

40%

60%

80%

100%

5 years

15%

30%

45%

60%

80%

The development of various riders subsequently accompanied the development ofdeath benefits, including term riders, hospital indemnity riders, lifestyle disease riders,nursing care riders, specified disease riders, and living needs riders. Eliminating antiselection is especially important for life insurance with living benefits, and the 90-day
waiting period for breast cancer in critical illness insurance is the result of extensive
experiential data. (Insurance for all types of cancer now has a 90-day waiting period.)
Insurance products featured various riders providing generous benefits in the early
1990s, but consumer needs shifted to less expensive products during the subsequenteconomic crisis. These products included preferred insurance, non-participating
insurance without policyholder dividends and insurance with no cash value atsurrender. In particular, preferred insurance outside Japan requires that various criteria
be met including a cotinine test, body mass index (BMI), blood pressure, lipid levels,
medical history (including that of the family), hobbies, occupation, and driving
history. In Japan, companies require that comparatively fewer criteria be met: asatisfactory cotinine test, BMI, blood pressure, and medical history, with somecompanies requiring driving history. In the latter half of the 1990s, the aging ofsociety shifted the need for life insurance from death to living needs. Simple healthinsurance plans became popular and companies developed riders that excluded certain
body parts or specific diseases in accordance with the medical history of applicants.
Competition among life insurance companies has intensified since the beginningof the 2000s. Companies have developed simplified issue products and guaranteedissue products to incorporate high-risk applicant groups such as sub-standard risk andpostponed risk, but have focused greatest attention on competitive underwriting.

23

3.Life Insurance Underwriting Trends in Japan

With investment yield margins and administrative expense margins under pressure,companies needed to generate mortality rate margins and increase earnings.
Facultative reinsurance for life insurance became popular during this time, and theUnderwriters Association of Japan (UWAJ) was established in 2006 as the importanceof underwriting increased and became more apparent. That was more than 10 years
after the Operation Management Committee of the Life Insurance Association ofJapan visited Europe and the United States as a team to research underwriting overseas
in 1987.
In the 2010s, product development for living needs rather than death benefits
accelerated. Products included long-term care insurance, disability income insurance
and health promotion insurance. Companies used experiential data for this kind of
insurance with living benefits, even though there was little relevance to the situation
they faced at that time. Analysis using big data also became an option, in some caseswith the cooperation of reinsurance companies, but companies without experiential
data could also develop similar products, and competition increased in conditions forcoverage and premium rates. Such insurance products with living benefits also posenew challenges for underwriting life insurance based on experiential data, big data andclinical data. Japan has an aging society with increasingly healthy longevity, so Japanese
underwriters must take on additional challenges. Notably, underwriting in Japan
currently does not employ genetic testing due to issues including ethics and privacy.
At the same time, traditional underwriting is rapidly being deregulated. This
includes major revisions to the proprietary underwriting guidelines companies use dueto the accumulation of experiential data, simpler declaration forms, major revisions to
medical examination standards, the incorporation of applicants in automatedunderwriting systems, and a reduction in the number of requisite tests due to fingertip
blood sampling. The wave of unprecedented deregulation of underwriting standards
will continue, and competition is likely to intensify further. Accurate estimation ofprotective value and the rapid introduction of accurate clinical data in addition toexperiential data into underwriting are important. Cooperation among sections ofunderwriting and actuary, claims, marketing and risk management will also become
more important.

5. Conclusion

24

As of this writing, COVID-19 is raging worldwide. The life insurance
environment may change due to the economic crisis caused by COVID-19. However,humanity has overcome many major economic crises throughout history, including
the Wall Street crash. We will certainly be able to overcome the current crisis, andunderwriting will play its part. Insurance companies will need to continuously lookfor opportunities to provide insurance coverage to customers who have given up on
insurance, and will need to remain cognizant of the need for low-cost premiums.
Moreover, with a commitment to fair treatment of policyholders, companies will
update underwriting and provide relief to people facing difficulties. The night may
seem long, but dawn always comes.

4.
1. The Operating
Environment of
the Non-Life
Insurance
Industry

2. Overview of the
Non-Life
Insurance
Industry

Trends in Japan’s Non-Life Insurance
Industry
Underwriting & Planning Department
The Toa Reinsurance Company, Limited

The GDP of Japan ranks third in the world and its economy has continued to
grow moderately in recent years. However, Japan’s population has been declining
since 2008, and its low birthrate and aging population are expected to continue.
Looking at the Japanese non-life insurance market, automobile insurance
currently accounts for about half of net premium income of direct non-life
insurance companies. Factors including new advances in automated driving
technology are projected to change the structure of the industry.
Non-life insurance companies in Japan are targeting further growth byaccelerating overseas business, developing new markets by providing new products
and services, and implementing initiatives to increase operating efficiency.

(1) Status of Non-Life Insurance Companies and Cooperatives
Japan’s non-life insurance industry comprises 28 Japanese non-life insurancecompanies that are members of the General Insurance Association of Japan (GIAJ)
and 19 companies that are members of the Foreign Non-Life Insurance Associationof Japan, Inc. (FNLIA). Japan’s non-life insurance market is an oligopoly in which
the three largest non-life insurance groups (in alphabetical order; MS&AD
Insurance Group Holdings, Inc., Sompo Holdings, Inc. and Tokio Marine
Holdings, Inc.) account for 7,524 billion yen, or 87%, of net premium income,
8,609 billion yen, written by the 28 GIAJ members as a whole.
Japan’s non-life insurance companies have increased operating efficiency sinceliberalization of the insurance industry in 1996, and have conducted mergers andbusiness integrations since 2000. As a result, for all non-life companies, theunderwriting expense ratio (other than commission and brokerage) in fiscal 2019
decreased to 15%, compared with 21% for all non-life insurance companies in theindustry for fiscal 1995, prior to liberalization.
One recent development among major Japanese insurance companies is that
Sompo Japan Nipponkoa Insurance Inc. changed its name to Sompo Japan
Insurance Inc. on April 1, 2020.
The cooperative market is another area of note, as it has a presence that issecond only to the non-life insurance market in terms of premium volume. Even if
we look only at the main cooperatives that make up the Japan Cooperative
Insurance Association Incorporated, they alone had premium income of 2,959
billion yen in fiscal 2018 (excluding life cooperatives and pension cooperatives).
Furthermore, Small Amount, Short Term Insurance (“SASTI”) business wasintroduced in Japan following an amendment to the Insurance Business Act in April
2006 and SASTI companies are now providing customers with non-life insurance
cover. As the name implies, this business is limited mainly to selling insurance insmall amounts with limited terms. On the other hand, regulations now make itpossible for companies that are not insurance companies to enter this business much
more easily than in the case of establishing a new insurance company. For example,
companies need only to register and need not to be licensed by the FSA to operate,
the minimum capital required is 10 million yen compared to 1 billion yen for an

25

4.Trends in Japan’s Non-Life Insurance Industry

insurance company, and participants may sell both life and non-life insurance. The
number of member companies of The Small Amount & Short Term Insurance
Association of Japan continues to grow and the scale of the market by premium
volume has expanded to approximately 91.4 billion yen. Non-life insurance
products sold in this market are mainly renters insurance, including fire insurance
for the home contents of renters and rental housing liability insurance sold throughthe real estate agent channel, pet insurance and pecuniary insurance.
The Small Amount & Short Term Insurance Market Data
Figure 1: Member Companies
Figure 2: Premium Income		(excl. Life and Medical Insurance)(Billions of yen)(Billion yen)

(Total companies)(Total companies)
105

105
101

100

100

95

95

90

85

97

88
84

85

80

80

75

75
2014

100

90

90

97

81.7

90

81

100
101

80

80

70

70

88

71.6

84

63.6

91.4

91.4

20172018

2018

81.7

71.6

63.6

81

20142015

20152016

20162017

20172018

60

60
55.7

55.7

50

50
2014

20142015

2018(Fiscal year)(Fiscal year)

20152016

20162017(Fiscal year)(Fiscal year)

Source: ‌The Small Amount & Short Term Insurance Association of Japan(2) Overseas Business Trends
The three largest non-life insurance groups have all positioned overseas businessas a growth driver, and have aggressively implemented initiatives such as forming
business alliances with local insurance companies and engaging in M&A.
Figure 3 shows overseas net premium income* for the three largest non-life
insurance groups. It decreased year on year in fiscal 2019 because Tokio Marine
Holdings sold reinsurance subsidiaries, as described later, but overall has been
trending upward. Overseas net premium income for these insurance groups in fiscal
2019 was about 5 times that of fiscal 2010, and overseas business accounted forapproximately 21% of net premium income for the three largest non-life insurancegroups.
* In this section, “overseas net premium income” shows the total of net premium income from
non-life insurance and life insurance premiums.

26

The Toa Reinsurance Company, Limited — Japan’s Insurance Market 2020

Figure 3: Trends in Overseas Net Premium Income for the Three Largest Non-Life Insurance 				Groups (Billion yen)
(%)
3,000

25

2,500
20

2,000
15
1,500
10
1,000

5

500

0

0
2010

2011

2012

2013

2014
2015
（Fiscal year）

2016

2017

2018

2019

Overseas net premium income (left scale)
Tokio Marine Holdings, Inc.
MS&AD Insurance Group Holdings, Inc.
Sompo Holdings, Inc.
Percentage of overseas net premium income (right scale) (Total of the three groups including life insurance)

The three largest non-life insurance groups have adopted similar strategies intargeting growth opportunities in emerging markets and expanding specialty lines indeveloped markets. Key overseas business developments of the three largest non-life
insurance groups and recent trends are as follows:
MS&AD Holdings is particularly focused on business in Asia. Mitsui
Sumitomo Insurance acquired the Asian general insurance operations of U.K.
company Aviva plc in 2004, and is using its non-life insurance businesses in Asia as
its base for advancing into the ASEAN region. It also enhanced its Asian presence byacquiring Singapore insurer First Capital Insurance Limited in December 2017. Inother markets, it strengthened its reinsurance business and specialty lines bycompleting the acquisition of Amlin plc of the United Kingdom in 2016.
Sompo Holdings acquired leading U.K. specialty (re)insurer Canopius Group
Limited in 2014. In addition, it significantly expanded its overseas business in 2017by completing the acquisition of Endurance Specialty Holdings Ltd. (now called
Sompo International). Also in 2017, Sompo Holdings restructured its overseas
business, making Sompo International the core overseas insurance business of thegroup, and selling all Canopius shares to a private equity investor.
Tokio Marine Holdings has pursued growth opportunities in its overseas
business by acquiring businesses in emerging countries, as well as insurancecompanies with strong specialty lines in developed countries, particularly in Europe
and the United States, such as Kiln Ltd. of Lloyd’s in the U.K., Philadelphia
Consolidated Holding Corp. of the U.S. in 2008, Delphi Financial Group, Inc. of
the U.S. in 2012 and specialty insurance group HCC Insurance Holdings, Inc. of
the U.S. in October 2015. Further, in February 2020 it completed the acquisition of27

4.Trends in Japan’s Non-Life Insurance Industry

Privilege Underwriters, Inc., which specializes in the U.S. market for personal
insurance and risk management services for high net worth individuals and families.
At the same time, Tokio Marine Holdings sold its reinsurance subsidiaries, Tokio
Millennium Re AG and Tokio Millennium Re (UK) Limited in 2018 and reviewed
its business portfolio.

(3) Trends in Business Results of Non-Life Insurance Companies for
Fiscal 2019
Earnings decreased in fiscal 2019 for Japan’s non-life insurance companies
because of additional provision for catastrophe loss reserves even as the amount of
natural disasters decreased year on year. The following is a summary of the main
financial results (total) of the 28 non-life GIAJ members in fiscal 2019.
Net premium income in all lines of business increased by 216 billion yen fromthe previous fiscal year to 8,609 billion yen.
Net claims paid (paid basis) decreased by 297 billion yen to 5,026 billion yen
because claims of typhoons and other natural disasters that impacted Japan decreased.
As a result, the loss ratio for fiscal 2019 decreased by 5.2 percentage points to 63.9%.
Expenses increased by 82 billion yen to 2,807 billion yen because of higher
earnings and an increase in Japan’s consumption tax. The net expense ratio increased
by 0.1 percentage points to 32.6%.
Underwriting profit (earned/incurred basis) decreased by 98 billion yen to 94
billion yen year on year because of additional provision for catastrophe loss reserves
despite the positive factors above.
Ordinary profits, calculated as the sum of underwriting profit and investment
profit, decreased by 267 billion yen to 596 billion yen. The decrease reflected the
downward trend of the sale of subsidiaries and strategic equity holdings by several
insurance companies in the previous year, along with the decrease in share prices
related to COVID-19. After deducting tax expense, net income decreased by 218
billion yen to 457 billion yen.
Consolidated results for the three largest non-life insurance groups benefited
from the strong performance of overseas subsidiaries. However, ordinary profits
decreased year on year because of the decrease in net income of main non-life
insurance companies of each group in Japan discussed above.

3. Recent Non-Life
Insurance
Industry Trends

28(1) Natural Disasters in Fiscal 2018 and 2019
As in fiscal 2018, Japan suffered from many wind and flooding disasters in fiscal
2019. Wind and flooding claims paid in one year were the highest ever in fiscal
2018 and the second highest ever in fiscal 2019. Details of the major wind andflooding disasters in Japan in fiscal 2018 and fiscal 2019 are as follows:

The Toa Reinsurance Company, Limited — Japan’s Insurance Market 2020

Table 1: Major Wind and Flooding Disasters in Japan in Fiscal 2018 and Fiscal 20192018
Name of Loss

Number of claim
payments

Total amount ofclaims paid
(Million yen)

2019

Heavy Rain in
Western Japan(Typhoon No. 7)

Typhoon No. 21(Jebi)

Typhoon No. 24(Trami)

Typhoon No.15(Faxai)

Typhoon No.19(Hagibis)

Total 55,320Total

857,284

Total  412,707

Total

383,585

Total  295,186

Total 11,283Motor
Fire
Misc.
Marine25,11024,146
6,064-

Motor
Fire
Misc.
Marine113,915
718,862
20,811
3,696

Motor
29,322Fire
370,968
Misc.
12,417
Marine-Motor
36,879Fire
337,065
Misc.
9,641
Marine-Motor
48,038Fire
230,439
Misc.
16,709Marine-MotorFire
Misc.
Marine

5,766
4,921
596
-

Total  195,595

Total  1,067,806

Total  306,091

Total  465,612

Total  582,604

Total

23,853Motor
28,307Fire
151,991
Misc.
15,297
Marine-Motor
Fire
Misc.
MarineMotor
11,459Fire
285,595
Misc.
9,037
Marine-Motor
25,818Fire
424,426
Misc.
15,367
Marine-Motor
64,519Fire
475,058
Misc.
43,025
Marine-Motor
Fire
Misc.
Marine

7,707
15,451
694-

77,981
920,227
16,06953,528Heavy Rain in
Chiba

Note: Numbers and amount of Miscellaneous Casualty Loss include those of Accident.
Source: GIAJ (The General Insurance Association of Japan)

The damage caused by Typhoon No. 15 (Faxai) in 2019 was mainly due tostrong wind. Faxai made landfall in Chiba Prefecture (a prefecture to the east ofTokyo) with maximum instantaneous wind velocity recorded at multiple points thatwas the highest since the start of statistical recording. Consequently, the number ofresidential claims paid reached 330,000. While large, this figure was lower than for
Typhoon No. 21 (Jebi), which caused a great deal of damage to Kansai in 2018.
Typhoon No. 19 (Hagibis) was very large and powerful. Damage from river flooding
caused by heavy rain was a standout feature of this typhoon. Consequently, as shown in
the table above, insurance claims paid per policy was higher than Jebi in 2018.
Thus Japan suffered large-scale wind and flooding disasters for the second
consecutive year. Factors such as rising seawater temperatures near Japan may be
increasing typhoon intensity and tail risk.
The reference loss cost rate of residential fire insurance was raised in Japan in
October 2019 by 4.9% on a national average because of the recent major natural
disasters. Direct non-life insurance companies revised their premium rates forresidential and commercial fire insurance accordingly. Additional premium rate
revisions are expected to take effect in January 2021, so fire insurance results should
therefore improve in Japan.
Japan’s direct non-life insurance companies have dealt with this series of natural
disasters by improving their organizational system for claims handling, and introducing
new rapid response initiatives including the use of smartphones and tablets for remoteassessment of claims, the use of drones to survey damage and the use of robotic process
automation (RPA) for handling accident claims and operations processing.

(2) Innovation
The insurance industry has embraced the term “InsurTech” to refer to the fusion of
insurance and information technology. Japan’s direct non-life insurance companies are29

4.Trends in Japan’s Non-Life Insurance Industry

encouraging innovation in non-life insurance products and their operations processes.
Artificial intelligence (AI) has been used to help address customer inquiries atcall centers, and other initiatives to use AI with greater sophistication have been
implemented in recent years. Damage assessment is one example. Initiatives areunderway to automate insurance claim calculation and for the allocation of fault for
automobile accidents through AI analysis of images taken with smartphones anddrive cams. AI is also being used in insurance underwriting to automate screening.
Progress among non-life insurance companies in deploying AI in their operations
will support improved customer satisfaction by increasing speed and efficiency, andenhancing objectivity and rationality in customer services.
Companies are also applying blockchain (distributed ledger) technology toinsurance policies. Several non-life insurance companies got together in a consortium
to apply blockchain technology to trade operations in 2017, and some companies
conducted demonstration tests independently. The actual application of blockchain
technology to insurance policies is expected to optimize business processes, which
will dramatically accelerate procedures and improve the quality of the services that
non-life insurance companies provide, in addition to enhancing security.
In addition to automobile manufacturers, non-life insurance companies are also
participating in the development of vehicles with automated driving technology.
Insurance companies are selling insurance that covers risks related to automateddriving demonstration tests, and are providing driving data collected using theInternet of Things (IoT) and their historical claims records of past accidents, alongwith expertise in accident risk prevention and damage mitigation enabled by these
data. In addition, they are providing insurance products for risks associated with
automated driving technology, including riders for accident victims of automateddriving in cases where the driver responsibility of the automated vehicle cannot be
verified immediately. In this way, non-life insurance companies are contributing to
the development of automated driving technology, while working to ensure thatsociety is secure and safe by developing insurance products that support theincreasing prevalence of automated driving.
Other non-life insurance company initiatives include investment in andalliances with technology startup companies and the creation of a framework for
promoting open innovation.

(3) Impact of the Revision of Japan’s Statutory Interest Rate
Revisions to the Civil Code that came into effect on April 1, 2020 reduced thestatutory interest rate to 3% from 5% per annum in light of the low interest rateenvironment associated with Japan’s negative interest rate policy in recent years.
This has led to the reduction of the discount rate for calculating the present
value of lost future profits, which causes concern about higher insurance payouts,
mainly for automobile and accident insurance. Consider the example of an insured
with an annual income of 5 million yen whose permanent condition after an
accident causes him/her to lose 100% of his/her ability to work at the age of 32.
The personal injury insurance payout would be about 80 million yen with a30

The Toa Reinsurance Company, Limited — Japan’s Insurance Market 2020

statutory interest rate of 5%, but would be about 110 million yen with a statutory
interest rate of 3%.
The reduction of the statutory interest rate coupled with the increase in the
consumption tax rate from 8% to 10% on October 1, 2019 led some direct non-life
insurance companies to revise premium rates because of their concern about
increased insurance payouts.

(4) Impact of COVID-19 on Japan’s Non-Life Insurance Industry
COVID-19 has also affected Japan’s non-life insurance industry.
Casualty insurance products with riders providing coverage for infectious
diseases incurred claim payments, and insurance companies also recognizedimpairment and valuation losses on shareholdings and other assets in investment
side. These factors impacted earnings of non-life insurance companies in fiscal 2019.
Net premium income from accident and marine insurance may decrease because
people and insured assets are moving less than in average years.
In addition, the United States and Europe may have the potential to implement
regulatory revisions that require payment of business interruption claims that are
not the result of property damage, which could particularly affect companies thatare part of Japan’s three largest non-life insurance groups.

(5) Trends in Regulation by Regulatory Agencies
Given changes in the financial environment and priorities, over the past several
years the Financial Services Agency (FSA) has recognized the importance ofbroadening its view of financial administration from “the Form” to “the Substance,”from “the Past” to “the Future,” and from “Element by element analysis” to “Holistic
analysis” to achieve the goals of financial administration. Moreover, the FSA’s
program to achieve its goals involves inculcating principles-based inspection andsupervision that emphasizes dialogue with financial institutions, and executing
various initiatives that add to the requisite quality and depth. Specifically, the FSA
has foregone universal, generalized monitoring of financial institutions in favor of
dialogue-based monitoring that focuses on priority themes and issues at eachfinancial institution. The FSA then obtains feedback to make improvements basedon monitoring results. The FSA has also announced several case studies of financial
institution initiatives and issues elucidated by this approach to monitoring.
In Japan, the FSA is examining evaluation and supervisory methods based on
economic value in parallel with the introduction of the Insurance Capital Standard(ICS) by the International Association of Insurance Supervisors (IAIS). Solvency
assessment based on economic value is central to this regime, and will likely comeinto force in line with the ICS application schedule (to be introduced in fiscal 2025
as a full-fledged regulation after a five-year monitoring period).
The FSA has noted that introducing the economic solvency ratio into theregulatory regime may bring unexpected consequences, such as excessively riskaverse behavior among insurance companies. Therefore, it is investigating possible
unintended consequences and international trends while continuing its examination
with emphasis on dialogue with relevant parties.
31

5.
1. Overview ofBusiness Resultsfor Fiscal 2019

Trends in Japan’s Life Insurance
Industry
Life Underwriting & Planning Department
The Toa Reinsurance Company, Limited

The fiscal 2019 business results for 42 life insurance companies are as follows:(1) Total Amount of New Business
During the fiscal year ended March 31, 2020 (fiscal 2019), the total insured
amount of new business for individual life decreased by 25.5% to 49.7 trillion yen.
The total insured amount of new business for individual annuity insurance decreased
by 0.9% to 5.3 trillion yen. The total insured amount of new business for groupinsurance decreased by 3.5% to 4.6 trillion yen.

(2) Total Amount of In-force Business
The total insured amount of in-force business for individual life decreased by
2.2% year-on-year to 829.9 trillion yen, which was essentially unchanged from theprevious fiscal year despite a decrease in the total insured amount of new business.
Similar to the trend of total insured amount of new business for individual insurance,
the total insured amount of in-force business for individual annuity insurance
decreased by 1.8% to 102.5 trillion yen. On the other hand, the total insured amountof in-force business for group insurance increased by 1.6% to 398.1 trillion yen.

(3) Premium Revenues and Total Assets
Total premium revenues decreased by 6.4% year-on-year to 33 trillion yen. Total
assets increased by 1.3% to 392.7 trillion yen due to the increase in government
bonds.

2. Trends in the Life
Insurance
Industry Broughton by COVID-19

32(1) How Life Insurance Companies in Japan Have Addressed the
Spread of COVID-19
Life insurance companies in Japan have addressed the spread of COVID-19 withsome unconventional measures. For one, many life insurance companies have decided
to cover deaths due to COVID-19 under accidental death benefit riders as anadditional benefit, in addition to ordinary death benefit cover, to meet societal
demands.
Furthermore, in some areas of Japan the number of available hospital beds has
decreased in line with the rapid increase in the number of people infected with
COVID-19, so based on the doctor’s discretion patients with mild cases of COVID19 have been treated at home or at hotels. At the urging of the government, life
insurance companies have adopted various measures to deal with this situation. One
example is the payment of hospital benefits for the insured receiving medical
treatment, not only at a hospital but also at home or at hotels, on condition that theysubmit a doctor’s medical certificate or something similar. Furthermore, life insurancecompanies have taken steps to expand payment of outpatient benefits for online
medical treatment, which has come into broad use to reduce contact among people. Ina related initiative, Tokio Marine & Nichido Life Insurance Co., Ltd. has begun tooffer its policyholders and the insured free online medical consultation services for alimited time with strategic alliance partner MedicalNote, Inc. This initiative helps to

The Toa Reinsurance Company, Limited — Japan’s Insurance Market 2020

relieve anxiety about health and reduce the risk of infection.
In addition to expanding insurance benefit coverage, life insurance companies
have decided to extend the grace period for premium payments for up to six months.
This decision was driven by the fact that the widening impact of COVID-19 has
made it very difficult for policyholders and insurance companies to adopt a ‘businessas-usual’ approach. Some insurance companies have also temporarily reduced interest
rates on policyholder loans to support the cash flow of corporations whose business isaffected by COVID-19. The rationale was that, with the suspension of operations ofcertain businesses such as restaurants in line with local government directives once thenational government declared a state of emergency, demand for cash flow support
would likely increase further for corporations in such industries.
Life insurance companies must continue to contribute to the stability of society
by responding flexibly and promptly to the growing impact of COVID-19 and theresulting anxiety it has caused among people in Japan.

(2) Impact of the Spread of COVID-19 on Life Insurance
Companies
COVID-19 cases in Japan numbered 14,000 by the end of April 2020, anddeaths totaled more than 430. However, the number of deaths due to COVID-19 per
100,000 people in Japan is still one-tenth the rate in Europe and the United States.
While the situation requires careful attention as the infection rate may yet again trend
upward, the impact of payment of death and hospital benefits due to COVID-19 onlife insurance companies would appear to be limited.
On the other hand, the negative impact of COVID-19 on financial markets ishaving a significant impact on the life insurance industry. The decline in interest rates
and stock prices overseas led Dai-ichi Life Holdings, Inc. to revise its initial 226
billion yen forecast for consolidated net income downward to 17 billion yen, before
settling on 32 billion yen. The impact on life insurance products is also evident. An
increasing number of insurance companies have suspended sales of popular foreign
currency-denominated insurance products because the sharp decline in long-term
interest rates overseas means that product yields can no longer be expected.
COVID-19 has also begun to affect insurance sales. In recent times, life insurance
sales channels in Japan have become more diverse and the number of inquiries andsales via the Internet has been increasing, but sales representatives at insurancecompanies are still the main source of sales. A recent survey indicated that sales
representatives account for 53.7% of sales in all channels. However, in the current
environment life insurance companies have no choice but to refrain from face-to-facesales in order to prevent the spread of COVID-19. This may negatively affect sales oflife insurance policies.
The impact of COVID-19 will be prolonged, as will interest in the strategies life
insurance companies employ in this challenging environment.

33

5.Trends in Japan's Life Insurance Industry

3. Trends in the Life
Insurance
Industry(1) Stronger Supervision to Protect Consumers
In recent years, the Financial Services Agency (FSA) has strengthened supervisionof insurance companies to protect consumers. One reason is that consumers may behaving difficulty selecting the most appropriate insurance product due to theincreasing complexity of insurance products and diversity of sales methods. Moreover,consumers risk being disadvantaged by the excessive focus on sales that has resulted
from intensifying competition.
Most recently, the FSA strengthened supervision over the sale of foreign currencydenominated products in order to protect consumers. This move was driven by anincrease in problems, mainly between elderly consumers and life insurance companies,that resulted from insufficient explanation of product risks. Marketing materials were
often vague or misleading, making it easy to confuse the interest rate on the cash value
portion of the policy with the policy’s real rate of return in a series of cases. This led
the FSA to force insurance companies to make improvements. For example, the FSA
provided guidance that pointed out that the marketing materials used in sales almost
never clearly defined the interest rate on policy cash value, and that regional banks
may be selling such policies without clearly explaining their risks.
Against a background of assiduously promoting consumer protection, in 2019
inappropriate sales by Japan Post Insurance came to light. Improper tactics for selling
new policies based on conversions from existing policies was the issue. Some Japan
Post Insurance salespeople were providing misleading explanations about the period inwhich a policyholder can cancel an existing policy. The explanations were factuallyinaccurate. Some customers who adopted conversion of their policies were therefore
disadvantaged through double premium payment or periods during which they did
not have coverage. The FSA took this situation very seriously, and imposed
administrative actions on Japan Post Insurance on December 27, 2019. The actions
involved a three-month business suspension order and a business improvement order,
and were the most stringent ever imposed on a major life insurance company. The
FSA indicated that a sales structure that excessively emphasized sales results anddysfunctional governance at Japan Post Insurance were the cause of the inappropriate
sales.
Amid this challenging and rapidly changing business environment, some tactics
for selling insurance neglect consumer protection. In selling insurance products,
insurance companies must take actions after reaffirming their social responsibilities.

(2) Insurance Products
In January 2020, justInCase, Inc. launched Japan’s first peer-to-peer (P2P) cancer
insurance product, Warikan Hoken. P2P, a term related to networks, originated as acommunication method through which users do not access a server as in the usual
client-server method. Instead, users communicate directly with one another in P2P,
thus forming a network more like a spider’s web. The product name “Warikan” is aJapanese expression that basically suggests that all members of a group will share theexpense of a drinking session equally (“Hoken” means insurance).

34

The Toa Reinsurance Company, Limited — Japan’s Insurance Market 2020

Warikan Hoken collects money using a method similar to P2P. For mostinsurance products, policyholders typically obtain insurance coverage by paying an
actuarially calculated premium. The premium for Warikan Hoken, however, is notdetermined using an actuarial model, but by multiplying claims paid for the entire
portfolio by an administrative cost coefficient and dividing that total by the number ofpolicyholders. For example, the insurance premium is zero in any given month withno claims paid, and in fact, the premium from February 2020 to April 2020 was 0
yen. In addition, the maximum monthly premium paid by each policyholder iscapped even if insured events occur frequently in that month, so policyholders do notbear unexpectedly large expenses. With Warikan Hoken it is possible to set lower
premiums because policyholders are themselves responsible for the risk buffer
insurance companies usually incorporate into insurance premiums of typical insurance
products.
However, the design of this product has given rise to concerns about its resilience
to moral risk and significant stress. CEO Kazuo Hata of justInCase addressed theseconcerns by commenting to the media that the potential for fraudulent claims is low
because they are particularly difficult for cancer insurance products. He also indicatedthat justInCase will negotiate with the authorities about funding reserves to withstandstress.
Warikan Hoken has been receiving extensive media attention since before its
launch because it is a system in which policyholders directly fund claims paid, and also
because of its unique name and ability to offer premiums that are lower than for
typical insurance. This product is currently in a trial period, but it has the potential tochange the Japanese market if it demonstrates utility. Its performance and sales trends
will therefore remain of great interest.

(3) Sales Channels
In Japan, sales representatives have traditionally been the primary sales channel oflife insurance, and accounted for more than 85% of sales in all channels until 1997.
However, sales channels are becoming more diverse in line with diversifying insurance
products and consumer needs, with particular growth in the share of agency sales inrecent years. A 1997 survey indicated that the agency sales channel accounted for
4.0% of total sales, but a 2018 survey showed that share had jumped to 17.8%. This
was the largest share gain among all sales channels.
Given these circumstances, even major life insurance companies that have reliedon their own sales representatives as their primary sales channel are strengthening theirstructures for agency sales by launching group companies to handle products suitable
for the agency channel. In 2009, Sumitomo Life Insurance Company establishedsubsidiary Medicare Life Insurance Co., Ltd., and in 2015, Dai-ichi Life Grouplaunched subsidiary The NeoFirst Life Insurance Company, Limited. More recently, in2019 Nippon Life Insurance Company launched subsidiary Hanasaku Life InsuranceCo., Ltd. Major life insurance companies that have relied on sales by their own sales
representatives have differentiated their own products and the products for the agency
channel that their subsidiaries handle to expand agency channel sales, which are in35

5.Trends in Japan's Life Insurance Industry

increasing demand. Such subsidiaries handle products that feature comparatively lower
prices, have a simple design, and are easy to combine.
Sales representatives are still the mainstream sales channel of life insurance inJapan, but sales channels are changing as insurance products and customer needs
diversify. Japanese society has been slow to embrace online lifestyles such as working
from home remotely, but the spread of COVID-19 may drive a rapid move to such
online lifestyles and further transform the social environment. Actually, Meiji Yasuda
Life Insurance Company has decided to start selling insurance products online in
April 2021. This will be the first instance of online sales for major life insurancecompanies in Japan. The background of this decision to open an online sales channel
was the concern about a second wave of COVID-19. Given this situation, the life
insurance industry is accelerating the shift from the traditional business model of faceto-face sales by sales representatives, and multichannel sales are likely to gain
momentum.
Figure 1: Diversification of Sales Channels
(%)
100
90

4.0％

80
70
17.8％

60
50
88.5％
40

53.7％

30
20
10
0
1997

2000

Sales Representatives

2003
Agency2006
Bancassurance

2009

2012

Direct Marketing

Note: The graph shows the breakdown of the number of new policies.

36

2015
Others2018(Year)

Company Overview
ProfileThe Toa Reinsurance Company, Limited (Toa Re), was established in 1940.
With the reinsurance market evolving and clients’ needs expanding, we haverecognized the importance of being able to provide a diverse line of life and non-lifereinsurance products to lead the market as Japan’s primary professional reinsurer.
Toa Re is based in Tokyo with subsidiaries in New Jersey (U.S.A.), Zürich
(Switzerland) and London (U.K.). Increasing demand for reinsurance products in
Asian countries prompted us to expand our operations in those regions and establish
branch offices in Singapore, Kuala Lumpur and Hong Kong.
In acknowledgment of Toa Re’s outstanding financial profile, credit rating
agencies, Standard & Poor’s Financial Services LLC, A.M. Best Company, Inc. andJapan Credit Rating Agency, Ltd., have assigned Toa Re ratings of A+, A and AA+,
respectively. As of March 31, 2020, the Toa Re Group boasted total assets of 711.6
billion yen. Net premiums written during the fiscal year ended March 31, 2020
totaled 270.2 billion yen.

Mission Statement

ToaRe Mission Statement
Providing Peace of Mind
Toa Re aims to realize its mission byworking with society and applying the principles of fairness
and integrity to all aspects of our business
offering long-term, solid support to our clients by supplying
reinsurance products and services that enable themto maintain stable operations
striving to further the interests of our shareholders
and keeping them fully informed at all times
respecting the creativity of our employees and valuing
their contributions
conserving the environment and contributing to
the community

37Company Overview

Consolidated
Financial Highlights

Thousand
U.S. dollars

Million yen
2020

2019

2018

Ordinary income¥297,757¥266,625

Net premiums written

270,252

2017

2016

2020

¥254,934 ¥251,462¥245,114$2,735,982

248,288237,911

223,749

223,786

2,483,249

88(7,390)9,857

14,0229,655

808(2,141)(7,150)9,191

10,512

5,674(19,672)

Total net assets

167,141

179,944

200,550

191,907

180,826

1,535,798

Total assets

711,690694,088687,950

698,418

688,2426,539,465

For the year ended March 31

Ordinary profit (loss)
	Net income (loss) attributableto owners of the parent
As of March 31(Rate: ¥108.83 = US$1)

Net Premiums
Written by Class(Consolidated Basis)(Million yen)

Others¥18,816
7.58%

Fire¥64,270
25.89%

Fiscal 2018
Life¥88,02735.45%

Total¥248,288

Marine¥10,035
4.04%
Personal Accident¥2,7871.12%
Motor¥32,22912.98%

Liability¥32,12112.94%(Million yen)

Others¥22,950
8.48%

Fire¥69,00925.54%

Fiscal 2019
Life¥90,692
33.56%

Liability¥38,585
14.28%

38

Total¥270,252

Marine¥11,205
4.15%
Personal Accident¥2,6410.98%
Motor¥35,167
13.01%

The Toa Reinsurance Company, Limited — Japan’s Insurance Market 2020

Overseas Network

The Toa 21st Century
Reinsurance Co., Ltd.
(Toa Re Europe)

U.K.

Toa Re America(Toronto Branch)●●

Toa Re (Head Office)
● ●

●
●

●

TaiwanHong Kong●●

Singapore
Kuala Lumpur

Toa Re Corporate Member Limited

Locations

Toa Re America(Agricultural Office)

U.S.A.
The Toa Reinsurance Co.
of America (Toa Re America)

Branches
Singapore

50 Raffles Place #26-01, Singapore Land Tower, Singapore 048623
Telephone: +65-6220-0123

Kuala Lumpur

28th Floor, UBN Tower, 10 Jalan P. Ramlee, 50250 Kuala Lumpur, Malaysia
Telephone: +60-3-2732-5911

Hong Kong

Room 801, 8th Floor, Tower 1, Admiralty Centre, 18 Harcourt Road, Hong Kong
Telephone: +852-2865-7581

Subsidiaries

U.S.A.

The Toa Reinsurance Co. of America
177 Madison Avenue, P.O. Box 1930, Morristown, NJ 07962-1930, U.S.A.
Telephone: +1-973-898-9480
The Toa Reinsurance Co. of America (Agricultural Office)18301 Von Karman Avenue, Suite 400, Irvine, CA 92612, U.S.A.
Telephone: +1-949-474-1420

CanadaThe Toa Reinsurance Co. of America (Toronto branch)
55 University Avenue, P.O. Box 53, Suite 1700, Toronto, Ontario, M5J 2H7, Canada
Telephone: +1-416-366-5888

Switzerland

The Toa 21st Century Reinsurance Co., Ltd. (Toa Re Europe)
Kreuzplatz 16, 8008 Zürich, Zürich, Schweiz

U.K.

Toa Re Corporate Member Limited
33 Gracechurch Street, London, EC3V 0BT, U.K.

Representative Offices
U.K.

3rd Floor, 33 Gracechurch Street, London, EC3V 0BT, U.K.

U.S.A.

177 Madison Avenue, P.O. Box 1930, Morristown, NJ 07962-1930, U.S.A.
Telephone: +1-973-898-9816

Taiwan4F-2, No. 128, Section 3, Min Sheng East Road, Taipei 10596, Taiwan, R.O.C.
Telephone: +886-2-2715-1015

39

40

Ratio 5
Solvency Margin Ratio (%)

Ratio 4
Yield on Investments(Realized Gains/Losses) (%)

Ratio 3
Yield on Investments (Income) (%)

Ratio 2
Expense Ratio (%)

Ratio 1
Loss Ratio (%)

Total Assets

Net Profit (Loss) for the Year

Ordinary Profit (Loss)

Underwriting Profit (Loss)

Net Claims Paid

Net Premiums Written

94,079171,1026,686,089
6,977,145
63.3
66.3
32.0
31.6
1.94
2.18

Fiscal 2019

Fiscal 2018

Fiscal 2019

Fiscal 2018

Fiscal 2019

Fiscal 2018

Fiscal 2019

Fiscal 2018

Fiscal 2019

Fiscal 2018

723.2

226,476

Fiscal 2018

Fiscal 201889,113Fiscal 2019

701.3

47,335

Fiscal 2018

Fiscal 2019

7,351

Fiscal 2019

4.34

910,965

Fiscal 2018

Fiscal 2018888,652

Fiscal 2019

2.53

1,512,449

Fiscal 2018

Fiscal 2019

1,547,930

Fiscal 2019

688.2

702.3

2.60

3.06

2.22

2.36

33.8

34.5

67.8

62.0

3,410,989

3,420,733

37,30744,784

61,38258,615

15,555

1,126

770,582

724,662

1,233,581

1,276,770

Aioi Nissay
Dowa

MS&AD Holdings
Mitsui
Sumitomo(Non-Consolidated Basis)

825.4

815.2

4.45

3.81

3.35

2.78

30.6

30.8

68.8

65.2

9,393,039

9,192,693

261,384

169,966

315,370

223,945

89,19938,4901,379,707

1,353,232

2,166,627

2,247,508

Tokio Marine& Nichido

1,219.9

1,115.3

2.02

1.89

1.48

1.57

34.2

33.4

69.5

64.8

396,474

381,758

4,403

3,757

5,069

5,785

1,509

2,789

90,161

86,704

143,798

148,850

NisshinTokio Marine Holdings

722.2

717.3

4.13

3.39

2.45

2.50

32.1

32.4

69.8

64.9

7,515,887

7,166,057

175,708

130,579

215,537

182,387

41,99043,113

1,377,796

1,301,872

2,148,632

2,184,750

Sompo Japan

Sompo Holdings

812.8

707.0

1.70

2.84

1.88

1.89

25.2

24.8

73.8

72.2

505,486

492,360

1,686

1,466

4,088

4,486

(1,215)(4,320)143,824

150,083

194,952

208,029

Toa Re(Unit: Million yen, %)Sources: Each company’s financial statements of fiscal 2019

Supplemental Data: Results of Japanese Major Non-Life Insurance Companies for Fiscal 2019, Ended March 31, 2020

The Toa Reinsurance Company, Limited
6, Kanda-Surugadai 3-chome, Chiyoda-ku, Tokyo 101-8703, Japanh t t p s : / / ww w.t oare.co.jp / english /Providing
Peace of Mind
The Toa Re Group is a global composite reinsurer that provides

peace of mind to its clients by protecting them from a broad rangeof perils such as catastrophic earthquakes and typhoons, casualty
events, crop damage, mortality and health care.

We at The Toa Re Group aim to be chosen by clients from acrossthe world because of our ability to offer a secure long-term
partnership of optimal solutions and strong financial security.

www.toare.co.jp

Printed in Japan