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Table of Contents
Introduction ......................................................................................

1

Japan’s earthquake risks ...............................................................

2

Establishing the earthquake insurance system ...........................

3

Mechanism of earthquake insurance and reinsurance ..............

4

About Japan Earthquake Reinsurance Co.,Ltd (JER) ................ 13
JER’s present conditions ............................................................... 16
Facts ................................................................................................. 23
Business conspectus ............................................................... 24
Accounting conspectus ............................................................ 31
Glossary ..................................................................................... 38

Chairman:

Shozo Wakabayashi

President:

Akihiko Mori

Introduction
We are glad to introduce to you a detailed disclosure of what wehave done and of what we are going to do in the years ahead.
We established ourselves in 1966 as the one and only company
in Japan that was allowed to exclusively handle reinsurance
business on dwelling earthquake insurance, celebrating in June
2006 the 40th anniversary. Not only our utmost efforts havebeen made so far to reinforce and upgrade the system of ourreinsurance payment, but also our best care has been given to
manage and operate assets to well support the system.
Earthquake insurance contracts continuously increased in ﬁscal 2005, amounting to more than 10 million. The balance ofthe total assets as of the end of March 2006 amounted to 838.5
billion yen. It is expected that earthquake insurance contracts
will be increasing more than ever in ﬁscal 2006 mainly becauseof tax reform enabling the deduction of earthquake insurance
premiums from incomes.
We have to admit, however, that there occurred in ﬁscal 2005
some mistakes in accounting procedures failing to add up reinsurances from some direct insurers. We have decided on theoccasion of our 40th anniversary to drastically review business
management as a whole, and to make a three-year mid-term
management plan for the ﬁrst time in a long-range perspective,
with an aim at well solid business management, pursuing an

Company in outline (as of March 31, 2006)
Established:
May 30, 1966
Capital:1 billion yen
Total assets:
838.5 billion yen
President:
Akihiko MoriNo.of employees: 21
Address:
Kobuna-cho Fuji Plaza, 8-1,
Nihonbashi-kobuna-cho,
Chuo-ku, Tokyo Japan
103-0024
Phone:
03-3664-6074
URL:
http://www.nihonjishin.co.jp/

important role and responsibility.
Bearing in mind that disclosure is a very useful means for corporate governance, we have prepared this disclosure booklet. We
hope that it will help you understand the current situation andactivities of the company. We would like you to take a look at ourinternet home page as well, and your comment or opinion will beappreciated very much.

December 2006
President

Japan Earthquake Reinsurance Co., Ltd.

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1. Proclamation of a predictive earthquake map by the Headquarters
for Earthquake Research Promotion
The Headquarters for Earthquake Research Prostrong shakes of slightly less than 6 and over on
motion of the Ministry of Education and Sciencea seismic intensity scale that might attack us inannounced in March 2005 a Probabilistic Seisa certain period of time from now on. The map is
mic Hazard Map.
called as earthquake hazard map on a probabilThe Probabilistic Seismic Hazard Map shows
ity theory in the ﬁeld of earthquake engineering
the result of estimation per area of the likelihoodand seismology.
of heavy shakes that might attack Japan, givFor reference, the Probabilistic Seismic Hazard
ing a consideration to a long-range probability
Map is shown, indicating the likelihood of earthof earthquake occurrence all over the country.
quakes of slightly less than 6 and over on seisIt will tell us, for example, of the likelihood of
mic intensity scale within 30 years to come.

A distribution map of the probability of earthquake of slightly less than 6and over on seismic intensity scale or higher within 30 years to come.

High

{

Rather highProbability
26% or higher
6%~26%
3%~6%
0.1%~0.3%
Under 0.1%

Note: “High” in the probability of earthquake of slightly lessthan 6 and over on a seismic intensity scale within 30
years to come shows any of the following probabilities:
26% means that an earthquake might happen in about
100 years on the average, 6% means that an earthquake
might happen in about 500 years, and 3% means that an
earthquake might happen in about 1,000 years.

(Source: National Seismic Hazard Map for Japan prepared by the Headquarters for Earthquake Research Promotion)

2

Japan Earthquake Reinsurance Co., Ltd. 2006

2. The Central Disaster Prevention Council proclaimed the result of estimation of earthquake losses.
The Central Disaster Prevention Council of Japan has disclosed the results of estimation of probable Tokai
earthquake, Tonankai earthquake, Nankai earthquake, metropolitan earthquake directly above its epicenter, deeps earthquakes surrounding the Japan Deeps and the Chishima Deeps and is under discussion
on a disaster preventive strategy and preventive measures against disasters with a view to reducing earthquake caused losses.

Damages to buildings
The dead

Tokai earthquake

Tonankai and Nankai
earthquakes

Metropolitan earthquake directly above
its epicenter

Deeps earthquakes
surrounding the Japan
Deeps and the Chishima Deeps

Approx. 460, 000

Approx. 630,000

Approx. 850,000

Approx. 21,000

Approx.

Approx. 12,500

Approx. 11,000

Approx.

5,900

290

Economic loss

Approx. ¥37,000 billion

Approx. ¥57,000 billion

Approx. ¥112,000 billion

Approx. ¥1,300 billion

DirectApprox. ¥26,000 billion

Approx. ¥43,000 billion

Approx. ¥67,000 billion

Approx. ¥1,000 billion

Indirect

Approx. ¥11,000 billion

Approx. ¥14,000 billion

Approx. ¥45,000 billion

Approx.

¥300 billion

Notes:
1. Each case shows the worst example of earthquake which might happen at 18:00 and with a wind velocity of 15 meters.
2. It is assumed that Tonankai and Nankai earthquakes happen at the same time.
3. Metropolitan earthquake directly above its epicenter is assumed to happen in the north of Tokyo Bay.
4. Deeps earthquakes surrounding the Japan Deeps and the Chishima Deeps are of the Miyagi-ken Oki earthquake type (worst case of the 6 assumed
earthquakes:).
(Source: Data published by the Cabinet Ofﬁce)��������������������������������������������
Japan is worldly known as a country which is
attacked so often by earthquakes, but people
used to think generally that it is difﬁcult to coverearthquake caused disasters by insurance. One
reason for this is that no one can be sure when an
earthquake happens, and another is that there
is a risk that tremendous damages will result incase of a great earthquake. Much research anddiscussion has been repeated on earthquake
insurance for many years, getting nowhere.
There was a social demand, nonetheless, forthe establishing of a dwelling risks earthquake
insurance system* to help people affected by anearthquake which made them lose their basis oflife such as house and household goods rebuild
their life. The non-life insurance business world

promoted, in response to the demand, a lot of
research on the founding of such a system.
The Niigata Earthquake which happened in June
1964 grew a tendency toward the establishmentof the system. The government and the non-life
insurance world put the earthquake insurance
system to a detailed examination, which eventually enacted Law concerning Earthquake Insurance. The dwelling risks earthquake insurance
system was built according to the law and Japan
Earthquake Reinsurance Co., Ltd. (JER) was established. We play an important role to take thefull responsibility by reinsurance of earthquake
insurance contracts entered into by non-life insurance companies. For detail, see p.8 “Mechanism of reinsurance”.

*Non-life insurance is divided into two groups: one is insurance in the household risks ﬁeld taken by individuals on various home risks; the otheris insurance in the corporate risks ﬁeld taken by companies on various company’s risks. This goes for earthquake insurance. Insurance taken byindividuals is called as dwelling risks earthquake insurance, and the other insurance is called as company-oriented earthquake insurance.
Law concerning Earthquake Insurance enacted targets at dwelling risks earthquake insurance.

Japan Earthquake Reinsurance Co., Ltd. 20063�������������������������������������������������

Earthquake insurance is to be entered into as an optional rider to ﬁre insurance* which covers buildings
for residential use and/or movables for living. No one can buy earthquake insurance alone. When you
conclude a ﬁre insurance contract without earthquake insurance, you are required to put your seal in theearthquake insurance check column of a ﬁre insurance contract application form.
Suppose that you have entered into a ﬁre insurance contract without earthquake insurance, and you will
be able to buy earthquake insurance while your ﬁre insurance contract is valid. In the event that a warningstatement is issued, you may not be able to buy earthquake insurance in some area.
*For detail, see p.38 Glossary.

Insurance Coverage
Loss of or damage to the buildings for residential
use and/or movables for living by ﬁre, destruction, burial or being washed-away caused directly or indirectly by any earthquake or volcanic
eruption, or resulting tsunami (referred, hereinafter, to as earthquake and so on).

Fire insurance does not cover
1. any of losses caused by ﬁre (spread thereof, and expanded loss) resulting from earthquake and so on, and2. any of ﬁres spread and expanded due to earthquake and so on.
Earthquake insurance is needed to compensate these kinds of loss.

Insurable interests
Buildings for residential use and/or movables forlivingNone of the following is insurable:
A building used as a plant or ofﬁce, and not used
for dwelling purposes, noble metal, gemstones

or antiques valued at ¥300,000 or higher per
piece, currency, securities (checks, share certiﬁcates, gift certiﬁcates), deposits certiﬁcates,
revenue stamps, postal stamps, automobiles
and some others.

Term insured
Short-term, 1 year, and long-term (2 - 5 years)

Amount insured
The policyholder is required to set the amountinsured of earthquake insurance within a scopeof 30 - 50% of that of his/her ﬁre insurance. Pro-

vided, however, that the amount insured is limited to a maximum of ¥50 million for a buildingand ¥10 million for movables for living.

Fire insurance
Ordinary ﬁre insurance, long-term comprehensive insurance, deposit life comprehensive insurance, dwelling ﬁre insurance, householders’ comprehensive insurance, storekeepers’ comprehensive insurance and some others.
The amount insured of a comparted-ownership building such as apartment building is limited to ¥50 million, totaling exclusively possessed parts
and jointly owned parts by comparted-owners.

4

Japan Earthquake Reinsurance Co., Ltd. 2006

Payment of insurance claims
Insurance claims will be paid according to the policyholder’s earthquake insurance to cover total, half orpartial loss of his/her residential building and/or movables for living.
Insurable objects

Residential buildings,
movables for living

Degree of loss

Amount of insurance claim paid

Total loss

100% of amount insured (up to the current price* of the insurable objects)

Half loss

50% of amount insured (up to 50% of the current price of the insurable objects)

Partial loss

5% of amount insured (up to 5% of the current price of the insurable objects)

Authorization criteria of losses
Total loss, half loss or partial loss is applicable to any the following cases
Residential building
Degree ofloss

Amount of loss ofmajor structural parts

Movables for living

Area of ﬂoor burnt down or washedaway (partial loss applies when theresidential building is ﬂooded above
the ﬂoor level)

Degree of loss of or damage tothe movables for living

Total loss

50% or higher of the current priceof the residential building

70% or higher of the total ﬂoor
area of the residential building

80% or higher of the current priceof the movables for living

Half loss

20% or higher to less than 50% of
the current price of the residentialbuilding

20% or higher to less than 70% of
the total ﬂoor area of the residential building

30% or higher to less than 80% of
the current price of the movables
for living

Partial loss

3% or higher to less than 20% of
the current price of the residentialbuilding

The residential building was damaged but not totally or half lost
although it was ﬂooded above
the ﬂoor level or above 45 cm or
higher from the ground level.

10% or higher to less than 30% of
the current price of the movables
for living

Cases when no insurance claim is payable:
・Loss or damage due to willful acts or gross negligence or violation of law
・Loss or damage due to war or rebellion
・Loss or damage which occurred 10 days or longer after the earthquake
・Loss or robbery of the objects of the insurance

Limit of total amount of insurance claims to be paid
Limit of total amount of insurance claims to be paid* is limited to 5,000 billion yen as revised in April 2005
per earthquake and so on. In the event the total amount of insurance claims payable exceeds the limit, lawallows insurance claims per contract to be reduced.
*Current price
The current price is such that the amount of depreciation according the service year is deducted from the price of a newly constructed building.

*Limit of total amount of insurance claims to be paid
Law concerning Earthquake Insurance stipulates the limit to the total insurance claims payable by the government and private insurance company
per earthquake and so on. For detail, see p.10 Insurance liability held by JER, non-life insurance companies and the government, and p.38 Glossary.

Japan Earthquake Reinsurance Co., Ltd. 2006

5

Premium rate
Premium rate for earthquake insurance is calculated by the Non-life Insurance Rating Organization of Japan* on the basis of Law concerning Non-life Insurance Rating Organizations.
Premium rate = Risk premium rate + Loading rate
The basic rate of insurance premium is composed of risk premium rate applicable to or appropriate for
future payment of insurance claims and loading premium rate applicable to or appropriate for non-life insurance companies’ expenses and agents’ commissions.
Risk premium rate is actually calculated on such data as related to past 375 earthquakes which caused
damages for the past 500 years approximately appearing on a chronological scientiﬁc table edited by the
National Astronomical Observatory of Japan.

Basic rate (applicable to buildings and movables for living)
The basic rate is set according to the residential building, the structure of the building to accommodate themovables for living and the building location.
Per insurance year /insurance money 1,000 yen
1st-class location
2nd-class location

Structure
Zone by location grade(Unit: yen)

Non-wooden

Wooden

1st-class location

0.50

1.20

3rd-class location

2nd-class location

0.70

1.65

4th-class location

3rd-class location

1.35

2.35

4th-class location

1.75

3.55

1st-class location: Hokkaido, Fukushima-ken, Shimane-ken,
Okayama-ken, Hiroshima-ken, Yamaguchi-ken, Kagawa-ken, Fukuoka-ken,
Saga-ken, Kagoshima-ken, Okinawa-ken
2nd-class location: Aomori-ken,
Iwate-ken,
Miyagi-ken,
Akita-ken, Yamagata-ken, Ibaraki-ken,Tochigi-ken, Gunma-ken, Nigata-ken,
Toyama-ken, Ishikawa-ken, Yamanashiken, Tottori-ken, Tokushima-ken, Ehimeken, Kochi-ken, Nagasaki-ken, Kumamoto-ken, Oita-ken, Miyazaki-ken
3rd-class location: Saitama-ken, Chiba-ken, Fukui-ken, Nagano-ken, Gifu-ken, Aichi-ken, Mie-ken,
Shiga-ken, Kyoto-fu, Osaka-fu, Hyogoken, Nara-ken, Wakayama-ken
4th-class location: Tokyo-to, Kanagawa-ken, Shizuoka-ken*Non-life Insurance Rating Organization of Japan
This is the organization which was established in accordance with Law concerning Non-life Insurance Rating Organization and aims at providing a fairbasis premium rate applicable to non-life insurance.
*Chronological scientiﬁc table
A data book annually edited and published by the National Observatory Japan, Ministry of Education and Science, containing up-to-date researches
and observations in the ﬁelds of natural science such as astronomy, weather and physical geography. The damage-causing earthquakes chronological table in the book is used when calculating the risk premium rate.

6

Japan Earthquake Reinsurance Co., Ltd. 2006

Discount rate
Either discount rate will be applied to the foregoing basic premiums rate when the building and movables
for living come under any of the following:(a) Construction age discount rate
When the building was constructed in and after June 1981 and accommodated movables for living.
10%

Discount rate(b) Earthquake-resistance class discount rate
When the building and movables for living correspond to the earthquake-resistance class* as provided for by law.
Earthquake-resistance class

1

2

3

Discount rate

10%

20%

30%

Premium rate of a long-term contract
Premium rate of a long-term contract will be calculated as follows:(Basic rate - discount rate) x applicable coefﬁcient = premium rate of a long-term contract (2 to 5 year
contract with special conditions of premiums paid).

■

Contract period

2 years

3 years

4 years

5 years

Coefﬁcient

1.90

2.75

3.60

4.45

An example of insurance premiums calculated
A wooden residential building constructed in January 2000 in Hyogo-ken:
Fire insurance (principal contract) amount insured: Building 20 million yen; movables for living 6 million
yen
1. Setting the amount insured of earthquake insurance: In this case, the proportion insured (*) will be 50%.
Residential building: 20 million yen x 50% = 10 million yen
Movables for living: 6 million yen x 50% = 3 million yen
2. Conﬁrming the premium rate applicable: Hyogo-ken (3rd-class location), wooden → 2.35
3. Conﬁrming the discount rate applicable: Building constructed in and after June 1981 → 10%
Earthquake insurance premiumon residential building

Earthquake amountinsured

=10,000Earthquake insurance
premium ratex

(1,000yen)

2.35

x

Discount rate

(100% - 10% )=21,200

=

6,360

(yen)

2.12
Earthquake insurance premium
on movables for living

Earthquake amountinsured

=

3,000

x

(1,000yen)

Earthquake insurance
premium rate

2.35

x

Discount rate

(100% - 10% )

(yen)

2.12
Earthquake-resistance class
The earthquake-resistance class of a residential building is an indicator of earthquake-resistance class as stipulated in the Japanese Housing Performance Designation Standards based on the Housing Quality Guarantee Law or one to evaluate the building for earthquake-resistance performanceas provided for in the assessment guideline to earthquake-resistance diagnosis based earthquake-resistance class (as to the body of the building)established by the Ministry of Land, Infrastructure and Transport. See below for the classes.

Earthquake-resistance class 3

Class suggesting that no building falls down or collapses against force 1.5 times stronger than such force of earthquake (as provided for in Section 3, Article 88, Enforcement Order of the Construction Standard Act) which happensvery rarely (once every some hundred times)

Earthquake-resistance class 2

Class suggesting that no building falls down or collapses against force 1.25 times stronger than such force of earthquake which happens very rarely

Earthquake-resistance class 1

Class suggesting that no building falls down or collapses against force of earthquake which happens very rarely

Proportion Insured
The rate of earthquake amount insured over ﬁre amount insured. Earthquake amount insured is supposed to be set within 30 - 50% of ﬁre insurance
amount insured.

Japan Earthquake Reinsurance Co., Ltd. 20067

Mechanism of reinsurance
In the event that a great earthquake happens, it
can result in large payouts of insurance claim by
insurance companies. Because there is a certain limit, however, to the capability of paymenton the part of non-life insurance companies, thegovernment shares insurance responsibility withthem by reinsurance.

We reinsurance the earthquake insurance contracts underwritten by non-life insurance companies to take the full liability, which we homogenize
before we pass on the risk proportionally to the
non-insurance companies and the government
by retrocession according to the limit indemnity,
and we take up the remaining indemnity.

Reinsurance by JER for non-life insurance companies(Treaty A reinsurance on earthquake insurance)

Treaty A

JER has entered into a treaty reinsurance contract with non-life insurance companies operated inJapan. According to the contract, the non-life insurance companies conclude a reinsurance contract with JER on the earthquake insurance contracts in full underwritten by them conforming to
Law concerning Earthquake Insurance, and JER is supposed to take up the full liability for such anearthquake insurance without fail.

Retrocession by JER on non-life insurance companies(Treaty B reinsurance on earthquake insurance)

Treaty B

JER enters into a treaty reinsurance contract individually with the non-life insurance companies, andretrocedes to each company part of insurance liability taken up by JER to the limit as determinedaccording to the balance of earthquake insurance risk reserves and so on.

Treaty C
Retrocession by JER on the government(Excess of loss reinsurance)
JER has entered into an Excess of loss reinsurance with the government on earthquake insurance
for loss exceeding the amount payable by JER, according to which JER retrocedes to the government part of insurance liability taken up according to Treaty A to the indemnity limit as approved by
the Diet.

Mechanism of payment of insurance claims
The policyholder claims insurance money tothe non-life insurance company when he / shesuffered a certain loss or damage because ofearthquake and so on, and the company will pay
insurance claim to him / her.
The non-insurance company which paid insurance claim to the policyholder will claim the full
☞ See p.11 Top 10 earthquakes as to reinsurance claims paid.

8

Japan Earthquake Reinsurance Co., Ltd. 2006

amount to JER by reinsurance. JER will pay thereinsurance claim in full amount to the non-life
insurance company.
This means that the amount of reinsurance claim
paid by JER is the same in amount as the insurance claim paid to the policyholder by the nonlife insurance company.

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When you want to buy earthquake insurance:
Contact your non-life insurance company when you have already entered into a ﬁre insurance or a household comprehensive insurance.
If not, directly contact your selected non-life insurance company ora non-life insurance agent. The internet home page of The General
Insurance Association of Japan will be of help to you.
*JER retrocedes the insurance liability taken by JER according to Treaty
A to the non-life insurance companies and the government, and we
hold the remaining liability so that insurance liability will be shared
among the parties.

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When you suffered an earthquake caused loss or damage:Contact your non-life insurance company or agent when you havebought earthquake insurance.
When a non-life insurance company became insolvent:As to earthquake insurance, insurance claim will be indemniﬁed in fullamount by the Non-life Insurance Policy-holders Protection Corporation of Japan for the company when the policyholder is an individual, a
corporate of a small scale or a condominium management union.

Japan Earthquake Reinsurance Co., Ltd. 2006

9

Insurance liability held by JER,
non-life insurance companies and the government
The following is the reinsurance scheme showing how much each of JER, non-life insurance companies
and the government shares insurance liability*, and the way each performs shared liability.
The total amount of insurance claims to be paid due to a single earthquake is limited to 5 trillion yen, starting on April 1, 2005. See below for the reinsurance scheme and the total maximum liability limit.

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*See p.38 Glossary for insurance terms for limit amount of total payable insurance claims and the indemnity limit.

Indemnity limit
JER
Non-life insurance companies
The government

452.01 billion yen
425.8 billion yen
4 trillion 122.19 billion yen

Total (limit amount of payable insurance claims)

5 trillion yen

The balance of JER’s and non-life insurance companies’ risk reserves
and the government liability reserves at the end of ﬁscal 2005
JER and the non-life insurance companies save the risk premium of the policyholder paid insurance premium as earthquake insurance risk reserves for possible payment of earthquake insurance claim while thegovernment saves governmental reserves in the earthquake insurance special account according to law.
In the event that an earthquake occurs causing losses or damages, each of JER, non-life insurance companies and the government pays insurance claim according to each liability as stipulated in the reinsurance
scheme by withdrawing from the reserves.

JER
Non-life insurance companies
The government

378.7 billion yen
427.4 billion yen
1,012.3 billion yen

Total

1 trillion 818.5 billion yen

Note 1: The risk reserves by the non-life insurance companies such an amount as equivalent to deferred tax assets due to tax effect accounting.
Note 2: The governmental liability reserves are established when the settlement for ﬁscal 2005 is approved at the Diet.

10

Japan Earthquake Reinsurance Co., Ltd. 2006

Examples of insurance claims to be paid by JER, non-life insurance companies and the government.
Suppose that insurance claims amounting to 2 trillion yen for losses or damages due to a single earthquake
are to be paid, and JER, non-life insurance companies and the government will pay each in the following
amount:(Unit: 100 million yen)claims paid
A person of burden

Portion up
to 75 billion yen

Portion up to 1 trillion
Portion up to 2 trillion
311.8 billion yen fromyen from more than 1
more than 75 billion yen trillion 311.8 billion yen

Total

JER

750

2,848

−

3,598.0

Non-life insurancecompanies

−

3,336

344.1

3,680.1

The government

−

6,184

6,537.9

12,721.9

Total

750

12,3686,882.0

20,000.0

Reinsurance claims paid in ﬁscal 2005
The reinsurance claims paid in ﬁscal 2005 reached 24 billion 662 million yen in amount including earthquake reinsurance claims paid to cover Fukuoka-ken seiho earthquake and 34,188 cases in number (onthe basis of insurance policies). See below for major claims paid per earthquake.
Earthquake

Date of occurrence

Magnitude

No. of policies

Reinsurance claims
paid (million yen)

1. Fukuoka ken Seiho-oki
earthquake

March 20, 2005

7.0

21,081

16,286

2. Fukuoka ken Seiho-oki
earthquake

April 20, 2005

5.8

8,350

5,214

3. Miyagi ken oki earthquake

August 16, 2005

7.2

2,549

1,387

Other earthquakes

−

−

2,208

1,775

Total

−

−

34,18824,662

Top 10 earthquakes as to reinsurance claims paid
See the table below for the top 10 earthquakes as to reinsurance claims paid since the earthquake insurance scheme started.
(As of March 31, 2006)
Earthquake

Date of occurrence

Magnitude

No. of policies

Reinsurance claims
paid (million yen)

1. Hyogoken-Nanbu earthquake

January 17, 1995

7.3

65,42778,346

2. Geiyo earthquake

March 24, 2001

6.7

24,43816,934

March 20, 2005

7.0

21,081

16,286

October 23, 2004

6.8

12,472

14,618September 26, 2003

8.0

10,516

5,954

3. Fukuoka ken Seiho-oki
earthquake
4. Niigataken-tyuetsu
earthquake
5. Tokachi-oki earthquake
6. Fukuoka ken Seiho-oki
earthquake
7. Tottoriken-Seibu
earthquake
8. Miyagiken-Hokubu
earthquake

April 20, 2005

5.8

8,350

5,214

October 6, 2000

7.3

4,078

2,868

July 26, 2003

6.4

2,540

2,171

9. Miyagiken-oki earthquake

May 26, 2003

7.1

2,959

1,915

10. Miyagiken-oki earthquake

August 16, 2005

7.2

2,549

1,387

Note: Insurance claims in the amount of 78 billion 346 million yen were paid to cover the Hyogoken-Nanbu earthquake. Of the claims, the government
paid 6 billion 173 million yen, JER 40 billion yen and the non-life insurance companies 32 billion 173 million yen according to the reinsurance
scheme in force at the time.

Japan Earthquake Reinsurance Co., Ltd. 2006

11

The rate of earthquake insurance buying households in such an area
as might be attacked by a great earthquake(As of March 31, 2006)

Earthquake

No. of households (A)(1,000 households)

No. of contracts (B)(1,000 contracts)

Amount of insurancemoney (million yen)

Rate of insurance buying
households (B/A)(%)

Great Kanto earthquake

22,585

5,505

43,016,007

24.38

Metropolitan earthquake
directly above
its epicenter

15,900

4,013

31,100,851

25.24

Tokai earthquake

21,4695,434

42,473,741

25.31

Tonankai earthquake

20,441

4,610

35,988,724

22.55

Nankai earthquake

27,972

5,956

46,712,285

21.29

Great Kanto earthquake (1 metropolis,10 prefectures): Tokyo, Saitama, Chiba, Kanagawa, Yamanashi, Shizuoka, Ibaraki, Tochigi, Gunma, Nagano, Aichi
Metropolitan earthquake directly above its epicenter (1 metropolis, 4 prefectures): Tokyo, Saitama, Chiba,Kanagawa, Ibaraki
Tokai earthquake (1 metropolis, 9 prefectures): Tokyo, Kanagawa, Yamanashi, Shizuoka, Aichi, Gifu, Mie, Saitama, Chiba,Nagano
Tonankai earthquake (13 prefectures): Shizuoka, Aichi, Mie, Osaka, Nara, Wakayama, Gifu, Shiga, Kyoto, Hyogo, Chiba, Kanagawa, Tokushima
Nankai earthquake (23 prefectures): Mie, Osaka, Hyogo, Nara, Wakayama, Okayama, Tokushima, Kagawa, Ehime, Kochi, Kyoto, Hiroshima, Yamaguchi,
Oita, Miyazaki, Chiba, Kanagawa, Shizuoka, Aichi, Shimane, Fukuoka, Kumamoto, Kagoshima
Note: Prepared by JER, targeting main prefectures which might be damaged with reference to the assumed losses or damaged due to potential immediate
earthquakes by the Non-life Insurance Rating Organization of Japan.

12Japan Earthquake Reinsurance Co., Ltd. 2006

������������������������������������������������
Company’s features
In accordance with the promulgation of the concerning Earthquake Insurance Law No.73,May
18,1966 and also following the launch of salesof dwelling earthquake insurance to be written
in conjunction with dwelling and shop-owners
comprehensive insurance policies, JER was
established with share capital of 1,000,000,000
by the 20 domestic Japanese non-life insurancecompanies on May 30,1966.The Company was
licensed for earthquake insurance business andstarted its operation on June 1,1966.
Dwelling earthquake insurance depends onsuch a reinsurance system (safety net as it were)as joined by the government, non-life insurancecompanies and JER so that insurance claims
can be paid to policyholders without fail.
The insurance premium paid by policyholders
are separated from non-life insurance companies, and managed and operated by the government and JER.
JER is thus in the center of reinsurance system,
going through reinsurance procedures among
the government, non-life insurance companies
and ourselves, and manages and operates theinsurance premium paid by policyholders as soleearthquake reinsurance company in Japan.

☞ For details of reinsurance mechanism, see p.8 Mechanism of reinsurance and p.38 Glossary.

Shareholders and shares❶ Top 10 shareholders(As of March 31, 2006)

Shareholder

No. of shares owned (1,000 shares)

Percentage of shares owned (%)

Tokio Marine & Nichido Fire Insurance Co., Ltd.

537

26.9

Mitsui Sumitomo Insurance Co., Ltd.

338

16.9

Sompo Japan Insurance Inc.

321

16.1

Nippon Koa Insurance Co., Ltd.

208

10.4

Aioi Insurance Co., Ltd.

153

7.7

Fuji Fire and Marine Insurance Co., Ltd.

123

6.2

Nissay Dowa General Insurance Co., Ltd.

102

5.1

The Toa Reinsurance Co., Ltd.

93

4.7

Nisshin Fire & Marine Insurance Co., Ltd.

61

3.1

The Kyoei Fire & Marine Insurance Co., Ltd.

34

1.7

❷ Capital(Unit: yen in billion)Year

As of the end of ﬁscal 2003

As of the end of ﬁscal 2004

As of the end of ﬁscal 2005

Capital1

1

1❸ Sharers(As of March 31, 2006)

Sum of shares to be issued

2 million shares

Sum of issued shares

2 million shares

No. of shareholders

12Japan Earthquake Reinsurance Co., Ltd. 200613

❹ Basics
When to hold a general meeting of shareholders

A regular general meeting of shareholders is held within 4 months after
April 1 every year.
March 31 every year

Date of settlement

By our internet homepage (http://www.nihonjishin.co.jp/)

Public announcement

Organization(As of April 1, 2006)

General meeting of shareholders
Board of auditors
Board of directors
Board of managing directors

Compliance committee
In-house auditing committee

Comprehensive risk management committee
Earthquake disaster task force

Reinsurance administration dept.

Financial dept.

Controller dept.

Directors (full-time)
Post(As of June 30, 2006)

Name / Date of birth

CareerApril 1967:

Chairman(representative
director)

Shozo Wakabayashi

June 1998:(November 23, 1943)

July 2001:
June 2004:
April 1967:

President(representative
director)

Managing
director(representative
director)

Managing
director

14

Akihiko Mori
(August 3, 1943)

June 2001:
April 2002:
June 2003:
June 2004:
April 1972:

Tatsuro Yoshida(April 30, 1948)

July 2002:
June 2004:

Joined the Ministry of Finance (currently Finance
Ministry)
Took ofﬁce as administrative vice minister. Okinawa
Development Agency (currently Calinet ofﬁce)
Took ofﬁce as managing director, Japan Securities
Dealers Association
Took ofﬁce as chairman of JER (present post)
Joined Tokio Marine Fire Insurance Co., Ltd. (currently Tokio Marine & Nichido Fire Insurance Co.,Ltd.)
Took ofﬁce as vice president of the above.
Took ofﬁce as vice president, Millea Holdings. Inc.
Took ofﬁce as managing director, JER
Took ofﬁce as president, JER (present post)
Joined Yasuda Fire Marine Insurance Co., Ltd. (currently Sompo Japan Insurance Inc.)
Took ofﬁce as executive ofﬁcer, Sompo Japan Insurance Inc.
Took ofﬁce as managing director, JER (present post)

April 1968:

Tsuyoshi Suzuki(representative
director)(June 3, 1944)

Corporate
auditor

Kentaro Takenaka(May 5, 1939)

Japan Earthquake Reinsurance Co., Ltd. 2006

Joined Sumitomo Marine Fire Insurance Co., Ltd.
(currently Mitsui Sumitomo Insurance Co., Ltd.)
October 2001: Took ofﬁce as managing director, Mitsui Sumitomo
Marine Kirameki Life Insurance Co., Ltd.
June 2005:
Took ofﬁce as managing director, JER (present post)
April 1963:
June 2000:
June 2004:

Joined Japan Non-Life Insurance Association.
Took ofﬁce as managing director of the above
Took ofﬁce as full-time auditor, JER (present post)Employees(As of March 31. 2006)

No. of employees

Average age

Average years of service

Average annual salary21

41.2 years old

11.8 years

7,773,808 yen

Note 1: The number of employees is that of the workers.
Note 2: The average annual salaries include bonuses and overtime pay.
Note 3: The employees include no employer cum director, those on leave of absence from work and temporary workers.

Others■ Remuneration for the directors
The amount of remuneration paid to the directors in ﬁscal 2005 came to 71 million yen.
■ Remuneration for the accounting ﬁrm
The amount of remuneration paid to Chuo Aoyama Accounting Firm in ﬁscal 2005 came to 7 million yen.

Japan Earthquake Reinsurance Co., Ltd. 200615

������������������������
Typical management indicators
More and more earthquake insurance contracts have been entered into, and the net premiums written recorded a 22.2% increase over the previous year. In addition, the assets are being operated by highly liquidand high-rate securities for the payment of reinsurance money.

Net premiums written

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Ordinary proﬁt = ordinary income – ordinary expenses

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16��������������

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Japan Earthquake Reinsurance Co., Ltd. 2006�������

The total assets are composed of cash, deposits, securities, property
and other assets, as shown in B/S ASSETS.

Net loss ratio Net operating expenses ratio

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Net loss ratio = (net claims paid + loss adjustment expenses) ÷ net
premiums written

The non-life insurance company has reserves for insurance claims
in case of accidents and repayment at maturity of installment insurance and other cases. In addition, it is expected that the company
maintains satisfactory solvency against extraordinary, unpredictablerisks such as great disaster and sharp decrease in assets owned by
the company.
The solvency-margin ratio is one of the indicators which is used by theadministrative authorities to give a check to the company for soundmanagement. When the ratio is 200% or higher, the company is regarded as having proper and satisfactory solvency.

Net operating expenses ratio = operating expenses involved in insurance underwriting ÷ net premiums written

Japan Earthquake Reinsurance Co., Ltd. has entered into an earthquake insurance reinsurance contract with the Japanese government
according to Law concerning Earthquake Insurance.
It is to be noted, in addition, that reinsurance on earthquake insurance
is a special form of business as seen from the provision of Law sayingthat the government should make an effort to facilitate or accommodate loan necessary for the payment of insurance money, and Item 4,
Order Article 3 stipulating the divisions as speciﬁed in Item 2, Article
132, Insurance Business Law provides that our solvency-margin ratio
is not supposed to be usable as a key ratio despite the above-mentioned ratio level when the government issues an administrative orderfor business improvement.

(Unit: Yen in million)

Fiscal Year

2001

2002

Net premiums written

50,859Net loss ratio
Net expense ratio
Underwriting incomes

2003

2004

2005

47,56650,89658,19871,132

35.8%

0.7%

20.5%

28.7%

37.9%

42.8%

43.2%

43.9%

42.6%

40.7%

62,86051,89754,67861,99591,001

Ordinary proﬁt

707

303

184

98

23

Net income

22

10

17

10

36

203.3%

176.3%

184.3%

182.2%

160.2%

1,569

1,577

1,579

1,587

1,605

681,736

726,458

761,594

804,333

838,555

27

25

14

11

△5

11,748

11,825

7,000

5,458

△ 9,054

Solvency-margin ratio
Total shareholders' equity
Total assets
After-tax unrealized gain in securities
After-tax unrealized gain
earthquake insuranceinsecuritiesofJapan Earthquake Reinsurance Co., Ltd. 2006

17

Coping with great earthquakes
The important role of ours is to pay reinsurance
claims promptly as well as properly in the eventthat a great earthquake occurred. We are provided therefore with a standing task force against
earthquake disasters, composed of full-time directors and managerial staff, and conduct a drill

against a great earthquake and system frame-up
annually. We also use the best care to manageand operate the assets, bearing liquidity (realization) and safety in mind. See below for detail.

■ Task force against earthquake disasters and its activities
The committee is a standing in-house crossoverorganization. It prepares an annual plan, takes
the ﬁrst-step action according to the plan, sets
up a task force headquarters and exercises
payment of reinsurance claims, and keeps an
emergency manual against an assumed greatearthquake. In 2006, all of the directors and employees are put to the drill that they walk to andfrom work.

We also gave a check to the payment system
in 2002, including a fund raising plan, by simulating damages suffered by the cities of Tokyo
because of a destructive inland earthquake. An
outside research institution prepared a survey
report in 2005 in a close cooperation with the
non-life insurance companies and JER, showing
how much a destructive inland earthquake is assumed to damage the metropolis. It will serve us
to improve the payment system.

■ Highly cashable assets based operation
We have to pay a tremendous amount of reinsurance claims in a short period of time in theevent that a great destructive inland earthquake
attacked the metropolis. For this reason, we always operate highly liquid, high-rating securities

18

Japan Earthquake Reinsurance Co., Ltd. 2006

on the main, and basically we are so prepared
as to cash almost all the assets within 4 days. To
reduce cost risks at the time of realization, we
operate mid-term securities on the main.

Mid-term management plan
We celebrated the 40th anniversary on June 1, 2006. We have decided to take this opportunity to make out
a mid-term management plan, the key words of which are [Trust and Leap], and start over.
Our goals in a 10-year perspective are:
1. To play an active role in fulﬁlling and developing the earthquake insurance system;
2. To grow the company to a company highly trusted by the stakeholders at all times while operating the earthquake insurance system.
In order to realize them, we have a more concrete three-year action plan composed of 15 target items.
Furthermore, we have prepared a plan for the current year and we are to make every effort to achieve theplan without fail.

Three-year action plan
1 Assuming such a state of affairs as may force us to innovate, and conducting research on how to cope with it

2
3
4
5

Reinforcing the checkup system of ceded reinsurance contracts according to the treaty A
Preparing a plan of independent management of credits and debts
Innovating the current system of accounting and business operating
Executing a quarterly settlement of accounts

6 Building a unitary risk control system
7 Establishing and implementing an efﬁcient way of exchange hedge

8 Upgrading the employees for business knowledge and skills, and fostering specialists
9 Supporting the employees institutionally for their life planning
10 Promoting the improvement of personnel system and work site environment

11 Taking measures for the improving of the earthquake insurance system
12 Conducting disposition of loss adjustment expenses from risk reserves

13 Taking active measures to encourage people to join earthquake insurance
14 Publicizing the products for contents and reinforcing the measures against great earthquakes

15 Strengthening corporate governanceJapan Earthquake Reinsurance Co., Ltd. 2006

19

Operating system■ In-house governance system���������������������������

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■ Committees system based operation
Our corporate governance depends on thecommittees system under control of the board ofmanaging directors. Composed of three committees, in-house auditing committee, compliancecommittee and comprehensive risk management
committee, the system is aimed at conducting
audit, law observation and risk management andmaintaining sound business operation. Preparing
for a natural calamity, the company is provided
with a task force against natural disasters to fa-

cilitate the payment of the insurance claims andmaintain the funding plan for payment, enabling
the company to take prompt action in responseto earthquake disasters of a large scale.
The annual operation policy and operating conditions of each committee is periodically reported to or put to the discussion by the board ofmanaging directors and board of directors.

■ Compliance
We are making efforts to foster a sound corporate business climate needed as insurance company, considering strict abiding by law as one of
the most important tasks. In order to establish acompliance promotion system, the company has
set up the compliance committee headed by thepresident to enable it to manage and promotecompliance in a unitary manner.
The current compliance program is so designed

as to review the action code, establish a legal
checkup system, train the labor and management on human rights, hold a hearing on compliance and hold a study meeting participated by
the labor and management. There are provided
an in-house consultation window and an outsidecompliance hot line to promote strict abiding bylaws and prevent and ﬁnd any illegal action.

■ Information protection
Because the protection of information is one ofour most important tasks, we hold a security policy, a basic one mentioning the safety measures,
establishing safety measure standards as con-

In particular, we handle personal information ina proper manner with reference to the privacy
policy, personal information protection rules andpersonal data safety control standards in con-crete instructions to this effect. We handle theinformation assets properly using the best care.

nection with proper acquisition, use and stocking of personal information.

☞ See p.18 Coping with great earthquakes for the task force against earthquake disasters and its activities.

20

Japan Earthquake Reinsurance Co., Ltd. 2006

■ Risk management system
It is getting more and more important to grasp and control various complicated and diversifying risks surrounding us, such as ongoing ﬁnancial liberalization and sophistication of ﬁnancial technology.
To meet the situation, we have been making efforts to maintain and develop the risk control system by establishing the comprehensive risk control committee to supervise risk control and reinforcing the functionsof comprehensive risk control. This helps us understand risks exactly and control them properly. Developments of the matter are regularly reported to the board of directors and the board of managing directors
as well.
Coping with assets management risks

Coping with paperwork risks

The investment assets have amounted to 826.7 billion yen. Because it is primarily necessary to pay reinsurance money promptly and properly in case of agreat earthquake disaster, the assets are being operated using public bondson the main. The management of risks involved in the management of assets
is carried out according to the annual control policy. See below for detail.

We constantly put the rules and regulations of authorityand paperwork procedures and manuals to the examination for exact and perfect paperwork. We also give a regular check to the rules and regulations by in-house auditing for conformity with related laws and regulations.

Market risks

We measure the responsiveness to interest rates and currency exchanges andvalue at risk (VaR), and calculate the amount of loss due to a heavy change ininterest or exchange rate to limit the volume of risks.

Credit risks

When purchasing securities, we limit the issuers to those high in credibility
with reference to the credit rating made by rating agencies. We always givea check to the securities in possession for credibility, and conduct individual
controls to avoid the concentration in a speciﬁc group of companies or typeof businesses.

Coping with system risks
We constantly review the risk control plan with emphasison system security in case of a calamity. This will result in
the improvement of the control system.

Liquidity risks

We give a check to the individual securities in advance for cashing, and to
the assets for cashing.

■ Auditing system, outside and in-house inspection
Outside auditing and inspection
We are to be given a check for management and general business operation by the Financial Services
Agency in accordance with Articles 129 and 313, Insurance Business Law and by the Ministry of Financein accordance with Article 9, Law concerning Earthquake Insurance.
We are also audited for accounting by an auditing corporation in accordance with Law for Exception on
Commercial Code.
In-house auditing
In addition to Commercial Code based auditing conducted by the auditors, we are equipped with the inhouse auditing committee as an inside organization. In-house auditing puts emphasis on how big issues
are handled by each division and the compliance system and risk control system as well.
The management of reinsurance, operation of ﬁnance and control system of assets are put to the auditing
this year, putting emphasis on the inspection of internal control conditions including ofﬁce work.
On top of that, we put the conditions of personal information control, system security and progress of compliance to the auditing.

Japan Earthquake Reinsurance Co., Ltd. 2006

21

Facts
Business conspectus
1. Business results in the last ﬁscal year .............................................. 24
2. Indicators showing the main business results over the last ﬁve ﬁscal years ...... 25
3. Indicators showing the business results in the last 3 ﬁscal years .......... 25

Accounting conspectus
1. Accounts in the last 2 years ........................................................... 31
2. Risk management credits ............................................................... 35
3. Present conditions of loans involving trust with contact for replacement of losses ..... 35
4. Credits obligations based on debtor classiﬁcation ............................ 35
5. Conditions of solvency-margin ratio ................................................ 35
6. Information on the market prices (acquisition cost or contract cost,market price and appraisal proﬁt and loss) and others....................... 36

Glossary
For an understanding of earthquake insurance ...................................... 38

Japan Earthquake Reinsurance Co., Ltd. 200623�������������������

1. Business results in the last ﬁscal year
The number of earthquake insurance contracts and premiums written continued to beon the increase in ﬁscal 2005 mainly because
earthquakes that happened, including the Fukuoka-ken Seiho-oki earthquake, aroused more
attention than ever among people to natural disasters. As a result, the number of payments ofearthquake insurance claims and insurance premiums marked increase over the previous year.
In the meantime, safety and liquidity came ﬁrst
in operating the assets, followed by earnings,
under interest rate ﬂuctuations to enable us tobe well prepared for the payment of reinsurance
claims.
(1) Earthquake insurance results in outline
a. Premiums written and insurance claims paid 3①
1, 3Media coverage and occurrence of earthquakes madepeople more interested in or aware of, earthquake
insurance, which served as a tail wind to let the net
premiums written reach 71.1 billion yen in the current ﬁscal year.
Insurance claims paid came to 24.6 billion yen to compensate damages caused by earthquakes such as Fukuoka-ken Seiho-oki earthquake.

b. Underwriting reserves 3 ⑤This resulted in that the risk reserves added amounted to 31 billion yen, a total of the net premiums written held 27.9 billion yen given by deducting the assumed insurance and held of commissions from thenet premiums written and a proﬁt of 3 billion yen fromoperation.
The risk reserves at the end of the current term cameto 378.7 billion yen after the ongoing insurance claims
were paid, the outstanding claims calculated in theprevious year were returned and the risk reserves
were drawn in the past year by 8 billion yen. The
underwriting reserves at the end of the current term
amounted to 450.8 billion yen after adding unearned
premium reserves and refunded reserves to the risk
reserves.

c. Entrusted reserves
Designated as entrusted reserve from the earthquake
insurance account, the entrusted reserves for the year
reached 377.3 billion yen by adding net premiums
written and proﬁt from investment of 23.4 billion yen
and drawing advertisement / publicity expenses of 500
million yen.

(2) Investments in outline 3 ⑥
It was expected that the business situation remained
at a phase of adjustment in the ﬁrst half of the year
and BOJ’s quantitative easing of monetary policy
would be protracted, with the result that the interest rate of 10-year government bond went down fromthe 1.3% level at the beginning of the ﬁscal year to
the 1.1% level in June. The Japanese government andBank of Japan declared in August, however, that theJapanese economy had escaped from the landing, letting people begin to feel optimistic about the domestic
economy. While the short- and mid-term interest rates
were on the increase, the quantitative easing policy
was abandoned in March, leading to a sharp rise ininterest rate to the 1.7% level at the end of ﬁscal year.
The dollar rose about 10 yen and the Euro dollar about
4 yen against the yen over the previous year on theforeign exchange market partly because there was observed a wider difference in interest rate among theUnited States of America, European countries and Japan. Under such circumstances, we operated the assets with utmost emphasis on safety and liquidity andthen proﬁtability. As a result, the proﬁts from investment before tax reached 3 billion yen in business account and in entrusted reserve account respectively.

(3) Current proﬁt and loss
The net income amounted to 36 million yen after calculating interests, dividend income and corporate taxes.
The proﬁt was added to the retained earnings brought
forward from last year in the amount of 520 million
yen, with the result that the unappropriated retained
earnings for the year came to 550 million yen.
Since a direct writing insurance company reported, in
addition, to JER that they had failed to add up reinsurance, we added up the reinsurance of the past year
to that of the current year. This brought a total of net
premiums written of 203 million yen.

24

Japan Earthquake Reinsurance Co., Ltd. 2006

2. Indicators showing the main business results over the last ﬁve ﬁscal
years(Unit: Yen in million)

Fiscal Year

2001

2002

50,859(△3.4%)

47,566(△6.5%)

50,896(7.0%)

58,198(14.3%)

71,132(22.2%)

Ordinary incomes (percentage changeover the previous term (△)

73,430(7.5%)

58,460(△20.4%)

66,352(13.5%)

71,856(8.3%)

107,868(50.1%)

Ordinary expenses(percentage change over the previous term (△)

72,722(7.3%)

58,156(△20.0%)66,167(13.8%)

71,758(8.4%)

107,845(50.3%)

Ordinary proﬁt(percentage change over the previous term (△)

707(32.5%)

303(△57.1%)

184(△39.3%)98(△46.7%)23(△76.4%)

Net income(percentage change over the previous term (△)

22(△34.5%)

10(△55.6%)17(74.2%)

10(△40.5%)36(243.6%)

1,000(2 mil. shares)

1,000(2 mil. shares)

1,000(2 mil. shares)

1,000(2 mil. shares)

1,000(2 mil. shares)

Net assets

1,569

1,577

1,579

1,587

1,605

Total assets

681,736

726,458

761,594

804,333

838,555

Underwriting reserves(percentage change over the previous term (△)

360,778(6.6%)

391,482(8.5%)

412,968(5.5%)

415,802(0.7%)

450,892(8.4%)(of the balance, risk reserve balance)(percentage change over the previous term (△)

312,523(6.2%)

341,675(9.3%)

359,772(5.3%)

355,813(△1.1%)

378,731
(6.4%)

Loans(percentage change over the previous term (△)

−
(−)

−
(−)

−
(−)

−
(−)

−
(−)

Securities(percentage change over the previous term (△)

618,296(14.0%)

652,210(5.5%)

682,285(4.6%)

734,046(7.6%)

771,383(5.1%)

Solvency-margin ratio

203.3%

176.3%

184.3%

182.2%

160.2%

Dividend propensity

−%

−%

−%

−%

−%

No. of employees

20

20

17

18

21

Division

Net premiums written (percentage changeover the previous term (△)

Common stock (sum of shares issued)

2003

2004

2005

Note:
As seen in Section 4, Article 3, Order to specify divisions, provided for in Section 2, Article 132, Insurance Business Law, our solvency-margin ratio is notsupposed to be used as criterion to enable the administrative authorities to trigger an order for improvement. For detail, see p.17

We conduct no trust business.

3. Indicators showing the business results in the last 3 ﬁscal years❶ Indicators showing the main business results
1. Net premium written

2. Underwriting proﬁt

Item: earthquake
Division

Fiscal Year

Ceded insurance
premiums (A)Surrender value (B)(Unit: Yen in million)
2003

2004

2005

108,028

120,972

143,493

1,045

1,082

1,440

(Unit: Yen in million)
Division

Fiscal Year

2003

2004

2005

Underwriting incomes

54,67861,99591,001

Underwriting expenses

54,09761,51590,580

427

401

421

Assumed net
premiums written (A-B)

104,993

117,942

139,621

Sales and general administrative expenses

Reinsurance premiums
ceded (C)54,09659,744

68,488Other incomes andexpenses

△154

△78

−

Net premiums written(A-B-C)

50,89658,19871,132

Underwriting proﬁt

−

−

−

Note:
1: Surrender value: Surrender value of receiving reinsurance.
2: Net receiving premiums: Produced by deducting surrender value
from receiving premiums.
3: Net premium written: Produced by deducting paid reinsurance premium ceded from net reinsurance premiums.

Note:
1: The above sales and general administrative expenses are thoserelating to the underwriting of insurances mentioned in the sales
and general administrative expenses in a statement of proﬁts andlosses.
2: Other incomes and expenses are those equivalent to corporate
taxes mentioned in a statement of earthquake insurance proﬁts
and losses.

Japan Earthquake Reinsurance Co., Ltd. 200625

❸ Indicators relating to accounting

3. Net claims paid
Item: earthquake
Division

Fiscal Year

(Unit: Yen in million)
2003

2004

2005

Assumed net claim
paid (A)

9,682

15,987

24,662

Reinsurance claims
recovered (B)

−

−

−

Net claims paid (A-B)

9,682

15,987

24,662Note:
1: Assumed Net claim paid: Produced by deducting surrender value
from ceded insurance money paid.
2: Net claims paid: Produced by deducting reinsurance claims recovered by ceded contract from assumed claim paid.

❷ Indicators relating to insurance contracts
1. Net loss ratio, net expense ratio and their added
ratio(Unit: Yen in million)

Fiscal Year

2003

2004

2005

Net loss ratio

20.5%

28.7%

37.9%

Division

1. Amounts of outstanding claims and underwriting reserves(Unit: Yen in million)

As of the endof ﬁscal 2004

As of the endof ﬁscal 2005

Outstanding claims

327

17,8781,104

Underwriting reserves

412,968

415,802450,892

Total

413,296

433,681451,997

2. Detail Listing of Liability Reserves
Balanceas ofthe endof ﬁscal2004

Amountofincreasein ﬁscal2005

Reserve forordinary bad
debts

−

Reserve forindividual bad
debts

Division(Unit: Yen in million)

Amount of decreasein ﬁscal 2005

Balanceas ofthe endof ﬁscal2005

Use per
objectOthers

−

−

−

−

−

−

−

−

−

Reserve for
speciﬁc foreign
loans

−

−

−

−

−

Accured severance beneﬁts

72

22

5

5

83

−

7

−

−

7

Underwriting expenses

22,34524,80429,982

Insurance related underwriting and general administrative
expenses

Reserve for ofﬁcer retirement
allowances

(427)

(401)

(421)

Reserve forbonus payment

13

14

13

−

14

(Agency commissions andbrokerage fees)(21,918)(24,403)(28,560)

Reserve for priceﬂuctuation

0

7

−

−

7

Net expense ratio

43.9%

42.6%

40.7%

Total

86

52

19

5

113

Added ratio

64.4%

71.3%

78.6%

Note:
1: Net loss ratio: (Net claims paid + loss adjustment expenses) ÷ net
premiums written
2: Net expense ratio: (Agency commissions and brokerage fees +Insurance related underwriting and general administrative expenses) ÷ net premiums written
3: Added ratio: Net loss ratio + net expense ratio

3. Common Stock

Fiscal Year

Division

Domestic contract

2003

2004

2005

100%

100%

100%

3. No. of reinsurers that ceded insurance contracts andtop 5 reinsurers for ceded reinsurance premiums
No. of reinsurers that ceded
insurance contracts

Rate of top 5 reinsurers’ ceded
insurance premiums

19

77.9%

Note:
The number of reinsurers that ceded insurance contracts is that ofthose who ceded treaty reinsurance contracts amounting to 10 million or more yen.
Nothing is mentioned about unearned claims paid.
Nothing is mentioned about the rate of damage occurrence, theexpenses ratio and rate of sum total before ceded insurance deduction.
Ratio of ceded insurance premiums by rating does not apply toearthquake insurance.
We pay no contractor dividend.

Japan Earthquake Reinsurance Co., Ltd. 2006

Balance asof the endof ﬁscal2004

Amount ofincrease inﬁscal 2005

Amount ofdecrease inﬁscal 2005

Balance asof the endof ﬁscal
2005

1,000

−

−

1,000

(2 mil. stock)−−(2 mil. stock)

1,000

−

−

1,000

(2 mil. stock)−−(2 mil. stock)

−

−

−

−

Common stock
Ordinary stock
Issued
stock
Total

1,000

(Legal reserve)
Legalreserveand appropriatedretainedearnings

Remarks(Unit: Yen in million)

Division

2. Rate of premiums written by domestic and overseas contracts

26

As of the endof ﬁscal 2003

Year

Division

1,000

1Appropriatedretainedearnings

1

Special reserve

17

−

−

17

Special reservefor priceﬂuctuation

39

−

−

39

Total

57

−

−

57

Note:
The number of owned shares was 11,400 as of the end of ﬁscal 2005.

4. Business expenses (inclusive of loss adjustment)(Unit: Yen in million)

Fiscal Year

Division

2003

2004

2005

Personnel expenses

352

420

453

Physical expenses

1,090

1,014

2,512

Taxes / contributions

139

159

195

Agency commissions andbrokerage fees

21,91824,40328,560Total

23,501

25,99831,722Note:
The business expenses are a total of loss adjustment expense, sales andgeneral administrative expenses, agency commissions and brokerage
fees as shown in a statement of proﬁt and loss.

5. Proﬁt on sale of securities by category(Unit: Yen in million)
Fiscal Year

Division

2003

2004

❹ Special deposit premium accountNothing is to be mentioned.

2005

Government bonds

26

35

92

Foreign securities

146

6

−

Total

172

41

92

❺ Earthquake insurance underwriting reserves by
category(Unit: Yen in million)Year

As of the endof ﬁscal 2003

As of the endof ﬁscal 2004

As of the endof ﬁscal 2005

Risk reserve359,772

355,813378,731

Repayment reserve

3,297

3,303

2,639

Unearned premium
reserve

49,89856,68569,521

Total

412,968

415,802450,892

Division

6. Loss on sale of securities by category(Unit: Yen in million)
Fiscal Year

Division

2003

2004

2005

Government bonds

92

10

288

Foreign securities

51

221

401

Total

143

231

689

❻ Investments
1. Investments policy

7. Securities appraisal loss by category(Unit: Yen in million)
Fiscal Year

Division

2003

2004

2005

Government bonds

−

−

−

Foreign securities

−

−

−

Total

−

−

−

8. Depreciation expenses by category(Unit: Yen in million)

Asset kind

Acquisition cost

Amount ofdepreciationin ﬁscal2005

Aggregateddepreciations

Balanceas the endof ﬁscal2005

Rate of aggregateddepreciations %Buildings

92

3

50

42

54.6

(for
business)

(92)

(3)

(50)

(42)

(54.6)(forinvestment)

(−)

(−)

(−)

(−)

(−)

Equipment

21

0

18

2

86.5

Others

9

0

2

6

28.4

Total

124

5

72

51

58.2

9. Loss from disposal of property and equipment
Fiscal Year

Division

2003

Because we have to pay a huge amount of claims
in a prompt manner in case of a natural disastersuch as a heavy earthquake, we put in principle thehighest priority on safety and liquidity in operating
the assets, followed by proﬁtability to increase risk
reserves. The risk management division is engaged
in grasping and controlling risks of all kinds, independently of the transactions execution division.
2. Investments in outline
Deposits(Unit: Yen in million)
Year

Division

As of the endof ﬁscal 2003

As of the endof ﬁscal 2004

As of the endof ﬁscal 2005

Deposits

44,06628,47038,026(Ordinary deposit)(15,736)(1,140)(10,696)(Time deposit)(28,330)(27,330)(27,330)

Total assets and investments assets
Fiscal
Year

2003

2004

Percentage
composition(%)

Division(Unit: Yen in million)
2005

Percentage
composition(%)

Percentage
composition(%)(Unit: Yen in million)

Deposits

44,066

5.8

28,4703.5

38,026

4.5

2004

Call loans−−

15,0001.9−−

Monetaryreceivablebought10,994

1.4

6,297

0.8

1,799

0.2

2005

Property−−−(Land)

(−)

(−)

(−)

(Building)

(−)

(2)

(−)

Equipment

0

−

−

Total

0

2

−

No mention is made about the level of underwriting reservesbecause there is no target contract.
Mention about ﬂuctuations of ordinary proﬁt or written loss
over increase in loss ratio is omitted because insurance
claims are offset by disposition of underwriting reserves.
Nothing is to be mentioned about loan write-off and proﬁt
from property and equipment.

Money trust

11,794

1.5

9,173

1.1

15,528

1.9

Securities

682,28589.6

734,046

91.3

771,383

92.0

Buildings

43

0.0

45

0.0

42

0.0

Total ofinvestments
assets749,18598.4

793,033

98.6

826,779

98.6

Total assets

761,594100.0

804,333

100.0

838,555

100.0

Japan Earthquake Reinsurance Co., Ltd. 2006

27

3. Amount of interest dividend received and yield on investment assets (income yield)

4. Asset management yield (realized yield)(Unit: Yen in million)

Fiscal
Year

2003

2004

Percentage
composition(%)

Division(Unit: Yen in million)

2005

Percentage
composition(%)

Percentage
composition(%)

Deposits

56

0.15

85

0.18

91

0.20

Call loan

0

0.05

0

0.05

0

0.05

Monetaryreceivablesbought

15

0.18

14

0.17

4

0.12

Money trust

117

0.95

75

0.78

86

0.57

Securities

9,199

1.39

9,140

1.30

10,307

1.40

Building

−

−

−

−

−

Total

9,389

1.30

9,315

1.21

10,490FiscalYear

Division

2004

2005

Amount Amount Yield on Amount Amount Yield onofof
workingofofworking
numera- denomi- assets numera- denomi- assets
tor
nator
(%)
tor
nator
(%)

Deposits

85

48,8090.18

91

46,8850.20

Call loan

0

80

0.05

0

208

0.05

Bond trading with
repurchaseagreement

−

−

−

−

−

−

14

8,425

0.17

4

3,918

0.12

−

Monetaryreceivablesbought1.31

Commodity
securities

−

−

−

−

−

−

Note:
Yield on investments (income yield): indicator showing the result of investment assets from a point of income (interest and dividend income)(which has been disclosed)
The numerator is composed of interest and dividend income from operating the assets while the denominator is an acquisition cost based
yield.
Numerator = Interest and dividend income (including the amount equivalent to interest and dividend income of proﬁt (or loss) frommonetary trust operation)
Denominator = Acquisition cost or depreciation based average balance

Money trust

83

9,633

0.87

270

15,2601.77

Securities

8,932

704,877

1.27

9,595

737,410

1.30

Public andcorporate
bonds

4,837

548,463

0.89

4,051

548,823

0.74

Stocks

−

−

−

−

−

−

Foreignsecurities

4,060

150,782

2.69

5,594

178,579

3.13

Other
securities

△1

5,631

△0.03

△51

10,007

△0.52

Loan

−

−

−

−

−

−

Buildings

−

48

−

−

45

−

Financialderivative△1,294−−△3,457−−

Others

86

−

−

105

−

−

Total

7,907

771,874

1.02

6,609

803,728

0.82

Note:
Asset management yield (realized yield): Indicator to show the result ofmanaging of assets from a point of contribution to the current proﬁt
and loss. The numerator is realized proﬁt and loss while the denominator is an acquisition cost based yield.
Numerator = proﬁt from asset management + investment income on savings premiums – expenses of assets management
Denominator = acquisition cost or writing-off cost based average balance

28

Japan Earthquake Reinsurance Co., Ltd. 2006

5. Market-price based overall yield (for reference)(Unit: Yen in million)
FiscalYear

2004

6. Balance, percentage composition and yield of Foreign
Loans & Investments(Unit: Yen in million)

2005

Year

Amountofnumerator

Amountofdenominator

Yield onworking
assets(%)

Amountofnumerator

Amountofdenominator

Yield onworking
assets(%)

Deposits

85

48,8090.18

91

46,8850.20

Foreign currency
denominatedDivision

Call loan

0

80

0.05

0

208

0.05

Foreign public andcorporate bonds

−

−

−

−

−

−

Yen denominatedMonetary receivables bought

14

8,425

0.17

4

3,918

0.12

Commodity
securities

−

−

−

−

−

−

Money trust

62

9,827

0.63

495

15,434

3.21

Securities

7,407

711,706

1.04△5,171

742,714△0.70

Public andcorporate
bonds

5,315

553,069

0.96△7,147553,869△1.29

Stocks

−

−

−

−

−

−

2,164

153,045

1.41

2,021

178,946

1.13

Other securities

△71

5,591

△1.29

△45

9,897

△0.46

Loans

−

−

−

−

−

−

Buildings

−

48

−

−

45

−

△1,294−−△3,457−−

Financial derivative
Others

86

−

−

105

−

−

Total

6,361

778,897

0.82△7,931

809,205

△0.98

Note:
Market-price based overall yield: Indicator showing the efﬁciency of operation on a market price basis. The numerator reﬂects realized proﬁt and loss,
and ﬂuctuation in difference in market
price appraisal while the denominator ismarket-price based yield.
Numerator = (income from operated assets management + investment
income on savings premium – expenses for assets management) + (after-tax unrealized gain for the year – after-tax
unrealized gain for previous year)* + ﬂuctuation in deferredhedge proﬁt and loss
Denominator = acquisition cost or write-off based average balance +after-tax unrealized gain for previous year of other securities + proﬁt and loss for the previous year related to securities for transaction*Based on the amount before tax effect deduction

As of the endof ﬁscal 2004

As of the endof ﬁscal 2005

Percentage
composition(%)

Percentage
composition(%)

Percentage
composition(%)

Division

Bond tradingwith repurchaseagreement

Foreignsecurities

As of the endof ﬁscal 2003

99,80277.8 137,611

82.7 167,736

83.2

Foreign public andcorporate bonds

28,49022.2

17.3

33,905

16.8

Total

128,293

100.0 166,320

100.0 201,642

100.0

28,709Yield on foreignloans & investment
Investments
assets yield(income yield)

2.94%

2.84%

3.36%

Assetsmanagement(realized yield)

3.03%

2.69%

3.13%

Comprehensive
market priceyield(for reference)

2.60%

1.41%

1.13%

Note:
1. Of the yield on foreign loans & investments, investment assets yield was
calculated in the same manner as 3 investment income and yield on
investment assets (income yield) in connection with the assets involving
foreign investment.
2. Of the yield on foreign investments, assets management yield was calculated in the same manner as 4 assets management yield (realized
yield) in connection with the assets involving foreign investment.

7. Balance of securities by category and percentage distribution(Unit: Yen in million)Year

As of the endof ﬁscal 2003

As of the endof ﬁscal 2004

Percentage
composition(%)

Division

As of the endof ﬁscal 2005

Percentage
composition(%)

Percentage
composition(%)

Government bonds

204,37330.0

256,14534.9

310,554

40.3

Municipal
bonds

21,453

3.1

17,940

2.4

4,476

0.6

Corporatebonds

323,201

47.4

287,23839.1

239,851

31.1

Stocks

−

−

−

−

−

−

Foreignsecurities

128,29318.8

166,32022.7

201,642

26.1

Other
securities

4,963

0.7

6,401

0.9

14,858

1.9

Loadreceivablein securities

−

−

−

−

−

−

682,285100.0

734,046

100.0

771,383

100.0

Total

Japan Earthquake Reinsurance Co., Ltd. 2006

29

8. Yield on securities held

(Unit: %)Fiscal Year

Division

2003

2004

10. Property & Equipment by breakdown(Unit: Yen in million)

2005
Year

Investment assets yield (income yield)
Division

As of theend of ﬁscal 2004

As of theend of ﬁscal 2005

Public & corporate bonds

1.07

0.88

0.78

Stocks

−

−

−

Land

−

−

−

(−)

(−)

(−)

(−)

(−)

(−)

Foreign securities

2.94

2.84

3.36

(for business)

Other securities

0.25

0.28

0.56

(for investment)

Total

1.39

1.30

1.31

Buildings

43

45

42

(for business)

(43)

(45)

(42)

0.74

(for investment)

(−)

(−)

(−)

Construction inprogress−−−

Assets operation yield (realized yield)
1.06

Corporate bonds

0.89

Shares−−−Foreign securities

3.03

2.69

3.13

(for business)

(−)

(−)

(−)

Other securities

△0.22

△0.03

△0.52

(for investment)

(−)

(−)

(−)

Total

1.39

1.27

0.82

Total of property

43

45

42

(for business)

(43)

(45)

(42)

(−)

(−)

(−)

Comprehensive market price yield (for reference)
Public & Corporate bonds

0.21

0.96

△1.29

(for investment)

Stocks−−−Equipment

432Foreign securities

2.60

1.41

1.13

Total

48

48

45

Other securities

△0.50

△1.29

△0.46

Total

0.62

1.04

△0.98

9. Balance Current Maturity of securities by category
As of the end of ﬁscal 2004

(Unit: Yen in million)

Division

Up to 1year

1 overup to 3years

3 overup to 5years

5 overup to 7years

7 over
up
to 10
years

Government
bonds

58,281

56,205 116,838

194−

Municipal
bonds

13,553

−

4,387

−

−

Corporatebonds

86,144 106,893

Over
10
years

Total

24,625 256,145−

17,94090,992

3,004

203

Stocks

−

−

−

−

−

−

Foreignsecurities

22,301

45,52895,223

3,267−− 166,320

Othersecurities

913

−

−

−

1,497

3,990

6,401

Loan
receivablein securities

−

−

−

−

−

−

−

181,194 208,626 307,442

6,466

1,700

DivisionLessthan 1
year

3 to
less
than 5
years

5 to
less
than 7
years

7 to
less
than 10years

Government
bonds

43,635 87,471 153,791−− 25,655 310,554

2,553

−

95

−

56,979 99,109 83,469

97

195

− 239,851

Total

As of the end of ﬁscal 2005

Municipal
bonds
Corporatebonds
StocksForeignsecurities

−

−

1 to
less
than 3
years

1,828

−

− 287,238−

28,616 734,046(Unit: Yen in million)
10
years
or
longer

4,476

−

−

−

6,403

2,919

− 201,642
6,805 14,858

−

−

5,066

−

2,986

Loan
receivablein securities

−

−

−

−

−

117,668 242,012 366,543

6,501

−

Total

17,053 53,602 121,662

Othersecurities

Total

30

As of theend of ﬁscal 2003

−

−

−

6,196 32,460 771,383

Japan Earthquake Reinsurance Co., Ltd. 2006

There is nothing to be mentioned about the following 11 items:
1. Commodity securities
2. Average balance and sales amount of commodity securities
3. Amount of stocks held by type of business4. Balance current maturity of loan by remaining life
5. Balance of loans by type of collateral secured
6. Balance and percentage distribution of loan by desinated use
7. Balance of loan by industry and its ratio to the total
8. Balance of loan by debtor size and its ratio to the total
9. Amount of loan & investment to public works (on a basis of newly
undertaken loan)
10. Housing-related loan
11. Loan interests���������������������

1. Accounts in the last 2 years
The president has conﬁrmed for the reasons given below that the ﬁnancial statements prepared on thefollowing ﬁscal years contain no untrue mention and the process of preparing was considered proper by(LIABILITIES)internal audit.
(Unit: Yen in million)
Fiscal Year
2004
2005
1. The administrative system has done the ﬁnancial(As of March 31, 2005) (As of March 31, 2006)
statements properly according to the division ofPercentage
Percentage
AmountAmountItem
distribution
distribution
duties, business handling rules and authorized
Underwriting funds
433,68153.9
451,99753.9
power.
Outstanding claims
17,8781,104
2. The internal audit depertment has reported to theUnderwriting reserves
415,802450,892
board of directors that it found out that the process
Entrusted reserves
354,48344.1
377,39045.0
of preparing the ﬁnancial statements was properand left nothing to be indicated.
Of the documents to be put to the public inspection
according to Item 1, Article 111, Insurance Business
Law, in addition, the balance sheet, and proﬁt andloss statement were audited by the auditors.
❶ Balance sheet(ASSET)
Fiscal Year

Corporate taxes payable

99

114

Deposits payable

2

2

746

702

Suspense receipts

7−

Financial derivative

3,259

10,292

Accrued amounts payable2005(As of March 31, 2006)

Reserves for directors’
retirement beneﬁt

Percentage
distribution

Percentage
distribution

28,470

Deposits

28,4703.5

38,026

4.5

38,026

Call loan

15,0001.9

Monetary receivable bought

6,297

0.8

1,799

0.2

Money trust

9,173

1.1

15,528

1.9

Securities

734,046

91.3

771,38392.0

256,145

−

0

0.0

7

0.0

After-tax unrealized gain
in securities of earthquake
insurance

5,458

0.7

△9,054△1.1(SHAREHOLDERS’ EQUITY)
Fiscal Year

4,476
Item

Foreign securities

166,320

201,642

Common stock

14,858Retained earnings

0.0

45
42

Equipment

3

2

Other assets

11,241

Reinsurance loan

1.4

8,032

11,686

0.0

1.4

8,172

Accounts receivable

109

427

Uncollected income

2,419

2,910

Deposits

52

51

Suspense payment

176

Financial derivative

448

Other assets

3

6

Deferred tax assets

54

0.0

85

0.0

Total assets

804,333

100.0

838,555

100.0

0.0

Price ﬂuctuation reserves

239,851

45

7

0.0

17,940

48

0.0

14

287,238

Buildings

83

0.0

Corporate bonds

Property & Equipment

0.0

13

310,554

6,401

72

2.0

Reserves for bonus
payment

Municipal bonds

Other securities

16,503
5,390(Unit: Yen in million)

Amount

1.1

4,920

2004
(As of March 31, 2005)

Cash & deposits

Government bonds

9,036

Reinsurance debts

Accrued serverance
beneﬁts

Amount

Item

Other liabilities(Unit: Yen in million)

2004(As of March 31, 2005)
Percentage
distribution

Amount2005(As of March 31, 2006)
Percentage
distribution

Amount

1,000

0.1

1,000

0.1

580

0.1

617

0.1

Legal reserve of retained
earnings

1

1

Voluntary reserves

56

56(Special reserves)

(17)

(17)

(Special price ﬂuctuation
reserves)

(39)

(39)

Unappropriated retained
earnings for the year

522

559

(Net income)

(10)

(36)

96

After-tax unrealized gain in
securities

11

0.0

△5

△0.0

20

Treasury Stock

△5

△0.0

△5

△0.0

1,587

0.2

1,605

0.2

804,333

100.0

838,555

100.0

Total shareholders’ equity
Total liabilities andshareholders’ equity

Japan Earthquake Reinsurance Co., Ltd. 200631

Notes for ﬁscal 2005
1. Appraisal standards and method of securities, and method of indication(1) Of the other securities, those to which market price
was applicable were appraised according to the market price on the term-end day.
(2) Of the other securities, those to which market price
was not applicable were appraised according to basisof cost or write-off cost price using the moving-average method.
(3) As to the unrealized gain of assets corresponding to
the underwriting reserves and entrusted reserves ofearthquake insurance, the amount before tax effectdeduction was indicated as after-tax unrealized gain
in securities of earthquake insurance in LIABILITIES
according to the pertinent Enforcement Rules of Insurance Business Act. As to other unrealized gain, theamount after tax effect deduction was all processed
according to the direct capital injection method andindicated in SHAREHOLDERS’ EQUITY. The calculation of sales price was based on the moving averagemethod.
2. Appraisal standards and method of money trust(1) In money trust exclusively operated centering on securities, the appraisal of securities operated as trust
assets was done on the basis of market price.
(2) In money trust exclusively operated with a view to holding securities which were not intended to be operated
or held to maturity, the appraisal of securities operated
as trust assets was done in the same manner as othersecurities.
3. The appraisal of derivatives was done on the basis ofmarket price.
4. The depreciation of property & equipment was done using the composite-line method.
5. Writing standards of reserves(1) Reserve for bad debts
The reserves for bad debts are written as follows
against loss from bad debts in accordance with the selfappraisal standard of assets and depreciation and reserve standards.
In connection with claims against debtors who havegone bankrupt legally and formally, including bankruptcy, special liquidation or disposition by suspension ofbusiness at a clearing house, or debtors who are substantially bankrupt, the rest of any of the claims deducting an estimated amount of disposable mortgage and adeductible amount by guarantee was appropriated forsuch reserves.
In connection with the other claims, the rate of bad
debts calculated according to the past bad debts andother factors is multiplied by the amount of claims to appropriate for reserves.
In addition, all the claims are written after the ﬁnancedepertment appraises the assets, and the result is audited by the management depertment independent of
the ﬁnance depertment to appropriate the appraisal forreserves.
There are no assets, nevertheless, in the current term
to be appropriate for reserves, and no writing is required.
(2) Reserves for employees’ retirement
For employees’ retirement and severance beneﬁts, reserves were appropriated according to the retirement
allowance liabilities at the end of the term and the esti-

32

Japan Earthquake Reinsurance Co., Ltd. 2006

mated amount of pension assets. The retirement allowance liabilities were calculated using a simple method
on a basis of the allowance to be supplied at the end of
the term for any employee who retires for his / her own
reasons.
On top of the above, 7 million yen is reserved as directors’ retirement beneﬁts to be paid at the end of theterm according to the pertinent in-house rules. The directors’ retirement beneﬁts were conventionally written
when they were paid, but we changed the related inhouse rules at this term to write the beneﬁts to be paid atthe end of the term into the directors’ retirement beneﬁt
reserves. With this, the beneﬁts payable at the end of
the terms has been written into the sales and generaladministrative expenses. As a result, the ordinary incomes and income before income tax were respectively
reduced by 7 million yen over the previous terms. The
directors’ retirement beneﬁt reserves are as speciﬁed in
Article 43, Enforcement Rules of the Commercial Act.
(3) Accrued bonuses for employees
Accrued bonuses for employees’ bonus were calculated according to the standards of estimated bonus
payable.
(4) Reserves for price ﬂuctuation
To prepare against loss from price changes of sharesand others, reserves are appropriated according to Article 115, Insurance Business Law.
6. The conversion of assets and liabilities in foreign currency into Japanese currency is processed according to
the accounting standards of transactions in foreign currency.
7. Taxes are excluded when doing accounts of consumption taxes and others.
8. The risk reserves contained in the underwriting reserves
have been deposited according to the instructions of calculation of liability reserves by accumulating the amounts
resulting from subtracting from the net premiums written
and proﬁt from operating the assets such an amount asequivalent to corporate taxes.
9. The transaction of ﬁnance lease other than the ownership of a lease item is transferred to the leaseholder isprocessed according to the method equivalent to that ofordinary lease transactions.
10. The accumulated depreciation of property & equipment
was 69 million yen.
11. In addition to the equipment mentioned in B / S, somecomputers are used on a lease contract.
12. The total sum of deferred tax assets reached 89 million
yen while the total sum of tax liabilities came to 3 million
yen. The deferred tax assets are by breakdown an unpaid taxes amount of 41 million yen, a retirement beneﬁt
reserve of 30 million yen and a bonus reserve of 5 million yen. The deferred tax liabilities come mainly from an
unrealized gain of 3 million yen of securities.
13. We started at this term to apply the accounting standards as to loss of ﬁxed assets (Written opinions about
setting the accounting standards as to loss of ﬁxed
assets issued on August 9, 2002 by the Corporate Accounting Council) and Guidelines to applying the accounting standards as to loss of ﬁxed assets issued on
October 31, 2003 as No. 6, corporate accounting standards application guideline). There are no ﬁxed assets,
however, to which the standards are applicable.
14. The amounts are indicated by rounding down any
amount not reaching the unit as mentioned.

❷ PROFIT AND LOSS STATEMENT(Unit: Yen in million)
Fiscal Year

Item

2004

2005

AmountAmount(from April 1, 2004 (from April 1, 2005
to March 31, 2005) to March 31, 2006)

Ordinary income & expenses
Ordinary incomes

71,856

107,868

Notes for ﬁscal 2005
1. See below for the net
breakdown.

premiums written by

Premiums written

139,621 (1 million yen)

Reinsurance money paid

68,488 (1 million yen)

Balance

71,132 (1 million yen)

Underwriting incomes

61,99591,001

Net premiums written

58,19871,132−

16,773

3,796

3,095

Claims paid

24,662 (1 million yen)

9,860

16,846

Balance

24,662 (1 million yen)

9,240

10,403Proﬁt from operating monetary trust

79

376

Realized gain on sale of securities

41

92

4,208

8,964

86

105

△3,796△3,0951

20

71,758107,845

61,51590,580

Payment reserve return
Investment income on savings
premium, etc
Investment incomesInterest and dividend incomes

Foreign exchange gain
Proﬁt from other operations
Transfer of proﬁt from Investment
income on savings premiums
Other ordinary incomes
Ordinary expenses
Underwriting expenses
Net claims paid

15,987

24,662739

2,266

Agency commissions and brokeragefees

24,40328,560

Provision for outstanding claims

17,550−

Provision for underwriting reserves

2,834

35,0895,753

13,331

Loss from operating monetary trust−

105

Realized loss on sale of securities

231

689

Loss on securities refundment

17

114

5,503

12,422

0

0

855

894

3,634

3,038

Interest paid

3,634

3,038

Ordinary income

98

23

0

−

0

−

2

7

2

−

Loss adjustment expenses

Investment expenses

Financial derivative cost
Other operation cost
Sales and general administrative
expenses
Other ordinary expenses

Extraordinary gain & losses
Extraordinary gain
Reversal of price ﬂuctuation reserve
returnExtraordinary losses
Loss from real estate and movables
disposition
Provision for price ﬂuctuation reserve
Income before taxes
Corporate income taxes and local taxes

−

7

96

15

96

0

△10

△21

Net income

1036

Retained earnings brought forward from last
year

512

522

Unappropriated retained earnings for the
year

522

559

Deferred income taxes(The income premiums include 203 million yen not registered.)

2. Net claims paid are as follows.

3. See below for the agency commissions and brokerage fees.
Commissions on reinsurance accepted 28,560 (1 million yen)
28,560 (1 million yen)

Balance

4. The interests and dividends income are given
below by category.
Interests on deposits

91 (1 million yen)Interests on call loan

0 (1 million yen)Interests on monetary receivable bought

4 (1 million yen)Interests on securities

10,307 (1 million yen)Total

10,403 (1 million yen)

5. Paper proﬁt / loss involved in the ﬁnancial derivative expenses is a loss of 10,272 million yen.
6. The net income per share is 18.23 yen.
The basis for this calculation is such that the net
income was 36 million yen, the net income accrued from ordinary shares was 36 million yen
and the term average No. of ordinary sharesamounted to 1 million 988 thousand.
7. The legal effective tax rate of the term was
36.21%, and the rate of burden of corporate taxes after applying tax effect was △134.11%. The
difference is explained by breakdown as follows.
The amount of write-off carried from publicity expenses related to risk reserve was △487.71%,
the surplus of proﬁt from operating unearned
premium deposits was △406.71%, and carried
tax loss was 718.81%.
8. Each amount is shown by omitting the ﬁgures
not reaching the unit.

Japan Earthquake Reinsurance Co., Ltd. 200633

❸ Statement of cash ﬂow(Unit: Yen in million)
Fiscal Year

2004

2005

AmountAmountNet proﬁt before net proﬁt tax

96

15

Depreciation

5

5

17,550△16773

Increase in underwriting reserves

2,834

35,089

Increase in entrusted reserves

20,26822,907

Increase in reserves for employees’
retirement and severance beneﬁts

810

Increase in directors’ retirement
beneﬁt reserves−

7

Increase in accrued bonuses for
employees

1

Item(from April 1, 2004 (from April 1, 2005
to March 31, 2005) to March 31, 2006)

Ⅰ. Cash ﬂow from operating activities

Notes
1. Relation of cash and cash equivalents at theend of the year with the amounts mentioned in
the related subject of the balance sheet.
(Unit: Yen in million)(As of March
31, 2005)(As of March
31, 2006)

Cash & deposits

28,47038,026

Call loan

15,000−

Monetary receivables bought

6,297

1,799

Securities

734,046

771,3831

Deposits of a depository periodof 3 months or longer△27,330 △27,330△0

7Monetary receivables bought
other than cash equivalent△9,240△10,403207

711△6,280△8,705Gain or loss on disposal of property
and equipment2−

2. Funds (cash and cash equivalents) in the state-

Increase in other assets (other thaninvest and ﬁnancial activities related)△1,048△377

ment of cash ﬂow statement are composed of
cash on hand, savings that allow optional drawing and short-term investments such as time
deposits readily realizable and of a good risk,
a depository period of 3 months or shorter fromacquisition to maturity or refundment.

Increase in outstanding claims

Increase in reserve for price ﬂuctuation
Interests and dividend income
Gain or loss on investment in securities
Foreign exchange gain or loss

Increase in other liabilities (other thaninvest and ﬁnancial activities related)
OthersSubtotal

459

418

5,585

7,486

30,44930,402

Interests and dividends received

9,410

10,019

Income tax paid

△103

△10

39,756

40,410Net cash provided by operating activities△5,297△999△734,046 △771,383

Securities other than cash equivalent

17,140Cash and cash equivalents

11,496

Ⅱ. Cash ﬂow in investing activities
Net increase in deposit at bank

1,000

−

Acquisition cost of monetary receivablesbought△14,589△3,497

Proceeds from the sales or maturity ofmonetary receivables

20,287

7,796

Expenses for increase in monetary
trust

−

△10,130

2,600

4,000

Proceeds from sales of money trust△333,388△332,403

Proceeds from sales and redemptionof securities

285,744

288,186

Ⅱ ① Subtotal△38,345△46,049(Ⅰ＋Ⅱ ①)(1,410)(5,638)△7△5Purchase of securities

Acquisition of property and equipment❹ Distribution of net proﬁts(Unit: Yen in million)
Fiscal Year

Item

2003

2004

2005

Unappropriated retained
earnings for the year

512

522

559

Retained earnings
carried forward

512

522

559

❺ Dividend per stock and total assets per employee△38,352△46,054

Ⅲ. Cash ﬂow in ﬁnancing activities−−

Ⅳ. Effect of exchange rate changes oncash and cash equivalents−−

Dividend per stock

–

–

–

Ⅴ. Net change in cash and equivalent

1,403△5,643

Net income per stock

8.90

5.30

18.23

Ⅵ. Cash and cash equivalents at beginning of the year

15,73617,140

Dividend propensity

–

–

–

Ⅶ. Cash and cash equivalents at end of
the year

17,14011,496

Net assets per stock

794.04798.07807.42

Total assets per
employee

44,79944,68539,931

Net cash used in investing activities(Unit: Yen in million)
Division

Fiscal Year

2003

2004

2005

Note:
1. Net income per share comes from net income / term average No.
of stocks
2. The number of own shares is deducted from producing information
per stock
3. The total assets per employee come from the total assets at the endof the term / No. of employees at the end of the term.

34

Japan Earthquake Reinsurance Co., Ltd. 2006

2. Risk management credits
There is no mention about the following ﬁve items:(1) Currently in bankruptcy(2) Delinquent in payments(3) Delinquent in payments more than 3 months(4) Favorable loan revisions completed(5) Total of risk management credit

3. Present conditions of loans involving trust with contact for replacement of losses
No mention is necessary.

4. Credits obligations based on debtor classiﬁcation
There is no mention about the following four items:(1) Bankrupt or bankrupt for all Intents and purposes(2) On verge of bankruptcy(3) Financial status needs careful monitoring(4) Financial status normal

5. Conditions of solvency-margin ratio(Unit: Yen in million)
As ofthe endof ﬁscal
2003

As of
the endof ﬁscal
2004

As of
the endof ﬁscal
2005

Total of solvency-margin364,308359,908

375,606

Total of stockholders’ equity (otherthan estimated outﬂow to the outside, deferred assets and after-tax
unrealized gain in securities)

1,564

1,575

1,611

Year
Division

Reversal for price ﬂuctuation
Catastrophe reserves
Reversal for ordinary bad debts(A)7
378,731

−

−

−

2,971

2,520

△4,743

Unrealized gain loss included landholdings−−−

Funding instruments with a debt-likenature−−−Items deductible

−

−

−

Others−−−395,324

394,964

468,880

General insurance risk (RI)

−

−

−

Anticipated Rate of Return Risk
(R2)

−

−

−

7,543

7,190

7,676

Investment risk (R3)(C)

0355,813

Variance of estimate for othersecurities (excluded deductions for
Tax Consequences) unrealized gain /loss on securities available for sale

Total risk
R12+(R2+R3)2+R4+R5(B)

0359,772

Default risk (R4)

7,751

7,744

9,193

Catastrophe risk (R5)

380,030

380,030

452,010

Solvency-Margin ratio[(A)/{(B)x1/2}]x100

184.3%

182.2%

160.2%Note:
The above amounts and ﬁgures were produced in accordance with
Articles 86 and 87, Enforcement Rules of Insurance Business Act,and Bulletin No. 50 issued by the Ministry of Finance in 1996.

Solvency-margin ratio
Non-life insurance company deposit reserves in case that they pay insurance money for any insurance accident that happened or refund depository insurance at maturity. It is also necessary for them to maintain asatisfactory capability of payment or solvency even in case of unusual,
unforeseeable risk, including a huge disaster or sharp drop in price ofsuch assets as owned by them.
The rate of “Non-life insurance company’s capability of payment byowned assets and reserves (A in the above table) over any risk unforeseeable (B in the above table)” is indicated as solvency-margin ratio (Cin the above table) which is calculated according to the pertinent rules
including Insurance Business Law.
[Unforeseeable risk] (Total of risks): Sum of 1~5
1. Risk on underwriting insurance: risk which might be caused byan insurance accident rate higher
than normally predictable (otherthan risk involved in a huge disaster).
2. Anticipated ratio of Return Risk: risk which might be caused when
actual yields from operation arelower than original at the time of
calculating premiums of a depository insurance
3. Risk on assets : management risk which might be caused when thevalue of assets owned including securities changes
in an unforeseeable manner.
4. Risk on management: risk which might be caused on business management in an unforeseeable manner, otherthan 1~3 and 5.
5. Risk involved in a huge disaster: risk which might be caused due toa huge disaster (such as the Great
Kanto Earthquake) which is normally unforeseeable.
[Capability of payment by non-life insurance company owned capitaland reserves] (Total of solvency-margin)
The total of capital owned by a non-life insurance company, reserves(price ﬂuctuation, catastrophe reserve, securities and part of latent proﬁt
from land, and so on)

Japan Earthquake Reinsurance Co., Ltd. 2006

35

The solvency-margin ratio is one of the indicators used when the administrative authorities give a check to insurance companies for the soundness of management for supervising purposes. When the rate is 200%
or higher, the insurance company is deemed as satisfactory in terms of
payment capability of insurance money and so on.

ﬁgure to enable the administrative authorities to trigger an order for
improvement in spite of the above solvency-margin ratio, as provided
for in Section 4, Article 3, Order to specify the division stated in Section
2, Article 132, Insurance Business Law.
Note: The article is as follows.
[In the event that an insurance company has entered into a reinsurance
contract with the government as stated in Section 1, Article 3, Law concerning Earthquake Insurance (law No. 73, 1966), any order to be issued
according to the listed division in Section 1 of the Article applicable tothe insurance company shall be issued in accordance with the list of
inapplicable division.]◎JER has entered into a reinsurance contract with the government ofJapan for earthquake insurance in accordance with Law concerning
Earthquake Insurance. The law stipulates in addition that the government takes responsibility to make efforts to conduct good ofﬁce andlend funds for the payment of insurance money. Because this is a formof special business, JER’s solvency-margin ratio is not usable as a

6. Information on the market prices (acquisition cost or contract cost,market price and appraisal proﬁt and loss ) and others❶ Securities
1. Other securities with market price

2. Other securities sold at the term

At the end of ﬁscal 2004

(Unit: Yen in million)Type

Acquisition
cost

Registeredamountin B/S

Difference

Public & corporate bonds

534,272

539,340

5,068

Stocks−−−Foreign securities

115,555

120,974

5,419

Division

Securities withacquisition
cost higher
than registeredin B/S

Others−−−Subtotal

649,827

660,315

10,487

Public & corporate bonds

22,00521,984△21

Stocks−−−Foreign securities

49,05745,345△3,711Others

6,510

6,401

△109

Securities withacquisition
cost not higher
than registeredin B/S

Subtotal
Total

77,57373,731△3,842

727,401

734,046

6,644

At the end of ﬁscal 2005
Type

Acquisition
cost

Registeredamountin B/S

Difference

Public & corporate bonds

99,781

100,108327

Stocks−−−Foreign securities

134,319

142,393

8,073

Others

1,797

1,826

28

Division

Securities withacquisition
cost higher
than registeredin B/S

Subtotal

235,898

244,328

8,430

Public & corporate bonds

461,253454,773△6,480

Securities withacquisition
cost not higher
than registeredin B/S

Total

36(Unit: Yen in million)

Stocks−−−Foreign securities

60,48359,248△1,234

Others13,164

13,032△131

Subtotal

534,901

527,054△7,846

770,799

771,383583

Japan Earthquake Reinsurance Co., Ltd. 2006

(Unit: Yen in million)

Fiscal 2004
Type

Total

Fiscal 2005

Sales
price

Total ofproﬁt onsale

Total ofloss on
sale

Sales
price

Total ofproﬁt onsale

Total ofloss onsale

50,18241

231

51,14992

689

There is nothing to be mentioned about the following items:
1. Securities held for trading purposes
2. Securities to be held till maturity and with market price
3. Securities sold at the term which were to be held till maturity
4. Main contents of securities without market price and the amounts registered in B / S.

❷ Money trust
1. Money trust for investment(Unit: Yen in million)

As of end of ﬁscal 2004
Type

As of end of ﬁscal 2005

Amountregisteredin B/S

Appraisaldifferencecontained in
proﬁt/loss

Amountregisteredin B/S

Appraisaldifferencecontained in
proﬁt/loss−−

10,000−

Money trust

2. Money trust for maturity

Nothing to be mentioned.
3. Other money trusts with any other purpose than operation and maturity(Unit: Yen in million)

As of end of ﬁscal 2004

As of end of ﬁscal 2005

Type

Acquisition
cost

Amountregistered in
B/S

Difference

Acquisition
cost

Amountregistered in
B/S

Difference

Money trust

9,000

9,173

173

5,130

5,528

398

❸ Information on transactions of derivatives
1. On the conditions of transactions

With a view to hedging risks due to possible
changes in foreign exchange of assets in foreign
currency, JER is engaged in dealing foreign exchange forward contracts and currency option
transactions. In addition, we conduct over-thecounter securities option transactions so as toreduce interest ﬂuctuation risks in connection
with securities.
The derivative transactions we are engaged
in have market risks due to market ﬂuctuation.
Most of them are done, however, to hedge theassets in kind, and it never happens that loss
from the transaction in question is caused alone.
In some cases, we use option transactions as tosuch securities as scheduled to be purchased.
But risks are limited because we put a quantitative limit on such transactions.
Now that we transact with highly reliable ﬁnancial
institutions, we understand there is little credit
risk such as non-fulﬁllment of a contract.
Our derivative transactions are checked by therisk management division independent of thetransactions execution division, and the resultsof checks are regularly reported to the board of
executive directors.
2. On market prices of transactions

A contract amount in a derivative transaction is
nothing but a nominal contract amount or an assumed principal by calculation in such a transaction. The contract amount as such represents
no market risk or credit risk.

3. Derivative transaction contract amounts, market priceand appraisal proﬁt and loss(a) Currency related

Type(Unit: Yen in million)

As of end of ﬁscal 2004

As of end of ﬁscal 2005

Contract
amountContract
amount1 year or
longerones

Marketprice

Appraisal
proﬁtand lossMarketprice

1 year or
longerones

Appraisal
proﬁtand loss

Transactions
other than market
ones
Forward foreignexchange
contract
Currencyused
US dollar

58,274 20,078 58,768 △494 61,231 28,403 66,631 △5,400

Euro

69,390 31,730 71,698 △2,308 83,141 34,779 87,637 △4,496

Canadiandollar−−−3,246 △374

− 2,872 1,211

130,467 △2,802

Total

157,516 △10,272

Note: Calculating a market priceForeign exchange forward contract: Foreign exchange rates depend on
futures quotation.

(b) Securities related

Type(Unit: Yen in million)

As of end of ﬁscal 2004

As of end of ﬁscal 2005

Contract
amountMarketprice

Appraisal
proﬁt
and
loss

Contract
amount

16

△8

(−)

−

△8

1 year or
longerones

1 year or
longerones

Marketprice

Appraisal
proﬁt
and
loss

−

−

−

−

Transactions otherthan market ones
Over-the-countersecurities option
transaction
Currency
used

5,000

Call
(Optionpremium)
Total

(7)

−
−

−

Note:
Calculating a market price is based on an option price calculation model.

Nothing to be mentioned more about information onmarket price and others.

Japan Earthquake Reinsurance Co., Ltd. 2006

37

Glossary
For an understanding of earthquake insuranceA
Amount Insured
The amount of insurance contract entered into by the insurance company and policyholder, which is the limit of theamount insured payable by the insurance company when
an insurance accident occurs.

C
Ceding Insurer
The insurance company which cedes part or whole of its
original insurance contract to spread risks.

Current price amount
A current price of a newly constructed building or house
after deducting a depreciation according to the years ofservice.

D
Direct Insurer
An insurance company which directly enters into an insurance contract with a general contractor.

Direct insurance contract
An insurance contract entered into by an insurance company and a general contractor.

E
Excess of loss reinsurance
A type of reinsurance according to which an excess
damage is compensated to a certain extent in the eventthat the amount of damage by an accident exceeds a certain limit.

H
Half loss
Half loss in earthquake insurance is such that when the
purpose of insurance is a building and it is damaged byearthquake, tunami or eruption, the amount of damage
to the main structures (foundation, pillars, walls and roof)
reaches 20% or higher to 50% of the insurable value or the
ﬂoor area of part of the building which was burnt or ﬂooded
away reaches 20% or higher to 70% of the total area of thebuilding.
As to movables for living, half loss is such that the rateof damage reaches 30% or higher to 80% of the insurable
value.

Household insurance
Insurance bought by an individual to respond to any
possible risk at home, which is told from enterprise insurance. Household insurance includes ﬁre and earthquake
insurance on personal housing and movables for living andautomobile insurance on home-use automobiles.

38

Japan Earthquake Reinsurance Co., Ltd. 2006

I
Insurable value
The value of any insurance purpose, land or in earthquake insurance when damage is caused.

Insurance interest
An interest or object to be insured. Buildings and movables for living are such objects in earthquake insurance.

L
Law of large numbers
When we observe many instances, we will know that
there is law of large numbers. That is, as you throw a dice,you will ﬁnd that there is a higher probability of 1 / 6 thatthe spot 1 is thrown. Even if the individual probabilities are
not always constant, the probability comes near to a certain
value. The probability of insurance accidents which givesbasis to the calculation of premiums will be thus calculated
according to law of large numbers.

Loss Ratio
Ratio of claims paid against income premiums during acertain term. Normally, the ratio is produced by adding loss
adjustment expenses to the net claims paid and dividing
the sum by the net premiums written.

N
Net premiums written
Insurance money produced by adjusting original insurance premium with reinsurance premium (by adding thepremium of accepted reinsurance and deducting reinsurance premium), and by deducting depository premium andreturns.

O
Operating expenses
Expenses required to conduct insurance business, whichaccording to non-life insurance accounting, are composedof loss adjustment expenses, sales & general administrative expenses, agency commissions and brokerage fees.

Outstanding claim
Reserve deposited for future payment of insurancemoney for an insurance accident which happened and theinsurance company is held responsible for payment by insurance contract.

P
Partial loss
Partial loss in earthquake insurance is such that when
the purpose of insurance is a building, and it is damaged
by an earthquake, tunami or eruption and the amount ofdamage to the main structures (foundation, pillars, walls,
and roof) reaches 3% or higher to less than 20% of the insurable value.
As to movables for living, the amount of damage is 10%
or higher to less than 30% of the insurable value of any ofsuch properties.

Payment limit due to a single Earthquake
Law concerning Earthquake Insurance stipulates the total insurance money to be paid by the government and theinsurance companies per earthquake, tunami or eruption
disaster. The limit is determined according to the maximum
estimated damage of earthquake insurance in force at thispoint, bearing in mind that insurance money can be paid
against disasters caused by an earthquake equivalent to
the Great Kanto Earthquake.
In the event that the total of insurance money payable
exceeds the limit, the insurance money per insurance contract may be reduced according to the rate of limit to thetotal amount of insurance money payable to the total sum of
insurance money payable.

Price ﬂuctuation reserve
Reserve against loss from price ﬂuctuation of securities
owned by an insurance company.

R
Receiving Reinsurer
The insurance company (the reinsurer) which undertakes reinsurance from a ceding insurance company (thereinsured)

Reinsurance
The insurance company cedes part or whole of the responsibility to pay insurance money for its direct insurance
contract to another insurance company. This is because thecompany needs to collect equivalent as many risks as possible and to average risks according to the Large-number
Law, essential to the insurance management.

Reinsurance commission
Commissions to be paid at a ﬁxed rate of reinsurance
premiums by the reinsurer to the reinsured when the former
takes reinsurance.

Reinsurance money
Insurance money to be paid to the reinsured by the reinsurer. The act of receiving reinsurance money by the reinsured from the reinsurer is called recovery of reinsurancemoney.

Reinsurance premium
Premiums to be paid when the direct Insurer cedes its
direct contract to any other insurance company

Retrocession

T
Term insured
The term during which the insurance company is responsible for liability from insurance contract. When an insurance accident happens during the term, the insurancecompany takes responsibility.

Total maximum liability
In earthquake insurance, it is decided in advance thathow much insurance money each of JER, non-life insurancecompanies and the government per time or per year. The
limit amount for which each is responsible is called the total
maximum liability. The total of maximum limits is equal to thetotal payment limit due to a single earthquake.

Total loss
Total loss in earthquake loss is such that when the purpose of insurance is a building and it is damaged by earthquake, tunami or eruption, the amount of damage to themain structures (foundation, pillars, walls and roof) reaches
50% of or higher than the insurable value or the ﬂoor area ofpart of the building which was burnt or ﬂooded away reaches 70% of or higher than the total area of the building.
As to movables for living, total loss is such that the rateof damage reaches 80% of or higher than the insurable
value.

Treaty reinsurance
A reinsurance contract in which there is concluded inadvance a blanket agreement on reinsurance transaction
by and between the reinsured and the reinsurer, and thetarget direct insurance contract is automatically and comprehensively reinsured.

U
Underwriting reserve
Reserve deposited by insurance company against possible insurance liabilities.

W
Warning System
This is a declaration to be announced according toLarge Scale Earthquake Countermeasures Act (Law No.
73, 1978). When he is given information on a prevision ofearthquake by the Director of the Metrological Agency andthink it necessary to take a quick step for earthquake disaster prevention, the prime minister is to hold a cabinet
meeting and issue an warning system, announcing that theparties concerned should follow an warning system against
earthquake disasters: In the event that such a declaration
is issued, Law concerning Earthquake Insurance prevents
any insurance company from entering into a new earthquake insurance on buildings and movables for living located in an area which needs reinforced measures against
earthquake disasters and any policyholder to increase incontract amount . For any earthquake insurance contract
which becomes mature while the declaration is in force, thepolicyholder is able to renew the contract at the same orlower amount.

Retroceded insurance, partially or wholly, from the reinsurer to another insurance company to spread risks.

Risk reserve
Reserve deposited by JER for the payment of insurancemoney due to possible earthquake, tunami or eruption
caused damages.
Japan Earthquake Reinsurance Co., Ltd. 2006

39

Japan Earthquake Reinsurance Co., Limited 2006
Published in Dec. 2006

Reinsurance Operation Group, Reinsurance Division
Japan Earthquake Reinsurance Company, Limited
Address:Kobuna-cho Fuji Plaza, 8-1, Nihonbashi-kobuna-cho, Chuo-ku,
Tokyo Japan 103-0024
URL: http://www.nihonjishin.co.jp/
E-mail: gyoumuunei@nihonjishin.co.jp
Phone: 03-3664-6107
This booklet was prepared in accordance with Article 111, Insurance Business Law of Japan.

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