2016

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Contents

1

Message from the President

2

Special Feature
The Earthquake Insurance System and JER’s 50th Anniversary

14

Japan Earthquake Reinsurance Co., Ltd.

23

Topics24

Earthquake Insurance in Japan

31

Reinsurance of Earthquake Insurance

35

Response to the Great East Japan Earthquake

42

2016 Kumamoto Earthquakes

45

Statistics

48

Financial Section

65

Corporate Data

CORPORATE DATA (as of March 31, 2016)
Established:

May 30, 1966

Capital:1 billion yen

Total assets:

709.4 billion yen

Address:

Hulic Kobuna-cho Building,
8-1, Nihonbashi-kobuna-cho,
Chuo-ku, Tokyo Japan 103-0024

Phone:

03-3664-6078

URL:

http://www.nihonjishin.co.jp/

MESSAGE FROM
THE PRESIDENT

Chairman:

Yoshihiko Murase

President:

Makoto Sugimachi

My name is Makoto Sugimachi. I became President on June 30, 2016.
Let me begin by expressing my sincere gratitude to all our stakeholders for their continued support.
I would also like to extend my condolences for the victims of the 2016 Kumamoto Earthquakes and their families, andpray that the souls of the victims may rest in peace. I offer my heartfelt sympathy to all those in the disaster-hit areasand hope for a swift recovery.
Japan is one of the most active seismic and volcanic areas in the world. The country has been repeatedly hit byearthquakes, volcanic eruptions, and tsunamis.
Earthquake insurance was established in 1966 to stabilize the livelihoods of those affected by such natural disasters.
An earthquake reinsurance scheme consists of three players: the government, private non-life insurance companies
and Japan Earthquake Reinsurance Co., Ltd. (JER), with the public and private sectors working together to ensure thatearthquake insurance claims are paid promptly and reliably.
JER was founded with the launch of the earthquake insurance system as the only company in Japan permitted to
exclusively handle reinsurance for earthquake insurance covering dwelling risks and, on May 30 this year, we marked
the momentous occasion of the 50th anniversary of our founding. I would like to express my gratitude to all those
involved in the earthquake insurance system and our shareholders and other stakeholders for their understanding andsupport, without which this would not have been possible.
JER has always sought to make earthquake reinsurance payouts promptly and reliably and has consistently paid close
attention to managing and operating assets for future earthquake reinsurance payouts, focusing primarily on asset
liquidity and safety.
In fiscal 2015, we launched our fourth medium-term business plan “Strengthening Arrangements for Earthquake
Reinsurance Payouts”. This fiscal year is the second year under the plan.
Thus far, we have worked to develop a business continuity plan (BCP) and related systems to prepare for feared largescale earthquakes. We will now further strengthen the effectiveness of our business continuity management (BCM) in
anticipation of an inland earthquake in the Tokyo Metropolitan area, in a bid to ensure our readiness for earthquake
reinsurance payouts, which is our most important mission under the plan.
We will also enhance our asset management capabilities and increase our capacity to deal with financial market
fluctuations, amid the continuing tough management situation globally, including negative interest rates. At the sametime, we will advance integrated risk management.
Further, as management base-related measures, we will further strengthen the IT governance system and corporate
governance system. We will also seek to develop and hire human resources to support the enhancement of corporate
value and aim to create a rewarding and vibrant workplace.
Recognizing our social mission, we will continue striving to contribute to the development of the earthquake insurance
system and, understanding our role and responsibilities, we will step up efforts to execute our duties reliably, aiming tobecome a company that is completely trusted by our stakeholders.
We hope that we can rely on your continued support.

July 2016

Makoto Sugimachi
President
Japan Earthquake Reinsurance Co., Ltd.

Japan Earthquake Reinsurance Co., Ltd. Annual Report 2016

1

SPECIAL FEATURE

THE EARTHQUAKE INSURANCESYSTEM AND JER’S 50TH
ANNIVERSARY
Thanks to your help, JER celebrated the 50th anniversary of its founding in May this year. JER
started its operation with the launch of the earthquake insurance system and has since worked
alongside this system. In commemoration of our 50th anniversary, we published our corporate
history explaining the development and current status of the earthquake insurance system and
JER. In this report, we would like to trace the path back to events before and after the launchof the earthquake insurance system, by citing part of our corporate history.

DEVELOPMENTS IN THE NON-LIFE
INSURANCE INDUSTRY BEFORE THE
ESTABLISHMENT OF THE EARTHQUAKEINSURANCE SYSTEM
With Japan’s economy entering a period of high growth and its current account balance almost recovering, pressure from the West demanding that Japan commit to trade liberalization
increased. In 1964, Japan accepted the obligations of Article 8 of the International Monetary Fund (IMF) agreement by removing foreign exchange and import restrictions throughthe balance of payments. Japan also gained membership of the Organisation for Economic
Co-operation and Development (OECD) and was at the same time required to commit to theliberalization of capital.
Under such circumstances, in 1962, the Insurance Council held deliberations on improvement measures to strengthen the international competitiveness of Japan’s non-life insurancecompanies.
In November 1962, a subcommittee under the Insurance Council examined concrete measures
such as increasing the ability to cover losses, rationalizing premiums, extending coverage andestablishing new lines of insurance, entering overseas markets, improving sales agencies andenhancing the reinsurance mechanism. The issue of earthquake insurance and windstorm
and flood insurance was raised as one of the issues associated with extending coverage.
In response to this, at a meeting of the subcommittee held the following month, the Chairmanof the General Insurance Association of Japan, who attended the meeting as a member ofthe committee at the time, expressed the opinion that the non-life insurance industry should
examine positive and concrete measures.

OCCURRENCE OF THE NIIGATA
EARTHQUAKEThe Niigata Earthquake (M 7.5) occurred on June 16, 1964, around 1:00 pm, with a hypocenter off the shore of Niigata Prefecture. The earthquake affected nine prefectures, especially
Niigata, Akita and Yamagata prefectures, leaving 26 dead. As for damage to residences, 1,960
were completely destroyed, 6,640 were half destroyed, 15,297 were flooded.

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Japan Earthquake Reinsurance Co., Ltd. Annual Report 2016

SUPPLEMENTARY RESOLUTION AT THE
46TH ORDINARY SESSION OF THE DIET
Just when the Niigata Earthquake struck, the Finance Committee of the House of Representatives was in the process of deliberating a bill to partially amend the Insurance BusinessAct. Consequently, on June 19, three days after the earthquake, the following supplementary
resolution was passed, approving the proposed amendments to the act.

In a country with frequent earthquakes such as Japan, the inability to pay claims forfire damage caused by earthquakes is a problem for the insurance system. For now,
this House is giving guidance to ensure that non-life insurance companies take measures of some sort to deal with the recent earthquake disaster. This House should
also examine the establishment of an earthquake insurance system, taking the nuclear insurance that is already offered into consideration, and seek to further develop
and enhance the non-life insurance system in Japan, a country with frequent natural
disasters.

Following this supplementary resolution, Kakuei Tanaka, who was originally from Niigata Prefecture and was the Ministry of Finance at the time, consulted with the Insurance Council at
its 16th General Meeting on July 13, 1964, saying “It is a problem that, although Japan has
one of the highest levels of seismic activity in the world, the risk of earthquake is currently
barely covered under the existing non-life insurance system. It is now deemed necessary to
re-examine the system and promptly establish a system to contribute to the stabilization of
the livelihood of the nation at the time of sudden earthquake disasters. What is your view on
concrete measures?” In response, the Insurance Council immediately began examination anddeliberation of an earthquake insurance system led by its subcommittee.

LAUNCH OF THE EARTHQUAKEINSURANCE SYSTEMOn February 15, 1966, the Government passed cabinet resolutions approving the Bill Concerning Earthquake Insurance and the Bill on Special Account for Earthquake Reinsurance andthese were submitted to the 51st ordinary session of the Diet on February 17. The bills were
submitted to the Finance Committee of the House of Representatives on April 13 and to the
Finance Committee of the House of Councillors on April 19 and, following deliberation by bothcommittees, the bills were approved by the House of Representatives on April 28 and by theHouse of Councillors on May 11 and then promulgated and enacted on May 18. Government
ordinances and ministerial ordinances related to these bills were promulgated and enacted
on May 31 and June 1 respectively, and the structure for the earthquake reinsurance system
was thus put in place.
Japan Earthquake Reinsurance Co., Ltd. Annual Report 20163

Meanwhile, non-life insurance companies filed applications for approval to the Minister ofFinance with respect to basic documentation such as the statement of business procedures,
policy conditions, statement of calculation procedures for premium rates and policy reserves,and statement of procedures for use of property, pursuant to Article 1 of the Insurance Business Act (at the time). Property and Casualty Insurance Rating Organization of Japan (nowthe General Insurance Rating Organization of Japan) convened an extraordinary general meeting to determine earthquake premium rates and similarly filed an application for approval to
the Ministry of Finance. These applications were approved on June 1, 1966, and earthquake
insurance began to be sold with effect from the same date.
On May 30, 1966, Japan Earthquake Reinsurance Co., Ltd. was established with investment
by 20 domestic non-life insurance companies as an organization which arranges reinsurancewith the government. On June 1, 1966 JER received a license from the Ministry of Financeand began its operation.

OCCURRENCE OF EARTHQUAKEDISASTERS AND REVISION OF THE
EARTHQUAKE INSURANCE SYSTEM
Given the specificity of earthquake risk and the absence of any contingency reserves at thelaunch of the system, it was necessary to avoid excessive losses as a result of the first earthquake and the earthquake insurance system was fairly restrictive, limiting the maximum coveravailable to the low level of 900,000 yen for building and 600,000 yen for contents and limiting the degree of indemnified loss to total loss.
As explained in the Insurance Council report of 1965 which stated “This long-pending insurance still probably entails many problems that need to be resolved but we believe it is imperative to seek to launch this system based on a proposal that is realistically achievable rather
than expecting this essentially problematic insurance to be perfect from the outset”, it wasconsidered important to establish the system and make a start.
In addition, the Insurance Council report at the time stated “We hope that Government andnon-life insurance companies will continue to enhance the system with even greater vigor in
the future to meet social demands” and the supplementary Diet resolution passed at the timeof the Law Concerning Earthquake Reinsurance (Law No. 73 of May 18, 1966) was passed
also called for efforts to improve the operation of the earthquake insurance system, taking
changes after enactment of the law into consideration.
Against this background, the earthquake insurance system has been improved many times in
the past. These improvements were prompted by a range of factors, including changes in social and economic conditions such as rising prices or an increase in home ownership, as wellas advances in government research into earthquakes and improvement in the earthquake
resistance of buildings. However, it was feedback from earthquake victims that strongly called
for improvements in the earthquake insurance system.
If we count detailed revisions to the system, the system has been revised ten or so times since4Japan Earthquake Reinsurance Co., Ltd. Annual Report 2016

its establishment. However, in the fifty years since the system’s establishment, there havebeen three major in-depth revisions to coverage option such as loss categories and maximum
coverage. The earthquakes that were the so-called turning points for each of the revisions areshown below.
1987
Earthquake of the East Coast of Chiba
Prefecture M6.7
1989
Earthquake swarm near Izu peninsula

1964
Niigata Earthquake M7.5

2011 Tohoku-Pacific Ocean Earthquake
M9.0 (The Great East Japan Earthquake)

1966

1980

1991

1996

June – Establishment

July – Revision

April – Revision

January – Revision

1978
Miyagi Earthquake M7.4

1995
Southern Hyogo Prefecture Earthquake
M7.3 (The Great Hanshin-Awaji Earthquake Disaster)Then, following the 2011 Tohoku-Pacific Ocean Earthquake (magnitude 9.0) (The Great East
Japan Earthquake) on March 11, 2011, the examination of a complete overhaul of the system, led by the Ministry of Finance’s Earthquake Insurance System Project Team (chaired byMotohiro Sato, professor at Hitotsubashi University) began.

JULY 1980 REVISION
On June 12, 1978, the Miyagi Prefecture Earthquake struck. The earthquake had a magnitudeof 7.4 and an epicentre off the coast of Miyagi Prefecture. Under the earthquake insurance
system at the time, claims were paid only for total losses of buildings and the many buildingsthat were half destroyed or partly destroyed as a result of this earthquake were not coveredby insurance. Consequently, although there was extensive damage, only 190 policies werecertified as totally lost and paid claims amounted to no more than around 260 million yen.
Meanwhile, under the Building Endowment Insurance of Japan Agricultural Cooperatives,
which similarly indemnified losses caused by the earthquake, partial loss was also indemnified and around 2.8 billion yen was paid out. Earthquake insurance thus became the subjectof public criticism and there were calls for improvement from all quarters including policyholders. This problem was also taken up in the Diet and there was strong pressure for enhancement and early improvement of the earthquake insurance system. As a result, in June
1979, a report entitled Revision of the Earthquake Insurance System was produced and it was
decided to make sweeping revisions to earthquake insurance in line with this report.

APRIL 1991 REVISIONOn December 17, 1987, a 6.7 magnitude earthquake struck offshore Chiba Prefecture, causing damage not only to cities, towns and villages on the Pacific coast of Chiba Prefecture but
to virtually the entire prefecture.

Japan Earthquake Reinsurance Co., Ltd. Annual Report 2016

5

The non-life insurance industry decided to introduce the “partial loss” category to expand
coverage and make earthquake insurance more widespread and, as a result, the method of
paying claims according to the current three categories “total loss”, “half loss” and “partial
loss” were established.

JANUARY 1996 REVISION
At 5:46 am on January 17, 1995, the 1995 Southern Hyogo Prefecture Earthquake struck. The
epicenter of this 7.3 magnitude earthquake was off the coast nearby Awaji Island.
The percentage of households enrolled in earthquake insurance directly before the Great
Hanshin-Awaji Earthquake Disaster had fallen to 7.0% (at the end of March 1994), the lowest
level since the establishment of the system, and the percentage of households enrolled in
Hyogo Prefecture was 2.9%, much lower than the national average. Consequently, the majority of disaster victims were unable to receive indemnification through earthquake insurance
and the system was unable to fulfill its purpose set out in Article 1 of the Law Concerning
Earthquake Reinsurance which was to promote the dissemination of earthquake insurance
thereby helping to contribute to the stability of the lives of disaster victims of an earthquake,
etc. Ultimately, claims paid through earthquake insurance amounted to no more than 65,427
claims or 78,346,970,000 yen.
Against this background, there were mounting calls to improve coverage and increase the appeal of earthquake insurance, in a bid to make earthquake insurance more widespread as ameans of self-help for earthquake disasters, and revisions such as increasing maximum coverage and reviewing premium rates were made.

EXAMINATION STATUS OF SYSTEMREVIEW FOLLOWING THE GREAT EAST
JAPAN EARTHQUAKEAt 14.46 on March 11, 2011, the most powerful earthquake recorded in Japan since records
began struck off the Sanriku Coast. The magnitude 9.0 earthquake caused violent tremors
and a large tsunami, resulting in unprecedented damage, mainly in the Tohoku and Kanto
regions. The Japan Meteorological Agency named this earthquake the 2011 Tohoku-Pacific
Ocean Earthquake, and the Government generally referred to the earthquake and the disaster
caused by the subsequent tsunami and aftershocks as the Great East Japan earthquake.
At the time of this unprecedented disaster, a huge number of insurance claims (780,000)
amounting to an enormous sum of money (over 1.2 trillion yen) were promptly paid to policyholders affected by the disaster through earthquake insurance, helping to rebuild and stabilize
the lives of the victims. However, at the same time, the contingency reserves of private-sector insurance companies were largely depleted following the payment of such an enormous
amount of claims, reducing their ability to pay future claims. There was also concern over the

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Japan Earthquake Reinsurance Co., Ltd. Annual Report 2016

occurrence of a large earthquake in the Tokyo Metropolitan area or the Nankai Trough in the
future, prompting calls for an increase in the robustness of the earthquake insurance system.
In the wake of the earthquake, a number of opinions regarding the commercial nature ofearthquake insurance were also put forward by policyholders affected by the disaster.
Under these conditions, the Basic Policy on Special Account Reform approved by Cabinet
resolution on January 24, 2012 stated with respect to the earthquake insurance system that
“In light of the recent earthquake, the Government will urgently revise the total amount ofapproved claims and the amount of public and private sector insurance liabilities and also
examine the commercial nature of earthquake insurance” and in April 2012, the Earthquake
Insurance System Project Team (hereinafter referred to as the “Earthquake Insurance SystemPT”; chaired by Motohiro Sato, professor at Hitotsubashi University) was established in the
Ministry of Finance.
The Earthquake Insurance System PT consisted of experts and academics from related fields,
and the General Insurance Association of Japan, Foreign Nonlife Insurance Association ofJapan, General Insurance Rating Organization of Japan, Financial Services Agency and JER
also participated as observers.
Where necessary, the views of outside experts involved in crisis management and relevant
ministries, agencies and organizations were sought, and energetic discussions were held, taking the actual situation of the people and areas affected by the Great East Japan Earthquake
into consideration and also listening to the opinions of policyholder and consumers.
From April 2012, discussions were held 12 times, and in November 2012, the Earthquake
Insurance System PT’s recommendations were published in a report. The report summarizedrecommendations relating to “general statement,” “resilience” “commercial nature” and “premium rates” divided into “urgent issues,” “issues to be addressed promptly” and “issues forfurther discussion.” In addition, from November 2013, approximately one year after publication of the report, the Earthquake Insurance System PT met to assess the status of initiatives
taken to address issues set out in the report.

PUBLICATION OF FIFTY YEARS OF JAPAN
EARTHQUAKE REINSURANCE CO., LTD.
In commemoration of our 50th anniversary, we
published Fifty Years of Japan Earthquake Reinsurance Co., Ltd. The book describes the development
and current status of the earthquake insurance
system and JER, and also records the collaborative initiatives undertaken between the public andprivate sectors to deal with the Great East Japan
Earthquake and the Great Hanshin-Awaji Earthquake. We hope it will be of reference to future
generations.

Japan Earthquake Reinsurance Co., Ltd. Annual Report 2016

7

CHRONOLOGICAL TABLE OF
EARTHQUAKE INSURANCE AND JAPAN
EARTHQUAKE INSURANCE CO., LTD.
Year

Month

Earthquake insurance/JER developments

1964

Jun. Supplementary resolution to resolution approving
bill for partial amendment of the Insurance
Business Act
When passing a resolution on a bill amending
the Insurance Business Act in the 46th Ordinary
Session of the Diet, the House of Representatives
Finance Committee, prompted by the Niigata
Earthquake, adopts a supplementary resolution
urging examination of the earthquake insurance
system.
Jul. Minister of Finance Kakuei Tanaka consults the
Insurance Council over concrete measures for theestablishment of earthquake insurance.

1965

Apr. Insurance Council finalizes Report on the
Establishment of Earthquake Insurance

1966

Feb. Board of Directors of General Insurance
Association of Japan passes resolution to establish
Japan Earthquake Reinsurance Co., Ltd. (JER).
May Property and Casualty Insurance Rating
Organization of Japan convenes extraordinary
general meeting to determine earthquakepremium rates.
May Promulgation and enactment of Law Concerning
Earthquake Insurance
Promulgation and enactment of Earthquake
Insurance Special Account Law
Establishment of JER
May JER is established in Chiyoda Ward, Tokyo withcapital of 1 billion yen through investment by 20
non-life insurance companies.
Launch of only company in Japan permitted to
exclusively handle reinsurance for earthquake
insurance
May Enforcement Ordinance of Law Concerning
Jun. Earthquake Insurance promulgated and enacted
Earthquake insurance system launched (Japanese
non-life insurance companies start selling
earthquake insurance.)

1968

1972

May Revision of earthquake insurance system (revisionof total amount of approved claims, etc.)
300 billion yen –› 400 billion yen

8•Launch of dwellinghouse fire insurance
Apr. Revision of earthquake insurance system(introduction of optional addition, revision of total
amount of approved claims, etc.)
400 billion yen –› 800 billion yen
Jul. Start of underwriting of long-term (2-35 years)
earthquake insurance policies

Japan Earthquake Reinsurance Co., Ltd. Annual Report 2016

Major earthquakes
or volcanic eruptions•Niigata Earthquake(M7.5)•Launch of longterm comprehensive
insurance•Launch of groupinsurance

1973
1975

Major events•Ebino Earthquake(M6.1)(First timeclaims are paidsince launch of
the earthquake
insurance system)

Year

Month

Earthquake insurance/JER developments

1978

Apr. Revision of earthquake insurance system (revisionof total amount of approved claims, etc.)¥800 billion –› ¥1.2 trillion
Nov. Insurance Council decides that non-life insurance
subcommittee will deliberate the overhaul ofearthquake insurance, which was found to belacking at the time of the Miyagi Earthquake.

1979

Jun. Insurance Council issues report, “Revision of the
Earthquake Insurance System”

1980

Jul. Revision of earthquake insurance system(introduction of half-destroyed category, etc.)
Jul. Discontinuation of underwriting of long-term (2-35
years) earthquake insurance policies

1981

1982

Major events•Enactment of
Law on Special
Measures Concerning
Countermeasures
for Large-Scale
Earthquakes

Major earthquakes
or volcanic eruptions•1978 Miyagi
Earthquake (M7.4)•Revision of
Enforcement
Regulations of the
Building Standards
Law (introductionof new earthquake
resistant design
standards)
Apr. Revision of earthquake insurance system (revisionof total amount of approved claims, etc.)¥1.2 trillion –› ¥1.5 trillion•Establishment ofDisaster Preparedness
Week•1983 Japan Sea
Earthquake (M7.7)•1983 Miyakejima
Volcanic Eruption

1988– Introduction of our first computer system
Jul. Start of underwriting of long-term (2-5 years)
earthquake insurance

1991

Apr. Revision of earthquake insurance system (revision •Japan Meteorologicalof premium rates, introduction of partly destroyed Agency (JMA) starts
using seismometers
category)(world first)•1991 Mt. Unzen
Fugendake Volcanic
Eruption

1983

1993

•1993 Southwest-Off
Hokkaido
Earthquake (M7.8)

1994

May UN World Conference on Disaster Risk Reduction
in Yokohama (Chairman of General Insurance
Association of Japan gave lecture entitled
Role of Non-life Insurance for Natural Disaster
Management)
Jun. Revision of earthquake insurance system (revisionof total amount of approved claims)
1.5 trillion yen –› 1.8 trillion yen•1994 East
Off Hokkaido
Earthquake (M8.2)•1994 Far Off
Sanriku Earthquake(M7.6)

1995

Jan. Introduction of earthquake insurance midway
addition
Oct. Revision of earthquake insurance system (revisionof total amount of approved claims)
1.8 trillion yen –› 3.1 trillion yen•1995 Southern•Enactment of Law
Hyogo Prefectureon Special Measuresconcerning Earthquake Earthquake (M7.3)(Great Hanshin-Awaji
Disaster Management
Earthquake)•Establishment ofDisaster Management
and Volunteer Day•Establishment of the
Headquarters For
Earthquake Research
Promotion

Japan Earthquake Reinsurance Co., Ltd. Annual Report 2016

9

Year

Month

Earthquake insurance/JER developments

Jan. Revision of earthquake insurance system (revisionof premium rates, etc.)
Jul. Relocation of JER to Chuo Ward, Tokyo

1997

Apr. Revision of earthquake insurance system (revisionof total amount of approved claims)
3.1 trillion yen –› 3.7 trillion yen

1998•Establishment ofOct. Promulgation and enactment of Ministerial
Ordinance Concerning Payment by Rough Estimate Financial Supervisory
Agencyof Reinsurance Claims Relating to Earthquake•Revision andInsurance
promulgation of
Insurance Business Act•Enactment of Law
on Support for
Reconstructing
Livelihoods of Disaster
Victims

1999

Apr. Revision of earthquake insurance system (revisionof total amount of approved claims)
3.7 trillion yen –› 4.1 trillion yen•Establishment of
Financial Services
Agency•Enactment of Housing
Quality Assurance Law•2000 Usuzan
Volcanic Eruption•2000 Western
Tottori Earthquake(M7.3)•2001 Geiyo
Eartquake (M6.7)

2001

Sep. Establishment of JER website
Oct. Revision of earthquake insurance system (revisionof premium rates, introduction of discountsystem)•Okurasho (Finance
Ministry) was renamed
Zaimusho (Ministry of
Finance).
•Establishment of
Cabinet Office•Start of insurance
sales by banks, etc.
•Liberalization of nonlife insurance agency
system•First round ofreorganization andconsolidation of
non-life insurancecompanies begins

2002

Apr. Revision of earthquake insurance system (revisionof total amount of approved claims)
4.1 trillion yen –› 4.5 trillion yen•Establishment ofGeneral Insurance
Rating Organization ofJapan•Enactment of
Law on Special
Measures concerning
Advancement ofCountermeasuresagainst Disasters ofTonankai and Nankai
Earthquakes

Japan Earthquake Reinsurance Co., Ltd. Annual Report 2016

Major earthquakes
or volcanic eruptions•Enactment of New
Insurance Business Act•Conclusion of U.S.Japan Insurance
Agreements•Revision of earthquake
intensity scale by JMA(0-10)

1996

2000

10

Major events

Year

Month

Earthquake insurance/JER developments

Major events

Major earthquakes
or volcanic eruptions

2003

Apr. Start of examination of issues relating to theunderwriting of earthquake insurance as a resultof “Tokai Earthquake Cautionary Information”
and “Convocation of Earthquake Assessment
Committee” issued by JMA•Start of provision of
volcano information
with JMA volcanic
activity level•Off Miyagi
Prefecture
Earthquake (M7.1)•Northern Miyagi
Prefecture
Earthquake (M6.4)•2003 Off-Tokachi
Earthquake (M8.0)

2004

Sep. Start of discussions for review of Special Accountfor Earthquake Reinsurance•Enactment of
Law on Special
Measures concerning
Advancement ofCountermeasuresagainst Earthquake
Disaster in Relation
to Subduction Zone
Earthquake Around
Japan Trench andChishima Trench•JMA starts applying
new information
related to Tokai
Earthquake.

•2004 Mid Niigata
Prefecture
Earthquake (M6.8)

2005•10 years after theJan. Public forum (earthquake insurance radio forum)
Great Hanshin-Awaji
held at UN World Conference on Disaster Risk
Earthquake
Reduction in Kobe
Apr. Revision of earthquake insurance system (revision •Business improvementof total amount of approved claims, establishment orders are issued to
non-life insuranceof standard premium rates using long-term
companies found tocoefficients)
have made omissions
4.5 trillion yen –› 5.0 trillion yen
in the payment ofclaims.

•West Off Fukuoka
Earthquake (M7.0)•West Off Fukuoka
Earthquake (M5.8)

2006

Mar. Number of earthquake insurance policies tops 10
million (10.24 million)

2007

Jan. Implementation of earthquake insurance premium
deduction system
Oct. Revision of earthquake insurance system (revisionof premium rates, etc.)•Administrative action,
including businesssuspension orders,taken against non-life
insurance companies
found to have
improperly paid or not
paid claims related tothird-party insurance
products.
•Ban on insurance sales
by banks lifted acrossthe-board.
•JMA starts generalprovision of early
earthquake warnings.
•JMA starts groundmotion warnings andvolcanic phenomenon
warnings, andintroduces volcanic
eruption warninglevels.

•2007 Noto Peninsula
Earthquake (M6.9)•2007 Niigata
Prefecture Chuetsu
Offshore Earthquake(6.8)

Japan Earthquake Reinsurance Co., Ltd. Annual Report 2016

11

Year

12

Month

Earthquake insurance/JER developments

Major events

Major earthquakes
or volcanic eruptions

2008

Apr. Revision of earthquake insurance system (revisionof total amount of approved claims)
5 trillion yen –› 5.5 trillion yen– Development of our system platform and complete
revamp of the system•2008 Iwate-Miyagi
Inland Earthquake(M7.2)•Earthquake in the
Northern Coast of
Iwate Prefecture(M6.8)

2009

Apr. Revision of earthquake insurance system (revisionof amounts of liability borne by public and private
sectors)•Suruga Bay
Earthquake (M6.5)

2010

Jan. Revision of earthquake insurance system (revision •Enactment ofof building structure categories for premium rates) Insurance Law•Second round ofOct. Special Account for Earthquake Reinsurance isreorganization andincluded in the budget screening of the Cabinet
consolidation of
Office’s Government Revitalization Unit
non-life insurancecompanies begins.
•Establishment ofGeneral insuranceCounseling and ADR
Center in the General
Insurance Associationof Japan

2011

Jan. Working Group for Summary of Issues Concerning
Special Account for Earthquake Reinsurance isestablished in the Ministry of Finance, and JER
takes parts as an observer.
Apr. The Government, the non-life insurance industry
and JER decide to implement payment by roughestimate of earthquake reinsurance claims.
May Revision of earthquake insurance system (publicprivate reinsurance scheme is revised throughenactment of FY2011 1st revised budget.)Nov. Working Group for Summary of Issues Concerning
Special Account for Earthquake Reinsurance
reports Summary of Issues Concerning Special
Account for Earthquake Reinsurance to theGovernment Revitalization Unit.

2012

Jan. Basic Policy on Special Account Reform (approvedby cabinet on January 24, 2012) concludes that
the Earthquake Reinsurance Special account willcontinue to exist.
Feb. GIAJ announces that total amount of approved
claims for the Great East Japan Earthquake
exceeded 1.2 trillion yen.
Mar. Earthquake insurance addition rate tops 50%(53.7%).
Mar. Number of earthquake insurance contracts tops
14 million (14.08 million).
Mar. JER installs its server at state-of-the-art data
center as BCP measures.

Japan Earthquake Reinsurance Co., Ltd. Annual Report 2016

•Enactment of Law on
Promotion of Tsunami
Countermeasures•Sanriku Offshore
Earthquake (M7.3)•2011 Tohoku-Pacific
Ocean Earthquake(M9.0) (TheGreat east Japan
Earthquake)•Northern Nagano
Prefecture
Earthquake (M6.7)•Eastern Shizuoka
Prefecture
Earthquake (M6.4)•Earthquake off
Miyagi Prefecture(M7.2)•Fukushima
Hamadoˉri
Earthquake (M7.0)•Central Nagano
Prefecture
Earthquake (M5.4)•Eruption at
Kirishima Volcano's
Shinmoedake Crater•Sanriku Offshore
Earthquake (M7.3)

Year

Month

Earthquake insurance/JER developments

Major events

Major earthquakes
or volcanic eruptions

Apr. Revision of earthquake insurance system (revisionof total amount of approved claims) 5.5 trillion
yen–›6.2 trillion yen
Apr. Earthquake Insurance System Project Teamestablished in Ministry of Finance, and JER
participates as observer.
Nov. Ministry of Finance publishes Earthquake
Insurance System Project Team Report.
2013

Mar. Complete revamp of our system in readiness forTokyo Inland Earthquake•Installation of backup system at Okinawa Data
Center•Development of remote access to enable
continuation of business even if head office isaffected by disaster
May Revision of earthquake insurance system (revisionof percentage of costs borne by public and private
sectors)
Nov. Ministry of Finance’s Earthquake Insurance
System Project Team holds follow-up meeting and
JER participates as observer.

•90 years since
the Great Kanto
earthquake•Enactment of Law
on Countermeasures
Against Tokyo Inland
Earthquake•Awaji Island
Earthquake (M6.3)

2014

Apr. Establishment of JER temporary office in Saitama
City as BCP measure.
Apr. Revision of earthquake insurance system (revisionof total amount of approved claims, etc.)
6.2 trillion yen –› 7 trillion yen
Jul. Revision of earthquake insurance system (revisionof premium rates, expansion of discount system)•50 years since Niigata
Earthquake•Iyonada Earthquake(M6.2)•Mount Ontake
Volcanic Eruption•Northern Nagano
Prefecture
Earthquake (M6.7)

2015

Mar. Public forum (earthquake insurance-related event)
held at UN World Conference on Disaster Risk
Reduction in Sendai
Jun. Publication of summary of conclusions of followup meeting Ministry of Finance’s Earthquake
Insurance System Project Team•20 years since theGreat Hanshin-Awaji
Earthquake•Eruption
occurred on
Kuchinoerabujima
Island•Earthquake West Off
Ogasawara Islands(M8.1)•Earthquake in
the South of Oita
Prefecture (M5.7)

2016

Apr. Revision of earthquake insurance system (revisionof total amount of approved claims, etc.)
7 trillion yen –› 11.3 trillion yen
May 50th anniversary of the establishment of JER
Jun. 50th anniversary of the launch of the earthquake
insurance system•5 years since the Great
East Japan Earthquake•2016 Kumamoto
Earthquakes (M6.5,
M7.3)* Details of major earthquake and volcanic eruptions are produced by JER based on data published on the JMA website.

Japan Earthquake Reinsurance Co., Ltd. Annual Report 201613

JAPAN EARTHQUAKEREINSURANCE CO., LTD.

PROFILEIn accordance with the introduction of the Law concerning Earthquake Insurance (Law No. 73,
May 18, 1966) and following the launch of sales of earthquake insurance on dwelling risks to
be written in conjunction with dwelling and shop-owners comprehensive insurance policies,
JER was established with share capital of 1 billion yen by 20 domestic Japanese non-life insurance companies on May 30, 1966. The Company was licensed for the earthquake insurance
business and started its operation on June 1, 1966.
Earthquake insurance on dwelling risks depends on this reinsurance system (which is a safety
net, as it were), in which the government, non-life insurance companies and JER participate toensure that insurance claims can be paid to policyholders without fail.
The insurance premiums paid by policyholders are separated from non-life insurance companies, and are managed and operated by the government and JER.
JER is thus at the center of a reinsurance system, and undertakes reinsurance procedures withthe government and non-life insurance companies, while managing and operating the insurance premiums paid by policyholders as the sole earthquake reinsurance company in Japan.

FINANCIAL HIGHLIGHTSNet premiums written

Assumed net premiums written(Yen in millions)(Yen in millions)

250,000

130,000
238,645

240,000
230,000
220,000

121,986
120,000

217,661

100,000

210,000

90,0000
Fiscal Year108,994

110,000

0
2014

2015

Fiscal Year

2014

2015

Net unrealized gains on available-for-salesecurities of earthquake insurance
and net unrealized gains on available-for-sale securities

Net loss ratio(Yen in millions)

25.0

5,000

20.0

4,000

15.0
10.0

10.1%

5.0

14

5.3%

50
3,717

3,390

40

3,000

30

2,000

20

1,000

4

3

0

0.0

0

Japan Earthquake Reinsurance Co., Ltd. Annual Report 2016
Fiscal Year

2014

2015

10

Fiscal Year
2014
2015
Net unrealized gains on available-for-sale securitiesof earthquake insurance
Net unrealized gains on available-for-sale securities

Net premiums written

Assumed net premiums written(Yen in millions)(Yen in millions)

250,000

130,000
238,645

240,000
230,000

121,986
120,000
108,994

110,000
217,661

220,000

100,000

Assumed net premiums written

210,000

Net premiums written

90,000(Yen in millions)(Yen in millions)0
250,000
Fiscal Year0130,000
Fiscal Year

2014

2015
238,645

240,000

108,994
Net unrealized
gains on available-for-sale
110,000
securities of earthquake insurance
and net unrealized gains on available-for-sale securities
100,000

230,000
217,661Net loss ratio

220,000

2015
121,9862014

120,000(Yen in millions)

210,000
25.0

90,000
5,000

0
20.0
Fiscal Year
15.0

2015

Net loss ratio

5.0

5.3%

0.0
25.0
Fiscal Year

3,717

4,000 0
2014
10.1%

10.0

50

2014

2015

20.0

3,390
Fiscal Year
3,000

2014

40
2015
30

2,000 Net unrealized gains on available-for-sale20
securities of earthquake insurance
and net unrealized gains on available-for-sale securities
1,000
10
4
3
(Yen in millions)
0
0
5,000
50
Fiscal Year
2014
2015
securities 40
3,717
4,000 Net unrealized gains on available-for-sale
3,390
of earthquake
insurance
3,000 Net unrealized gains on available-for-sale securities 30

15.0

10.1%
Total assets and net assets
Breakdown of total assets
2,000
Non-consolidated solvency-margin ratio

10.0

20

(Yen in millions)(Yen in millions)

5.0
800,000

5.3%
709,408

Items

1,000
4,000

Others4
FY2014
19,176FY20153

100
0.0 amount(A) Total
421.3 billion yen
469.3 billion yen0
640,137of non-consolidated solvency-margin
Fiscal Year
2014
2015
3,000 Fiscal Year237.7
600,000(B) Total
amount2014
of non-consolidated2015
risk
billion yen
239.3
billion yen
NetDeposits
unrealized gains on available-for-sale securities
Non-consolidated solvency-margin ratioof 189,215
earthquake
insurance
354.5%
392.1%(A) / {1/2x(B)} x 100
loans
2,000 CallNet
400,000
unrealized
gains on available-for-sale securities
1,543
1,542
Securities
4,668
Breakdown of securities
401,751
Total assets and net assets
Breakdown of total assets
Monetary
1,000
200,000
Government
receivablesbought(Yen
in millions)(Yen in millions)0800,000
Fiscal Year2014
640,137
Total
assets600,000

709,4082015
Net assets

0
4,000

3,000

94,596

Foreignsecurities

109,523

Others19,176bonds

93,829Corporatebonds

154,871

Municipal
bonds

43,526

Deposits

189,215400,000

1,543

1,542

2,000 Call loans
4,668
1,000

200,000

0

0

Fiscal Year

2014

2015

Total assets

Net assets

Monetaryreceivablesbought

94,596

Securities

401,751

Breakdown of securities
Foreignsecurities

109,523

Government
bonds

93,829Corporatebonds

154,871

Municipal
bonds

43,526

Japan Earthquake Reinsurance Co., Ltd. Annual Report 2016

15

ORGANIZATION(As of April 1, 2016)
General meeting of shareholders

Board of auditors
Board of directors

Board of managing directors

Compliance committee
Risk management committee
Task force against earthquake disaster
Information System Committee

Reinsurance
administration dept.

Planning andcontroller dept.

Audit office

No. of shares owned(1,000 shares)

Percentage of shares
owned (%)

Tokio Marine & Nichido Fire Insurance Co., Ltd.

537

26.9

Sompo Japan Nipponkoa Insurance Inc.

529

26.5

Mitsui Sumitomo Insurance Co., Ltd.

338

16.9

Aioi Nissay Dowa Insurance Co., Ltd.

255

12.8

The Fuji Fire and Marine Insurance Co., Ltd.

123

6.2

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

The Asahi Fire and Marine Insurance Co., Ltd.

8

0.4

SECOM General Insurance Co., Ltd.

7

0.4

Financial dept.

Shareholders(As of March 31, 2016)
Shareholder

16Japan Earthquake Reinsurance Co., Ltd. Annual Report 2016

BOARD MEMBERS (FULL-TIME)(As of July 1, 2016)
Post

Name

Chairman(representative director)

Yoshihiko Murase

President(representative director)

Makoto Sugimachi

Managing director(representative director)

Shinji Okazaki

Managing director(representative director)

Shoichiroh Takemoto

Corporate auditor

Katsuhiko Murata

RESPONSES TO MAJOR EARTHQUAKES
We consider prompt earthquake reinsurance payouts to be our most important mission.
Based on this view, we have established a standing Task Force Against Earthquake Disasterthat deals exclusively with earthquake disaster responses. Consisting of our full-time directors
and division managers, the Task Force oversees system development in preparation for major
earthquakes and carries out periodic earthquake response drills.
We also manage and operate the assets we have accumulated for the purpose of earthquake
reinsurance payouts by paying the utmost attention to their liquidity (cashability) and safety
so that reinsurance payouts are made without delay in the event of a major earthquake.

Task Force Against Earthquake Disaster and its Activities
Our Task Force Against Earthquake Disaster is working to make business continuity management more effective in preparation for an inland earthquake in the Tokyo metropolitan area,with the view that this activity is of the utmost importance.
Immediately after the Great East Japan Earthquake, the Task Force reformed system infrastructure and relocated important systems to data centers that are more resistant to earthquakes to ensure business continuation in the event of an office disaster. In addition, theTask Force substantially reduced the risk of simultaneous disaster damage by establishing a
backup system in Okinawa. The Task Force also established a system that enables directors
and employees to continue undertaking business from home, even in cases where traveling tothe office becomes impossible, by building a system that can be accessed from external locations. The Task Force confirms the effectiveness of this system through regular work-at-home
exercises.
In fiscal 2014, the Task Force Against Earthquake Disaster resolved issues that had surfaced
through work-at-home exercises that were undertaken in the previous fiscal year and carriedout drills to develop a more effective business continuity system division by division. Moreover,
the Task Force implemented additional drills, in which all JER employees participated, in a bid
Japan Earthquake Reinsurance Co., Ltd. Annual Report 201617

to secure the personnel necessary for processing the tasks that will arise in large volumes inthe event of a major earthquake.
Drills by division (drills at home and using a temporary office)From May 2015 to November 2015, the Task Force Against Earthquake Disaster conducted
drills by division, based on the assumption that employees were prevented from going to workat the Kobunacho office, to seek to strengthen BCM. The Task Force implemented drills forestablishing an earthquake response headquarters assuming that the president was unreachable in the administrative and planning divisions, and in the operating divisions, assuming a
scenario in which managerial staff were unable to work, ran drills for reinsurance claim payments based on rough estimates. In addition, the Task Force asked members of the financial
divisions to conduct securities purchasing operations in a temporary office.
Drills for all employees (drills for processing loss assessment expenses)
The number of claims for loss assessment expenses increases significantly with the occurrence of a major earthquake, making it impossible for the division in charge to handle them.
To address this problem, in September 2015 the Task Force Against Earthquake Disasterconducted drills for checking and inputting the loss assessment expenses, in which all JER
employees participated, to secure processing personnel. The Task Force is working during
normal conditions to secure personnel that can undertake prompt payments to prepare JER
for an inland earthquake in the Tokyo metropolitan area and an earthquake in the Nankai
Trough, both of which are expected to produce claims outnumbering those made at the timeof the Great East Japan Earthquake.

Management Based on Highly Liquid Assets
Should a disaster such as an inland earthquake in the Tokyo metropolitan area strike, wewould have to pay a tremendous amount of reinsurance claims in a short period of time. For
this reason, we always manage assets safely commensurate with our responsibilities, centeredon highly rated bonds such as highly liquid government bonds. We also hold mainly short- andmedium-term bonds to reduce the risk of price fluctuations at the time of their liquidation.

Preparations for Earthquakes
We have installed a terminal for receiving early earthquake warnings from the Japan
Meteorological Agency at our head office. We use this terminal to ensure the safety of visitors,
directors and employees. We are proceeding with a program for making business facilities,
equipment and the like at our head office earthquake-proof as well. In accordance with thepart of the Tokyo metropolitan ordinance related to measures for dealing with commuters who
are unable to get home, we store sufficient drinking water, food, daily necessities and otheritems to enable employees to stay in the office if an earthquake occurs during working hours.

18

Japan Earthquake Reinsurance Co., Ltd. Annual Report 2016

System Infrastructure in Anticipation of an
Inland Earthquake in the Tokyo Metropolitan
Area
To ensure business continuity in the case of the feared inland earthquake in the Tokyo metropolitan area, in March 2013 we renovated all of our important systems and moved them
onto a virtual platform at a cutting-edge data center in Tokyo, which has Japan’s highest-level
earthquake-resistance capacity and energy utilization efficiency. To make doubly sure, we haveestablished a backup system at our data center in Okinawa, which is unlikely to be affectedby an earthquake at the same time as Tokyo, and have built a system for data synchronization
between Tokyo and Okinawa using a communications line.
Moreover, we have made our terminals thin clients and concentrated data on the virtual platform to reduce the risk of data loss and information leakage. Combined with a remote accesssystem whereby users outside the company can access the company’s system via the Internet,
we have created an environment that enables employees to use the same systems as usual ifthey have access to the Internet, even if the transportation network is disrupted by an inland
earthquake in the Tokyo metropolitan area and they are unable to come to the office.
We will continue to focus on strengthening our business continuity management in anticipation of an inland earthquake in the Tokyo metropolitan area.

Remote Access(Home)

Remote Access（Out of the office）

Temporary Office(Saitama City)

Head Office (Tokyo)

Thin Client

ActiveInternet (KDDI)

StandbyWAN

ActiveFirewall
Active/Standby

Internet (USEN)

Standby

ActiveStandby

L3Switch

Virtual Platform

L3Switch

Virtual Platform (Main)(an environment in anticipation of disasters)

Data Synchronization

Surveillance

Surveillance

Okinawa Data CenterTokyo Data Center

Japan Earthquake Reinsurance Co., Ltd. Annual Report 201619

CORPORATE GOVERNANCE
We believe that establishing corporate governance is an important management issue, andare endeavoring to manage our business in a sound and appropriate manner by establishinga transparent management system with verification functions.
Appointments
and dismissals

Board ofdirectors

Board ofmanaging directors

Audit

Submission/Report
Appointments
General meeting and dismissalsof shareholders

Audit

Compliance committee

Board ofauditors

Cooperation
Appointments
and dismissals Accounting
auditors

Submission/Report
Executive division

Risk management
committee

In-house audit

Task force against
earthquake disaster

In-house audit division

Information System
Committee

In-house audit

Accounting audit

Committee-based Operation
We have established a Compliance Committee, a Risk Management Committee and an Information System Committee under the direct control of the Board of Managing Directors in an effort
to ensure sound and transparent business operations by strengthening the supervisory function
with the construction of systems for compliance, risk management and system management.
In addition, in preparation for the risk of a major earthquake, we have establishing the Task
Force Against Earthquake Disaster to facilitate the payment of reinsurance claims and maintain the funding plan for payment, enabling us to take prompt action in response to large-scale
earthquake disasters.
The annual operation policies and operating conditions of each committee are periodicallysubmitted or reported to the Board of Managing Directors and the Board of Directors.

Auditing and Inspection Systems
Outside Auditing and Inspection
We are subject to inspection by the Financial Services Agency under the Insurance BusinessAct and inspection by the Ministry of Finance under the Act on Earthquake Insurance. We
also undergo accounting audits by PricewaterhouseCoopers Aarata LLC in accordance with
the Companies Act.
In-house auditing
Corporate auditors conduct audits and the Audit Division of JER, which is independent from otherdivisions, conducts in-house audits. The corporate auditors and the Audit Division cooperate witheach other, drawing on the results of each other’s audits, in a bid to ensure effective audits.
The purpose of an in-house audit is to develop and establish an internal control system. This isdone by conducting an audit to examine and evaluate various in-house systems and the executionof various internal activities fairly and objectively from the standpoint of lawfulness and rationality.

20

Japan Earthquake Reinsurance Co., Ltd. Annual Report 2016

It also requires the provision of the necessary advice and recommendations based on theexamination and evaluation, contributing to the sound development of the company and building
credibility in the community.
The Audit Division conducts regular audits of the internal control conditions of all divisions aswell as audits on priority themes based on the “In-house Audit Policy and Plan” for each fiscal
year adopted by resolution of the Board of Directors. Following audits, the audit results, including
recommendations for corrections and improvements, are reported to the Board of Managing
Directors and the Board of Directors, and are communicated to the audited divisions.

Risk management system
We have developed a structure in which risk management is appropriately carried out toensure sound and safe management. This organizational framework and important risk management issues are defined in our Risk Management Rules and Integrated Risk Management
Rules. Specific ways of managing various risks—namely, asset management risks, liquidity
risks, and operational risks—are defined in our management rules for each type of risk andour annual risk management policies. We have also established a company-wide Risk Management Committee, and are managing risks in an integrated manner by fully understanding ourrisk management situation.
ASSET MANAGEMENT RISKS

Risks relating to asset management are classified into “market risks” and “credit risks”
for risk management, and the management standards are stipulated in the “Standards forManagement of Investment Risks” for each fiscal year.
Market risksMarket risks include interest-rate risk, foreign exchange risk, and price volatility risk. These
are the risks of losses that investors may sustain with fluctuations in the value of assets or
debt, or in income, due to changes in a number of risk factors in the market. We manage
overall market risks both quantitatively and qualitatively. We measure the value at risk
(VaR) of interest rates and currency exchange as the amount of risk, while also monitoring
the unrealized gain/loss and price changes (sensitivity). We also apply an upper limitof retention or a loss-cut rule if necessary. In addition, we have separate divisions for
executing transactions and for handling administrative processes, respectively, thereby
enabling the supervisory and checking functions to work effectively.
Credit risks
Credit risks are the risks of a reduction in value or the disappearance of assets, which
results when the credit standing of the borrower has weakened, for example.
When purchasing securities, we limit their issuers to those with high credibility withreference to the credit rating made by rating agencies. We always check securities held
to determine credibility, and conduct individual controls to avoid a concentration on a
specific group of companies or type of business. We also measure the credit VaR based on
the default rate, etc. for managing credit risks.

Japan Earthquake Reinsurance Co., Ltd. Annual Report 2016

21

Stress test
The VaR that statistically measures the amount of risks has a limit in circumstances whenfinancial market is fluctuating greatly. The stress test is used to complement monitoring insuch circumstances. The stress test examines the amount of potential losses by assuming
a situation in which risk factors, such as interest rates and exchange rates, fluctuateconsiderably.
LIQUIDITY RISKS

Liquidity risks are the risks of losses that may be caused by failure to ensure the liquidityof assets against debt or by being forced to execute transactions at a disadvantageous pricedue to market turmoil, etc. These risks are important in fulfilling our social mission. We own
sufficient liquid assets by keeping in mind the possibly of having to dispose of all assets in theevent of a major earthquake. We also strive to accurately assess cash flows, thereby managing
funds appropriately.
OPERATIONAL RISKS

Operational risks are classified into “Administrative risks,” “IT system risks,” and “otheroperational risks,” and we manage these risks as appropriate given the characteristics ofeach.
Administrative risks
Administrative risks are the risks of losses that may be caused by the failure of officers,
employees, or any other members of an organization to do accurate paperwork, orby accidents, fraud, or any other improper acts. We constantly examine the rules andregulations of authority and paperwork procedures and manuals and strive to improve ourtraining programs and educational system, to ensure exact and perfect paperwork. We also
regularly check the rules and regulations through in-house auditing for conformity withrelated laws and regulations.
IT system risks
IT system risks are risks of losses that may be caused by IT system problems such as
computer system failures or glitches or by unauthorized use of a computer.
We strive to protect our information assets appropriately under our Security Policy
and Safety Measure Standards, which we established for preventing leaks of internal
information, etc., and as safety measures for our information system. In addition, we
have clarified our measures for handling crises by developing the Information System
Contingency Plan for disasters and other emergency situations.
Other operational risks
As other operational risks, we are aware of such risks as “human resource risks” (the risksof losses that may be caused by outflows or losses of human resources) and “reputationalrisks.” We strive to manage these risks with each responsible division playing the leadingrole.
* Underwriting risks are excluded from risks to be managed, because earthquake insurance on dwellingrisks has been managed under the legal system.

22

Japan Earthquake Reinsurance Co., Ltd. Annual Report 2016

TOPICS

Dispatch of Employees to Educational Institutions
We dispatch our employees to educational institutions and similar facilities to enhance understanding of earthquake insurance systems. In fiscal 2015, JER employees delivered lectures
at a seminar of the Faculty of Economics of Tohoku University in September. They explained
to students taking a course on insurance theory an outline of the earthquake insurance system, how the reinsurance system works, and the roles we played in the aftermath of the Great
East Japan Earthquake.

Lecture as Part of Training Organized by the Thai
Insurance Authorities
JER gave a presentation outlining Japan’s earthquake insurance system and explained earthquake risk and household earthquake insurance system to a group of trainees (totaling 65)
from the Thai insurance authorities (OIC) who were visiting Japan. Participants showed a highlevel of interest, asking questions about how earthquake insurance premium rates work andJER’s roles.

Japan Earthquake Reinsurance Co., Ltd. Annual Report 201623

EARTHQUAKE INSURANCEIN JAPANESTABLISHING THE EARTHQUAKEINSURANCE SYSTEM
Japan is well known for its frequent earthquakes. Traditionally, the thinking has been that itis difficult to provide insurance coverage for damage caused by earthquakes. One reason forthis is that nobody can be sure when an earthquake will strike. Another reason is that there isa risk that a major earthquake could cause tremendous damage. Earthquake insurance wasfor many years the subject of a great deal of research and discussion, to little avail. Despite
this, there was considerable public demand for a system of earthquake insurance on dwellingrisks* to enable victims of an earthquake who have lost their homes or property to rebuild theirlife. Responding to this demand, the non-life insurance business continued to study ways tobuild such a system.
The Niigata Earthquake of June 1964 prompted efforts to establish the system. The government and the non-life insurance industry conducted a detailed examination of the earthquake insurance system, ultimately leading to the Law concerning Earthquake Insurance.
The system for earthquake insurance on dwelling risks was built based on this law and Japan
Earthquake Reinsurance Co., Ltd. (JER) was established. We play a key role in taking on full
responsibility with the reinsurance of earthquake insurance contracts entered into by non-life
insurance companies.

MECHANISM OF THE EARTHQUAKEINSURANCE SYSTEM
Earthquake insurance is arranged as an optional rider to fire insurance which covers buildings
for residential use and/or personal property. Earthquake insurance cannot be purchased on its
own. If you conclude a fire insurance contract without earthquake insurance, you are required
to seal the earthquake insurance check column of the fire insurance contract application form.
If you have entered into a fire insurance contract without earthquake insurance, you will beable to purchase earthquake insurance while your fire insurance contract is valid. In someareas, however, if an announcement warning of an earthquake has been made, you may not
be able to purchase earthquake insurance.

24

Japan Earthquake Reinsurance Co., Ltd. Annual Report 2016

Insurance Coverage
Loss of or damage to buildings for residential use and/or personal property through fire,
destruction, burial or flooding caused directly or indirectly by any earthquake or volcanic eruption, or resulting tsunami (hereinafter referred to as an earthquake, etc.).
Fire insurance* does not cover
1. any losses caused by fire (including the spread thereof, and expanded loss) resulting
from an earthquake, etc., and2. any fire that has spread because of an earthquake, etc. Earthquake insurance is needed
to compensate for these kinds of losses.

Insurable interests
Buildings for residential use and/or personal property
None of the following is insurable:
A building used as a plant or office, and not used for dwelling purposes, precious metals,
gems or antiques valued at 300,000 yen or more per piece, currency, securities (checks, sharecertificates, gift certificates), certificates of deposit, revenue stamps, postal stamps, automobiles and certain other items.

Term insured
Short-term, one year and long-term (two to five years)

Amount insured
The policyholder is required to set the amount insured under earthquake insurance within arange of 30-50% of the amount of insurance provided by his/her fire insurance. However, theamount insured is limited to a maximum of 50 million yen for a building** and 10 million yen
for personal property.

*
Fire insurance		
Ordinary fire insurance, long-term comprehensive insurance, deposit life comprehensive insurance, dwelling fire
insurance, householders’ comprehensive insurance, storekeepers’ comprehensive insurance and certain other types of
insurance.
**	
The amount insured of a condominium building such as apartment building is limited to 50 million yen, totaling
exclusive areas and common areas.

Japan Earthquake Reinsurance Co., Ltd. Annual Report 2016

25

Payment of insurance claims
Insurance claims are paid according to the policyholder’s earthquake insurance to cover total,
half or partial loss of the policyholder’s residential building and/or personal property.
Insurable objects

Residential buildings,
personal property

Degree of loss

Amount of insurance claim paid

Total loss

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

Half loss

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

Partial loss

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

Authorization criteria of losses
Total loss, half loss or partial loss applies to any of the following cases:
Residential building

Personal property

Amount of loss of major
structural parts

Area of floor burnt down or
washed away (partial loss
applies when the residentialbuilding is flooded above
floor level)

Degree of loss of or damage
to the personal property

Total loss

50% or more of the current
price of the residentialbuilding

70% or more of the total
floor area of the residentialbuilding

80% or more of the current
price of the personal
property

Half loss

From 20% to less than 50%of the current price of theresidential building

From 20% to less than 70%of the total floor area of theresidential building

From 30% to less than 80%of the current price of thepersonal property

From 3% to less than 20%of the current price of theresidential building

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

From 10% to less than 30%of the current price of thepersonal property

Degree of loss

Partial loss

Cases when no insurance claim is payable:• Loss or damage due to willful acts or gross negligence or violation of law• Loss or theft of the objects of the insurance• Loss or damage due to war or insurrection• Loss or damage occurring ten days or more after the earthquake• Loss or damage caused only to gates, walls, fences, and other parts that are not major
structural parts.

*
Current price		The current price is such that the amount of depreciation according to the service year is deducted from the price ofa new building.

26

Japan Earthquake Reinsurance Co., Ltd. Annual Report 2016

Limit of total amount of insurance claims to be paid
Limit of total amount of insurance claims to be paid* is limited to 11,300 billion yen as
revised in April 1, 2016 per earthquake, etc.. (On the same day, the liability limits of JER,
non-life insurance companies and the government were revised. Please refer to page 33 forthe details.) In the event the total amount of insurance claims payable exceeds the limit, lawallows insurance claims per contract to be reduced.

Premium rate
The premium rate for earthquake insurance is calculated by the General Insurance Rating
Organization of Japan** on the basis of the Law concerning General Insurance Rating Organizations. The basic rate of insurance premiums consists of a risk premium rate applicableto or appropriate for the future payment of insurance claims and a loading premium rate applicable to or appropriate for non-life insurance company expenses and agency commissions.

Premium rate = Risk premium rate + Loading rate
The Headquarters for Earthquake Research Promotion***, a government organization, published the Probabilistic Seismic Hazard Maps. The risk premium rate is calculated based on
the latest revised damage projection method to cover all earthquakes used in the preparationof the maps that are assumed to have the potential to cause damage in the future.
The premium rate actually applied is calculated by multiplying the basic rate of the insurance
premium that is set according to the structure of the residential building and the residentialbuilding to accommodate personal property that are subject to insurance and the building
location, by a discount rate set according to the earthquake-resistance capability (for which
certain confirmation documents are required).

*
Limit of total amount of insurance claims to be paid		The Law concerning Earthquake Insurance stipulates that the limit to the total insurance claims payable by thegovernment and private insurance company per earthquake, etc.. For details, see page 33 Insurance liabilities held by
JER, non-life insurance companies and the government.
**
General Insurance Rating Organization of Japan		An organization established in accordance with the Law concerning General Insurance Rating Organizations, whichaims to provide a fair basis premium rate applicable to non-life insurance.
***
The Headquarters for Earthquake Research Promotion
		Following on the lessons learned from the Great Hanshin-Awaji Earthquake Disaster, the Special Measure Law on
Earthquake Disaster Prevention was enacted to develop a system to facilitate research and study on earthquakes, andbased on this Law, the Headquarters for Earthquake Research Promotion was founded in July 1995. In March 2005,
the Headquarters for Earthquake Research Promotion published two kinds of maps as the National Seismic Hazard
Maps for Japan: the Probabilistic Seismic Hazard Map and the Scenario Earthquake Shaking Map.
		The National Seismic Hazard Maps are subject to an annual review.

Japan Earthquake Reinsurance Co., Ltd. Annual Report 201627

Basic rate (applicable to buildings and personal property)
Examples of premiums
Per one year insurance period and 10 million yen of amount insured (Unit: yen)
Locationclassification

1

2

3

28

PrefectureNonwoodenWoodenWooden(withtransitional
measures)

Iwate-ken, Akita-ken, Yamagata-ken, Tochigi-ken, Gunma-ken, Toyamaken, Ishikawa-ken, Fukui-ken, Nagano-ken, Shiga-ken, Tottori-ken,
Shimane-ken, Okayama-ken, Hiroshima-ken, Yamaguchi-ken, Fukuokaken, Saga-ken, Nagasaki-ken, Kumamoto-ken, Kagoshima-ken

6,500

10,6008,400

Fukushima-ken

6,500

13,0008,400

Hokkai-do, Aomori-ken, Miyagi-ken, Niigata-ken, Yamanashi-ken, Gifuken, Hyogo-ken, Nara-ken, Kyoto-fu, Kagawa-ken, Oita-ken, Miyazaki-ken,
Okinawa-ken

8,400

16,50010,900Ibaraki-ken, Ehime-ken

11,800Saitama-ken, Osaka-fu

13,600Tokushima-ken, Kochi-ken

11,80027,90015,300Chiba-ken, Tokyo-to, Kanagawa-ken, Shizuoka-ken, Aichi-ken, Mie-ken,
Wakayama-ken

20,20032,60026,200Japan Earthquake Reinsurance Co., Ltd. Annual Report 2016

24,40015,30017,600Discount rate
Either discount rate will apply to the foregoing basic premiums rate when the building andpersonal property come under any of the following:• Discounts cannot be claimed more than once.
(a) Seismic isolated building* discountWhen the building is a seismic isolated building constructed in accordance with related
laws and accommodated personal property
Discount rate50%(b) Earthquake-resistance class** discount rate
When the building corresponds to the earthquake-resistance class as provided for by law
and accommodated personal property
Earthquake-resistance class
Discount rate

1

2

3

10%

30%

50%

(c) Earthquake-resistance diagnosis discountWhen the building was assessed as having an earthquake-resistance capacity*** equivalent
to that stipulated by related laws as a result of an earthquake-resistance diagnosis or anearthquake-resistance refurbishment, and accommodated personal property
Discount rate

10%(d) Building age discount rate
When the building was constructed during or after June 1981 and accommodated personal property
Discount rate

10%*
Seismic isolated building		A seismic isolated building is a building that is assessed to be a seismic isolated building in accordance with the related
indicators in the Japanese Housing Performance Designation Standards under the Housing Quality Guarantee Law.
**
Earthquake-resistance class		The earthquake-resistance class of a residential building is an indicator of earthquake resistance as stipulated in theJapanese Housing Performance Designation Standards based on the Housing Quality Guarantee Law. It is also used toevaluate a building for earthquake resistance as provided for in the assessment guidelines for earthquake-resistancediagnosis based on the earthquake-resistance class (as to the body of the building) established by the Ministry ofLand, Infrastructure and Transport. A description of the classes is as follows.

		 Earthquake-Resistance Class 3
		A class suggesting that the building will not topple or collapse against a force that is 1.5 times stronger than theforce of an earthquake (as provided for in Paragraph 3, Article 88, Enforcement Order of the Construction StandardAct) that occurs very rarely (once every some hundred years)
		 Earthquake-Resistance Class 2
		Class suggesting that the building will not topple or collapse against a force 1.25 times stronger than the force of anearthquake that occurs very rarely		 Earthquake-Resistance Class 1
		Class suggesting that the building will not topple or collapse against that force of earthquake that occurs very rarely***
Earthquake-resistance capacity		Earthquake-resistance capacity is a seismic capacity that conforms to the current earthquake-resistance standards set
out in the Building Standards Law.

Japan Earthquake Reinsurance Co., Ltd. Annual Report 201629

Premium rate of a long-term contract
Premium rate of a long-term contract (a two-to-five year contract with special conditions forpremiums) is calculated as follows:
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; personal property
10 million yen
Period of insurance: One year
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
Personal property: 10 million yen x 50% = 5 million yen
2. Confirming the premium rate applicable: Hyogo-ken, wooden→ 1.65 (premium per 1,000 yen insurance)
3. Confirming the discount rate applicable: Building constructed in and after June 1981
→ 10%
Earthquake insurance premiumon residential building

Earthquake insurance premiumon personal property

Earthquake
amount insured=

10,000Earthquake insurance
premium rate

x

1.65

x

(100%

(1,000 yen)

5,000

–

10%)

=

14,900 (yen)=7,450 (yen)

1.49

Earthquake
amount insured=

Discount rate

Earthquake insurance
premium rate

x

1.65

(1,000 yen)x

Discount rate

(100%

–

10%)

1.49

*
Proportion Insured		The insured earthquake amount as a percentage of the insured fire amount. The insured earthquake amountshould be 30-50% of the insured fire amount.

Income tax credit system for earthquake insurance
In the tax system revision in fiscal 2006, the old income tax credit for non-life insurance wasrevised, and an income tax credit for earthquake insurance was established to support selfhelp efforts of the public in preparation for earthquake damages. As the revision enables
deductions of up to 50,000 yen and 25,000 yen from the gross income, etc. for the purposesof income tax and the local inhabitant tax, respectively, the purchase of an earthquake insurance policy became easier.
30

Japan Earthquake Reinsurance Co., Ltd. Annual Report 2016

REINSURANCE OF
EARTHQUAKE INSURANCEMECHANISM OF REINSURANCE
In the event that a major earthquake happens, it can result in large payouts of insurance claim
by insurance companies. Because there is a certain limit, however, to the ability of these companies to make payments, the government shares insurance responsibility with them throughreinsurance.
JER reinsures the earthquake insurance contracts underwritten by non-life insurance companies to take on full liability, which we homogenize before we pass on the risk proportionally tothe non-life insurance companies and the government by retrocession according to the limit
indemnity. We take up the remaining indemnity.

MECHANISM OF PAYMENT OF
INSURANCE CLAIMSThe policyholder claims insurance money to the non-life insurance company when the policyholder suffers a certain loss or damage as a result of an earthquake, etc., and the company
will pay insurance claim to the policyholder.
The non-insurance company which paid an insurance claim to the policyholder will claim thefull amount from JER through reinsurance. JER will pay the reinsurance claim in full to thenon-life insurance company.
This means that the amount of reinsurance claim paid by JER is the same as the amount of
the insurance claim paid to the policyholder by the non-life insurance company.
When a major earthquake occurs, a non-life insurance company must make a large amountof money ready so that it can pay a large number of insurance claims. To avoid problems inpaying insurance claims, the government has set forth a ministerial ordinance that covers
the payment of reinsurance claims pertaining to earthquake insurance based on a roughestimate, and promptly pays reinsurance claims based on a rough estimate (makes aprovisional payment) through JER.

Japan Earthquake Reinsurance Co., Ltd. Annual Report 2016

31

FLOWCHART OF REINSURANCETo enable the government, non-life insurance companies and JER to share insurance liabilities
in an equitable manner, it is necessary to first collect and standardize evenly the risks non-life
insurance companies underwrote, and then distribute them to the relevant organizations. It
is also necessary to receive insurance premiums (reinsurance and retrocession premiums) as
compensation for taking on insurance liabilities. To collect, evenly standardize and distributerisks and to give and take insurance premiums (reinsurance and retrocession premiums),
reinsurance transactions are conducted, centered on JER.
JER first reinsures earthquake insurance contracts that were underwritten by non-life insurance companies, and then divides the risks evenly. After excluding the risks held by JER, JER
implements retrocession against the government and non-life insurance companies in accordance with the burden of risks taken on by each organization.

Policyholders
Direct insurance

Application of insurance contracts (Insurance premiums)

Non-life insurance companies
Treaty A
Reinsurance(Collection andequalization of risks)

100% reinsurance(Reinsurance premiums)

Treaty A:
Earthquake Reinsurance Treaty (A)Non-life insurance companies <=> JER
Non-life insurance companies are required to conclude areinsurance contract with JER on all liabilities of earthquake
insurance contracts underwritten by them in accordance with the
Act on Earthquake Insurance, and JER is obliged to take up thefull liability for this earthquake insurance without fail. In otherwords, non-life insurance companies are not allowed to selectcertain earthquake insurance contracts underwritten by themand enter into reinsurance contract. Meanwhile, JER cannot turndown an application for a reinsurance contract to cover the
insurance liabilities taken up by non-life insurance companies inaccordance with the Act on Earthquake Insurance.

JER (Japan Earthquake Reinsurance Co., Limited)
Retrocession(Distribution of risks)Treaty B

Retrocession

Retrocession(Retrocession
premiums)(Retrocession
premiums)

Government(Earthquake reinsurance special account)

32

Retaining of risks

Treaty C

JER
Non-life insurance companies

Treaty C:
Excess of loss reinsurance
JER <=> Government

Treaty B:
Earthquake Reinsurance Treaty (B)JER <=> Non-life insurance companies

JER has entered into an excess of loss
reinsurance with the government inaccordance with the Act on Earthquake
Insurance. JER retrocedes to the government
part of the insurance liability taken up under
Treaty A. The government’s indemnity limit ofreinsurance is determined with the approvalof the Diet every year.

It has been determined that a certain part ofliabilities underwritten under Treaty A is to be
retroceded to non-life insurance companies.
The proportion of underwriting by each non-life
insurance company is determined mainly inaccordance with the outstanding balance ofrisks reserves for earthquake insurance.

Japan Earthquake Reinsurance Co., Ltd. Annual Report 2016

INSURANCE LIABILITIES HELD BY JER,
NON-LIFE INSURANCE COMPANIES AND
THE GOVERNMENT
The limit of the total amount of insurance claims to be paid per earthquake, etc. is set inadvance. This system is designed so that, even in the event of an earthquake as devastating
as the Great Kanto Earthquake, insurance claims can be paid without problems. The current
limit of total amount of insurance claims to be paid is set at 11.3 trillion yen. This is thereinsurance scheme that shows how JER, non-life insurance companies and the government
share and limit insurance liabilities within the limit of the total amount of insurance claims
to be paid per earthquake.
Reinsurance scheme (applicable to earthquake, etc. thattake place after April 1, 2016)
Small

Amount of damage per earthquake, etc.

Large

(Payable insurance claims)
Up to115.3 billion yen

Up to186.3 billion yen

161.3 billion
115.3
billion1 layer
st

JER

Up to
437.9 billion yen

Up to approx.
1,844.7 billion yen

11.3 trillion yen

50%
10,828.9 billion

35.5
billion125.8
billion2nd50%
4.3 billion

28.9 billion

Approx. 0.3%

3 layer

layer

Non-life insurance companies

Approx. 99.7%

rd

The government

Liability limit
270.0 billion yen
39.8 billion yen
10,990.2 billion yen

JER
Non-life insurance companies
The government

JER pays insurance claims up to 115.3 billion yen (1st layer) per earthquake, etc. The
government and others (non-life insurance companies and JER) share equally insurance
claims for the portion exceeding 115.3 billion yen, up to 437.9 billion yen (2nd layer). The
government pays a majority of insurance claims (approximately 99.7%) for the portion
exceeding 437.9 billion yen (3rd layer). In portions of insurance claims to be paid by non-life
insurance companies in the 2nd and 3rd layers, the first part represents insurance claims tobe paid by non-insurance companies and the second part by JER.
In this way, in cases where insurance claims per earthquake, etc. exceed a certain amount,excess liabilities are shared by the relevant organizations. This is called the excess of the loss
reinsurance.

Japan Earthquake Reinsurance Co., Ltd. Annual Report 201633

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 associatedwith a single earthquake are to be paid. JER, non-life insurance companies and the government will pay each in the following amount:(Unit: billion yen)

Portion up to
115.3 billion yen

Portion over
115.3 billion yen,
and up to437.9 billion yen

115.3

161.3

About 4.7

About 281.3

—

161.3

About 1,557.4

About 1,718.7

115.3

322.6

1,562.1

2,000.0

Claims paid

A person of burden

Non-life insurancecompanies
The government
Total

Portion over
437.9 billion yen,
and up to
2,000 billion yen

Total

The balance of risk reserves at JER and non-life insurancecompanies and the government liability reserves at the endof fiscal 201 5
JER and non-life insurance companies save the risk premium of insurance premiums paid bypolicyholders as earthquake insurance risk reserves for the possible payment of earthquake
insurance claims while the government saves government reserves in the earthquake insurance special account under law. Additionally, it is necessary for all investment profits fromthese accumulated liability reserves to also be accumulated as liability reserves. In the eventthat an earthquake occurs and causes losses or damages, each of JER, non-life insurancecompanies and the government pays an insurance claim according to each liability as stipulated in the reinsurance scheme by withdrawing from reserves.
JER
Non-life insurance companies
The government

464.5 billion yen
78.1 billion yen
1,325.0 billion yen

Total

1,866.7 billion yen

Note 1:	The risk reserves by the non-life insurance companies include the amount equivalent to deferred tax assets due
to tax effect accounting.
2: Government reserves will be finalized when the settlement for fiscal 2015 is approved by the Diet.

34

Japan Earthquake Reinsurance Co., Ltd. Annual Report 2016

RESPONSE TO
THE GREAT EAST JAPAN
EARTHQUAKEAt 2:46 p.m. on March 11, 2011, the largest earthquake in recorded Japanese history, with amagnitude of 9.0 on the Richter scale, struck off the coast of Sanriku, causing unprecedented
damage to the Tohoku and Kanto regions, with violent tremors and a massive tsunami. The
Japan Meteorological Agency named this earthquake, “The 2011 off the Pacific coast of
Tohoku Earthquake,” while the Japanese government decided to collectively call the disaster“The Great East Japan Earthquake,” which referred to the damage caused by the earthquake,the subsequent tsunami, and aftershocks.
Responding to this devastating disaster, the non-life insurance industry and the Japanese
government were united to take initiatives to promptly and steadily make insurance payouts
to support the reconstruction of the lives of policyholders.
Summary of the Great East Japan Earthquake
Outlook of the Earthquake(i) Date and Time: Friday, March 11, 2011, 14:46 JST (05:46 UTC)(ii) Hypocenter:
Sanriku-oki (N38.1, E142.5)
Distribution of seismic intensity: Estimated distribution of seismic intensity(iii) Depth:
24 km(iv) Magnitude:
9.0(v) JMA Seismic Intensity:
The intensity of 7 was recorded in Kurihara
City, Miyagi Prefecture, and the intensity of a
6-upper was recorded in 34 cities and towns
in four prefectures of Miyagi, Fukushima,
Ibaraki and Tochigi, in addition to a wide areaof Japan from Hokkaido to Kyushu, mainly inthe eastern part of Japan, where the intensityof between a 6-lower and 1 was recorded.
(vi) Number of aftershocks:
Seismic intensity
The number of aftershocks so far (as at 12
7
6-uppera.m., March 6, 2016) is as follows.
6-lowerMaximum seismic intensity

No. ofaftershocks

6-upper26-lower2

5-upper17

5-lower

47

4

282

5-upper
5-lower4321

Sources: “Monthly Report on Earthquakes and Volcanoes in Japan, March 2011” of the Japan
Meteorological Agency

Japan Earthquake Reinsurance Co., Ltd. Annual Report 201635

Summary of damage (as of March 1, 2016)(i) Casualties:
Death:
19,418 people
Missing:
2,592 people
Injured:6,220 people(ii) Residential damage:
Total collapse:
121,809 houses
Half collapse:
278,496 houses
Partially collapse: 744,190 houses* Prepared by JER based on “Monthly Report on Earthquakes and Volcanoes in Japan, March 2011” of theJapan Meteorological Agency and “The 2011 off the Pacific coast of Tohoku Earthquake (the Great East
Japan Earthquake) (No. 153)” of the Fire and Disaster Management Agency

Initiatives taken in the wake of the Great East Japan
Earthquake
1. Initiatives taken by the non-life insurance industry
To carry out the social mission of earthquake insurance, “Contribute to establishing a stableliving for the victims,” the General Insurance Association of Japan (the “GIAJ”) establishedan “Earthquake Insurance Central Command,” and the non-life insurance industry unitedacross all member companies to take the initiatives described below. As a result, as of March
31, 2015, the overall non-life insurance industry paid earthquake insurance of approximately
1,265.3 billion yen.
(1) Enhancement of information provision to customers
The GIAJ prepared posters (approximately 80,000 sheets) and leaflets (approximately 546,000
copies) that presented inquiry addresses and telephone numbers of non-life insurancecompanies, and presented and distributed them mainly to municipal government offices andevacuation centers. It also published a list of inquiry addresses of member companies in 18
newspapers, while it broadcast 500 radio commercial messages about the inquiry addressesof the GIAJ, and released advertising (on 12 regional television stations in affected areas)
to encourage policyholders to make earthquake insurance claims. Moreover, it introduced
special measures to the no-entry zone and other areas in the wake of the accident at the
Fukushima Daiichi Nuclear Power Plant, and published payments of earthquake insurance in
two newspapers in Fukushima Prefecture.
(2) Strengthening support for customers who are unsure about their insurance companies
The GIAJ established an “the Center for Searching Earthquake Insurance Contracts” forcustomers who were unsure about which insurers their earthquake insurance and other nonlife insurance contracts were concluded with because they had lost their insurance policies,
due to the disaster and other reasons. It helped confirm customers’ non-life insurancecompanies through the specially designated free telephone services and the web page. In
the same manner, each member company also dealt with inquiries from customers who were
unsure about their insurance companies.

36

Japan Earthquake Reinsurance Co., Ltd. Annual Report 2016

(3) Prompt insurance payouts by streamlining loss confirmation procedures and survey ofearthquake insurance
Because the tsunami and fires caused losses across large areas of the coastal regions in
Iwate, Miyagi and Fukushima prefectures, non-life insurance companies carried out a joint
loss survey, in what was an industry’s first. Non-life insurance companies identified areas
with the same level of losses through the joint survey, and identified areas that had sustained
devastating damage from the disaster as “total loss areas” using aerial and satellite
photography as well as tours of the areas themselves. As a result, by waiving the need for
onsite inspections, member companies promptly paid total earthquake insurance claims forearthquake insurance contracts in total loss areas. To facilitate claims by customers, the GIAJ
also published the total loss area on its website.
(4) Simpler procedures for earthquake insurance claims
In conducting an earthquake loss survey on wooden buildings and on furniture in suchbuildings, in addition to onsite inspections, non-life insurance companies adopted a loss
inspection in which, provided certain requirements are met, onsite inspections are waived andthe loss is inspected based on photos taken by customers and other self-reported documents.
They also conducted inspections based on self-reported documents for claims in the no-entry
zone and other areas where entries were limited in the wake of the accident at the Fukushima
Daiichi Nuclear Power Plant.
(5) Donation of the relief money
To help support people in the areas affected by the Great East Japan Earthquake, the GIAJ
received donations from 26 member companies and donated relief money of 1 billion yen to
the Japanese Red Cross Society.
2. Initiatives taken by JER
JER’s mission and role in the face of major disasters
Our mission in the face of major disasters is to financially facilitate prompt insurance
payouts by non-life insurance companies through “reinsurance payouts” to support the earlyreconstruction of the lives of policyholders in the afflicted areas.

JER

Reinsurance
payoutNon-life
insurancecompanies

Insurance
payout

Early

Policyholders, reconstruction
etc.

of a steady living

Financial backup

Japan Earthquake Reinsurance Co., Ltd. Annual Report 201637

Prompt reinsurance payment
To promptly make reinsurance payouts to non-life insurance companies, we established an
Earthquake Disaster Countermeasures Headquarters on the day the Great East Japan Earthquake
took place, and took steps to promptly secure funds and make reinsurance payouts based on
approximate projections, in cooperation with non-life insurance companies and the government.
As a result, we made reinsurance payouts of approximately 1,265.3 billion yen for approximately
790,000 policies(Note) by the end of March 2015.
(Note) The figures do not include reinsurance payouts related to aftershocks and other earthquakes.

Securing funds promptly
Preparation of approximately 322.4 billion yen in cash by selling assets within 20
days of the occurrence of the earthquake (March 31, 2011).
Receipt of reinsurance payouts of approximately 426.8 billion yen (based on
approximate projections) from the government within 73 days of the occurrenceof the earthquake (May 23, 2011).
Because the earthquake insurance system is a system whose income and expenditures aredesigned to be balanced out after a long period of time, all premiums received, after deducting
necessary expenses, are individually set aside as reserves by non-life insurance companies and thegovernment.
Insurance claims paid to policyholders affected by the earthquake were funded from these reserves.
To promptly secure funds for reinsurance payouts to non-life insurance companies, we quickly
started to sell our reserve assets from the first business day after the occurrence of the earthquake.
At the same time, cooperating with the government, we flexibly requested the government’s
reinsurance payouts and implemented procedures for receiving the payments.

Sales ofprivate assets

Receipt of thegovernment’s
reinsurance
payouts

Funds forinsurance
payouts

Reinsurance payouts based on approximate projections
Provision of funds of approximately 968.6 billion yen to non-life insurancecompanies within 75 days of the earthquake (May 25, 2011).
To facilitate prompt insurance payouts by non-life insurance companies to policyholders, we madereinsurance payouts based on approximate projections for the first time since the establishment ofJapan’s earthquake insurance system.
Payments based on approximate projections is a system in which estimated reinsurance payouts
based on rough projections on the amount of damage incurred by the relevant earthquake. The
system is designed to make it possible to provide in advance the funds necessary for insurance
payouts to non-life insurance companies before they actually pay insurance claims to policyholders
who are afflicted by an earthquake.

38

Japan Earthquake Reinsurance Co., Ltd. Annual Report 2016

Status of the burden of liabilities associated with theGreat East Japan Earthquake
The reinsurance scheme for the Great East Japan Earthquake and the share of liabilities forthe damage from the earthquake between non-life insurance companies and the government
are as follows:
Reinsurance scheme at the time when the Great East Japan Earthquake took place(from April 1, 2009 to May 1, 2011)
Payable reinsurance claim(excluding those of aftershocks)(as at the end of March 2015)
Approximately 1,265.3 billion yen(Payable insurance claims)
Up to1,925 billion yen

Up to
115 billion yen

905 billion

5.5 trillion yen

50%

115
billion95%

3,396.25 billion
905 billion

50%
178.75 billion

5%(Liability)

Non-life insurance companies Approximately 690.1 billion yen
The government

Approximately 575.1 billion yen

Liability limit
Non-life insurance companies (including JER)
The government

1,198.75 billion yen
4,301.25 billion yen

Total

5,500.00 billion yen

Japan Earthquake Reinsurance Co., Ltd. Annual Report 201639

Modification of the reinsurance scheme after theGreat East Japan Earthquake
Reserves of non-life insurance companies noticeably decreased with the burden of liabilities
after the Great East Japan Earthquake. As a result, to reinforce the continuity and the stabilityof the scheme to deal with large-scale earthquakes in the future, the reinsurance scheme wasrevised on May 2, 2011, as shown below.
Reinsurance scheme after the Great East Japan Earthquake took place(from May 2, 2011 to April 5, 2012)(Payable insurance claims)
Up to
115 billion yen

Up to871 billion yen

378 billion

5.5 trillion yen

50%

115
billion378 billion

4,397.55 billion

95%

231.45 billion

5%

50%

Liability limit
Non-life insurance companies (including JER)
The government

724.45 billion yen
4,775.55 billion yen

Total

5,500.00 billion yen

Note: Please refer to page 33 for information on the mechanism of reinsurance and the latest reinsurance scheme.

Status of reinsurance payments associated with theGreat East Japan Earthquake(As of March 31, 2015)
By prefectures

Tohoku40

RegionNo. of policies

Reinsurance claims (million yen)

Hokkaido
Aomori
Iwate
Miyagi
Akita
Yamagata
Fukushima

1,532
8,314
26,744
244,548
2,289
4,023
75,743

1,723
5,266
57,713556,886
1,278
3,157
159,123

Subtotal

361,661

783,427

Japan Earthquake Reinsurance Co., Ltd. Annual Report 2016

Kanto,Koshinetsu,
Shizuoka

RegionNo. of policies

Reinsurance claims (million yen)

IbarakiTochigi
Gunma
Saitama
Chiba
Tokyo
Kanagawa
Niigata
Yamanashi
NaganoShizuoka
Subtotal
Other prefectures
Total

106,700
38,664
9,046
39,23598,988104,086
25,481
1,558
4,881
417
1,074
430,130
437
793,760

156,260
44,5797,862
30,045
116,752
97,033
21,400
1,391
3,105
575
802
479,810397
1,265,359

Note 1: The number of policies represents the number of insurance policies of earthquake insurance contracts, underwhich insurance claims were paid.
2: The figures do not include reinsurance payouts related to aftershocks.

By properties and loss categories
Tohoku region
Buildings

Total loss
Half loss
Partial loss
Total

Personal property

Total

No. ofproperties

Reinsurance
claims(million yen)

No. ofproperties

Reinsurance
claims(million yen)

No. ofproperties

Reinsurance
claims(million yen)

22,86664,769193,705
281,340

206,483
302,727
102,255
611,467

13,15575,64546,365
135,165

43,355
120,923
7,681
171,960

36,021
140,414240,070
416,505

249,839423,651
109,937
783,427

Non-Tohoku region
Buildings

Total loss
Half loss
Partial loss
Total

Personal property

No. ofproperties

Reinsurance
claims(million yen)

No. ofproperties

5,009
33,608322,276
360,893

46,944
160,853
192,583
400,381686
34,457
98,183
133,326

Reinsurance
claims(million yen)
2,227
61,09818,22481,550Total
No. ofproperties

Reinsurance
claims(million yen)

5,695
68,065
420,459494,219

49,171
221,952
210,808
481,932

Note 1: The number of properties represents the number of properties (by building and personal property) under theearthquake insurance contracts, whose insurance claims were paid.
2: The figures do not include reinsurance payouts related to aftershocks.

Japan Earthquake Reinsurance Co., Ltd. Annual Report 201641

2016 KUMAMOTO EARTHQUAKES

We offer our deepest sympathy to all those affected by the 2016 Kumamoto Earthquakes. JER,
the non-life insurance industry and the Japanese Government were united to take initiatives topromptly and steadily make insurance payouts to support the reconstruction of the lives ofpolicyholders affected by these earthquakes.

Summary of the earthquakes(1) First earthquake
Date and Time: April 14, 2016, 21:26 JST
Hypocenter (depth) and magnitude:
Place: K umamoto District, Kumamoto Prefecture (N32.445, E130.485) at a depthof around 11km (tentative)
Scale: Magnitude of 6.5 (tentative)
Seismic Intensity Scale: 7 in Kumamoto (Mashikimachi-Miyazono), Kumamoto Prefecture(2) Second earthquake
Date and Time: April 16, 2016, 01:25 JST
Hypocenter (depth) and magnitude:
Place: Kumamoto District, Kumamoto Prefecture (N32.452, E130.457) at a depth ofaround 12km (tentative)
Scale: Magnitude of 7.3 (tentative)
Seismic Intensity Scale: 7 in Mashiki, Nishihara, Kumamoto Prefecture

42Japan Earthquake Reinsurance Co., Ltd. Annual Report 2016

PAYMENT OF EARTHQUAKE INSURANCE
Industry response
The General Insurance Association of Japan (the “GIAJ”) strengthened the system for dealing
with claims due to the 2016 Kumamoto Earthquakes and established an Earthquake Insurance Central Command at the GIAJ headquarters (Chiyoda Ward, Tokyo). The GIAJ also established a local base in Kumamoto, Kumamoto Prefecture to reinforce the system for dealing
with claims locally.
Earthquake insurance response since the earthquakes to the present
April 15, 2016

The GIAJ Chairman's message to all affected by the 2016 Kumamoto Earthquake
Industry Response to the 2016 Kumamoto earthquake
Implementation of special measures due to the 2016 Kumamoto Earthquake

April 18, 2016

Notification of general insurance helpline for all member companies
GIAJ reinforces the 2016 Kumamoto Earthquake response
Additional special measures following the 2016 Kumamoto Earthquake

April 20, 2016

Actions being taken for the prompt payment of earthquake insurance claims

April 25, 2016

Number of earthquake insurance accidents dealt with due to the 2016 Kumamoto
earthquake

April 26, 2016

The GIAJ Chairman Hisahito Suzuki visits/plans to visit the affected areas
Additional special measures following the 2016 Kumamoto Earthquake (Part 2)

April 28, 2016

Donations to those affected by the 2016 Kumamoto Earthquake

May 11, 2016

Key figures related to insurance claims due to the 2016 Kumamoto Earthquake as of
May 9, 2016

May 13, 2016

Introduction of toll free number for general insurance policy inquiries

May 18, 2016

Key figures related to insurance claims due to the 2016 Kumamoto Earthquake as of
May 16, 2016

May 25, 2016

Key figures related to insurance claims due to the 2016 Kumamoto Earthquake as of
May 23, 2016

June 1, 2016

Key figures related to insurance claims due to the 2016 Kumamoto Earthquake as of
May 30, 2016

June 9, 2016

Key figures related to insurance claims due to the 2016 Kumamoto Earthquake as ofJune 6, 2016

June 16, 2016

Key figures related to insurance claims due to the 2016 Kumamoto Earthquake as ofJune 13, 2016

June 23, 2016

Key figures related to insurance claims due to the 2016 Kumamoto Earthquake as ofJune 20, 2016

June 30, 2016

Key figures related to insurance claims due to the 2016 Kumamoto Earthquake as ofJune 27, 2016

Japan Earthquake Reinsurance Co., Ltd. Annual Report 201643

Key figures related to insurance claims
As of June 27, 2016: The figures below were gathered from both domestic and foreign insurance companies.
Region/Prefecture

Number ofinquiries (*1)

Number of settled
cases (*2)

Number of claim
payments

Total amount ofclaims paid (inthousands of yen)

Fukuoka

15,875

14,273

9,976

6,388,864

Saga

2,474

2,162

1,549

1,050,806

Nagasaki

693

628

419

252,587

Kumamoto

211,114201,778

186,684

312,006,363

Oita

13,371

12,312

9,979

8,321,410

Miyazaki

387

336

216

187,700

Kagoshima

330

297

165

85,971Other prefectures

621

549

305

238,350

244,865

232,335

209,293

328,532,051

Total*1: The number of inquiries includes the number of cases where insurance companies received requests for damage
investigations, inquiries about earthquake insurance coverage, and requests for advice on policyholder contracts.
The number includes inquiries for both buildings and contents.
*2: The number of settled cases includes those cases where claims were paid as well as those where claims werewithdrawn as a result of actual investigations. It also includes cases that were resolved when insurance companies
received inquiries.

(Source: The GIAJ website)

44

Japan Earthquake Reinsurance Co., Ltd. Annual Report 2016

STATISTICS

Reinsurance claims paid in fiscal 201 5
Reinsurance claims paid in fiscal 2015 amounted to 8.2 billion yen, including earthquake reinsurance claims paid to cover the 2011 off the Pacific coast of Tohoku Earthquake. In termsof numbers, 12,012 claims were paid (on the basis of insurance policies). See below for major
claims paid per earthquake.
Earthquake(Region name)Date of occurrence

1. The 2011 off the Pacific coast of Tohoku
2. Ogasawara

March 11, 2011

Magnitude

No. ofpolicies

9.0

7,494

Reinsurance
claims paid
(million yen)
5,250

May 30, 2015

8.1

766

582

3. Nagano-ken Hokubu

November 22, 2014

6.7

464

351

4. Saitama-ken Hokubu

May 25, 2015

5.5

482

312

5. Ibaraki-ken Nanbu

September 16, 2014

5.6

369

238

Other earthquakes

—

—

2,437

1,478

Total

—

—

12,0128,214

The percentage of households purchasing earthquake
insurance in areas at risk of major earthquakes(As of March 31, 2016)
No. ofhouseholds (A)(1,000households)

Great Kanto

25,472

Tokyo metropolitan
Nankai troughEarthquake(Region name)

No. ofpolicies (B)(1,000 policies)

Percentage ofhouseholds withinsurance (B/A)(%)

Probability that an
earthquake could occur
within the next 30 years

8,232

32.3

Nearly 0%–5%17,992

5,965

33.2

About 70%

43,352

13,14830.3

About 70%

Note 1: JER prepared the number of policies, assuming that major prefectures were stricken, based on the preliminary
figures as of the end of fiscal 2014 from the General Insurance Rating Organization of Japan that were
published on June 22, 2015.
2: The probability that an earthquake could occur within the next 30 years is based on the 2015 version of the
National Seismic Hazard Maps for Japan of the Headquarters for Earthquake Research Promotion of theJapanese government.
		 The probability of a Great Kanto Earthquake is that of a magnitude 8 earthquake along the Sagami Trough.
The probability of an inland earthquake in Tokyo metropolitan area is that of a magnitude 7 earthquake to becaused by a sinking plate along the Sagami Trough.

Japan Earthquake Reinsurance Co., Ltd. Annual Report 201645

Top 20 earthquakes as to reinsurance claims paid
See the table below for the top 20 earthquakes with respect to reinsurance claims paid since
the earthquake insurance was established.
(As of March 31, 2016)
Earthquake(Region name)Date of occurrence

Magnitude

No. of policies

Reinsurance claims
paid (million yen)

1. The 2011 off the Pacificcoast of Tohoku

March 11, 2011

9.0

801,254

1,270,610

2. Hyogo-ken Nanbu

January 17, 1995

7.3

65,42778,346

3. Miyagi-ken-oki

April 7, 2011

7.2

30,99832,388

4. Fukuoka-ken Seiho-oki

March 20, 2005

7.0

22,063

16,971

5. Geiyo

March 24, 2001

6.7

24,452

16,941

6. Niigata-ken Chuetsu

October 23, 2004

6.8

12,60814,897

7. Niigata-ken Chuetsu-oki

July 16, 2007

6.8

7,866

8,248

8. Fukuoka-ken Seiho-oki

April 20, 2005

5.8

11,337

6,429

September 26, 2003

8.0

10,553

5,990

10. Iwate-Miyagi Nairiku

June 14, 2008

7.2

8,276

5,545

11. Suruga-wan

August 11, 2009

6.5

9,500

5,155

12. Shizuoka-ken Tobu

March 15, 2011

6.4

5,303

4,631

13. Iwate-ken Engan Hokubu

July 24, 2008

6.8

7,754

3,972

14. Fukushima-ken Hamadori

April 11, 2011

7.0

2,370

3,678

15. Nagano-ken Chubu

June 30, 2011

5.4

2,971

3,310

16. Tottori-ken Seibu

October 6, 2000

7.3

4,079

2,869

17. Noto Hanto

March 25, 2007

6.9

3,306

2,732

18. Awajishima fukin

April 13, 2013

6.3

2,922

2,328

19. Miyagi-ken Hokubu

July 26, 2003

6.4

2,543

2,172

20. Tokachi-chiho Nanbu

February 2, 2013

6.5

4,248

2,161

9. Tokachi-oki

Note 1: After the 2011 Great East Japan Earthquake, in accordance with our reinsurance scheme at the time, the government paid 577,805 million yen and private non-life insurance companies paid 692,805 million yen.
2: After the Hyogo-ken Nanbu Earthquake in 1995, in accordance with our reinsurance scheme at the time, thegovernment paid 6,173 million yen and private non-life insurance companies paid 72,173 million yen.

46

Japan Earthquake Reinsurance Co., Ltd. Annual Report 2016

Below are the epicenters and magnitudes of the top 20 earthquakes for which we paid reinsurance claims in the past. The number attached to the name of the earthquake is in order ofpayment amount.
As a reference, the epicenter area and the probability that an earthquake with a magnitude
of about 7 in southern Kanto, the Nankai Trough earthquake could occur within the next 30
years announced by the Headquarters for Earthquake Research Promotion of the government
are also included.

20. Tokachi-chiho Nanbu (M6.5)

13. Iwate-ken Engan Hokubu (M6.8)
10. Iwate-Miyagi Nairiku (M7.2)

9. Tokachi-oki (M8.0)

6. Niigata-ken Chuetsu (M6.8)
7. Niigata-ken Chuetsu-oki (M6.8)

1. The 2011 off the Pacificcoast of Tohoku (M9.0)

17. Noto Hanto (M6.9)
15. Nagano-ken Chubu (M5.4)

3. Miyagi-ken-oki (M7.2)
19. Miyagi-ken Hokubu (M6.4)

11. Surugawan (M6.5)

14. Fukushima-ken Hamadori (M7.0)
16. Tottori-ken Seibu (M7.3)

A magnitude 7 (6.7 to 7.3) earthquake caused
by a sinking plate along the Sagami TroughAround 70%

5. Geiyo (M6.7)

12. Shizuoka-ken Tobu (M6.4)

2. Hyogo-ken Nanbu (M7.3)
18. Awajishima fukin (M6.3)

Nankai Trough earthquake(about M8 – 9) About 70%

4. Fukuoka-ken Seiho-oki (M7.0)
8. Fukuoka-ken Seiho-oki (M5.8)

Japan Earthquake Reinsurance Co., Ltd. Annual Report 201647

Financial Section

Financial Review
Indicators Showing the Main Results over the Last Five Fiscal Years
Summary of Operations
Accounting Concepts
1. Financial statements
2. Details of assets and liabilities
3. Income and loss details
4. Information about fair values, etc.

48

Japan Earthquake Reinsurance Co., Ltd. Annual Report 2016

FINANCIAL REVIEWBusiness development, results, etc.
Business development, results, etc.
During fiscal 2015, the Japanese economy as a whole came to a standstill amid weak foreign demand caused bydownturn in the world economy, especially emerging economies, despite firm domestic demand on the back of
low crude oil prices and improved employment conditions under the large-scale monetary easing policy.
Earthquake insurance premiums grew from the previous fiscal year due to the impact of higher premium rates
following premium rate revisions in July, 2014 and last-minute demand for earthquake insurance policies associated with revision of fire insurance in October 2015. Earthquake insurance payouts and loss adjustment
expenses decreased from the previous fiscal year, reflecting gradual reduction in insurance payouts for the Great
East Japan Earthquake in 2011.
Looking at asset management, earnings from investments fell below the level posted in the previous fiscal year,
reflecting the advanced redemption of high-yield bonds under the sustained condition of low interest rates.
In this environment, we launched our fourth medium-term business plan, “Strengthening Arrangements for Earthquake Reinsurance Payouts” covering the three-year period from April 2015. We pushed ahead with initiatives toreinforce business continuity management (BCM) to ensure our readiness for earthquake reinsurance payout, ourmost important mission.
During fiscal 2015, the first fiscal year under the plan, we began steadily implementing measures in areas suchas the development of BCM to prepare for an inland earthquake in the Tokyo metropolitan area and information
security measures.
Summary of earthquake insurance results① Net premiums written and net claims paid
In the fiscal year under review, net premiums writtenrose sharply to 121.9 billion yen (up 11.9% year onyear) as a result of growth in assumed reinsurance
premiums. Meanwhile, net claims paid came to 5.5billion yen (down 41.6% year on year), reflecting factors such as the Great East Japan Earthquake in 2011.
② Risk reserves and underwriting reserves
Risk reserves added totaled 53.8 billion yen (up 11.2%
year on year), consisting of net premiums written of
52.6 billion yen, calculated by deducting assumed reinsurance commissions from net premiums written,
and gains on investments of 1.1 billion yen.
Risk reserves at the end of the fiscal year under review
came to 464.5 billion yen (up 11.4% year on year) as
a result of the reversal of the provision for outstanding claims of 0.4 billion yen to risk reserves and thewithdrawal from the reserves in the past year of net
claims paid of 5.5 billion yen as stated above, loss assessment expenses of 0.8 billion yen, and advertisingand publicity expenses of 0.3 billion yen.
Underwriting reserves at the end of the fiscal year under review amounted to 627.3 billion yen (up 12.7%
year on year) as a result of the addition of unearned
premium reserves to the risk reserves stated above.
③ Risk reserves of direct insurance companies
A total of 4.8 billion yen (up 11.0% year on year), consisting of net premiums written and gains on investments, was added to the risk reserves of direct insurance companies recorded as entrusted reserves. The
risk reserves of direct insurance companies at the endof the fiscal year under review came to 78.1 billion yen(up 4.6% year on year) as a result of the withdrawal ofadvertising and publicity expenses of 0.8 billion yen.

Outline of investments
Medium- to long-term domestic interest rates remained low due to the Bank of Japan’s sustained policy of quantitative and qualitative monetary easing. The
adoption of negative interest rates announced by the
Bank of Japan in January this year added momentum
to the interest rate decline.
Looking at exchange rates, the yen gradually strengthened against the US dollar amid speculation that theinterest rate hike in the US would be delayed, despite
differences in the monetary policies of Japan, whereeasy money continued, and the United States, which
aimed to tighten credit. Meanwhile, the yen strengthened against the euro due to sovereign debt problems
and political disarray. In these circumstances, we invested in assets with the top priority placed on safety
and liquidity, followed by profitability. As a result, pretax profits from investments amounted to 1.1 billion
yen in the business account and 0.2 billion yen in theentrusted reserves account. Consequently, investment
assets totaled 690.2 billion yen at the end of the fiscal
year under review.
Profit and loss for the fiscal year under review
Interest and dividend income in the capital account fell
sharply and was not enough to cover account expenses. As a result, pre-tax profit turned negative, resulting
in a net loss for the fiscal year under review of lessthan a million yen.

Japan Earthquake Reinsurance Co., Ltd. Annual Report 2016

49

INDICATORS SHOWING THE MAIN RESULTS
OVER THE LAST FIVE FISCAL YEARS(Yen in millions)Fiscal Year

Division

2011

2012

2013

2014

2015

Net premiums written
Percentage change over the previous term

83,671
17.0%

92,996
11.1%

92,248(0.8%)

108,99418.2%

121,986
11.9%

Net claims paid
Percentage change over the previous term

196,625
18,927.3%

31,607(83.9%)

15,010(52.5%)

9,563(36.3%)

5,589(41.6%)

Ordinary income
Percentage change over the previous term

286,81263.1%

110,370(61.5%)

104,703(5.1%)

119,82214.4%

129,107
7.7%

Ordinary expenses
Percentage change over the previous term

286,723
63.9%

110,176(61.6%)

104,509(5.1%)

119,81814.6%

129,107
7.8%

Ordinary profit
Percentage change over the previous term

89
(91.0%)

193
117.5%

194
0.3%

3(98.2%)

0(98.4%)Net income (loss)
Percentage change over the previous term

(5)(239.9%)4–(82)(2,045.2%)

3
–

(0)
(115.6%)

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

Common stock
Sum of shares issued
Net assets

1,631

1,633

1,544

1,543

1,542

Total assets

509,498

536,808

577,305

640,137

709,408

Underwriting reserves
Percentage change over the previous term

430,700(16.5%)

461,480
7.1%

499,2748.2%

556,727
11.5%

627,345
12.7%

Of the balance, risk reserves
Percentage change over the previous term

331,499(21.9%)

352,830
6.4%

378,0417.1%

417,05610.3%

464.584
11.4%

Loans
Percentage change over the previous term

–
–

–
–

–
–

–
–

–
–

Securities
Percentage change over the previous term

448,120(44.3%)

476,979
6.4%

525,161
10.1%

391,034(25.5%)

401,751
2.7%

Non-consolidated solvency-margin ratio

120.8%

160.0%

344.9%

354.5%

392.1%

Dividend propensity

–

–

–

–

–

No. of employees

26

27

26

29

28

Note:
JER’s solvency-margin ratio will not be used as a criterion for the administrative authorities’ order for improvement. For details, please refer to page 54.

q Indicators relating to insurance underwriting

SUMMARY OF OPERATIONS
Item: earthquake
1. Net premiums written(Yen in millions)

Division

Fiscal Year

2013

2014

2015

Premiums written

197,919

222,014245,353

Return premiums

3,271

4,341

6,708

Assumed net premiums
written (A)194,628

217,661

238,645

Reinsurance premiums
ceded (B)102,379

108,666

116,659

Net premiums written (A – B)

92,248108,994

121,986

Notes:
1. R
 eturn premiums: Return premiums of receiving reinsurance.
2. 
Assumed net premiums: Produced by deducting return premiums
from premiums written.
3. Net premiums written: Produced by deducting the reinsurance premiums ceded from the assumed net premiums written.

2. Rate of premiums written by domestic and overseas contracts
Division

Fiscal Year

2013

2014

2015

100%

100%

100%

2013

2014

2015

22,014

13,287

8,214

Reinsurance claims
recovered (B)

7,003

3,723

2,625

Net claims paid (A – B)

15,010

9,563

5,589

Domestic contract

3. Net claims paid
(Yen in millions)

Division

Fiscal Year

Assumed net claims paid (A)Notes:
1. 
Assumed net claims paid: Produced by deducting surrender value
from ceded insurance claims paid
2. Net claims paid: Produced by deducting reinsurance claims recoveredfrom assumed net claims paid

50

Japan Earthquake Reinsurance Co., Ltd. Annual Report 2016

4. Net loss ratio, net expense ratio and their combined ratio(Yen in millions)

Division

Fiscal Year

2013

2014

18.7%

10.1%

5.3%

41,13444,026

46,606 Insurance related operating,general and administrative
expenses722

710 Commissions and brokeragefees

40,411

43,315Net loss ratio
Underwriting expenses

8. No. of reinsurers that ceded insurance contracts andtop five reinsurers for ceded reinsurance premiums

2015
Fiscal Year

2013

2014

2015

11

10

10

725

No. of reinsurersthat ceded insurance
contracts

45,880Rate of top fivereinsurers’ ceded
insurance premiums

81.9%

90.4%

91.5%

Net expense ratio

44.6%

40.4%

38.2%

Combined ratio

63.3%

50.5%

43.5%

Notes:
1. Net loss ratio: (Net claims paid + loss adjustment expenses) / net
premiums written
2. Net expense ratio: (Commissions and brokerage fees + Insurance-related operating and general administrative expenses) / net premiums
written
3.	Combined ratio: Net loss ratio + net expense ratio

5. Rate of damage occurrence, the expenses ratio andrate of sum total before ceded insurance deduction
Not applicable
6. Changes in ordinary income or loss against a risein the loss rate
There are no changes in ordinary income or loss
in earthquake insurance because increases ininsurance payments are set off through the reversalof underwriting reserves in accordance of theprinciple of no loss and no profit.

Division

Note:
The number of reinsurers that ceded insurance contracts is the number
who ceded treaty reinsurance contracts of 10 million or more yen.

9. Ratio of ceded insurance premiums by rating
Not applicable
10. Contractor dividend
Not applicable
11. Conditions at the end of the current fiscal year
(runoff result) of outstanding claims (estimatedamount) at the beginning of the term
Not applicable to earthquake insurance.
12. Amount of estimated final damages associatedwith the elapse of a period from the occurrenceof accidents
Not applicable to earthquake insurance.

7. Underwriting profit(Yen in millions)

Division

Fiscal Year

2013

2014

2015

Underwriting income

96,358112,468

123,681

Underwriting expenses

95,447111,757

122,956

Operating and generaladministrative expenses

722

710

725

Other income and expenses

(188)

–

–

–

–

–

Underwriting profit

Notes:
1. The above operating, general and administrative expenses are thoserelating to the underwriting of insurances mentioned in the operating, general and administrative expenses in a statement of profits andlosses.
2. Other income and expenses are those equivalent to corporate taxes
mentioned in a statement of earthquake insurance profits and losses.

Japan Earthquake Reinsurance Co., Ltd. Annual Report 201651

w Investments
1. Investments policy	Because we have to pay a substantial amount ofclaims promptly in the event of a natural disastersuch as a major earthquake, we put in principle
the highest priority on safety and liquidity followedby profitability to increase risk reserves. The risk
management division is engaged in monitoring andcontrolling risks of all kinds, independently of thetransactions execution division.

3. 
Amount of interest and dividend received andinvestment assets yield (income yield)(Yen in millions)FiscalYear

2013
Yield (%)

Division

As of the end of
fiscal 2013

As of the end of
fiscal 2014

Percentage
distribution(%)

Division

Percentage
distribution(%)

Yield (%)

23

0.09

28

0.10

34

0.06

7

0.04

23

0.03

8

0.02

Monetaryreceivablesbought

–

–

15

0.10

144

0.08

–

–

–

–

–

–

3,248

0.66

2,642

0.59

2,280

0.62

Buildings

As of the end of
fiscal 2015

Yield (%)

Call loans

Securities(Yen in millions)

Year

2015

Deposits

Money trusts

2. Total assets and investments assets

2014

Total

–

–

–

–

–

–

3,279

0.61

2,710

0.47

2,468

0.38

Note:
Investment assets yield (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 investment assets while the denominator is an acquisition cost based assets.

Percentage
distribution(%)

Deposits

23,892

4.1

34,1195.3 189,215

26.7

Call loans

14,634

2.5

84,898

13.3

4,668

0.7

Monetaryreceivablesbought–– 113,991

17.8

94,596

13.3

Numerator = Interest and dividend income (including the amount equivalent to interest and dividend income of profit (or loss) from monetarytrust operation)
Denominator = Acquisition cost or depreciation based average balance

Money trusts

–

–

–

–

–

–

Securities

525,161

91.0

391,03461.1

401,751

56.6

Buildings

31

0.0

28

0.0

27

0.0

Total ofinvestments
assets563,71997.6

624,07297.5

690,258

97.3

Total assets

577,305

100.0

640,137

100.0

709,408

100.0

4. Asset management yield (realized yield)(Yen in millions)2013

Fiscal Year

2014

2015

Division

Amount ofnumerator

Amount ofdenominator

Yield onworking
assets (%)

Amount ofnumerator

Amount ofdenominator

Yield onworking
assets (%)

Amount ofnumerator

Amount ofdenominator

Yield onworking
assets (%)

Deposits

23

24,9740.09

28

29,8240.10

3460,181

0.06

Call loans

719,3850.04

2377,0580.03

838,1870.02

Monetary receivables bought

–

–

–

15

15,5130.10

144

184,504

0.08

Money trusts

–

–

–

–

–

–

–

–

–

3,346

490,629

0.68

2,642

450,256

0.59

2,475

368,634

0.67

1,054

356,6490.30

791

312,6400.25

818

250,382

0.33

–

–

–

–

–

–

–

–

–

2,292

133,980

1.71

1,850

137,615

1.34

1,657

118,251

1.40–

Securities
Public and corporate bonds
StocksForeign securities

–

–

–

–

–

–

–

–

Loans

Other securities

–

–

–

–

–

–

–

–

–

Buildings

–

33

–

–

31

–

–

28

–

Derivatives(7,336)––(6,447)

–

–

3,954

–

–

Others

7,691

–

–

6,153

–

–

(4,494)

–

–

Total

3,731

535,023

0.70

2,416

572,684

0.42

2,124

651,536

0.33

Notes:
1. Asset management yield (realized yield): indicator to show the result of managing of assets from the point of contribution to the current profit andloss. The numerator is realized profit and loss while the denominator is an acquisition cost based assets.
Numerator = profit from asset management + investment income on savings premiums – expenses of assets management
Denominator = acquisition cost or writing-off cost based average balance
2. Profit and loss from derivatives principally involve foreign exchange forward contracts with the remainder primarily involving currency exchange of foreign
currency-denominated bonds. JER deals in foreign exchange forward contracts and other transactions for the purpose of hedging risks associated with foreign
currency-denominated bonds.

52

Japan Earthquake Reinsurance Co., Ltd. Annual Report 2016

5. Market-price based overall yield (for reference)(Yen in millions)2013

Fiscal Year

2014

2015

Division

Amount ofnumerator

Amount ofdenominator

Yield onworking
assets (%)

Amount ofnumerator

Amount ofdenominator

Yield onworking
assets (%)

Amount ofnumerator

Amount ofdenominator

Yield onworking
assets (%)

Deposits

23

24,9740.09

28

29,8240.10

3460,181

0.06

Call loans

719,3850.04

2377,0580.03

838,1870.02

Monetary receivables bought

–

–

–

15

15,5130.10

144

184,504

0.08

Money trusts

–

–

–

–

–

–

–

–

–

2,182

494,802

0.44

3,030

453,264

0.67

2,800

372,0300.75

898

358,533

0.25

1,253

314,369

0.40

2,014

252,572

0.80

–

–

–

–

–

–

–

–

–

1,284

136,268

0.94

1,777

138,895

1.28

786

119,458

0.66

Securities
Public and corporate bonds
StocksForeign securities

–

–

–

–

–

–

–

–

–

Loans

Other securities

–

–

–

–

–

–

–

–

–

Buildings

–

33

–

–

31

–

–

28

–

Derivatives(7,336)––(6,447)

–

–

3,954

–

–

Others

7,691

–

–

6,153

–

–

(4,494)

–

–

Total

2,567

539,196

0.48

2,804

575,693

0.49

2,449

654,932

0.37

Notes:
1. M arket-price based overall yield: indicator showing the efficiency of operation on a market price basis. The numerator reflects realized profit and loss
and fluctuations in market price appraisal while the denominator is market-price based assets.
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 deferred hedge 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
2. P rofit and loss from derivatives principally involve foreign exchange forward contracts with the remainder primarily involving currency exchange of foreign
currency-denominated bonds. JER deals in foreign exchange forward contracts and other transactions for the purpose of hedging risks associated with foreign
currency-denominated bonds.

6. B alance, percentage distribution and yield of Foreign Loans & Investments(Yen in millions)

Year

As of the end of fiscal 2013

As of the end of fiscal 2014

As of the end of fiscal 2015

Percentage
distribution(%)

Percentage
distribution(%)

Percentage
distribution(%)

Division
Foreign currency denominatedForeign public and corporate bonds

70,35749.7

93,63864.876,40469.8

Yen denominatedForeign public and corporate bonds
Total

71,16450.3

50,76335.2

33,11830.2

141,522100.0

144,401

100.0

109,523

100.0

Yield on foreign loans & investments
Investment assets yield (income yield)

1.71%

1.34%

1.39%

Assets management (realized yield)

1.71%

1.34%

1.40%

Market-price based overall yield (for reference)

0.94%

1.28%

0.66%

Note:
Of the yield on foreign loans & investments, the investment assets yield was calculated in the same manner as 3., Amount of interest and dividend
received and yield on investment assets (income yield) in connection with the assets involving foreign investments.

Japan Earthquake Reinsurance Co., Ltd. Annual Report 201653

e Informationonthenon-consolidated
solvency-margin ratio (the ratio that shows
the ability to pay out claims)(Yen in millions)Year
Division
Total amount of non-consolidated solvency-margin421,385

469,361

1,539

1,539

Price fluctuation reserves

5

6

Risk reserves––

417,056

464,584

Common stock, etc.

Catastrophe reserves
Reserves for ordinary bad debts

(A)

–

–

2,783

3,231

Unrealized gain and loss included land holdings––

Surplus such as premium reserves––

Funding instruments with a debt-like nature––

Surplus such as premium reserves and funding
instruments with a debt-like nature that are notincluded in the margin––

Items deductible––

Others––237,717239,352

General underwriting risk (RI)––

Underwriting risk in third-area insurance (R2)––

Anticipated rate of return risk (R3)

–

–

8,355

9,958

Unrealized gain/loss on available-for-salesecurities / Deferred gain/loss on hedges

Total amount of non-consolidated risk√(R1 + R2)2 + (R3 + R4)2 + R5 + R6

(B)

Investment risk (R4)(C)

As of theAs of theend ofend offiscal 2014 fiscal 2015

Management risk (R5)

4,661

4,693

Catastrophe risk (R6)

224,700

224,700

Non-consolidated solvency-margin ratio[(A) / { (B) x 1 / 2 }] x 100

354.5%

392.1%

Note:
Amounts and other figures presented above are calculated on the basisof the provisions of Article 86 and Article 87 of the Enforcement Regulations for the Insurance Business Act and Notification No. 50 of the Ministry of Finance issued in 1996.

Non-consolidated solvency-margin ratio
The non-life insurance companies deposit reserves incase that they pay insurance money for any insurance
accident that occurred or refund depository insurance
at maturity. It is also necessary for them to maintaina satisfactory ability to make payments or solvency
even in case of unusual, unforeseeable risk, including
a huge disaster or sharp drop in price of such assets
as owned by them.
The rate of “Non-life insurance company’s ability tomake payments by owned assets and reserves (A in theabove table) over any risk unforeseeable (B in the abovetable)” is indicated as the non-consolidated solvencymargin ratio (C in the above table) which is calculated
according to the pertinent rules, including the Insurance Business Law.

54

[Unforeseeable risk] (Total of risks): Sum of 1–5
1. General underwriting risk: risk associated with aninsurance accident rate that is higher than normallypredictable (other than the risk associated with ahuge disaster).
2. Anticipated ratio of return risk: the risk that may
arise for saving-type insurance if the actual yieldfrom operations is lower than it was when calculating depository insurance premiums.
3. Investment risk: management risk that might arise
when the value of assets owned including securities
changes in an unforeseeable manner.
4. Management risk: risk that might arise on business
management in an unforeseeable manner, otherthan 1–3 and 5.
5. Catastrophe risk: risk that might arise with a hugedisaster (such as the Great Kanto Earthquake)
which is normally unforeseeable.
Capability of payment by non-life insurance company
owned capital and reserves (total amount of non-consolidated solvency-margin) is the total of capital owned
by a non-life insurance company, various reserves (pricefluctuation reserve, catastrophe reserve, etc.), part of latent profit from land, and so on.
The solvency-margin ratio is one of the indicators used
when the administrative authorities check insurancecompanies to determine the soundness of management
for supervisory purposes. When the rate is 200% or
more, the insurance company is deemed satisfactory interms of its ability to make insurance and other payouts.
◎ JER has entered into a reinsurance contract with thegovernment of Japan for earthquake insurance in accordance with Law concerning Earthquake Insurance.
The law stipulates in addition that the government takes
responsibility for support and for lending funds for thepayment of insurance money. Because this is a form ofspecial business, JER’s solvency-margin ratio is not usable as a figure to enable the administrative authorities
to trigger an order for improvement, irrespective of theabove solvency-margin ratio, as provided for in Paragraph 4, Article 3, Order to specify the division statedin Paragraph 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 Paragraph 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 applicableto the insurance company shall be issued in accordance with the list of
inapplicable division.]

Japan Earthquake Reinsurance Co., Ltd. Annual Report 2016

ACCOUNTING CONCEPTS(NET ASSETS)

q Financial statements(Yen in millions)2014(As of March
31, 2015)

2015(As of March
31, 2016)

Item

AmountAmountCommon stock

1,000

1,000

545

544



Fiscal Year

1. Balance sheets(ASSETS)

(Yen in millions)2014(As of March
31, 2015)

2015(As of March
31, 2016)

Item

AmountAmount Other legal reserve of retained earnings

Cash and deposits
Deposits

34,11934,119189,215
189,215  Special reserves

1717  Special price fluctuation reserves3939  Retained earnings carried forward

487

487



Fiscal Year

Call loans

84,898

4,668

Monetary receivables bought

113,991

94,596

Securities
Government bonds
Municipal bonds
Corporate bonds
Foreign securities

391,034
181,570
2,891
62,170144,401

401,751
93,82943,526
154,871
109,523

Tangible fixed assets
Buildings Other tangible fixed assets

91
28
62

66
27
39

Intangible fixed assets
Software Other intangible fixed assets

167
165
1

151
150
1

Other assets Reinsurance accounts receivable
Accounts receivable
Uncollected income
Deposits
Suspense payments
Derivatives

15,834
12,660
84
1,438
47
33
1,568

18,957
12,357
–
1,227
46
45
5,280

Total assets

640,137

709,408(LIABILITIES)
(Yen in millions)Fiscal Year

Item

2014
(As of March
31, 2015)

2015(As of March
31, 2016)

AmountAmountUnderwriting funds
Outstanding claims
Underwriting reserves

558,377
1,650
556,727

628,497
1,152
627,345

Entrusted reserves

63,012

67,102Other liabilities
Reinsurance accounts payable
Income taxes payable
Deposits payable
Accrued amounts payable
Derivatives

13,629
7,764
167
3
100
5,593

8,364
8,071
185
3
104
–

Reserve for retirement benefits

130

145

Reserve for directors’ retirement benefits

22

8

Reserve for bonus payments

21

21

Reserves under the special law
Reserve for price fluctuation

5
5

6
6

3,390

3,717

Net unrealized gains on available-for-salesecurities of earthquake insurance
Deferred tax liabilities
Total liabilities

1

1

638,593

707,865

Retained earnings Legal reserve of retained earnings

Treasury Stock
Total shareholders’ equity
 et unrealized gains on available-for-saleNsecurities Total valuation and translation adjustments
Total net assets
Total liabilities and net assets

1

1

544

543

(5)

(5)

1,539

1,539

4

3

4

3

1,543

1,542

640,137

709,408

Notes for fiscal 2015
1. Appraisal standards and method of securities, andmethod of indication(1) Of available-for-sale securities, those to which
the market price is applicable is appraised according to the market price at term end.
(2) With respect to the unrealized gain of assets
corresponding to the underwriting reserves andentrusted reserves of earthquake insurance, theamount before tax effect deduction is shownas Net unrealized gains on other securities ofearthquake insurance in Liabilities on the form
attached to the Enforcement Rules of Insurance
Business Act. For other unrealized gains, theamount after tax effect deduction is processed
entirely according to the direct capital injection
method and indicated in Shareholders’ Equity.
The calculation of the sales price is based on
the moving average method.
2. The appraisal of derivatives is done on the basis ofmarket price.
3. Although depreciation of tangible fixed assets is calculated using the declining balance method, buildings (excluding equipment attached to buildings)
that were acquired on and after April 1, 1998 weredepreciated using the straight-line method.
4. Software for in-house use that is recorded as an intangible fixed asset is amortized using the straight-line
method over the estimated usable life (five years).
5. T he conversion of foreign currency assets and liabilities
into Japanese currency is processed according to theaccounting standards for foreign currency transactions.

Japan Earthquake Reinsurance Co., Ltd. Annual Report 2016

55

6. W
 riting standards of reserves(1) Reserve for bad debts
		
Reserve for bad debts is written as follows
against losses from bad debts in accordancewith the self-appraisal standard of assets anddepreciation and reserve standards.
		In connection with claims against debtors who
have gone bankrupt legally and formally, including bankruptcy, special liquidation or disposition by suspension of business at a clearing
house, or debtors who are effectively bankrupt,
the rest of any of the claims deducting an estimated amount of disposable mortgage and adeductible amount by guarantee was appropriated for such reserves.
		In connection with the other claims, the rateof bad debts calculated according to past bad
debts and other factors is multiplied by theamount of claims to appropriate for reserves.
		
In addition, all claims are written after the finance department appraises the assets, and theresult is audited by the planning and controller
department independent of the finance department to appropriate the appraisal for reserves.
		There are no assets in the current term that are
to be appropriated for reserves and no reserveis required.
(2) Reserve for retirement benefits		For employees’ retirement and severance benefits, reserve is appropriated according to estimated retirement allowance liabilities at theend of the term.
		Retirement allowance liabilities are calculatedusing a simple method on the basis of the allowance to be supplied at the end of the term for any
employee who retires for his/her own reasons.
	 (3) Reserve for directors’ retirement benefits		For reserve for directors’ retirement benefits, thebenefits to be paid at the end of the term arerecorded according to the relevant in-house rules.
(4) Reserve for bonus payments
		Reserve for bonus payments is calculated according to the standards for the estimated bonuses payable as of the end of the fiscal year
under review.
(5) Reserve for price fluctuation		
To prepare for a loss from price changes ofshares and others, reserve is appropriated according to Article 115, Insurance Business Law.

56

7. 
Financial instruments and fair values of financial
instruments(1) S ituation of financial instruments
We mainly hold highly rated short- and mediumterm Japanese and foreign bonds and short-term
financial instruments in preparation for reinsurance payouts. We manage assets by attaching toppriority to liquidity and safety and giving additional consideration to profitability. It is our policy toengage in derivatives trading or forward exchange
contracts to reduce the market risks of foreigncurrency receivables associated with exchange
fluctuations, within the limits of actual demand.
In addition, we maintain an understanding of market risks, credit risks and liquidity risks and manage current quotations and credit information on aregular basis in this regard.
(2) F air values of financial instruments
The table below shows the balance sheet amounts
and fair values of financial instruments and thedifferences between them as of March 31, 2016.
(Yen in millions)

Balancesheet
amountFair value

Difference(i) Cash and deposits

189,215

189,215–(ii) Call loans

4,668

4,668

–

(iii) Monetary receivablesbought

94,596

94,596–(iv) Securities
Available-for-sale securities

401,751

401,751–

Total assets

690,231690,231–(v) Derivatives* to which
hedge accounting is notapplied

5,280

5,280

–

Derivatives total

5,280

5,280

–

* Derivatives recorded in other assets and other liabilities.
Net claims and debts derived from derivatives represent the net amounts, and items
whose net balance becomes debts are stated in brackets.

Note: Methods for calculating the fair values of financial instruments(i) Cash and deposits
Cash and deposits are settled in the short term and their fair values
are based on their carrying values as their fair values and carrying
values are similar.
(ii) Call loans
Call loans are settled in the short term and their fair values are
based on their carrying values as their fair values and carrying values are similar.
(iii) Monetary receivables bought
Monetary receivables bought are settled in the short term and theirfair values are based on their carrying values as their fair values andcarrying values are similar.
(iv) Securities
The fair values of securities are based on their market prices atterm end, which are reference prices in the trading statistics of theJapan Securities Dealers Association or market prices obtained
from outside vendors or brokers.
(v) Derivatives
The fair values of derivatives are determined by prices offered bycorrespondent financial institutions.

Japan Earthquake Reinsurance Co., Ltd. Annual Report 2016

8. Taxes are included when preparing accounts for consumption tax and other items.
9. 
Risk reserves contained in Underwriting reserves
have been deposited based on instructions for the
calculation of underwriting reserves by accumulating the amounts that result from subtracting anamount equivalent to corporate taxes from the net
premiums written and profit from operating the assets.
10. The accumulated depreciation of tangible fixed assets is 161 million yen.
11. S ee below for a breakdown of outstanding claims.
(Yen in millions)

Outstanding claims (before the deduction ofoutstanding reinsurance claims)

1,764

Outstanding reinsurance claims related to theabove claims

611

Net outstanding claims

14. Net assets per share are 775.61 yen. The basis forthis calculation is that net assets are 1,542 million yen, net assets accrued from ordinary sharesare 1,542 million yen and the number of ordinary
shares at the end of the term is 1.988 million.
15. 
The impact of the 2016 Kumamoto Earthquakethat occurred on April 14, 2016 on JER’s financial
position for the next fiscal year and beyond has
yet to be determined. Insurance payouts and loss
adjustment expenses due to the earthquake will
not affect net income for the next fiscal year andbeyond due to the reversal of risk reserves.
16. Each amount is rounded down to the nearest whole
unit.

1,152

12. Total deferred tax assets amount to 261 million yen,while total deferred tax liabilities come to 1 million
yen. Deferred tax assets are all deducted from thetotal amount for a valuation reserve.
	A breakdown of deferred tax assets reveals tax loss
carried forward of 157 million yen, a reserve forretirement benefits of 40 million yen, unpaid business taxes of 37 million yen and unpaid special local corporate tax of 15 million yen. Deferred tax
liabilities resulted mainly from unrealized gains on
securities of 1 million yen.
13. Corrections made to the amounts of deferred tax
assets and deferred tax liabilities in response tochanges in corporate and other tax rates are as follows: Corporate and other tax rates fell from each fiscal year commencing on or after April 1, 2016 as aresult of the promulgation of the Act on Partial Revision of the Income Tax Act, Etc. (Act No. 15 of 2016)
on March 29, 2016. With this change, the legal effective tax rate used for calculating deferred tax assets
and deferred tax liabilities fell from the previous levelof 28.85% to 28.24% for temporary differences
and the like expected for resolution in the fiscal year
commencing on April 1, 2016 and in the fiscal year
commencing on April 1, 2017 and to 28.00% for
temporary differences and the like expected for resolution in or after the fiscal year commencing on April
1, 2018. Deferred tax liabilities decreased less than
1 million yen as a result of this tax rate change. The
tax cut produced no effect on net income.

Japan Earthquake Reinsurance Co., Ltd. Annual Report 201657

2. Statements of income(Yen in millions)

Fiscal Year

2014

2015

(from April 1, 2014
to March 31, 2015)(from April 1, 2015
to March 31, 2016)

Item

AmountOrdinary income

Notes for fiscal 2015
1. See below for a breakdown of net premiums written.
(Yen in millions)

Premiums written:

238,645

AmountReinsurance premiums ceded:

116,659

119,822

129,107

Net premiums written:

121,986

Underwriting income

112,468

123,681   Net premiums written

108,994

121,986

1,544

1,198

  Investment income on savings
premiums  Reversal of outstanding claims

1,929

497

Investment income

7,353

5,424

   Interest and dividend income

2,710

2,468

   Gains on sales of securities

–

194

–

3,954

6,180

–

   Gains on derivatives   Foreign exchange gains   Other investment income  Transfer of investment income on
savings premiums
Other ordinary income
Ordinary expenses
Underwriting expenses   Net claims paid

7

4

(1,544)(1,198)0

1

119,818

129,107

111,757

122,956

9,563

5,589

   Loss adjustment expenses

1,425

868

  Commissions and brokerage fees

43,31545,880   Provision of underwriting reserves

57,45370,617

Investment expenses

6,481

4,498

  Losses on derivatives

6,447

–

  Foreign exchange losses

–

4,470

   Other investment expenses

34

28

1,322

1,394

 Operating, general and administrative
expenses

2. S ee below for a breakdown of net claims paid.
(Yen in millions)

Claims paid:

8,214

Reinsurance claims recovered:

2,625

Net claims paid:

5,589

3. See below for a breakdown of the provision of outstanding claims (figures in parentheses are the reversal of outstanding claims).
(Yen in millions)

Provision of outstanding claims(before the deduction of outstanding
reinsurance claims)(694)

Provision of outstanding reinsurance claims
related to the above claims(197)

Net provision of outstanding claims(497)

4. The interest and dividend income are given below
by category:(Yen in millions)

Deposits:
Call loans:
Monetary receivables bought:

34
8
144

257

257

Securities:

2,280  Interest paid

257

257

Total:

2,468

Ordinary profit

30Extraordinary losses

Other ordinary expenses

00

Losses on disposal fixed assets

00Provision of price fluctuation reserves00

Net income (loss) before income taxes

3(0)Income taxes

00

Total income taxes00

Net income (loss)

3(0)

5. Paper profit/loss involved in the losses on derivatives
is a loss of 5,280 million yen.
6. Net
income per share is 0.23 yen.
The basis for this calculation is such that net income is 0 million yen, net income accrued from
common stocks is 0 million yen and the term average number of common stocks amount to 1.988
million.
7. The legal effective tax rate at the end of the termis 28.85%, and the corporate tax burden after applying the tax effect is (157.52%). The differenceis explained by the following breakdown: valuation
reserve (51,004.21%), the amount of the write-off
carried from publicity expenses related to risk reserves 51,124.32%.
8. Each amount is rounded down to the nearest whole
unit.

58

Japan Earthquake Reinsurance Co., Ltd. Annual Report 2016

3. Statements of cash flow
(Yen in millions)

Fiscal Year

Item

2014

2015

(from April 1, 2014
to March 31, 2015)(from April 1, 2015
to March 31, 2016)

AmountAmountNotes for fiscal 2015
1. 
Relationship of cash and cash equivalents at theend of the year with the amounts mentioned in therelevant balance sheet item.
(Yen in millions)

Cash flow from operating activities
Net income before income taxes
Depreciation

3

(0)

97

82

Increase (decrease) in outstanding
claims(1,929)(497)

Increase (decrease) in underwriting
reserves

57,453

34,11984,898

4,668

Monetary receivables bought

113,991

94,59670,617

Securities

391,034

401,751

Deposits of a depository period
over three months(11,000)(11,000)

Monetary receivables bought other thancash equivalents(19,997)(71,597)

Securities other than cash equivalent(391,034)(401,751)

Cash and cash equivalents

202,011

205,882

4,089

Increase (decrease) in reserve forretirement benefits

14

15

Increase (decrease) in reserve fordirectors’ retirement benefits

3

(13)

Increase (decrease) in reserve forbonus payments

1(0)Increase (decrease) in reserve forprice fluctuation

00(2,710)(2,468)Losses (gains) on investment insecurities

–

(194)

Foreign exchange losses (gains)(5,906)

5,723

Losses (gains) on tangible fixed
assets00Decrease (increase) in other assets(other than investment and financial
activities related)(1,198)377

Increase (decrease) in other liabilities(other than investment and financial
activities related)

99

311

Others

1,606(9,288)   Subtotal

51,30468,753

4,483

4,211

Income taxes paid

(92)

–

55,69472,965(19,995)(71,588)–

19,997Purchase of securities(633,191)(217,876)

Proceeds from sales and redemptionof securities

772,089

200,414    Total investment assets activities

118,903(69,052)    Total operating activities and   investment assets activities

174,598

3,913

Net cash provided by operating activities

189,215

Cash and deposits

3,769Interest and dividends received(As of March
31, 2016)

Call loans

Increase (decrease) in entrusted
reserves

Interest and dividend income(As of March
31, 2015)

2. Cash flow in investing activities includes cash flowfrom the investment assets operations in the insurance business.

Cash flow from investing activities
Purchase of monetary receivablesboughtProceeds from sales and redemptionof monetary receivables bought

Acquisition of tangible fixed assets

(36)

(1)

Others(76)(40)

118,790(69,094)

Cash flow in financing activities

Net cash provided by investing activities–– ffect of exchange rate changes on cashEand cash equivalents––

 et increase (decrease) in cash andNcash equivalents

174,485

3,870

Cash and cash equivalents at the
beginning of the year

27,526

202,011

Cash and cash equivalents at the endof the year

202,011

205,882

Japan Earthquake Reinsurance Co., Ltd. Annual Report 201659

4. Statement of Changes in Shareholders’ Equity
Fiscal 2014 (from April 1, 2014 to March 31, 2015)(Yen in millions)

Valuation andtranslation adjustments

Shareholder’s equity
Retained earnings
Commonstock

Legalreserve ofretainedearnings

1,000

1Balance at the
beginning of theperiodOther legal reserve of retained earnings
Specialreserves

Specialprice
fluctuation
reserves

Retainedearnings
carriedforwardTotal
retainedearnings

17

39

484

542

3

3

Treasury
stock

Total
shareholders’equity

(5)

Net
Total
unrealized
valuation
gains onandavailabletranslation
for-saleadjustments
securities

1,536

7

7

Total net
assets1,544

Changes during
the period
Net income(loss)

3

3

Net changes
other thanshareholders’equityTotal changes
Balance at theend of the period

1,000

1

17

39

3

3

487

545

(5)

(3)

(3)

(3)

3

(3)

(3)

(0)

1,539

4

4

1,543

Fiscal 2015 (from April 1, 2015 to March 31, 2016)(Yen in millions)

Valuation andtranslation adjustments

Shareholder’s equity
Retained earnings
Commonstock

Legalreserve ofretainedearnings

1,000

1Balance at the
beginning of theperiodOther legal reserve of retained earnings
Total
retainedearnings

Specialreserves

Specialprice
fluctuation
reserves

Retainedearnings
carriedforward

17

39

487

545

(0)

(0)

Treasury
stock

Total
shareholders’equity

(5)

Net
Total
unrealized
valuation
gains onandavailabletranslation
for-saleadjustments
securities

1,539

4

4

Total net
assets1,543

Changes during
the period
Net income(loss)(0)(0)

Net changes
other thanshareholders’equityTotal changes
Balance at theend of the period

1,000

1

17

39

(0)

(0)

487

544

Notes for fiscal 2015
1. Matters related to the types and total number ofstocks outstanding and the types and number oftreasury stock(Stock)Issuedstock
Treasury
stock

(1)

(1)

(0)

(1)

(1)

(1)

1,539

3

3

1,542

5. Dividend per share and total assets per employee(Yen in millions)
Division

Fiscal Year

Dividend per share
Net income (loss) per share

2013

2014

2015

–

–

–

(41.63 yen)

1.53 yen(0.23 yen)

Balance asof the endof fiscal
2014

Increase in
fiscal 2015

Decrease in
fiscal 2015

Balance asof the endof fiscal
2015

Dividend propensity

–

–

–

Net assets per share

776.66 yen

776.41 yen

775.61 yen

22,20422,07324,462

Ordinary stock

2,000,000––

2,000,000

Total

Notes:
1. Net income (loss) per share comes from net income (loss) / term average
number of shares
2. The number of treasury stock is deducted from producing information per share
3. The total assets per employee come from the total assets at the end of
the term / number of employees at the end of the term.

2,000,000––

2,000,000

Ordinary stock

11,400––11,400Total

11,400––11,400Total assets per employee

2. Each amount is rounded down to the nearest whole
unit.

60

(5)

(1)

Japan Earthquake Reinsurance Co., Ltd. Annual Report 2016

5. Balance Current Maturity of securities by categoryw Details of assets and liabilities

As of the end of fiscal 2014
1.	Deposits(Yen in millions)Year
Division

As of the endof fiscal 2013

As of the endof fiscal 2014

As of the endof fiscal 2015

23,892

34,119189,215

Ordinary deposits

3,832

559

155,655

Time deposits

20,06033,56033,560

Deposits

2.	Average balance and trading amount of commodity
securities
Not applicable
3.	Balance of securities by category and percentage
distribution


5 over
up to
7
years

(Yen in millions)

7 over
up to
10
years

Division

Up to
1 year

1 overup to
3 years

3 overup to
5 years

Government
bonds

48,22654,312

26,830 37,677

Municipal
bonds

2,891

–

Corporatebonds

36,031

26,139

–

–

–

–

–

–

26,272 104,917

13,211––– 144,401

–

–

–

–

–

5,839 8,685

391,034

StocksForeignsecurities
Other
securities
Total

–

–

113,421 185,368

–

Total

5,839 8,685 181,570–

40,041 37,677

Over
10
years

–

–

2,891

–

–

62,170–––(Yen in millions)

Year

As of the end of
fiscal 2013
Percentage
distribution(%)

Division
Government
bonds

As of the end of
fiscal 2014

378,735

22,08547,744 13,391
–

Over
10
years

Total

2,891

0.7

43,52610.8

0.9

62,17015.9 154,871

38.5

Municipal
bonds

22,305

21,220––––

Corporatebonds

68,90085,971–––– 154,871

36.9 109,523

27.3

–

–

–

–

–

–

60,24549,278–––– 109,523

–

–

–

–

–

–

–

– 9,398

401,751

4,904
–

Total

1,208

(Yen in millions)

7 over
up to
10
years

Government
bonds

Corporatebonds–

26.9 144,401

Stocks

–

–

–

–

–

–

Foreignsecurities

525,161

100.0

391,034100.0

401,751

100.0

Other
securities

Other
securities

Up to
1 year3 overup to
5 years

23.4–

141,522

Division

5 over
up to
7
years

1 overup to
3 years

93,829–Foreignsecurities

Percentage
distribution
(%)



46.4

Municipal
bonds

StocksPercentage
distribution(%)

72.1 181,570

As of the end of fiscal 2015

As of the end of
fiscal 2015

Total

152,660 178,556–

47,744 13,391– 9,398

93,829–43,526––

4. Yield on securities held(%)


Division

Fiscal Year

2013

2014

2015

0.27

0.25

0.25

–

–

–

1.71

1.34

1.39

–

–

–

0.66

0.59

0.62

0.30

0.25

0.33

–

–

–

1.71

1.34

1.40

Investment assets yield (income yield)
Public & corporate bonds
StocksForeign securities
Other securities
Total

Assets management yield (realized yield)
Public & corporate bonds
StocksForeign securities
Other securities
Total

–

–

–

0.68

0.59

0.67

0.25

0.40

0.80

–

–

–

0.94

1.28

0.66

Market-price based overall yield (for reference)
Public & corporate bonds
StocksForeign securities
Other securities
Total

–

–

–

0.44

0.67

0.75

6.	Amount of stocks held by type of business
There are no stocks.
7.	Loans
There are no notes with the following items; amountof stocks held by type of business, balance current
maturity of loan by remaining life, balance ofloans by type of collateral secured, balance andpercentage distribution of loan by designated use,balance of loan by industry and its ratio to the total,and balance of amortization of loans.
8.	Risk management credits
Not applicable

Note:
Public & corporate bonds include government bonds, municipal bonds, andcorporate bonds.

Japan Earthquake Reinsurance Co., Ltd. Annual Report 2016

61

9.	
Present conditions of loans involving trust withcontact for replacement of losses
Not applicable

17. Detailed listing of liability reserves

10. Credits classified in accordance with debtor
classification
Not applicable

Balance asof the end of
fiscal 2013

11. Self-appraisal of assets
We categorize assets in accordance with the level ofrisk associated with collection and the level of riskof a loss in the value by carrying out self-appraisal
and individually examining holding assets. There
were no category assets (II through IV categories)
as of March 31, 2015.
12. Tangible fixed assets by category(Yen in millions)Year
Division

As of the endof fiscal 2013Land

As of the endof fiscal 2014

As of the endof fiscal 2015

–

–

–

for underwriting

–

–

–

for investment

–

–

–

31

28

27

for underwriting

31

28

27

for investment

–

–

–

Buildings

Construction in progress

–

–

–

for underwriting

–

–

–

for investment

–

–

–

Total of property

31

28

27

for underwriting

31

28

27

for investment

–

–

–

–

–

–

Other tangible fixed assets

Leased assets

52

62

39

Total

84

91

66

13. Unearned claims paid
Not applicable

As of the end of fiscal 2014
(Yen in millions)
Division

Reserve for ordinary
bad debts

–

–

–

–

Reserve for individual bad debts

–

–

–

–

Reserve for specificforeign securities

–

–

–

–

Reserve for retirement benefits

116

19

5

130

Reserve for directors’ retirement
benefits

18

3

0

22

Reserve for bonus
payments

20

21

20

21

Reserve for pricefluctuation
Total

–

5

26

180

Division

Balance asof the end of
fiscal 2014

Balance
Decrease
as of the end of
in fiscal 2015
fiscal 2015

Increase in
fiscal 2015

Reserve for ordinary
bad debts

–

–

–

–

Reserve for individual bad debts

–

–

–

–

Reserve for specificforeign securities

–

–

–

–

Reserve for retirement benefits

130

22

7

145

Reserve for directors’ retirement
benefits

22

4

17

8

Reserve for bonus
payments

21

21

21

21

Reserve for pricefluctuation

5

0

–

6

180

49

47

182

18. Detailed listing of shareholders’ equity
Please refer to the statement of changes in shareholders’ equity on page 60.
(Yen in millions)Year As of the end
Divisionof fiscal 2013

As of the endof fiscal 2014

As of the endof fiscal 2015

Outstanding claims

3,579

1,650

1,152

Underwriting reserves

499,274

556,727

627,345

Risk reserves

378,041

417,056

464,584

Unearned premium
reserves

119,727

139,671

162,760

1,505

–

–

502,854558,377

628,497

16. Level of underwriting reserves
There is no target contact.

62

0
45

(Yen in millions)15.	Underwriting funds

Repayment reserves

5161

As of the end of fiscal 2015Total

14. Special accountNot applicable

Total

Balance
Decrease
as of the end of
in fiscal 2014
fiscal 2014

Increase in
fiscal 2014

Japan Earthquake Reinsurance Co., Ltd. Annual Report 2016

7. D
 epreciation expenses by category

e Income and loss details

As of the end of fiscal 2014

1. Gains on sales of securities by category(Yen in millions)(Yen in millions)

Division

Fiscal Year

2013

2014

2015

Type of asset

Acquisition
cost

Government bonds

100–

Foreign securities

–

–

12

Tangible fixed assets

100

–

194

Buildings

Total

181

2. Losses on sales of securities by category(Yen in millions)

Division

Fiscal Year

2013

2014

2015

101

2

72

28

71.6

for
underwriting

101

2

72

28

71.6

for
investment

–

–

–

–

–

Other tangible
fixed assets

151

27

89

62

58.8

253

29

162

91

63.9

Government bonds

2

–

–

Total

Foreign securities

–

–

–

Intangible fixed assets

Total

2

–

–

3. Losses on valuation of securities
Not applicable
4. Gains on disposal of fixed assets
Not applicable

Software

415

67

249

165

60.1

Other
intangible
fixed assets

1

–

–

1

–

Total

416

67

249

167

59.9

Grand total

670

97

411

258

61.4

As of the end of fiscal 2015
(Yen in millions)

5. Losses on disposal of fixed assets

Type of asset(Yen in millions)

Division

Fiscal Year

2013

2014

2015

–

–

–

Buildings–––

Other tangible fixed assets

0

0

0

Total

0

0

0

6. Business expenses (inclusive of loss adjustment)(Yen in millions)Fiscal Year

Personnel expenses
Non personnel expenses
Taxes

2013

2014

Acquisition
cost

Rate of
Deprecia- Aggregated Balance as
aggregatedtion indeprecia- the end ofdepreciafiscal 2015
tions
fiscal 2015
tions %

Tangible fixed assets

Land

Division

Rate of
Deprecia- Aggregated Balance as
aggregatedtion indeprecia- the end ofdepreciafiscal 2014
tions
fiscal 2014
tions %

2015

496

417

404

2,773

2,037

1,527

249

293

331

Commissions and brokeragefees

40,411

43,31545,880Total

43,931

46,06348,144

Buildings

85

1

58

27

68.1

for
underwriting

85

1

58

27

68.1

for
investment

–

–

–

–

–

Other tangible
fixed assets

142

24

103

39

72.4

Total

228

25

161

66

70.8

Intangible fixed assets
Software

294

56

144

150

48.9

Other
intangible
fixed assets

1

–

–

1

–

Total

295

56

144

151

48.7

Grand total

524

82

305

218

58.3

Note:
Business expenses are the total of loss adjustment expense, operating,general and administrative expenses, commissions and brokerage fees
as shown in the income statement.

Japan Earthquake Reinsurance Co., Ltd. Annual Report 2016

63

(iv) Available-for-sale securities sold at the termr Information about fair values, etc.

(Yen in millions)

1. Matters related to financial instruments

Fiscal 2014

For matters related to the status of financial instruments and matters related to the fair values of financial instruments, please refer to Note 7 on thebalance sheet (page 56).

Sales
price

Total ofgains onsale

Total oflosseson sale

Sales
price

Total ofgains onsale

Total oflosseson salePublic &corporate
bonds

–

–

–

40,210181–

Stocks

–

–

–

–

–

–

Type

2. Securities(i) Securities held for trading purposes
Not applicable

Foreignsecurities

–

–

–

4,592

12

–

Others

–

–

–

–

–

–

Total

–

–

–

44,802

194–(ii) Securities to be held to maturity
Not applicable

3. Money trust
Not applicable(iii) Available-for-sale securities
At the end of fiscal 2014
Division

Securities whosecarrying amountexceeds their cost

Securities whosecarrying amount
does not exceed
their cost

(Yen in millions)Type

Acquisition
cost

Book value

Difference

Public &corporatebonds

152,926

155,186

2,259

–

–

–

StocksForeignsecurities

127,162

138,778–––

Subtotal

280,089

293,964

13,874

Public &corporatebonds

91,51691,446

(69)

–

–

–

5,780

5,623

(157)

OthersStocksForeignsecurities
Others113,991

113,991–

211,288

211,061(226)

491,378505,026

13,648At the end of fiscal 2015
Division

Securities whosecarrying amountexceeds their cost

Acquisition
cost

Book value

Difference

Public &corporatebonds

250,668

254,073

3,405

StocksOthersSecurities whosecarrying amount
does not exceed
their cost

Total

–

–

–

78,35883,798

5,440

–

–

–

Subtotal

329,026

337,872

8,846

Public &corporatebonds

38,17338,153

(20)

–

–

–

26,301

25,724(576)

StocksForeignsecurities

Contract amount1 year or
longerones

Type

Others

94,596

94,596–

Subtotal

159,071

158,475(596)

488,098496,347

8,249

Marketprice

Appraisal
profit andloss(5,568)Over-the-counter transactions Forward foreign exchange contracts  Short positions   US dollar

59,455–(5,568)   Euro28,159

–

1,543

1,543

(4,024)(4,024)Total

At the end of fiscal 2015

(Yen in millions)Contract amount1 year or
longerones

Type(Yen in millions)Type

Foreignsecurities

4. Derivative transactions(i) Derivative transactions to which hedge accounting is
not applied
Currency related
At the end of fiscal 2014
(Yen in millions)

11,615

Subtotal
Total

Marketprice

Appraisal
profit andloss

Over-the-counter transactions Forward foreign exchange contracts  Short positions   US dollar

60,484

–

4,148

4,148

   Euro20,366

–

1,132

1,132

5,280

5,280

Total

Notes:
1. Currency related derivative transactions other than the above areomitted as there is no applicable item.
2. Calculating a market price: Foreign exchange rates using forward exchange rate.

(ii) Derivative transactions to which hedge accounting
is applied
Not applicable

Note:
On the balance sheet, commercial paper treated as monetary receivablesbought is included in Other.

64

Fiscal 2015

Japan Earthquake Reinsurance Co., Ltd. Annual Report 2016

Contents

1

Message from the President

2

Special Feature
The Earthquake Insurance System and JER’s 50th Anniversary

14

Japan Earthquake Reinsurance Co., Ltd.

23

Topics24

Earthquake Insurance in Japan

31

Reinsurance of Earthquake Insurance

35

Response to the Great East Japan Earthquake

42

2016 Kumamoto Earthquakes

45

Statistics

48

Financial Section

65

Corporate Data

CORPORATE DATA (as of March 31, 2016)
Established:

May 30, 1966

Capital:1 billion yen

Total assets:

709.4 billion yen

Address:

Hulic Kobuna-cho Building,
8-1, Nihonbashi-kobuna-cho,
Chuo-ku, Tokyo Japan 103-0024

Phone:

03-3664-6078

URL:

http://www.nihonjishin.co.jp/

2016

ry
sa

5

th
YEARS

A niver