Contents

1

Message from the President

2Japan Earthquake Reinsurance Co., Ltd.

11

Topics13

Earthquake Insurance in Japan

20

Reinsurance of Earthquake Insurance

24

Response to the Great East Japan Earthquake

31

Statistics

34

Financial Section

51

Corporate Data

Corporate data (as of March 31, 2015)
Established:

May 30, 1966

Capital:1 billion yen

Total assets:

640.1 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 fromthe President

Chairman:

Yoshihiko Murase

President:

Masamichi Irie

I would like to take this opportunity to express my sincere gratitude to all our stakeholders for their continued support.
Japan Earthquake Reinsurance Co., Ltd. (JER) was founded with the launch of an earthquake insurance system in1966 as the only company in Japan permitted to exclusively handle reinsurance for earthquake insurance coveringdwelling risks. We have thus been involved in earthquake insurance for nearly half a century. During this time, wehave sought to make earthquake reinsurance payouts promptly and reliably in response to earthquakes, tsunamis andvolcanic eruptions that have occurred in Japan, including the Great Hanshin Awaji Earthquake and the Great East Japan
Earthquake. At the same time, JER has consistently paid close attention to managing and operating assets for futureearthquake reinsurance payouts, focusing primarily on asset liquidity and safety.
Observations in recent years suggest that the Japanese economy continues to recover moderately on the back of firm
personal consumption growth supported by steady improvements in employment and income conditions. In March
2016, it will be exactly five years since the Great East Japan Earthquake. Under these conditions, it is assumed that theJapanese government will maintain its policies aimed at speeding up reconstruction following the disaster, ensuring a
breakaway from deflation and pursuing economic recovery and financial reconstruction at the same time.
In the meantime, looking at the situation regarding disasters caused by earthquakes and volcanic eruptions, concerns
regarding volcanic eruptions are spreading throughout Japan as a result of the Nagano-ken Hokubu Earthquake andthe eruption of Mount Ontake in 2014, as well as the eruptions of mountains including Kuchinoerabujima Shindake,
Asama and Hakone since the beginning of this year. New developments in earthquake research have included theannouncement of the likelihood of an earthquake in the Kanto region within the next 30 years based on a regional
active fault assessment undertaken by the Headquarters for Earthquake Research Promotion under the Japanese
government in April 2015.
Under these circumstances, interest in earthquake insurance has continued to rise among Japanese citizens. This has
led to the number of in-force contracts reaching 16 million, the highest level on record.
This fiscal year, we launched our fourth medium-term business plan, “Strengthening Arrangements for Earthquake
Reinsurance Payouts.”
Under our third medium-term business plan, we have worked to develop a business continuity plan (BCP) andrelated systems to prepare for earthquakes, such as the feared inland earthquake in the Tokyo metropolitan area.
We will further our initiatives for increasing stakeholders’ trust through the reinforcement of our business continuity
management (BCM) in a bid to ensure our readiness for earthquake reinsurance payout, our most important mission.
We will also enhance our asset management capabilities and increase our capacity to deal with financial market
fluctuations under the tough management situation of extremely low interest rates. At the same time, we will address
new risk management processes for advancing integrated risk management. We will also enhance information security
measures and strengthen information technology (IT) management as part of our initiatives for stepping up for IT
governance system IT.
As an earthquake reinsurance specialist, we are committed to continuing to play an active role in enhancing anddeveloping the system of earthquake insurance covering dwelling risks through the sound operation of this system,
aiming to become a company that is completely trusted by our stakeholders.
We hope that we can rely on your continued support.

July 2015

Masamichi Irie
President
Japan Earthquake Reinsurance Co., Ltd.

Japan Earthquake Reinsurance Co., Ltd. Annual Report 2015

1

Japan earthquake
Reinsurance 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 highlights
Net premiums written

Assumed net premiums written(Yen in millions)

217,661

220,000
200,000

194,628(Yen in millions)

108,994

110,000
100,000
92,248180,000

90,000160,000

80,000140,000

70,0000
Fiscal Year

0
2013

2014

Fiscal Year

2013

2014

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)

50.0

5,000

40.0

4,000

30.0

3,000

20.0

18.7%

40

3,390

2,996

30

2,000
1,000

10.0
10.1%

2

50

20
7

4

0

0.0

0

Japan Earthquake Reinsurance Co., Ltd. Annual Report 2015
Fiscal Year

2013

2014

10

Fiscal Year
2013
2014
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)

217,661

220,000
194,628200,000

108,994

110,000
100,000
92,248180,000

90,000160,000

80,000Net premiums written

Assumed net premiums written

140,000(Yen in millions)

70,000(Yen in millions)

217,6610
220,000
Fiscal Year2013

200,000

194,628

2014

2013

2014

100,000
92,248Net unrealized gains on available-for-sale
90,000securities of earthquake insurance
and net unrealized gains on available-for-sale securities
80,000180,000
Net loss ratio

160,000

108,9940
110,000
Fiscal Year

(Yen in millions)

140,000
50.0

70,000
5,000

0
40.0
Fiscal Year2013

4,000 0Fiscal Year
2,996
3,000

2014

30.0
18.7%

20.0

Net loss ratio

10.0

10.1%
0.0
50.0
Fiscal Year

2013

2013

3,390

40
2014
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
7
4
(Yen in millions)
0
0
5,000
50
Fiscal Year
2013
2014
4,000 Net unrealized gains on available-for-sale securities 40
3,390
of earthquake insurance
2,996
3,000 Net unrealized gains on available-for-sale securities 30

2014

40.0
30.0

18.7%
Total assets and net assets
Breakdown of total assets
2,000
Non-consolidated solvency-margin ratio

20.0(Yen in millions)(Yen in millions)

10.0
800,000

Items

10.1%

1,000
4,000

(A) Total
0.0 amount of non-consolidated
640,137solvency-margin

Fiscal amount
Year
2013
577,305(B) Totalof non-consolidated 2014
risk
600,000

Non-consolidated solvency-margin ratio(A) / {1/2x(B)} x 100
400,000
1,544

1,543

0

Deposits

7

Others
FY201316,093

34,119381.9 billion yen

receivables bought

1,000

0
4,000
2013

577,305
Total assets

2014
640,137
Net assets

1,544

1,543

10

421.3 billion yen0

Securities

Foreignsecurities

Deposits

34,1193,000

OthersMonetaryreceivables bought

113,991

Government
bonds

181,570

Corporate bonds

62,170Call loans

2,000

144,401

16,09384,898400,000

FY2014
4

Breakdown of securities
391,034
Breakdown of total assets(Yen in millions)(Yen in millions)0800,000
Fiscal Year

20

Year
2014 billion yen
221.42013
billion yen
237.7
3,000 Fiscal
Call loans
Net unrealized gains on available-for-sale securities
84,898of earthquake
insurance
344.9%
354.5%
2,000
Monetary
Net unrealized gains on available-for-sale securities
113,991

Total assets and net assets

200,000

600,000

50

Municipal bonds

2,891
Securities

391,034

Breakdown of securities

1,000

200,000

Foreignsecurities

00

Fiscal Year

2013

2014

Total assets

Net assets

144,401

Government
bonds

181,570

Corporate bonds

62,170
Municipal bonds

2,891Japan Earthquake Reinsurance Co., Ltd. Annual Report 20153

Organization(As of April 1, 2015)
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, 2015)
Shareholder

4Japan Earthquake Reinsurance Co., Ltd. Annual Report 2015

Board Members (full-time)(As of July 1, 2015)
Post

Name

Chairman(representative director)

Yoshihiko Murase

President(representative director)

Masamichi Irie

Managing director(representative director)

Hiroyuki Fushimi

Managing director(representative director)

Shinji Okazaki

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 20155

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
The Task Force Against Earthquake Disaster conducted drills division by division from November 2014 to December 2014 to enhance the skills of JER employees in business execution andequipment operation at home and in a temporary office. The Task Force implemented drills
for establishing disaster response headquarters in the administrative and planning divisions
and carried out drills to ensure a workflow for reinsurance claim payments based on roughestimates in the operating divisions. In addition, the Task Force asked members of the financial divisions to buy and sell bonds and perform routines in a temporary office in an attempt
to increase the efficiency of the business continuity system.
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 2014 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.

6Japan Earthquake Reinsurance Co., Ltd. Annual Report 2015

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 20157

Corporate governanceWe 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 Arata in accordance with theCompanies Act.
In-house auditing
Apart from the audits conducted by corporate auditors under the Companies Act, the Audit
Division of JER conducts in-house audits.
The purpose of an in-house audit is to develop and establish an internal control system. Thisis done by conducting an audit to examine and evaluate various in-house systems and theexecution of various internal activities fairly and objectively from the standpoint of lawfulness
and rationality. It also requires the provision of the necessary advice and recommendations

8

Japan Earthquake Reinsurance Co., Ltd. Annual Report 2015

based on the examination and evaluation, contributing to the sound development of thecompany and building credibility in the community.
In fiscal 2015, based on the “In-house Audit Policy and Plan” adopted by resolution of theBoard of Directors, we will prioritize the evaluation of the administrative status of our programsfor educating and training personnel who are capable of supporting the development of IT
governance systems and the enhancement of corporate value.
We will also conduct regular audits of the internal control conditions of all divisions.
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 2015

9

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.

10

Japan Earthquake Reinsurance Co., Ltd. Annual Report 2015

Topics

Participation in Public Forums on Earthquake
Insurance at the Third UN World Conference on
Disaster Risk Reduction
We took part in public forums on earthquake insurance sponsored by the General Insurance
Association of Japan at the UN World Conference on Disaster Risk Reduction held in Sendai
City, Miyagi Prefecture in March 2015. The aim of the Conference was to facilitate disasterprevention initiatives around the world by holding sessions with concerned parties from Japanand overseas to share the experiences gained and lessons learned by the city of Sendai andthe surrounding Tohoku region through the Great East Japan Earthquake, as well as postearthquake initiatives for disaster prevention and community reconstruction.
At the World Conference Venue, we exhibited panels introducing the way earthquake reinsurance works, the reinsurance payments made, and the history of earthquake insurance
systems. We also distributed a brochure containing the same information to the people who
visited the venue.

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 2014, JER employees delivered lectures
at a seminar of the Insurance Institute of Keio University in September. They reported on theroles we played in the aftermath of the Great East Japan Earthquake after explaining how weare positioned and the functions we perform in Japan’s earthquake insurance system.
In October, we dispatched employees to lectures at Seijo University’s Department of Economics and Management. They used diagrams to provide explanations to students taking a course
on insurance theory, including an outline of the earthquake insurance system and the way
reinsurance works.
We will actively disseminate information on the earthquake insurance system by dispatchinglecturers and the like during this fiscal year too.

Participation in the World Forum of Catastrophe Programs
Representatives from 15 countries and regions have been operating the World Forum of Catastrophe Programs as a platform for public institutions that operate insurance schemes forearthquakes and other natural disasters to share knowledge and exchange information witheach other. The Ninth Conference of the World Forum of Catastrophe Programs was held in
Christchurch, New Zealand in September 2014. The city of Christchurch was struck by theCanterbury Earthquake on February 22, 2011. At the Conference, our representatives shared
the state of the disaster and the state of the subsequent community reconstruction with theircounterparts from other countries and regions based on visits they made to the stricken areas
and the Canterbury Earthquake Recovery Authority (CERA, equivalent to the Reconstruction
Agency in Japan), as well as giving presentations on the systems used in the respective countries. Our representatives explained the state of affairs in Japan three and a half years after
the Great East Japan Earthquake, the details of follow-up meetings organized by a Ministry

Japan Earthquake Reinsurance Co., Ltd. Annual Report 201511

of Finance project team on the earthquake insurance system, and the earthquake insurance
premium revisions undertaken in July 2014.
Through its participation in the World Forum of Catastrophe Programs, JER is actively disseminating information overseas.

Participation in the TREIF Natural Catastrophe
Conference
A JER representative was invited to attend the Natural Catastrophe Conference, which wassponsored by the Taiwan Residential Earthquake Insurance Fund (TREIF) in Taiwan in October
2014, as a guest speaker.
Representatives of parties involved in earthquake insurance, insurance companies and competent authorities in the respective countries that administer earthquake insurance and otherinsurance schemes for natural disasters and the like took part in the TREIF Natural Catastrophe Conference. The JER representative lectured the participants on the details of the earthquake insurance system in Japan and the problems with the system. At the ensuing panel
discussion, the JER representative explained various points, including the reasons for prompt
insurance payments after the Great East Japan Earthquake and the reasons against using the
global reinsurance market, taking the present state of the system into consideration.

Participation in the Follow-up Meetings by the Project
Team on the Earthquake Insurance System
The Project Team on the Earthquake Insurance System (PT) resumed its follow-up meetings
in February 2015. JER has been taking part in the PT as an observer with parties such as theGeneral Insurance Association of Japan.
Established within the Ministry of Finance in April 2012, the PT examined the aspects of theearthquake insurance system that require reconsideration, taking into account experiences
and lessons gained through the Great East Japan Earthquake. The PT published a report on
the outcome of the investigations it made in November 2012. In the subsequent period, thePT organized follow-up meetings to confirm the status of initiatives taken to address problems with the system that were addressed in the report.
Official website for the Ministry of Finance:
https://www.mof.go.jp/about_mof/councils/jisinpt_fu/index.html

12Japan Earthquake Reinsurance Co., Ltd. Annual Report 2015

EARTHQUAKE INSURANCE
IN japan

Establishing the earthquake
insurance 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 earthquake
insurance 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.

Japan Earthquake Reinsurance Co., Ltd. Annual Report 201513

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.

14

Japan Earthquake Reinsurance Co., Ltd. Annual Report 2015

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.

Japan Earthquake Reinsurance Co., Ltd. Annual Report 201515

Limit of total amount of insurance claims to be paid
Limit of total amount of insurance claims to be paid* is limited to 7,000 billion yen as revisedin April 1, 2014 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 22 for the details.)
In the event the total amount of insurance claims payable exceeds the limit, law allows 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 22 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.

16

Japan Earthquake Reinsurance Co., Ltd. Annual Report 2015

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

Non
woodenPrefecture

WoodenWooden(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

20,20032,60026,20024,40015,30017,600Japan Earthquake Reinsurance Co., Ltd. Annual Report 201517

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.

18

Japan Earthquake Reinsurance Co., Ltd. Annual Report 2015

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

Earthquake insurance
premium ratex

(1,000 yen)

–

10%)

=

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

1.49

Earthquake
amount insured=

Discount rate

1.65

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.
Japan Earthquake Reinsurance Co., Ltd. Annual Report 2015

19

Reinsurance of earthquake
INSURANCE

Mechanism 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 claims
The 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.

20

Japan Earthquake Reinsurance Co., Ltd. Annual Report 2015

Flowchart of reinsurance
To 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)

Retaining of risks

Treaty C

Treaty B

Retrocession

Retrocession(Retrocession
premiums)(Retrocession
premiums)

Government(Earthquake reinsurance special account)

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 201521

Insurance liabilities held by JER,
non-life insurance companies andthe 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 7.0 trillion yen. This is the reinsurance scheme that shows how JER, non-life insurance companies and the government shareand 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, 2014)
Small

Amount of damage per earthquake, etc.

Large

(Payable insurance claims)
Up to
100 billion yen

Up to163.6 billion yen

Up to362.0 billion yen

131.0 billion

Up to approx.
1,431.9 billion yen

50%

Approx. 99.5%

6,607.6 billion

100 billion
31.8
billion1st layer
JER

7 trillion yen

50%
4.9 billion

99.2 billion

Approx. 0.5%

3rd layer

2nd layer
Non-life insurance companies

25.5 billion

The government

Liability limit
JER
Non-life insurance companies
The government

224.7 billion yen
36.7 billion yen
6,738.6 billion yen

JER pays insurance claims up to 100 billion yen (1st layer) per earthquake, etc. The governmentand others (non-life insurance companies and JER) share equally insurance claims for the
portion exceeding 100 billion yen, up to 362 billion yen (2nd layer). The government pays amajority of insurance claims (approximately 99.5%) for the portion exceeding 362 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 to be paid by non-insurancecompanies 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.

22

Japan Earthquake Reinsurance Co., Ltd. Annual Report 2015

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
100 billion yen

Portion over
100 billion yen,
and up to362 billion yen

100.0

131.0

About 8.2

About 239.2

—

131.0

About 1,629.8

About 1,760.8

100.0

262.0

1,638.0

2,000.0

Claims paid

A person of burden

Non-life insurancecompanies
The government
Total

Portion over
362 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 20 1 4JER 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

417.0 billion yen
74.7 billion yen
1,193.4 billion yen

Total

1,685.1 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 2014 is approved by the Diet.

Japan Earthquake Reinsurance Co., Ltd. Annual Report 201523

Response to
the Great East Japan earthquake

At 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 10
7
6-uppera.m., July 3, 2015) is as follows.
6-lower

24

Maximum seismic intensity

No. ofaftershocks

6-upper26-lower2

5-upper17

5-lower

47

4

274

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 2015

Summary of damage (as of March 9, 2015)(i) Casualties:
Death:
19,225 people
Missing:
2,614 people
Injured:6,219 people(ii) Residential damage:
Total collapse:
127,830 houses
Half collapse:
275,807 houses
Partially collapse: 766,671 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. 151)” 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.

Japan Earthquake Reinsurance Co., Ltd. Annual Report 201525

(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
payoutFinancial backup

26

Japan Earthquake Reinsurance Co., Ltd. Annual Report 2015

Early

Policyholders, reconstruction
etc.

of a steady living

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.

Japan Earthquake Reinsurance Co., Ltd. Annual Report 201527

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(Liability)

Non-life insurance companies Approximately 690.1 billion yen
The government

Approximately 575.1 billion yen

Liability limit

28

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 2015

5%

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

50%

115
billion378 billion

5.5 trillion yen

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 22 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

TohokuRegionNo. of policies

Reinsurance claims (million yen)

Hokkaido
Aomori
Iwate
Miyagi
Akita
Yamagata
Fukushima
Subtotal

1,532
8,314
26,744
244,548
2,289
4,023
75,743361,661

1,723
5,266
57,713556,886
1,278
3,157
159,123
783,427

Japan Earthquake Reinsurance Co., Ltd. Annual Report 201529

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.

30

Japan Earthquake Reinsurance Co., Ltd. Annual Report 2015

Statistics

Reinsurance claims paid in fiscal 201 4
Reinsurance claims paid in fiscal 2014 amounted to 13.2 billion yen, including earthquake reinsurance claims paid to cover the 2011 off the Pacific coast of Tohoku Earthquake. In termsof numbers, 19,361 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. Iyonada

March 11, 2011

Magnitude

No. ofpolicies

9.0

10,729

Reinsurance
claims paid
(million yen)
7,447

March 14, 2014

6.2

3,230

1,955

3. Nagano-ken Hokubu

November 22, 2014

6.7

1,505

1,335

4. Ibaraki-ken Nanbu

September 16, 2014

5.6

1,413

865

5. Izu Oshima Kinkai

May 5, 2014

6.0

448

328

Other earthquakes

—

—

2,036

1,353

Total

—

—

19,361

13,287

The percentage of households purchasing earthquake
insurance in areas at risk of major earthquakes(As of March 31, 2015)
No. ofhouseholds (A)(1,000households)

Great Kanto

25,204

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

8,379

33.2

Nearly 0%–5%17,790

6,039

33.9

About 70%

42,97913,361

31.1

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 201531

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, 2015)
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

793,760

1,265,359

2. Hyogo-ken Nanbu

January 17, 1995

7.3

65,42778,346

3. Miyagi-ken-oki

April 7, 2011

7.2

30,98532,371

4. Fukuoka-ken Seiho-oki

March 20, 2005

7.0

22,058

16,9695. 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

7,864

8,247

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

9,477

5,142

12. Shizuoka-ken Tobu

March 15, 2011

6.4

5,252

4,600

13. Iwate-ken Engan Hokubu

July 24, 2008

6.8

7,754

3,972

14. Fukushima-ken Hamadori

April 11, 2011

7.0

2,357

3,669

15. Nagano-ken Chubu

June 30, 2011

5.4

2,957

3,302

16. Tottori-ken Seibu

October 6, 2000

7.3

4,078

2,868

17. Noto Hanto

March 25, 2007

6.9

3,306

2,732

18. Awajishima fukin

April 13, 2013

6.3

2,865

2,283

19. Miyagi-ken Hokubu

July 26, 2003

6.4

2,543

2,172

20. Tokachi-chiho Nanbu

February 2, 2013

6.5

4,013

2,054

9. Tokachi-oki

Note 1: After the 2011 Great East Japan Earthquake, in accordance with our reinsurance scheme at the time, the government paid 575,179 million yen and private non-life insurance companies paid 690,179 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.

32

Japan Earthquake Reinsurance Co., Ltd. Annual Report 2015

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 201533

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.

34

Japan Earthquake Reinsurance Co., Ltd. Annual Report 2015

Financial review
Business development, results, etc.
During fiscal 2014, the Japanese economy showed a temporary decline attributable to the consumption tax increase. However, the economy then took a turn toward a moderate recovery under the large-scale monetary easing
policy of the Japanese government and the Bank of Japan. Personal spending supported by low crude oil prices
and improved employment conditions contributed to this upswing, together with increased exports on the backof the yen’s depreciation.
The number of in-force earthquake insurance contracts and earthquake insurance premiums grew from the previous fiscal year due to the impact of new contracts associated with housing purchases ahead of the consumption tax increase in April and premium rate revisions in July. Earthquake insurance payouts and loss adjustment
expenses decreased substantially from the previous fiscal year, reflecting steps taken toward the resolution of
insurance payouts for the Great East Japan Earthquake in 2011.
Looking at asset management, earnings from investments fell far 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, during fiscal 2014, which was the final year of our third medium-term business plan, we
steadily implemented initiatives with a focus on those aimed at strengthening our business continuity plan basedon the damage predicted to be caused by an inland earthquake in the Tokyo metropolitan area. In each of thethree years under the third medium-term business plan, we worked steadily to advance measures, concentrating on those for preparing for massive, consecutive earthquakes. Upon completing our business plan, we hadachieved almost all of its targets.
vestments, was added to the risk reserves of direct
insurance companies recorded as entrusted reserves.
Summary of earthquake insurance results
The risk reserves of direct insurance companies at① Net premiums written and net claims paid
the end of the fiscal year under review came to 74.7
In the fiscal year under review, the number of in-force
billion yen (up 3.0% year on year) as a result of theinsurance contracts and premiums written increased
withdrawal of advertising and publicity expenses of 1
and the government’s share of reinsurance decreased
billion yen.
after revisions to the reinsurance scheme. As a result,net premiums written rose sharply to 108.9 billion yen
Outline of investments(up 18.2% year on year).
Medium- to long-term domestic interest rates reMeanwhile, net claims paid came to 9.5 billion yen
mained low due to the Bank of Japan’s sustained(down 36.3% year on year), reflecting factors such aspolicy of quantitative and qualitative monetary easing.
the Great East Japan Earthquake in 2011.
Additional monetary easing through an asset purchase
expansion announced by the Bank of Japan in October② Risk reserves and underwriting reserves
added momentum to the interest rate decline.
Risk reserves added totaled 48.4 billion yen (up 17.1%
Looking at exchange rates, the yen weakened against
year on year), consisting of net premiums written of
the US dollar, reflecting differences in the monetary
46.8 billion yen, calculated by deducting assumed repolicies of Japan, where easy money continued, andinsurance commissions from net premiums written,
the United States, which aimed to tighten credit.
and gains on investments of 1.5 billion yen.
Meanwhile, the yen strengthened against the euro due
Risk reserves at the end of the fiscal year under review
to additional monetary easing by the European Cencame to 417 billion yen (up 10.3% year on year) as
tral Bank. In these circumstances, we invested in asa result of the reversal of the provision for outstandsets with the top priority placed on safety and liquiding claims of 1.9 billion yen to risk reserves and theity, followed by profitability. As a result, pre-tax profits
withdrawal from the reserves in the past year of net
from investments amounted to 1.5 billion yen in theclaims paid of 9.5 billion yen as stated above, loss asbusiness account and 0.2 billion yen in the entrusted
sessment expenses of 1.4 billion yen, and advertisingreserves account. Consequently, investment assets toand publicity expenses of 0.3 billion yen.
taled 624 billion yen at the end of the fiscal year under
Underwriting reserves at the end of the fiscal year unreview.
der review amounted to 556.7 billion yen (up 11.5%
year on year) as a result of the addition of unearned
Profit and loss for the fiscal year under review
premium reserves to the risk reserves stated above.
Net income for the fiscal year under review totaled 3
Repayment reserves were transferred to risk reserves
million yen after the addition or deduction of otherwith the expiration of monthly premium earthquake
items to or from interest and dividends received, andinsurance contracts in fiscal 2014.
the deduction of corporate and resident taxes.
③ Risk reserves of direct insurance companies
A total of 4.3 billion yen (down 6.4% year on year),consisting of net premiums written and gains on in-Japan Earthquake Reinsurance Co., Ltd. Annual Report 201535

Indicators showing the main resultsover the last five fiscal years(Yen in millions)Fiscal Year

Division

2010

2011

2012

2013

2014

Net premiums written
Percentage change over the previous term

71,532(1.0%)

83,671
17.0%

92,996
11.1%

92,248(0.8%)

108,994
18.2%

Net claims paid
Percentage change over the previous term

1,033
(81.4%)

196,625
18,927.3%

31,607(83.9%)

15,010(52.5%)

9,563(36.3%)

Ordinary income
Percentage change over the previous term

175,903
76.9%

286,81263.1%

110,370(61.5%)

104,703(5.1%)

119,822
14.4%

Ordinary expenses
Percentage change over the previous term

174,91377.6%

286,723
63.9%

110,176(61.6%)

104,509(5.1%)

119,818
14.6%

Ordinary profit
Percentage change over the previous term

990
4.1%

89
(91.0%)

193
117.5%

194
0.3%

3(98.2%)Net income (loss)
Percentage change over the previous term

3
(30.2%)(5)(239.9%)4–(82)(2,045.2%)

3
–

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

1,634

1,631

1,633

1,544

1,543

Total assets

1,154,108

509,498

536,808

577,305

640,137

Underwriting reserves
Percentage change over the previous term

515,981(11.9%)

430,700(16.5%)

461,480
7.1%

499,2748.2%

556,727
11.5%

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

424,401(14.6%)

331,499(21.9%)

352,830
6.4%

378,0417.1%

417,056
10.3%

Loans
Percentage change over the previous term

–
–

–
–

–
–

–
–

–
–

Securities
Percentage change over the previous term

805,223(20.0%)

448,120(44.3%)

476,979
6.4%

525,161
10.1%

391,034(25.5%)

Non-consolidated solvency-margin ratio

124.7%

120.8%

160.0%

344.9%

354.5%

Dividend propensity

–

–

–

–

–

No. of employees

25

26

27

26

29

Note:
For a stricter risk measurement, revised laws and regulations concerning the calculation of the non-consolidated solvency-margin ratio have been applied since fiscal 2011. 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 40.

Summary of operations
Item: earthquake

q Indicators relating to insurance underwriting
1. Net premiums written(Yen in millions)

Division

Fiscal Year

2012

2013

2014

Premiums written

185,568

197,919

222,014Return premiums

2,642

3,271

4,341

Assumed net premiums
written (A)182,895

194,628

217,661

Reinsurance premiums
ceded (B)89,899102,379

108,666

Net premiums written (A – B)

92,99692,248108,994

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.

36

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

Fiscal Year

2012

2013

2014

100%

100%

100%

2012

2013

2014

Assumed net claims paid (A)55,88322,014

13,287

Reinsurance claims
recovered (B)24,276

7,003

3,723

Net claims paid (A – B)

31,60715,0109,563

Domestic contract

3. Net claims paid
(Yen in millions)

Division

Fiscal Year

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

Japan Earthquake Reinsurance Co., Ltd. Annual Report 2015

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

Division

Fiscal Year

2012

2013

39.2%

18.7%

10.1%

38,867

41,13444,026 Insurance related operating,general and administrative
expenses725

722 Commissions and brokeragefees

38,14140,411

Net loss ratio
Underwriting expenses

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

2014
Fiscal Year

2012

2013

2014

13

11

10

710

No. of reinsurersthat ceded insurance
contracts

43,315Rate of top fivereinsurers’ ceded
insurance premiums

81.9%

81.9%

90.4%

Net expense ratio

41.8%

44.6%

40.4%

Combined ratio

81.0%

63.3%

50.5%

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

2012

2013

2014

Underwriting income

106,333

96,358112,468

Underwriting expenses

105,420

95,447111,757
710

Operating and generaladministrative expenses

725

722

Other income and expenses

(186)

(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 201537

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

2012
Yield (%)

Division

As of the end of
fiscal 2012

As of the end of
fiscal 2013

Percentage
distribution(%)

Division

Percentage
distribution(%)

Yield (%)

32

0.18

23

0.09

28

0.10

8

0.05

7

0.04

23

0.03

Monetaryreceivablesbought

–

–

–

–

15

0.10

–

–

–

–

–

–

4,549

0.96

3,248

0.66

2,642

0.59

Buildings

As of the end of
fiscal 2014

Yield (%)

Call loans

Securities(Yen in millions)

Year

2014

Deposits

Money trusts

2. Total assets and investments assets

2013

Total

–

–

–

–

–

–

4,589

0.90

3,279

0.61

2,710

0.47

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

25,9384.8

23,892

4.1

34,1195.3

Call loans

21,137

3.9

14,634

2.5

84,898

13.3

Monetaryreceivablesbought–––– 113,991

17.8

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

476,97988.9

525,161

91.0

391,034

61.1

Buildings

33

0.0

31

0.0

28

0.0

Total ofinvestments
assets524,08897.6

563,71997.6

624,072

97.5

Total assets

536,808

100.0

577,305

100.0

640,137

100.0

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

Division

Amount ofnumerator

Deposits

32

2012
Amount ofdenominator
17,63623

2013
Amount ofdenominator
24,974

Call loans

818,0670.05

719,3850.04

2377,0580.03

Monetary receivables bought

–

–

–

–

–

–

15

15,5130.10

Money trusts

–

–

–

–

–

–

–

–

–

4,548

473,767

0.96

3,346

490,629

0.68

2,642

450,256

0.59

1,711

325,550

0.53

1,054

356,6490.30

791

312,640

0.25

–

–

–

–

–

–

–

–

–

2,837

148,217

1.91

2,292

133,980

1.71

1,850

137,615

1.34–

Fiscal Year

Securities
Public and corporate bonds
StocksForeign securities
Other securities

Yield onworking
assets (%)
0.18

Amount ofnumerator

Yield onworking
assets (%)
0.09

Amount ofnumerator
28

2014
Amount ofdenominator
29,824

Yield onworking
assets (%)
0.10

–

–

–

–

–

–

–

–

Loans

–

–

–

–

–

–

–

–

–

Buildings

–

35

–

–

33

–

–

31

–

Derivatives(2,836)––(7,336)––(6,447)––

Others

2,783

–

–

7,691

–

–

6,153

–

–

Total

4,536

509,507

0.89

3,731

535,023

0.70

2,416

572,684

0.42

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.

38

Japan Earthquake Reinsurance Co., Ltd. Annual Report 2015

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

Division

Amount ofnumerator

Deposits

32

2012
Amount ofdenominator
17,63623

2013
Amount ofdenominator
24,97428

2014
Amount ofdenominator
29,824

Call loans

818,0670.05

719,3850.04

2377,0580.03

Monetary receivables bought

–

–

–

–

–

–

15

15,5130.10

Money trusts

–

–

–

–

–

–

–

–

–

4,067

478,421

0.85

2,182

494,802

0.44

3,030

453,264

0.67

1,666

327,4800.51

898

358,533

0.25

1,253

314,369

0.40

–

–

–

–

–

–

–

–

–

2,401

150,940

1.59

1,284

136,268

0.94

1,777

138,895

1.28

Fiscal Year

Securities
Public and corporate bonds
StocksForeign securities
Other securities

Yield onworking
assets (%)
0.18

Amount ofnumerator

Yield onworking
assets (%)
0.09

Amount ofnumerator

Yield onworking
assets (%)
0.10

–

–

–

–

–

–

–

–

–

Loans

–

–

–

–

–

–

–

–

–

Buildings

–

35

–

–

33

–

–

31

–

Derivatives(2,836)––(7,336)––(6,447)––

Others

2,783

–

–

7,691

–

–

6,153

–

–

Total

4,055

514,160

0.79

2,567

539,196

0.48

2,804

575,693

0.49

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 2012

As of the end of fiscal 2013

As of the end of fiscal 2014

Percentage
distribution(%)

Percentage
distribution(%)

Percentage
distribution(%)

Division
Foreign currency denominatedForeign public and corporate bonds

36,34728.2

70,35749.7

93,63864.8

Yen denominatedForeign public and corporate bonds
Total

92,494

71.8

71,16450.3

50,76335.2

128,842100.0

141,522100.0

144,401

100.0

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

1.91%

1.71%

1.34%

Assets management (realized yield)

1.91%

1.71%

1.34%

Market-price based overall yield (for reference)

1.59%

0.94%

1.28%

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 201539

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-margin

381,954421,385

1,536

1,539

Price fluctuation reserves

55

Risk reserves––

378,041

417,056

Common stock, etc.

Catastrophe reserves
Reserves for ordinary bad debts

(A)

–

–

2,370

2,783

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––

221,459

237,717

General underwriting risk (RI)––

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

Anticipated rate of return risk (R3)––

11,017

8,355

Unrealized gain / loss on available-for-salesecurities (prior to tax effect deductions)

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 2013 fiscal 2014

Management risk (R5)

4,342

4,661

Catastrophe risk (R6)

206,100

224,700

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

344.9%

354.5%

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.

40

[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 2015

ACCOUNTING CONCEPTS(NET ASSETS)

q Financial statements(Yen in millions)2013(As of March
31, 2014)

2014(As of March
31, 2015)

Item

AmountAmountCommon stock

1,000

1,000

542

545



Fiscal Year

1. Balance sheets(ASSETS)

(Yen in millions)2013(As of March
31, 2014)

2014(As of March
31, 2015)

Item

AmountAmount Other legal reserve of retained earnings

Cash and deposits
Deposits

23,892
23,892

34,11934,119  Special reserves

17

17

Call loans

14,63484,898  Special price fluctuation reserves

39

39

–

113,991  Retained earnings carried forward

484

487

525,161
378,735–
4,904
141,522391,034
181,570
2,891
62,170144,401

Tangible fixed assets
Buildings Other tangible fixed assets

84
31
52

91
28
62

Intangible fixed assets
Software Other intangible fixed assets

158
156
1

167
165
1

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

13,375
11,519
–
1,690
47
61
55

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

Total assets

577,305

640,137



Fiscal Year

Monetary receivables bought
Securities
Government bonds
Municipal bonds
Corporate bonds
Foreign securities(LIABILITIES)
(Yen in millions)Fiscal Year

Item

2013
(As of March
31, 2014)

2014(As of March
31, 2015)

AmountAmountUnderwriting funds
Outstanding claims
Underwriting reserves

502,8543,579
499,274

558,377
1,650
556,727

Entrusted reserves

59,24363,012Other liabilities
Reinsurance accounts payable
Income taxes payable
Deposits payable
Accrued amounts payable
Derivatives

10,502
7,636
214
3
128
2,518

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

Reserve for retirement benefits

116

130

Reserve for directors’ retirement benefits

18

22

Reserve for bonus payments

20

21

Reserves under the special law
Reserve for price fluctuation

5
5

5
5

2,996

3,390

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

3

1

575,761

638,593

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

541

544

(5)

(5)

1,536

1,539

7

4

7

4

1,544

1,543

577,305

640,137

Notes for fiscal 2014
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 2015

41

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.

42

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 in preparation
for reinsurance payouts. We manage assets byattaching top priority to liquidity and safety andgiving additional consideration to profitability. It
is our policy to engage in derivatives trading or
forward exchange contracts to reduce the market
risks of foreign-currency receivables associatedwith 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 a regular 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, 2015.
(Yen in millions)

Balancesheet
amountFair value

Difference(i) Cash and deposits

34,11934,119–(ii) Call loans

84,89884,898–(iii) Monetary receivablesbought

113,991

113,991–(iv) Securities
Available-for-sale securities

391,034

391,034–

Total assets

624,043624,043–(v) Derivatives* to which
hedge accounting is notapplied(4,024)(4,024)–

Derivatives total(4,024)(4,024)–* 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 2015

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 162 million yen.

14. Net assets per share are 776.41 yen. The basis forthis calculation is that net assets are 1,543 million yen, net assets accrued from ordinary sharesare 1,543 million yen and the number of ordinary
shares at the end of the term is 1.988 million.
15. No events that could significantly affect assets orincome or loss for the next fiscal years and beyond
have taken place since the last day of the fiscal
year under review.
16. Each amount is rounded down to the nearest whole
unit.

11. S
 ee below for a breakdown of outstanding claims.
(Yen in millions)

Outstanding claims (before the deduction ofoutstanding reinsurance claims)

2,458

Outstanding reinsurance claims related to theabove claims

808

Net outstanding claims

1,650

12. Total deferred tax assets amount to 174 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 73 million yen, a reserve for retirement benefits of 37 million yen, unpaid business taxes of 27 million yen and unpaid special
local corporate tax of 20 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, 2015 as a result of the promulgation of the Act on Partial Revision of the Income Tax Act, Etc. (Act No. 9 of 2015)
on March 31, 2015.
	With this change, the legal effective tax rate used
for calculating deferred tax assets and deferred tax
liabilities related to temporary differences and thelike expected for resolution in or after the fiscal year
commencing on April 1, 2015 fell from the previous
level of 30.78% to 28.85%. Deferred tax liabilities
decreased less than 1 million yen as a result of thistax rate change. The tax cut produced no effect on
net income.

Japan Earthquake Reinsurance Co., Ltd. Annual Report 201543

2. Statements of income(Yen in millions)

Fiscal Year

2013

2014

(from April 1, 2013
to March 31, 2014)(from April 1, 2014
to March 31, 2015)

Item

AmountOrdinary income

Notes for fiscal 2014
1. See below for a breakdown of net premiums written.
(Yen in millions)

Premiums written:

217,661

AmountReinsurance premiums ceded:

108,666

104,703

119,822

Net premiums written:

108,994

Underwriting income

96,358112,468   Net premiums written

92,248108,994  Investment income on savings
premiums

2,761

1,544

  Reversal of outstanding claims

1,348

1,929

Investment income

8,339

7,353

   Interest and dividend income

3,279

2,710

   Gains on sales of securities

100

–

7,712

6,180

8

7

(2,761)(1,544)

60   Foreign exchange gains   Other investment income  Transfer of investment income on
savings premiums
Other ordinary income
Ordinary expenses

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

Claims paid:

13,287

Reinsurance claims recovered:

3,723

Net claims paid:

9,563

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)

104,509

119,818

95,447111,757   Net claims paid

15,0109,563   Loss adjustment expenses

2,230

1,425

Provision of outstanding reinsurance claims
related to the above claims  Commissions and brokerage fees

40,411

43,315

Net provision of outstanding claims   Provision of underwriting reserves

37,79457,453

7,368

6,481

2

–

7,336

6,447

29

34

1,289

1,322

404

257

Monetary receivables bought:  Interest paid

404

257

Securities:

2,642

Ordinary profit

194

3

Total:

2,710

0

0

Losses on disposal fixed assets

00Provision of price fluctuation reserves00Underwriting expenses

Investment expenses   Losses on sales of securities  Losses on derivatives   Other investment expenses Operating, general and administrative
expenses
Other ordinary expenses

Extraordinary losses

Net income before income taxes

194

3

Income taxes

184

0

Deferred income taxes

92–

Total income taxes

277

0

Net income (loss)

(82)

3

(2,685)(756)(1,929)

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

Deposits:

28

Call loans:

23
15

5. Paper profit/loss involved in the losses on derivatives
is a loss of 4,024 million yen.
6. Net
income per share is 1.53 yen.
The basis for this calculation is such that net income is 3 million yen, net income accrued from
common stocks is 3 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 term
is 30.78%, and the corporate tax burden after applying the tax effect is 8.69%. The difference is
explained by the following breakdown: valuation reserve 2,970.25%, the amount of the write-off carried from publicity expenses related to risk reserves(3,009.11%).
8. Each amount is rounded down to the nearest whole
unit.

44

Japan Earthquake Reinsurance Co., Ltd. Annual Report 2015

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

Fiscal Year

Item

2013

2014

(from April 1, 2013
to March 31, 2014)(from April 1, 2014
to March 31, 2015)

AmountAmountNotes for fiscal 2014
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

194(As of March
31, 2014)(As of March
31, 2015)

Cash and deposits

23,892

34,119Call loans

14,63484,898–113,991

3

134

97

Increase (decrease) in outstanding
claims(1,348)(1,929)

Increase (decrease) in underwriting
reserves

37,794

Monetary receivables bought
57,453

Securities

525,161

391,034

4,115

3,769

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

Increase (decrease) in reserve forretirement benefits

(4)

14

–

(19,997)

Increase (decrease) in reserve fordirectors’ retirement benefits

43(525,161)(391,034)

27,526

202,011

Increase (decrease) in reserve forbonus payments(0)1

Increase (decrease) in reserve forprice fluctuation

00(3,279)(2,710)

Increase (decrease) in entrusted
reserves

Interest and dividend income
Losses (gains) on investment insecurities

(98)

–

Foreign exchange losses (gains)(6,790)(5,906)

Losses (gains) on tangible fixed
assets00Decrease (increase) in other assets(other than investment and financial
activities related)(1,104)(1,198)

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

1,272

99

Others404

1,606   Subtotal

31,29451,304

Interest and dividends received

4,088

4,483

Income taxes paid

(130)

(92)

35,252

55,694–(19,995)

Purchase of securities(628,856)(633,191)

Proceeds from sales and redemptionof securities

585,053772,089

Net cash provided by operating activities

Monetary receivables bought other thancash equivalents
Securities other than cash equivalent
Cash and cash equivalents

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 receivablesboughtOthers28–    Total investment assets activities(43,774)

118,903    Total operating activities and   investment assets activities(8,522)

174,598

Acquisition of tangible fixed assets

(0)

(36)

Others(25)(76)(43,801)

118,790

Cash flow in financing activities–– ffect of exchange rate changes on cashEand cash equivalents

Net cash provided by investing activities––

 et increase (decrease) in cash andNcash equivalents(8,548)

174,485

Cash and cash equivalents at the
beginning of the year

36,07527,526

Cash and cash equivalents at the endof the year

27,526

202,011

Japan Earthquake Reinsurance Co., Ltd. Annual Report 201545

4. Statement of Changes in Shareholders’ Equity
Fiscal 2013 (from April 1, 2013 to March 31, 2014)(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

567

625

(82)

(82)

Treasury
stock

Total
shareholders’equity

(5)

Net
Total
unrealized
valuation
gains onandavailabletranslation
for-saleadjustments
securities

1,619

13

13

Total net
assets1,633

Changes during
the period
Net income(loss)(82)(82)

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

1,000

1

17

39

(82)

(82)

484

542

(5)

(5)

(5)

(5)

(82)

(5)

(5)

(88)

1,536

7

7

1,544

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
Total
retainedearnings

Specialreserves

Specialprice
fluctuation
reserves

Retainedearnings
carriedforward

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

Notes for fiscal 2014
1. Matters related to the types and total number ofstocks outstanding and the types and number oftreasury stock(Stock)Issuedstock
Treasury
stock

(3)

(3)

3

(3)

(3)

(0)

1,539

4

4

1,543

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

Fiscal Year

Dividend per share
Net income (loss) per share

2012

2013

2014

–

–

–

2.14 yen(41.63 yen)

1.53 yen

Balance asof the endof fiscal
2013

Increase in
fiscal 2014

Decrease in
fiscal 2014

Balance asof the endof fiscal
2014

Dividend propensity

–

–

–

Net assets per share

821.18 yen

776.66 yen

776.41 yen

19,881

22,20422,073

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.

46

(5)

(3)

Japan Earthquake Reinsurance Co., Ltd. Annual Report 2015

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

As of the end of fiscal 2013
1.	Deposits(Yen in millions)Year
Division

As of the endof fiscal 2012

As of the endof fiscal 2013

As of the endof fiscal 2014

25,93823,892

34,119Ordinary deposits

8,908

3,832

559

Time deposits

17,03020,06033,560

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

246,622

31,74450,414 41,312

Municipal
bonds

–

–

Corporate
bonds

2,302

2,601

–

–

–

–

–

–

31,13889,794

20,589––– 141,522

–

–

–

–

–

–

–

1,052 7,587

525,161

StocksForeignsecurities
Other
securities
Total

280,063 124,141

–

Total

1,052 7,587 378,735–

71,004 41,312

Over
10
years

–

–

–

–

–

4,904

–

–

–

(Yen in millions)

Year

As of the end of
fiscal 2012
Percentage
distribution(%)

Division
Government
bonds

As of the end of
fiscal 2013

328,071

Percentage
distribution(%)

68.8 378,735

As of the end of fiscal 2014

As of the end of
fiscal 2014
Percentage
distribution(%)

72.1 181,570

46.4

Division
5 over
up to
7
years

Up to
1 year

1 overup to
3 years

3 overup to
5 years

48,22654,312

26,830 37,677(Yen in millions)

7 over
up to
10
years

Over
10
years

Total

Municipal
bonds

–

–

–

–

2,891

0.7

Government
bonds

Corporatebonds

20,065

4.2

4,904

0.9

62,17015.9

Municipal
bonds

2,891

–

–

–

–

–

–

–

Corporatebonds

36,031

26,139––26.9 144,401

36.9

–

–

–

–

26,272 104,917

13,211––– 144,401

–

–

–

–

–

5,839 8,685

391,034

StocksForeignsecurities

128,842

Stocks

–

–

–

–

–

–

Foreignsecurities

476,979100.0

525,161

100.0

391,034

100.0

Other
securities

Other
securities
Total

27.0 141,522

Total

–

–

113,421 185,368––

40,041 37,677

5,839 8,685 181,570
–

–

2,891

–

–

62,170–––

4. Yield on securities held(%)


Division

Fiscal Year

2012

2013

2014

0.53

0.27

0.25

–

–

–

1.91

1.71

1.34

–

–

–

0.96

0.66

0.59

0.53

0.30

0.25

–

–

–

1.91

1.71

1.34

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

–

–

–

0.96

0.68

0.59

0.51

0.25

0.40

–

–

–

1.59

0.94

1.28

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

–

–

–

0.85

0.44

0.67

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 2015

47

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 2012

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 2012Land

As of the endof fiscal 2013

As of the endof fiscal 2014

–

–

–

for underwriting

–

–

–

for investment

–

–

–

33

31

28

for underwriting

33

31

28

for investment

–

–

–

Buildings

Construction in progress

–

–

–

for underwriting

–

–

–

for investment

–

–

–

Total of property

33

31

28

for underwriting

33

31

28

for investment

–

–

–

–

–

–

Other tangible fixed assets

Leased assets

84

52

62

Total

117

84

91

13. Unearned claims paid
Not applicable

As of the end of fiscal 2013
(Yen in millions)
Division

Reserve for ordinary
bad debts

–

–

–

–

Reserve for individual bad debts

–

–

–

–

Reserve for specificforeign securities

–

–

–

–

Reserve for retirement benefits

120

19

23

116

Reserve for directors’ retirement
benefits

14

4

0

18

Reserve for bonus
payments

21

20

21

20

Reserve for pricefluctuation
Total

–

5

45

161

Division

Balance asof the end of
fiscal 2013

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

Increase in
fiscal 2014

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

5

0

–

5

161

45

26

180

18. Detailed listing of shareholders’ equity
Please refer to the statement of changes in shareholders’ equity on page 46.
(Yen in millions)Year As of the end
Divisionof fiscal 2012

As of the endof fiscal 2013

As of the endof fiscal 2014

Outstanding claims

4,927

3,579

1,650

Underwriting reserves

461,480499,274

556,727

Risk reserves

352,830

378,041

417,056

Unearned premium
reserves

107,140

119,727

139,671

1,509

1,505

–

466,407502,854558,377

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

48

0
44

(Yen in millions)15.	Underwriting funds

Repayment reserves

5161

As of the end of fiscal 2014Total

14. Special accountNot applicable

Total

Balance
Decrease
as of the end of
in fiscal 2013
fiscal 2013

Increase in
fiscal 2013

Japan Earthquake Reinsurance Co., Ltd. Annual Report 2015

7. D
 epreciation expenses by category

e Income and loss details

As of the end of fiscal 2013

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

Division

Fiscal Year

2012

2013

2014

Type of asset

Acquisition
cost

Government bonds

–

100

–

Foreign securities

–

–

–

Tangible fixed assets

Total

–

100

–

Buildings

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

Division

Fiscal Year

2012

2013

2014

101

2

70

31

68.9

for
underwriting

101

2

70

31

68.9

for
investment

–

–

–

–

–

Other tangible
fixed assets

115

32

62

52

54.1

217

34

132

84

61.1

Government bonds

–

2

–

Total

Foreign securities

0

–

–

Intangible fixed assets

Total

0

2

–

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

Software

562

100

405

156

72.1

Other
intangible
fixed assets

1

0

0

1

12.7

Total

563

100

405

158

72.0

Grand total

780

134

538

242

68.9

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

5. Losses on disposal of fixed assets

Type of asset(Yen in millions)

Division

Fiscal Year

2012

2013

2014

–

–

–

Buildings–––

Other tangible fixed assets

0

0

0

Total

0

0

0

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

2012

2013

2014

Personnel expenses

1,031

496

417

Non personnel expenses

4,881

2,773

2,037

Taxes

Acquisition
cost

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

Tangible fixed assets

Land

Division

Rate of
Deprecia- Aggregated Balance as
aggregatedtion indeprecia- the end ofdepreciafiscal 2013
tions
fiscal 2013
tions %

252

249

293

Commissions and brokeragefees

38,14140,411

43,315

Total

44,30743,931

46,063

Buildings

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

Total

253

29

162

91

63.9

Intangible fixed assets
Software

415

67

249

165

60.1

Other
intangible
fixed assets

1

–

–

1

0.0

Total

416

67

249

167

59.9

Grand total

670

97

411

258

61.4

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 201549

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

(Yen in millions)

1. Matters related to financial instruments

Fiscal 2013

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 42).
2. Securities(i) Securities held for trading purposes
Not applicable(iii) Available-for-sale securities
At the end of fiscal 2013

Securities whosecarrying amountexceeds their cost

Book value

Difference

Public &corporatebonds

190,481

192,232

1,750

–

–

–

121,335

127,001

5,665

–

–

–

311,817319,233

7,415

OthersSubtotal

Securities whosecarrying amount
does not exceed
their cost

Public &corporatebonds

191,429

Total

191,407–––

14,520

(40)

–

–

–

205,990

205,928(62)

517,808

525,161

7,353

At the end of fiscal 2014
Division

Securities whosecarrying amountexceeds their cost

Acquisition
cost

Book value

Difference

Public &corporatebonds

152,926

155,186

2,259

StocksOthersSecurities whosecarrying amount
does not exceed
their cost

Total

(Yen in millions)Type

Foreignsecurities

–

–

–

127,162

138,778

11,615–––

Subtotal

280,089

293,964

13,874

Public &corporatebonds

91,51691,446(69)

StocksForeignsecurities

Sales
price

Total ofgains onsale

Total oflosses on
sale

Total

7,541

100

2

–

–

–

3. Money trust
Not applicable

–

–

–

5,780

5,623

(157)

Others113,991

113,991–

Subtotal

211,288

211,061(226)

491,378505,026

13,648

Appraisal
profit andloss

Marketprice

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

28,819

–

(564)

(564)

   Euro36,703–(1,899)(1,899)(2,463)(2,463)Total

At the end of fiscal 2014

(Yen in millions)Contract amount1 year or
longerones

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

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.

50

1 year or
longer
ones

Type

(21)

14,561OthersSubtotal

Total oflosses on
sale

Type

StocksForeignsecurities

Total ofgains onsale

Contract amount

Acquisition
cost

Foreignsecurities

Sales
price

(Yen in millions)Type

StocksType

4. Derivative transactions(i) Derivative transactions to which hedge accounting is
not applied
Currency related
At the end of fiscal 2013
(Yen in millions)(ii) Securities to be held to maturity
Not applicable

Division

Fiscal 2014

Japan Earthquake Reinsurance Co., Ltd. Annual Report 2015

Contents

1

Message from the President

2Japan Earthquake Reinsurance Co., Ltd.

11

Topics13

Earthquake Insurance in Japan

20

Reinsurance of Earthquake Insurance

24

Response to the Great East Japan Earthquake

31

Statistics

34

Financial Section

51

Corporate Data

Corporate data (as of March 31, 2015)
Established:

May 30, 1966

Capital:1 billion yen

Total assets:

640.1 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/