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

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

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

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

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

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

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

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

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

4

Japan Earthquake Reinsurance Co., Ltd. 2006

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

Residential buildings,
movables for living

Degree of loss

Amount of insurance claim paid

Total loss

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

Half loss

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

Partial loss

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

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

Amount of loss ofmajor structural parts

Movables for living

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

Degree of loss of or damage tothe movables for living

Total loss

50% or higher of the current priceof the residential building

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

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

Half loss

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

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

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

Partial loss

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

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

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

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

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

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

Japan Earthquake Reinsurance Co., Ltd. 2006

5

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

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

Structure
Zone by location grade(Unit: yen)

Non-wooden

Wooden

1st-class location

0.50

1.20

3rd-class location

2nd-class location

0.70

1.65

4th-class location

3rd-class location

1.35

2.35

4th-class location

1.75

3.55

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

6

Japan Earthquake Reinsurance Co., Ltd. 2006

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

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

1

2

3

Discount rate

10%

20%

30%

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

■

Contract period

2 years

3 years

4 years

5 years

Coefﬁcient

1.90

2.75

3.60

4.45

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

Earthquake amountinsured

=10,000Earthquake insurance
premium ratex

(1,000yen)

2.35

x

Discount rate

(100% - 10% )=21,200

=

6,360

(yen)

2.12
Earthquake insurance premium
on movables for living

Earthquake amountinsured

=

3,000

x

(1,000yen)

Earthquake insurance
premium rate

2.35

x

Discount rate

(100% - 10% )

(yen)

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

Earthquake-resistance class 3

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

Earthquake-resistance class 2

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

Earthquake-resistance class 1

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

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

Japan Earthquake Reinsurance Co., Ltd. 20067

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

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

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

Treaty A

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

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

Treaty B

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

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

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

8

Japan Earthquake Reinsurance Co., Ltd. 2006

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

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

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

Japan Earthquake Reinsurance Co., Ltd. 2006

9

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

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

Indemnity limit
JER
Non-life insurance companies
The government

452.01 billion yen
425.8 billion yen
4 trillion 122.19 billion yen

Total (limit amount of payable insurance claims)

5 trillion yen

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

JER
Non-life insurance companies
The government

378.7 billion yen
427.4 billion yen
1,012.3 billion yen

Total

1 trillion 818.5 billion yen

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

10

Japan Earthquake Reinsurance Co., Ltd. 2006

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

Portion up
to 75 billion yen

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

Total

JER

750

2,848

−

3,598.0

Non-life insurancecompanies

−

3,336

344.1

3,680.1

The government

−

6,184

6,537.9

12,721.9

Total

750

12,3686,882.0

20,000.0

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

Date of occurrence

Magnitude

No. of policies

Reinsurance claims
paid (million yen)

1. Fukuoka ken Seiho-oki
earthquake

March 20, 2005

7.0

21,081

16,286

2. Fukuoka ken Seiho-oki
earthquake

April 20, 2005

5.8

8,350

5,214

3. Miyagi ken oki earthquake

August 16, 2005

7.2

2,549

1,387

Other earthquakes

−

−

2,208

1,775

Total

−

−

34,18824,662

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

Date of occurrence

Magnitude

No. of policies

Reinsurance claims
paid (million yen)

1. Hyogoken-Nanbu earthquake

January 17, 1995

7.3

65,42778,346

2. Geiyo earthquake

March 24, 2001

6.7

24,43816,934

March 20, 2005

7.0

21,081

16,286

October 23, 2004

6.8

12,472

14,618September 26, 2003

8.0

10,516

5,954

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

April 20, 2005

5.8

8,350

5,214

October 6, 2000

7.3

4,078

2,868

July 26, 2003

6.4

2,540

2,171

9. Miyagiken-oki earthquake

May 26, 2003

7.1

2,959

1,915

10. Miyagiken-oki earthquake

August 16, 2005

7.2

2,549

1,387

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

Japan Earthquake Reinsurance Co., Ltd. 2006

11

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

Earthquake

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

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

Amount of insurancemoney (million yen)

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

Great Kanto earthquake

22,585

5,505

43,016,007

24.38

Metropolitan earthquake
directly above
its epicenter

15,900

4,013

31,100,851

25.24

Tokai earthquake

21,4695,434

42,473,741

25.31

Tonankai earthquake

20,441

4,610

35,988,724

22.55

Nankai earthquake

27,972

5,956

46,712,285

21.29

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

12Japan Earthquake Reinsurance Co., Ltd. 2006