2018

Annual Report
Introduction to Earthquake Reinsurance in Japan

Contents

1

Message from the President

2Japan Earthquake Reinsurance Co., Ltd.

11

Topics13

Earthquake Insurance in Japan

21

Reinsurance of Earthquake Insurance

25

Statistics

28

Financial Section

45

Corporate Data

CORPORATE DATA (as of March 31, 2018)
Established:

May 30, 1966

Capital:1 billion yen

Total assets:

549.2 billion yen

Address:

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

Phone:

03-3664-6078

URL:

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

MESSAGE FROM
THE PRESIDENT

Chairman:

Yoshihiko Murase

President:

Makoto Sugimachi

I would like to begin this message by expressing my sincere gratitude to all our stakeholders for their continued
support.
Before moving on, I would also like to offer my deepest condolences to the bereaved families of those who died in the
recent earthquake, the epicenter of which was in the northern part of Osaka Prefecture. My thoughts and prayers
are with the victims. I would also like to express my heartfelt sympathy to people who are suffering as a result of theearthquake. I pray for the earliest possible reconstruction of their livelihoods.
Japan Earthquake Reinsurance Co., Ltd. (JER) will work to deliver earthquake insurance claims promptly and reliably
to policyholders affected by this recent earthquake to help them reconstruct their livelihoods.
Japan is one of the most active seismic and volcanic areas in the world. Disasters caused by earthquakes, volcanic
eruptions and tsunamis have occurred in the country over and over again. Earthquake insurance was established tostabilize the livelihoods of those affected by such natural disasters. In the earthquake reinsurance scheme, threeplayers – the Japanese government, private non-life insurance companies and JER – work together across sectors toensure that earthquake insurance claims are paid promptly and reliably.
Since the establishment of the earthquake insurance system in 1966, JER has adopted contributing to themaintenance and development of an affluent and safe society and becoming a company that is widely trusted by the
public through the sound management of the household earthquake insurance system as its management philosophy
as the only company in Japan that is permitted to exclusively handle reinsurance for earthquake insurance coveringdwelling risks. JER has been working to make this philosophy a reality.
JER has always sought to make earthquake reinsurance payouts promptly and reliably in the wake of disasters suchas the Great Hanshin-Awaji Earthquake, the Great East Japan Earthquake and the Kumamoto Earthquakes as its mostimportant mission. At the same time, JER has consistently paid close attention to managing and operating assets for
future earthquake reinsurance payouts, focusing primarily on asset liquidity and safety.
The fifth medium-term business plan for JER commenced in fiscal 2018. Under this medium-term business plan, we
will work on building strong, sustainable earthquake insurance systems and making business continuity management(BCM) more effective in anticipation of an inland earthquake in the Tokyo Metropolitan area. In asset management,
we will approach contributions to corporate earnings through our management capacity buildups while guaranteeing
asset liquidity and safety. As business foundation items underpinning these initiatives, we will seek to train experts andpromote working conditions that match diverse ways of working. Furthermore, we will build a governance system thatis compatible with environmental changes and make our business administration more appropriate and effective.
Recognizing our social mission, we will continue making efforts to understand our roles and responsibilities andexecute our duties reliably in order to contribute to the development of the earthquake insurance system. We aim tobecome a company that is completely trusted by its stakeholders.
We hope that we can continue to count on your support as we pursue these initiatives.

July 2018

Makoto Sugimachi
President
Japan Earthquake Reinsurance Co., Ltd.

Japan Earthquake Reinsurance Co., Ltd. Annual Report 2018

1

JAPAN EARTHQUAKEREINSURANCE CO., LTD.

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

FINANCIAL HIGHLIGHTSNet premiums written

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

300,000

130,000

280,000

120,000
257,239

260,000

114,114110,000

243,099
240,000

100,000

220,000

90,0000
Fiscal Year97,302

0
2016

2017

Fiscal Year

2016

2017

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)

5,000

50

200

4,000

40

150

3,000

100

2,000

250
206.0%

30

2,511

20
1,225

2

1,000
50
Japan Earthquake
Reinsurance Co., Ltd. Annual
11.4% Report 2018
0

0
Fiscal Year

2016

2017

10
2

0

Fiscal Year
2016
2017
Net unrealized gains on available-for-sale securities

0Net premiums written

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

300,000

130,000

280,000

120,000
257,239

260,000

114,114110,000

243,099

Assumed net premiums written

220,000(Yen in millions)

Net premiums written

90,000(Yen in millions)0300,000
Fiscal Year2016

0
130,000
Fiscal Year

2017

2016

2017

120,000

280,000
257,239

260,000
Net loss ratio
243,099
240,000

114,114
Net unrealized gains on available-for-sale
110,000 securities of earthquake insurance
and net unrealized gains on available-for-sale securities
97,302(Yen in100,000
millions)

250
220,000
200

97,302100,000

240,000

206.0%

0Fiscal Year
150

2016

2017

5,000
90,000

50

4,000

40

0

3,000 Fiscal Year
2,511

2016

2017

30

2,000

20
Net unrealized gains on available-for-sale
1,225
securities of earthquake insurance
1,000
10
and net unrealized gains on available-for-sale securities
20(Yen in millions)
0
0
5,000
50
Fiscal Year
2016
2017

100
50

Net loss ratio 11.4%

0
250 Year
Fiscal2016
206.0%

2017

Net unrealized gains on available-for-sale securities
4,000 of earthquake insurance

200

3,000

150

Net unrealized gains on available-for-sale securities
2,511

Total assets and net assets

30

Breakdown of total assets

2,000
Non-consolidated solvency-margin(Yen in millions)ratio

100(Yen in millions)

40

20
1,225

Others104,0001,000
Call loans
FY2016FY2017
15,6969020(A) Total
282.6 billion yen
306.6 billion yen 000 amount of non-consolidated solvency-margin549,2203,000
600,000(B) Totalof non-consolidated 2017risk
188.92016
billion yen
161.5
511,297 2016
FiscalamountYear
Fiscal Year2017 billion yen
Securities
Net
unrealized
gains
onavailable-for-salesecurities
Non-consolidated solvency-margin ratio
200,239299.1%
379.6%
of earthquake
insurance
2,000
400,000[(A) / {(B)x1/2}] x 100
1,542
1,540
DepositsNet
unrealized gains on available-for-sale
Breakdown ofsecurities
securities
333,194
Foreign
1,000
200,000
Total assets and net assets
Breakdown of total
assetssecurities

50
800,000

Items

11.4%

34,822 Government(Yen in millions)0800,000
Fiscal Year

600,000

2016

2017

Total assets

Net assets
549,220

511,297

0
4,000

bonds

(Yen in millions)
Call loans

90

62,581OthersCorporatebonds

15,69682,7843,000

Municipal
bonds

20,051

Securities

400,000

1,542

1,540

200,2392,000
Deposits

333,194
1,000

200,000

Breakdown of securities
Foreignsecurities

34,822 Government
bonds

0

62,581

0
2016

2017

Corporatebonds

Total assets

Net assets

82,784

Fiscal Year

Municipal
bonds

20,051

Japan Earthquake Reinsurance Co., Ltd. Annual Report 2018

3

ORGANIZATION(As of April 1, 2018)
General meeting of shareholders
Board of auditors
Board of directors

Board of managing directors

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

AIG General Insurance Company, 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, 2018)
Shareholder

BOARD MEMBERS (FULL-TIME)(As of April 1, 2018)

4

Post

Name

Chairman (representative director)

Yoshihiko Murase

President (representative director)

Makoto Sugimachi

Managing director (representative director)

Shinji Okazaki

Managing director (representative director)

Shoichiroh Takemoto

Corporate auditor

Katsuhiko Murata

Japan Earthquake Reinsurance Co., Ltd. Annual Report 2018

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
Our Task Force Against Earthquake Disaster is working to make business continuity management (BCM) more effective in preparation for an inland earthquake in the Tokyo metropolitanarea, 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 important business from home, even in cases wheretraveling to the office becomes impossible, by building a system that can be accessed fromexternal locations. The Task Force confirms the effectiveness of this system through regular
work-at-home exercises.
In fiscal 2017, we conducted company-wide drills with the Project Team (PT) Against Earthquake Disaster, which was established in the previous fiscal year and comprises working-level
employees, as their main executor, in addition to our regular drills. We are working to makeour measures against earthquake disasters more effective by requiring all JER employees totake part in these exercises planned by working-level employees that more accurately reflect
the viewpoints of the existing in-house conditions and business circumstances.
Drills Sponsored by the PT Against Earthquake Disaster(Simulated Overnight Drills Against Potential Risks)
The PT Against Earthquake Disaster conducted drills aimed at enabling employees remaining in JER offices to take appropriate actions in the absence of officials in charge of BCM,
assuming that an earthquake has occurred and forced them to stay overnight in the offices.
Through the drills, all JER employees had first-hand experience of things like cooking and eating emergency provisions and generating power internally using dynamos. They reconfirmed
the actions that are necessary for staying overnight in the offices, including the confirmationof storage sites and handling methods for the provisions and dynamos.

Japan Earthquake Reinsurance Co., Ltd. Annual Report 20185

Drills by Department (Drills at Home and Drills Using
Temporary Offices)
To bolster BCM, the Task Force Against Earthquake Disaster conducted drills by department
from September 2017 to March 2018, assuming that employees work at home or in temporary offices. Members of the Reinsurance Administration Department practiced reinsurance
claim payments at home based on rough estimates. Members of the Financial Department
checked temporary office operations for raising funds immediately after a major earthquake.
Furthermore, in March 2018, members of the System Department performed operations forswitching systems used in the Tokyo metropolitan area in the event of an earthquake to a data
center in Okinawa. They confirmed the switching operations and identified system problems
under operating conditions in Okinawa by actually performing these operations under the assumed condition of the disaster caused by the quake.
Drills for All Employees (Drills for Processing Loss
Assessment Expenses)
The number of claims for loss assessment expenses increases significantly when a major
earthquake strikes, making it impossible for the department in charge to handle them. To
secure processing personnel, the Task Force Against Earthquake Disaster is asking all JER
employees to check and input loss assessment expenses every year. In fiscal 2017, the Task
Force sought to raise the collective capacity of all JER employees to process loss assessment
expenses by changing the details of the drills and processing volumes based on their individual experiences in operations for processing loss assessment expenses.

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 2018

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 2018

7

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

Appointments
General meeting and dismissalsof shareholders

Board ofdirectors

Board ofmanaging directors

Submission/Report

In-house audit

Audit
Board ofauditors

Executive division

Audit

Submission/Report

In-house
audit division

Cooperation
Appointments
and dismissals Accounting
auditors
Accounting audit

Auditing and Inspection Systems
Outside Auditing and Inspection
We are subject to inspection by the Financial Services Agency under the Insurance BusinessAct and inspection by the Ministry of Finance under the Act on Earthquake Insurance. We
also undergo accounting audits by PricewaterhouseCoopers Aarata LLC in accordance with
the Companies Act.
In-house auditing
Corporate auditors conduct audits and the Audit Division of JER, which is independent from otherdivisions, conducts in-house audits. The corporate auditors and the Audit Office work closely witheach other in a bid to ensure effective audits.
The purpose of an in-house audit is to develop and establish an internal control system. This isdone by conducting an audit to examine and evaluate various in-house systems and the executionof various internal activities fairly and objectively from the standpoint of lawfulness and rationality.
It also requires the provision of the necessary advice and recommendations based on theexamination and evaluation.
The Audit Office conducts regular audits of the internal control conditions of all divisions as well
as audits on priority themes based on the “In-house Audit Plan” for each fiscal year adopted byresolution of the Board of Directors, and the results of in-house audits are reported to the Boardof Directors, etc.

8

Japan Earthquake Reinsurance Co., Ltd. Annual Report 2018

Risk management system
We have made arrangements for proper risk management execution to ensure the soundness
and safety of our management. The organizational framework and important risk management
issues are stipulated in our Integrated Risk Management Rules. Specific ways of managing various
risks – namely, asset management risks, liquidity risks, and operational risks – are prescribedin our management rules for the respective types of risks and our annual risk management
plans. Based on these rules, the planning and controller department, which is the integrated
risk management department, manages risks in an integrated manner by monitoring the risk
management situation. In addition, we have established the cross-sectional Risk Management
Committee as an advisory board that reports to our director in charge of risk management.
The Committee is making a range of proposals for issues related to risk management.
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.”
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.
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.
Japan Earthquake Reinsurance Co., Ltd. Annual Report 20189

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 2018

TOPICS

Employee Dispatches to University Lectures
JER is promoting understanding of the earthquake insurance system by dispatching its employees to universities as lecturers. In fiscal 2017, JER sent its employees to the Nihon University College of Risk Management in June 2017 and the Tohoku University Faculty of Economics in September 2017. Using diagrams, the employees gave explanations covering theoutline of the earthquake insurance system, how reinsurance works, and the role played byearthquake insurance in the Great East Japan Earthquake and the Kumamoto Earthquakes tostudents taking courses on nonlife insurance at the two universities.

JER Representatives Give a Lecture to a Group fromAAUI and MAIPARK Visiting Japan for Training
JER representatives gave a presentation on the Japanese earthquake insurance system toa group from the General Insurance Association of Indonesia (Asosiasi Asuransi Umum Indonesia, AAUI) and MAIPARK, a specialist earthquake reinsurance company in Indonesia,
which visited Japan for training in November 2017. On this occasion, the JER representatives
explained subjects including earthquake risks and the outline of the household earthquake
insurance system in Japan. Like Japan, Indonesia is one of the most active areas on earthin terms of seismic activity. For this reason, people in Indonesia have a strong interest in theearthquake insurance system that is peculiar to Japan. The visitors from Indonesia asked thelecturers numerous questions, including how the premium rates for earthquake insurance are
structured and the roles assigned to the reinsurance provided by the Japanese government.

Major Earthquakes in the Past Year
Earthquakes that registered a maximum intensity of five or above on the Japanese seismic
scale in the period from July 2017 to June 2018 are shown in the following Table.
Date of occurrence

Name

Magnitude(M)

Maximum seismic intensity

July 11, 2017

Earthquake whose epicenter was in the
Kagoshima Bay

5.3

Strong 5: Kagoshima City

September 8, 2017

Earthquake whose epicenter was in thesouthern inland part of Akita Prefecture

5.2

Strong 5: Daisen City

April 9, 2018

Earthquake whose epicenter was in thewestern part of Shimane Prefecture

6.1

Strong 5: Ota CityMay 25, 2018

Earthquake whose epicenter was in thenorthern part of Nagano Prefecture

5.2

Strong 5: Sakae Village,
Nagano Prefecture

June 18, 2018

Earthquake whose epicenter was in thenorthern part of Osaka Prefecture

6.1

Weak 6: Kita-ku, Osaka City,
Takatsuki City, Hirakata City,
Ibaraki City and Minoh City

(Prepared by JER based on the results of a search of a seismic intensity databasepublished on the official website of the Meteorological Agency)

Japan Earthquake Reinsurance Co., Ltd. Annual Report 201811

Matters Relating to the Earthquake Whose Epicenter
was in the Northern Part of Osaka Prefecture
JER would like to express its heartfelt sympathy to people who suffered damage in the earthquake whose epicenter was in the northern part of Osaka Prefecture.
JER is working as one body with the nonlife insurance industry and the Japanese government
to deliver insurance payouts promptly and reliably to policyholders affected by this earthquake so that they can rebuild their livelihoods.
Outline of the earthquake
Date and time of occurrence:

June 18, 2018 at 7:58 a.m.

Magnitude:

6.1 (provisional figure)

Epicenter:Northern part of Osaka Prefecture

Seismic intensity registered in the respective areas (strong 5 or greater):
Weak 6:

Osaka Prefecture: Kita-ku, Osaka City, Takatsuki City, Hirakata City, Ibaraki
City and Minoh City

Strong 5: Osaka Prefecture: Miyakojima-ku, Osaka City, Higashi-Yodogawa-ku, Osaka
City, Asahi-ku, Osaka City, Yodogawa-ku, Osaka City,
Toyonaka City, Suita City, Neyagawa City, Settsu City,
Katano City and Shimamoto Town
Kyoto Prefecture: Nakagyo-ku, Kyoto City, Fushimi-ku, Kyoto City, Nishikyoku, Kyoto City, Kameoka City, Nagaokakyo City, Yawata
City, Oyamazaki Town and Kumiyama Town
(Prepared by JER based on a document released by the Cabinet Office titled “Matters Relating to the State ofDamage, Etc. in Connection with the Earthquake Whose Epicenter was in the Northern Part of Osaka Prefecture”)

State of nonlife insurance industry responses
The General Insurance Association of Japan (GIAJ) has established a countermeasures headquarters in Osaka City, Osaka Prefecture, to respond to matters related to the earthquake withcomprehensive arrangements.
[State of earthquake insurance responses in the period from the occurrenceof the earthquake to the present: their state as of June 30, 2018]12

June 18, 2018

The GIAJ chairman’s comment: To people affected by the earthquake whose epicenter wasin the northern part of Osaka Prefecture

June 18, 2018

Matters relating to nonlife insurance industry responses to the earthquake whose epicenter
was in the northern part of Osaka Prefecture

June 19, 2018

Matters relating to special measures in connection with the earthquake in 2018 whose
epicenter was in the northern part of Osaka Prefecture

June 29, 2018

Matters relating to the number of earthquake insurance inquiries in connection with theearthquake in 2018 whose epicenter was in the northern part of Osaka Prefecture
54,212 inquiries as of Monday, June 25, 2018

Japan Earthquake Reinsurance Co., Ltd. Annual Report 2018

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

MECHANISM OF THE EARTHQUAKEINSURANCE SYSTEM
Earthquake insurance is arranged as an optional rider to fire insurance which covers buildings for residential use and/or personal property. Earthquake insurance cannot be purchasedon its own. If you conclude a fire insurance contract without earthquake insurance, you arerequired 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 201813

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 2018

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.
(Table 1-1) <Policies the inception date of which is on or after January 1, 2017>
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)

Large half loss

60% of amount insured (up to 60% of the current price of theinsurable objects)

Small half loss

30% of amount insured (up to 30% of the current price of theinsurable objects)

Partial loss

5% of amount insured (up to 5% of the current price of theinsurable objects)(Table 1-2) <Policies the inception date of which is on or before December 31, 2016>
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)

Note:	If the degree of damage is judged to be less than a partial loss, insurance claims will not be paid.

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 201815

Authorization criteria of losses
Major loss assessment standards by degree of loss are as follows.
(Table 2-1) <Policies the inception date of which is on or after January 1, 2017>
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

Large half loss

From 40% to less than 50%of the current price of theresidential building

From 50% to less than 70%of the total floor area of theresidential building

From 60% to less than 80%of the current price of thepersonal property

Small half loss

From 20% to less than 40%of the current price of theresidential building

From 20% to less than 50%of the total floor area of theresidential building

From 30% to less than 60%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 the damage is
not as much as total, large
half, small half or partial
loss, although it was flooded
above the floor level or above
45 cm from the ground level.

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

Degree of loss

Partial loss

(Table 2-2) <Policies the inception date of which is on or before December 31, 2016>
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 the damage is
not as much as total, half orpartial loss, although it was
flooded above the floor levelor above 45 cm from theground level.

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

Degree of loss

Partial loss*
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.

16Japan Earthquake Reinsurance Co., Ltd. Annual Report 2018

Limit of total amount of insurance claims to be paid
Limit of total amount of insurance claims to be paid* is limited to 11,300 billion yen as revised in April 1, 2016 per earthquake, etc. 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 23 Insurance liabilities held by
JER, non-life insurance companies and the government.
**
General Insurance Rating Organization of Japan		An organization established in accordance with the Law concerning General Insurance Rating Organizations, whichaims to provide a fair basis premium rate applicable to non-life insurance.
***
The Headquarters for Earthquake Research Promotion
		Following on the lessons learned from the Great Hanshin-Awaji Earthquake Disaster, the Special Measure Law on
Earthquake Disaster Prevention was enacted to develop a system to facilitate research and study on earthquakes, andbased on this Law, the Headquarters for Earthquake Research Promotion was founded in July 1995. In March 2005,
the Headquarters for Earthquake Research Promotion published two kinds of maps as the National Seismic Hazard
Maps for Japan: the Probabilistic Seismic Hazard Map and the Scenario Earthquake Shaking Map.
		The National Seismic Hazard Maps are subject to an annual review.

Japan Earthquake Reinsurance Co., Ltd. Annual Report 201817

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

18

PrefectureNonwoodenWoodenIwate-ken, Akita-ken, Yamagata-ken, Tochigi-ken, Gunma-ken, Toyama-ken, Ishikawaken, Fukui-ken, Nagano-ken, Shiga-ken, Tottori-ken, Shimane-ken, Okayama-ken,
Hiroshima-ken, Yamaguchi-ken, Fukuoka-ken, Saga-ken, Nagasaki-ken, Kumamotoken, Kagoshima-ken

6,800

11,400

Hokkai-do, Aomori-ken, Niigata-ken, Gifu-ken, Kyoto-fu, Hyogo-ken, Nara-ken

8,100

15,300Fukushima-ken

7,400

14,900Miyagi-ken, Yamanashi-ken, Kagawa-ken, Oita-ken, Miyazaki-ken, Okinawa-ken

9,500

18,400Ehime-ken

12,00023,800

Osaka-fu

13,20023,800Aichi-ken, Mie-ken, Wakayama-ken

17,10028,900Ibaraki-ken,

13,50027,900Saitama-ken,

15,60027,900Tokushima-ken, Kochi-ken

13,50031,900Chiba-ken, Tokyo-to, Kanagawa-ken, Shizuoka-ken

22,50036,300Japan Earthquake Reinsurance Co., Ltd. Annual Report 2018

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

1

2

3

10%

30%

50%

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

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

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

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

Japan Earthquake Reinsurance Co., Ltd. Annual Report 201819

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→ 1.53 (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

1.53

x

(100%

(1,000 yen)

5,000

–

10%)

=

13,800 (yen)=6,900 (yen)

1.38

Earthquake
amount insured=

Discount rate

Earthquake insurance
premium rate

x

1.53

(1,000 yen)x

Discount rate

(100%

–

10%)

1.38

*
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.

20

Japan Earthquake Reinsurance Co., Ltd. Annual Report 2018

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

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

Japan Earthquake Reinsurance Co., Ltd. Annual Report 201821

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

Policyholders
Direct insurance

Application of insurance contracts (Insurance premiums)

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

100% reinsurance(Reinsurance premiums)

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

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

Retrocession

Retrocession(Retrocession
premiums)(Retrocession
premiums)

Government(Earthquake reinsurance special account)

22

Retaining of risks

Treaty C

JER
Non-life insurance companies

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

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

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

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

Japan Earthquake Reinsurance Co., Ltd. Annual Report 2018

INSURANCE LIABILITIES HELD BY JER,
NON-LIFE INSURANCE COMPANIES AND
THE GOVERNMENT
The limit of the total amount of insurance claims to be paid per earthquake, etc. is set inadvance. This system is designed so that, even in the event of an earthquake as devastating
as the Great Kanto Earthquake, insurance claims can be paid without problems. The current
limit of total amount of insurance claims to be paid is set at 11.3 trillion yen. This is thereinsurance scheme that shows how JER, non-life insurance companies and the government
share and limit insurance liabilities within the limit of the total amount of insurance claims
to be paid per earthquake.
Reinsurance scheme (applicable to earthquake, etc. thattake place after April 1, 2017)
Small

Amount of damage per earthquake, etc.

Large

(Payable insurance claims)
Up to
Up to
Up to
Up to approx.
88.4 billion yen 126.8 billion yen 224.4 billion yen 2,268.1 billion yen

68.0 billion
88.4
billion11.3 trillion yen

50%
11,058.8 billion

19.2 48.8
billion billion

1st layer
JER

50%
3.1 billion

13.7 billion

Approx. 0.2%

3rd layer

2nd layer
Non-life insurance companies

Approx. 99.8%

The government

Liability limit
150.9 billion yen
22.3 billion yen
11,126.8 billion yen

JER
Non-life insurance companies
The government

JER pays insurance claims up to 88.4 billion yen (1st layer) per earthquake, etc. The governmentand others (non-life insurance companies and JER) share equally insurance claims for the
portion exceeding 88.4 billion yen, up to 224.4 billion yen (2nd layer). The government pays
a majority of insurance claims (approximately 99.8%) for the portion exceeding 224.4 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-life
insurance companies and the second part by JER.
In this way, in cases where insurance claims per earthquake, etc. exceed a certain amount,excess liabilities are shared by the relevant organizations. This is called the excess of the loss
reinsurance.

Japan Earthquake Reinsurance Co., Ltd. Annual Report 201823

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
88.4 billion yen

Portion over
88.4 billion yen,
and up to224.4 billion yen

88.4

68.0

About 2.7

About 159.1

—

68.0

About 1,772.9

About 1,840.9

88.4

136.0

1,775.6

2,000.0

Claims paid

A person of burden

JER and Non-life
insurance companies
The government
Total

Portion over224.4 billion yen,
and up to
2,000 billion yen

Total

The balance of risk reserves at JER and non-life insurancecompanies and the government liability reserves at the endof fiscal 201 7
JER and non-life insurance companies save the risk premium of insurance premiums paid bypolicyholders as earthquake insurance risk reserves for the possible payment of earthquake
insurance claims while the government saves government reserves in the earthquake reinsurance 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

303.9 billion yen
47.7 billion yen
1,520.1 billion yen

Total

1,871.8 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 2017 is approved by the Diet.

24

Japan Earthquake Reinsurance Co., Ltd. Annual Report 2018

STATISTICS

Reinsurance claims paid in fiscal 201 7
Reinsurance claims paid in fiscal 2017 amounted to 14.7 billion yen, including earthquake
reinsurance claims paid to cover the 2016 Kumamoto Earthquake. In terms of numbers,
16,385 claims were paid (on the basis of insurance policies). See below for major claims paid
per earthquake.
Earthquake(Region name)
1. The 2016 Kumamoto
2. The 2011 off the Pacific coast of Tohoku

Reinsurance
claims paid
(million yen)

Magnitude

No. ofpolicies

April 14, 2016

7.3

6,249

7,061
4,662

Date of occurrence

March 11, 2011

9.0

5,219

3. Tottori-ken Chubu

October 21, 2016

6.6

990

594

4. Fukushima-ken-oki

November 22, 2016

7.4

696

456

5. Ibaraki-ken North

December 28, 2016

6.3

510

341

Other earthquakes

—

—

2,721

1,670

Total

—

—

16,385

14,786

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

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

Percentage ofhouseholds withinsurance (B/A)(%)

Probability that an
earthquake could occur
within the next 30 years

Great Kanto

26,115

8,812

33.7

Nearly 0%–5%Tokyo metropolitan

18,475

6,346

34.3

About 70%

Nankai trough44,22814,17132.0

70%–80%Earthquake(Region name)Note 1: Number of households is prepared based on data of the Ministry of Internal Affairs and Communications (asof January 1, 2017).
2: JER prepared the number of policies, assuming that major prefectures were stricken, based on the preliminary
figures as of the end of 2016 from the General Insurance Rating Organization of Japan.
3: The probability that an earthquake could occur within the next 30 years is based on the 2018 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 201825

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 system was established.
(As of March 31, 2018)
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

812,371

1,279,517

2. The 2016 Kumamoto

April 14, 2016

7.3

206,278

382,360

January 17, 1995

7.3

65,42778,346

4. Miyagi-ken-oki

April 7, 2011

7.2

31,00832,393

5. Fukuoka-ken Seiho-oki

March 20, 2005

7.0

22,066

16,973

6. Geiyo

March 24, 2001

6.7

24,453

16,942

7. Niigata-ken Chuetsu

October 23, 2004

6.8

12,60814,897

8. Niigata-ken Chuetsu-oki

July 16, 2007

6.8

7,870

8,249

9. Fukuoka-ken Seiho-oki

April 20, 2005

5.8

11,337

6,429

September 26, 2003

8.0

10,553

5,990

11. Iwate-Miyagi Nairiku

June 14, 2008

7.2

8,276

5,545

12. Tottori-ken Chubu

October 21, 2016

6.6

6,528

5,191

13. Suruga-wan

August 11, 2009

6.5

9,529

5,178

14. Shizuoka-ken Tobu

March 15, 2011

6.4

5,392

4,692

15. Iwate-ken Engan Hokubu

July 24, 2008

6.8

7,756

3,973

16. Fukushima-ken Hamadori

April 11, 2011

7.0

2,377

3,681

17. Nagano-ken Chubu

June 30, 2011

5.4

2,982

3,332

18. Tottori-ken Seibu

October 6, 2000

7.3

4,079

2,869

19. Noto Hanto

March 25, 2007

6.9

3,308

2,734

20. Awajishima fukin

April 13, 2013

6.3

2,954

2,346

3. Hyogo-ken Nanbu

10. Tokachi-oki

Note 1: After the 2011 off the Pacific coast of Tohoku, in accordance with our reinsurance scheme at the time, thegovernment paid 582,258 million yen and JER and non-life insurance companies paid 697,258 million yen.
2: After the 2016 Kumamoto Earthquake, in accordance with our reinsurance scheme at the time, the government
paid 133,530 million yen and JER and non-life insurance companies paid 248,830 million yen.
3: After the Hyogo-ken Nanbu Earthquake in 1995, in accordance with our reinsurance scheme at the time, thegovernment paid 6,173 million yen and JER and non-life insurance companies paid 72,173 million yen.

26

Japan Earthquake Reinsurance Co., Ltd. Annual Report 2018

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.

10. Tokachi-oki (M8.0)
7. Niigata-ken Chuetsu (M6.8)
8. Niigata-ken Chuetsu-oki (M6.8)

15. Iwate-ken Engan Hokubu (M6.8)

17. Nagano-ken Chubu (M5.4)

11. Iwate-Miyagi Nairiku (M7.2)

19. Noto Hanto (M6.9)
1. The 2011 off the Pacificcoast of Tohoku (M9.0)

12. Tottori-ken Chubu (M6.6)
18. Tottori-ken Seibu (M7.3)

4. Miyagi-ken-oki (M7.2)

5. Fukuoka-ken Seiho-oki (M7.0)
16. Fukushima-ken Hamadori (M7.0)

9. Fukuoka-ken Seiho-oki (M5.8)

A magnitude 7 (6.7 to 7.3) earthquake caused
by a sinking plate along the Sagami TroughAround 70%
14. Shizuoka-ken Tobu (M6.4)

3. Hyogo-ken Nanbu (M7.3)

13. Surugawan (M6.5)

20. Awajishima fukin (M6.3)
6. Geiyo (M6.7)
Nankai Trough earthquake(about M8 – 9) 70% to 80%

2. The 2016 Kumamoto (M7.3)

Japan Earthquake Reinsurance Co., Ltd. Annual Report 201827

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.

28

Japan Earthquake Reinsurance Co., Ltd. Annual Report 2018

FINANCIAL REVIEWBusiness development, results, etc.
The Japanese economy continued its moderate expansion in fiscal 2017 with benefits brought to the export sector
by the sustained growth of overseas economies, in addition to support from the extremely relaxed financial policiesof the Bank of Japan.
Premiums written increased from the previous fiscal year under the effects of a premium rate revision that was
implemented in January 2017. However, net premiums written excluding reinsurance premiums ceded decreased
because reinsurance premiums ceded to the government grew as a result of the revision of the reinsurance scheme
for earthquake insurance in April 2017. Net claims paid and loss adjustment expenses decreased from the previous
fiscal year, reflecting a gradual reduction in insurance payouts for the Kumamoto Earthquakes.
Looking at asset management, investment income fell from the previous fiscal year as the situation of extremely low
interest rates continued and the redemption of high-yield bonds advanced under tough conditions for managing new
assets.
JER worked on 29 management items in fiscal 2017, which it positioned as the final year under the fourth mediumterm business plan “Strengthening Arrangements for Earthquake Reinsurance Payouts.” Overall, JER achieved thetargets set for those items in the fiscal year under review.
As key measures, JER studied ways of improving credit risk management systems and revised new system foundations, in addition to working to achieve appropriate and realistic additional contribution ratios in the earthquake
insurance system.
Summary of earthquake insurance results① Net premiums written and net claims paid
Premiums written rose from the previous fiscal year, butreinsurance premiums ceded to the government grew
as a result of the revision of the reinsurance scheme
for earthquake insurance in April 2017. As a result, net
premiums written decreased to 97.3 billion yen (down
14.7% year on year).
In the meantime, net claims paid fell to 8.9 billion yen(down 96.0% year on year), reflecting factors including
the Kumamoto earthquakes.
② Risk reserves and underwriting reserves
JER added a total of 34.6 billion yen, including net premiums written and held of 34.3 billion yen, calculated bydeducting assumed reinsurance commissions from net
premiums written, and investment income of 0.3 billion
yen, to its risk reserves (down 33.4% year on year ).
Furthermore, JER returned the provision for outstanding
claims of 1.8 billion yen to the risk reserves, and withdrew the net claims paid of 8.9 billion yen stated above,
damage research expenses of 2.1 billion yen, and advertising and publicity expenses of 0.3 billion yen from therisk reserves posted for the past year. As a result, risk
reserves at the end of the fiscal year under review cameto 303.9 billion yen (up 9.0% year on year).
Underwriting reserves at the end of the fiscal year underreview amounted to 495.6 billion yen (up 8.5% year onyear) as a result of the addition of unearned premium
reserves to the risk reserves stated above.
③ Risk reserves of direct insurance companies
JER added a total of 3.1 billion yen (down 30.8% year
on year), including net premiums written and investment
income, to the risk reserves of direct insurance companies recorded as entrusted reserves. The risk reservesof direct insurance companies at the end of the fiscal
year under review came to 47.7 billion yen (up 1.8% year
on year) after withdrawing advertising and publicity expenses of 2.3 billion yen.

Outline of investments
Conditions for extremely low interest rates remained stable in Japan under the policy of quantitative and qualitative monetary easing with yield curve control advancedby the Bank of Japan. Investment conditions for JER remained severe with continued negative interest rates on
short- and medium-term bonds, which are JER’s maininvestment targets.
Looking at exchange rates, an interest rate hike in the
United States was a factor in the appreciation of the U.S.
dollar. However, the yen gradually strengthened against
the U.S. dollar as U.S. political pressure for correcting
the trade imbalance and long-term interest rates in the
United States calmed down. The yen weakened against
the euro in response to the monetary tightening policy
announced by the European Central Bank with the sustained recovery of the European economy in the background.
In these circumstances, we invested in assets with toppriority placed on safety and liquidity, followed by profitability. As a result, pretax profits from investments
amounted to 0.3 billion yen in the business account and71.2 million yen in the entrusted reserves account. Investment assets came to 533.5 billion yen at the end of
the fiscal year under review.
Profit and loss for the fiscal year under review
As a result of adding and subtracting other items to andfrom interest and dividend income and subtracting income taxes and residential taxes, net loss for the fiscal
year under review came to 0.6 million yen.

Japan Earthquake Reinsurance Co., Ltd. Annual Report 2018

29

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

Division

2013

2014

2015

2016

2017

Net premiums written
Percentage change over the previous term

92,248(0.8%)

108,99418.2%

121,986
11.9%

114,114(6.5%)

97,302(14.7%)Net claims paid
Percentage change over the previous term

15,010(52.5%)

9,563(36.3%)

5,589(41.6%)

220,905
3,852.3%

8,924(96.0%)

Ordinary income
Percentage change over the previous term

104,703(5.1%)

119,82214.4%

129,1077.7%

289,485
124.2%

101,288(65.0%)

Ordinary expenses
Percentage change over the previous term

104,509(5.1%)

119,81814.6%

129,1077.8%

289,487
124.2%

101,290(65.0%)

Ordinary profit (loss)
Percentage change over the previous term

194
0.3%

3
(98.2%)

0(98.4%)(1)(3,537.5%)(1)–

Net income (loss)
Percentage change over the previous term

(82)
(2,045.2%)

3
–

(0)
(115.6%)1–(0)(159.8%)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

1,544

1,543

1,542

1,542

1,540

Total assets

577,305

640,137

709,408

511,297549,220

Underwriting reserves
Percentage change over the previous term

499,2748.2%

556,727
11.5%

627,34512.7%

456,745(27.2%)

495,634
8.5%

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

378,0417.1%

417,05610.3%

464.584
11.4%

278,846(40.0%)

303,954
9.0%

Loans
Percentage change over the previous term

–
–

–
–

–
–

–
–

–
–

Securities
Percentage change over the previous term

525,161
10.1%

391,034(25.5%)

401,751
2.7%

234,580(41.6%)

200,239(14.6%)

Non-consolidated solvency-margin ratio

344.9%

354.5%

392.1%

299.1%

379.6%

Dividend propensity

–

–

–

–

–

No. of employees

26

29

28

26

28

Note:
JER’s solvency-margin ratio will not be used as a criterion for the administrative authorities’ order for improvement. For details, please refer to page 34.

SUMMARY OF OPERATIONS
q Indicators relating to insurance underwriting
Item: earthquake
1. Net premiums written(Yen in millions)

Division

Fiscal Year

2015

2016

2017

Premiums written

245,353

247,441

261,556

Return premiums

6,708

4,342

4,316

Assumed net premiums
written (A)238,645

243,099257,239

Reinsurance premiums
ceded (B)

116,659

128,984

159,937

Net premiums written (A – B)

121,986

114,114

97,302

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.

30

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

Fiscal Year

2015

2016

2017

100%

100%

100%

2015

2016

2017

8,214

388,527

14,786

Reinsurance claims
recovered (B)2,625

167,622

5,861

Net claims paid (A – B)

5,589

220,905

8,924

Domestic contract

3. Net claims paid
(Yen in millions)

Division

Fiscal Year

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

Japan Earthquake Reinsurance Co., Ltd. Annual Report 2018

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

Division

Fiscal YearNet loss ratio

2015

2016

2017
2015

2016

2017

10

11

9

1,054
48,426Rate of top fivereinsurers’ ceded
insurance premiums

91.5%

89.8%

90.4%

206.0%

11.4%

46,60647,40949,481 Insurance related operating,general and administrative
expenses725

734 Commissions and brokeragefees

45,88046,675Net expense ratio

38.2%

41.5%

50.9%

Combined ratio

43.5%

247.5%

62.3%

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

Fiscal Year

No. of reinsurersthat ceded insurance
contracts

5.3%

Underwriting expenses

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

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

2015

2016

2017

Underwriting income

123,681284,934

99,430Underwriting expenses

122,956

284,200

98,375

Operating and generaladministrative expenses

1,054

725

734

Other income and expenses

–

–

–

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 201831

w Investments
3. 
Amount of interest and dividend received andinvestment assets yield (income yield)

1. Investments policy	JER is the only company in Japan that specializes
in reinsurance for earthquake insurance. JER attaches top priority to the guarantee of liquidity andsafety in earthquake reinsurance payouts because
the time and scale of an earthquake are unpredictable, and the liquidation of all investment assets ispossible. In asset management, JER is striving tomaintain and strengthen its capacity for earthquake
reinsurance payouts through the guarantee of funds
for payments and the expansion of risk reserves.

(Yen in millions)FiscalYear

Percentage
distribution(%)

Division
Deposits

189,215

Call loans
Monetaryreceivablesbought51.0 333,194

60.7

4,668

0.7

1,040

0.2

90

0.0

94,596

13.3

–

–

–

–

Money trusts

0.06

7

0.00

5

0.00

8

0.02

0

0.00

0

0.00

Monetaryreceivablesbought

144

0.08

3

0.02

–

–

–

–

–

–

–

–

Securities

401,75156.6

234,58045.9

200,239

36.5

Buildings

27

0.0

25

0.0

24

0.0

Total ofinvestments
assets690,258

97.3

496,18197.0

533,548

97.1

Total assets

709,408

100.0

511,297100.0

549,220

100.0

–

–

–

–

–

–

2,280

0.62

1,283

0.44

1,176

0.55

Buildings

–

–

–

–

–

–

2,468

0.38

1,294

0.24

1,181

0.23

Note:
Investment assets yield (income yield): indicator showing the result of investment assets from a point of income (interest and dividend income)The numerator is composed of interest and dividend income from investment assets while the denominator is an acquisition cost based assets.

Percentage
distribution(%)

26.7 260,534

Yield (%)

34

Securities

As of the end of
fiscal 2017

Percentage
distribution(%)

Yield (%)

Call loans

Total

As of the end of
fiscal 20162017

Deposits

Money trusts(Yen in millions)

As of the end of
fiscal 2015

2016

Yield (%)

Division

2. Total assets and investments assets
Year

2015

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

4. Asset management yield (realized yield)(Yen in millions)2015

Fiscal Year

2016

2017

Division

Amount ofnumerator

Amount ofdenominator

Yield onworking
assets (%)

Amount ofnumerator

Amount ofdenominator

Yield onworking
assets (%)

Amount ofnumerator

Amount ofdenominator

Yield onworking
assets (%)

Deposits

34

60,1810.06

7

233,6710.00

5300,366

0.00

Call loans

838,187

0.02

0

1,471

0.00

0

388

0.00

144

184,504

0.08

320,157

0.02

–

–

–

–

–

–

–

–

–

–

–

–

2,475

368,634

0.67

1,419

294,061

0.48

1,216

215,2830.57

818

250,3820.33

662

251,1260.26

556

179,425

0.31

–

–

–

–

–

–

–

–

–

1,657

118,251

1.40

757

42,9341.76

659

35,857

1.84

Monetary receivables bought
Money trusts
Securities
Public and corporate bonds
StocksForeign securities

–

–

–

–

–

–

–

–

–

Loans

Other securities

–

–

–

–

–

–

–

–

–

Buildings

–

28

–

–

27

–

–

25

–

Derivatives

3,954

–

–

3,329

–

–

929

–

–

Others(4,494)––(3,791)––(1,404)

–

–

Total

2,124

651,5360.33

968

549,3900.18

747

516,0640.14

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.

32

Japan Earthquake Reinsurance Co., Ltd. Annual Report 2018

5. Market-price based overall yield (for reference)(Yen in millions)2015

Fiscal Year

2016

2017

Division

Amount ofnumerator

Amount ofdenominator

Yield onworking
assets (%)

Amount ofnumerator

Amount ofdenominator

Yield onworking
assets (%)

Amount ofnumerator

Amount ofdenominator

Yield onworking
assets (%)

Deposits

34

60,1810.06

7

233,6710.00

5300,366

0.00

Call loans

838,187

0.02

0

1,471

0.00

0

388

0.00

144

184,504

0.08

320,157

0.02

–

–

–

–

–

–

–

–

–

–

–

–

2,800

372,0300.75

212

297,783

0.07

(71)

217,797(0.03)

2,014

252,572

0.80

(227)

254,512(0.09)(63)

181,922(0.04)

–

–

–

–

–

–

–

–

–

Foreign securities

786

119,458

0.66

439

43,2701.01(7)35,874(0.02)

Other securities

Monetary receivables bought
Money trusts
Securities
Public and corporate bonds
Stocks

–

–

–

–

–

–

–

–

–

Loans

–

–

–

–

–

–

–

–

–

Buildings

–

28

–

–

27

–

–

25

–

Derivatives

3,954

–

–

3,329

–

–

929

–

–

Others(4,494)––(3,791)––(1,404)

–

–

Total

2,449

654,932

0.37

(239)

553,111(0.04)(540)

518,578(0.10)

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 2015

As of the end of fiscal 2016

As of the end of fiscal 2017

Percentage
distribution(%)

Percentage
distribution(%)

Percentage
distribution(%)

Division
Foreign currency denominatedForeign public and corporate bonds

76,404

69.8

14,91056.4

24,361

33,11830.2

109,523

100.0

70.0

11,525

43.6

10,46030.026,435100.0

34,822100.0

Yen denominatedForeign public and corporate bonds
Total
Yield on foreign loans & investments
Investment assets yield (income yield)

1.39%

1.45%

Assets management (realized yield)

1.40%

1.76%

1.88%
1.84%

Market-price based overall yield (for reference)

0.66%

1.01%

(0.02%)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 201833

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-margin282,607306,691

1,540

1,539

Price fluctuation reserves

2

1

Risk reserves––

278,846

303,954

Common stock, etc.

Catastrophe reserves
Reserves for ordinary bad debts

(A)

–

–

2,218

1,195

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––

188,948

161,550

General underwriting risk (RI)––

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

Anticipated rate of return risk (R3)

–

–

7,343

7,482

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

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

(B)

Investment risk (R4)(C)

As of theAs of theend ofend offiscal 2016 fiscal 2017Management risk (R5)

3,704

3,167

Catastrophe risk (R6)

177,900

150,900

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

299.1%

379.6%

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.

34

[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 2018

ACCOUNTING CONCEPTS(NET ASSETS)

q Financial statements(Yen in millions)2016(As of March
31, 2017)

2017(As of March
31, 2018)

Item

AmountAmountCommon stock

1,000

1,000

546

545



Fiscal Year

1. Balance sheets(ASSETS)

(Yen in millions)2016(As of March
31, 2017)

2017(As of March
31, 2018)

Item

AmountAmount Other legal reserve of retained earnings

Cash and deposits
Deposits

260,534
260,534

333,194
333,194  Special reserves

1717  Special price fluctuation reserves3939  Retained earnings carried forward

488

487



Fiscal Year

Call loans

1,040

90

234,580
91,41924,257
92,467
26,435200,239
62,581
20,05182,78434,822

Tangible fixed assets
Buildings Other tangible fixed assets

43
25
17

125
24
101

Intangible fixed assets
Software
Software in progress Other intangible fixed assets

227
173
52
1

261
259
–
1

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

14,87014,464
–
261
46
17
80

15,30914,234
0
309
46
2
715

Total assets

511,297549,220

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

Item

2016
(As of March
31, 2017)

2017(As of March
31, 2018)

AmountAmountUnderwriting funds
Outstanding claims
Underwriting reserves

460,327
3,581
456,745

497,407
1,773
495,634

Entrusted reserves

36,10337,499Other liabilities
Reinsurance accounts payable
Income taxes payable
Deposits payable
Accrued amounts payable
Derivatives

10,630
9,709
144
3
328
444

11,36011,180109
561
3

Reserve for retirement benefits

151

154

Reserve for directors’ retirement benefits

5

9Reserve for bonus payments

22

21

Reserves under the special law
Reserve for price fluctuation

2
2

1
1

2,511

1,225

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

00509,755

547,680

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

545

544

(5)

(5)

1,540

1,539

2

0

2

0

1,542

1,540

511,297549,220

Notes for fiscal 2017
1. Matters relating to accounting policies are as follows.
(1)	Appraisal standards and method of securities
and method of indication are as follows.
(i)	Of available-for-sale securities, those to which
the market price is applicable is appraised according to the market price at term end.
(ii)	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 basisof market price.
(3) Although depreciation of tangible fixed assets
is calculated using the declining balance method, buildings (excluding equipment attached tobuildings) that were acquired on or after April 1,
1998 and equipment attached to buildings andstructures that were acquired on or after April
1, 2016 were depreciated using the straight-line
method.

Japan Earthquake Reinsurance Co., Ltd. Annual Report 2018

35

(4)

Software for in-house use that is recorded as
an intangible fixed asset is amortized using thestraight-line method over the estimated usable
life (five years).
(5) The conversion of foreign currency assets and liabilities into Japanese currency is processed according to the accounting standards for foreign
currency transactions.
(6)	Reserve for bad debts is written as follows against
losses from bad debts in accordance with theself-appraisal standard of assets and depreciation 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, ordebtors who are effectively bankrupt, the rest of
any of the claims deducting an estimated amountof disposable mortgage and a deductible amountby guarantee was appropriated for such reserves.
	
In connection with the other claims, the rate ofbad debts calculated according to past bad debts
and other factors is multiplied by the amount ofclaims to appropriate for reserves.
	In addition, all claims are written after the financedepartment appraises the assets, and the result
is audited by the planning and controller department independent of the finance department toappropriate the appraisal for reserves.
	
There are no assets in the current term that are
to be appropriated for reserves and no reserve isrequired.
(7) For employees’ retirement and severance benefits, reserve for retirement benefits is appropriated according to estimated retirement allowanceliabilities at the end of the term.
	Retirement allowance liabilities are calculated using 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.
(8) For reserve for directors’ retirement benefits, thebenefits to be paid at the end of the term arerecorded according to the relevant in-house rules.
(9) Reserve for bonus payments is calculated according to the standards for the estimated bonuses
payable as of the end of the fiscal year underreview.
(10) To prepare for a loss from price changes ofshares and others, reserve for price fluctuation isappropriated according to Article 115, Insurance
Business Law.

36

2. Financial instruments and fair values of financial
instruments(1) Situation of financial instruments
We mainly hold highly rated short- and mediumterm Japanese and foreign bonds and short-term
financial instruments in preparation for reinsurance payouts. We manage assets by attaching
top priority to liquidity and safety and giving
additional consideration to profitability. It is ourpolicy to engage in derivatives trading or forward
exchange contracts to reduce the market risks offoreign-currency receivables associated with exchange fluctuations, within the limits of actual
demand. In addition, we maintain an understanding of market risks, credit risks and liquidity risks
and manage current quotations and credit information on a regular basis in this regard.
(2) Fair 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, 2018.
(Yen in millions)

Balancesheet
amountFair value

Difference(i) Cash and deposits

333,194

333,194

–

90

90

–

(iii) Securities
Available-for-sale securities

200,239200,239–

Total assets(ii) Call loans

533,524

533,524–(iv) Derivatives* to which
hedge accounting is notapplied

711

711

–

Derivatives total

711

711

–

* 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) 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.
(iv) Derivatives
The fair values of derivatives are determined by prices offered bycorrespondent financial institutions.

Japan Earthquake Reinsurance Co., Ltd. Annual Report 2018

3. Taxes are included when preparing accounts for
consumption tax and other items.
4. 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.
5. The accumulated depreciation of tangible fixed assets is 113 million yen.
6. See below for a breakdown of outstanding claims.
(Yen in millions)

Outstanding claims (before the deduction ofoutstanding reinsurance claims)

2,881

Outstanding reinsurance claims related to theabove claims

1,108

Net outstanding claims

1,773

7. Total deferred tax assets amount to 441 million yen,while total deferred tax liabilities come to 0 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 358 million yen, a reserve for retirement benefits of 43 million yen, unpaid businesstaxes of 21 million yen and unpaid special local corporate tax of 8 million yen. Deferred tax liabilities
resulted mainly from unrealized gains on securitiesof 0 million yen.
8. No event that could have a material impact on assets
or profits or losses in or after the next fiscal year
has arisen since the last day of the fiscal year underreview.
9. Net assets per share are 774.54 yen. The basis forthis calculation is that net assets are 1,540 million
yen, net assets accrued from ordinary shares are
1,540 million yen and the number of ordinary sharesat the end of the term is 1.988 million.
10. Each amount is rounded down to the nearest
whole unit.

Japan Earthquake Reinsurance Co., Ltd. Annual Report 201837

2. Statements of income(Yen in millions)

Fiscal Year

2016

2017

(from April 1, 2016
to March 31, 2017)(from April 1, 2017
to March 31, 2018)

Item

AmountOrdinary income

Notes for fiscal 2017
1. See below for a breakdown of net premiums written.
(Yen in millions)

Premiums written:

257,239

AmountReinsurance premiums ceded:

159,937

289,485

101,288

Net premiums written:

97,302

Underwriting income

284,934

99,430   Net premiums written

114,114

97,302220

319  Investment income on savings
premiums  Reversal of outstanding claims

–

1,808

170,599–

Investment income

4,550

1,858

   Interest and dividend income

1,294

1,181

  Reversal of policy reserve   Gains on sales of securities   Gains on derivatives   Other investment income  Transfer of investment income on
savings premiums
Other ordinary income
Ordinary expenses
Underwriting expenses   Net claims paid

147

63

3,329

929

0

3

(220)

(319)

8,924

Provision of outstanding reinsurance claims
related to the above claims(1,182)

Net provision of outstanding claims(1,808)

2,429

–

–

38,888

3,803

1,429

   Loss on sales of securities

1022  Foreign exchange losses

3,773

1,386

   Other investment expenses

19

20

1,345

1,413

138

71

138

71

(1)

(1)

3

1

Reversal of reserve for price fluctuation(2,990)98,375  
Provision of outstanding claims

Extraordinary income(Yen in millions)

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

220,905

2,135

Ordinary profit (loss)

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

284,200

48,426  Interest paid

8,924

0

14,190

Other ordinary expenses

5,861

Net claims paid:

101,290

46,675 Operating, general and administrative
expenses

14,786

Reinsurance claims recovered:0   Loss adjustment expenses

Investment expenses(Yen in millions)

Claims paid:

289,487  Commissions and brokerage fees   Provision of underwriting reserves

2. S ee below for a breakdown of net claims paid.

3

1

Net income (loss) before income taxes

1(0)Income taxes

00

Total income taxes00

Net income (loss)

1(0)

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

Deposits:

5

Call loans:0Securities:

1,176

Total:

1,181

5. Paper profit/loss involved in the gains on derivatives
is a profit of 711 million yen.
6. Netloss per share is 0.34 yen.
The basis for this calculation is such that net loss
is 0 million yen, net loss accrued from common
stocks is 0 million yen and the term average number of common stocks amount to 1.988 million.
7. The legal effective tax rate at the end of the termis 28.24%, and the corporate tax burden after applying the tax effect is (73.59%). The difference is
explained by the following breakdown: valuation
reserve (23,162.17%), the amount of the write-off
carried from publicity expenses related to risk reserves 23,213.07%.
8. Each amount is rounded down to the nearest whole
unit.

38

Japan Earthquake Reinsurance Co., Ltd. Annual Report 2018

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

Fiscal Year

Item

2016

2017

(from April 1, 2016
to March 31, 2017)(from April 1, 2017
to March 31, 2018)

AmountAmountNotes for fiscal 2017
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

1(0)(As of March
31, 2017)(As of March
31, 2018)

260,534

333,194

88

115

Increase (decrease) in outstanding
claims2,429(1,808)

Increase (decrease) in underwriting
reserves(170,599)

38,888Deposits of a depository period
over three months(14,000)(14,000)

Increase (decrease) in entrusted
reserves(30,999)

1,396

Securities other than cash equivalent(234,580)(200,239)

Increase (decrease) in reserve forretirement benefits

52Cash and cash equivalents

247,574

319,284

Increase (decrease) in reserve fordirectors’ retirement benefits(3)

4Increase (decrease) in reserve forbonus payments

0(0)Increase (decrease) in reserve forprice fluctuation
Interest and dividend income

(3)

(1)

(1,294)(1,181)

Losses (gains) on investment insecurities

(136)

(40)

Foreign exchange losses (gains)

3,865

1,904

Decrease (increase) in other assets(other than investment and financial
activities related)(2,079)244

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

1,862

1,205

Others5,603(1,110)   Subtotal(191,258)

39,620

3,009

1,654

Interest and dividends received
Income taxes paid

(0)

(0)

(188,249)

41,274

Net decrease (increase) in cash anddeposits(3,000)–

Proceeds from sales and redemptionof monetary receivables bought

71,597–Purchase of securities(21,306)(112,994)

Proceeds from sales and redemptionof securities

182,791

143,662    Total investment assets activities

230,082

30,667    Total operating activities and   investment assets activities

41,833

71,941(0)(117)

Net cash provided by operating activities

Cash and deposits
Call loans

1,040

90

Securities

234,580

200,239

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

Cash flow from investing activities

Acquisition of tangible fixed assets
Others

(140)

(114)

229,941

30,435

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

 et increase (decrease) in cash andNcash equivalents

41,692

71,709Cash and cash equivalents at the
beginning of the year

205,882

247,574

Cash and cash equivalents at the endof the year

247,574

319,284

Net cash provided by investing activities

Japan Earthquake Reinsurance Co., Ltd. Annual Report 201839

4. Statement of Changes in Shareholders’ Equity
Fiscal 2016 (from April 1, 2016 to March 31, 2017)(Yen in millions)

Valuation andtranslation adjustments

Shareholder’s equity
Retained earnings
Commonstock

Legalreserve ofretainedearnings

1,000

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

Specialreserves

Specialprice
fluctuation
reserves

Retainedearnings
carriedforward

17

39

487

544

1

1

Treasury
stock

Total
shareholders’equity

(5)

Net
Total
unrealized
valuation
gains onandavailabletranslation
for-saleadjustments
securities

1,539

3

3

Total net
assets1,542

Changes during
the period
Net income(loss)

1

1

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

1,000

1

17

39

1

1

488

546

(5)

(1)

(1)

(1)

1

(1)

(1)

0

1,540

2

2

1,542

Fiscal 2017 (from April 1, 2017 to March 31, 2018)(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

488

546

(0)

(0)

Treasury
stock

Total
shareholders’equity

(5)

Net
Total
unrealized
valuation
gains onandavailabletranslation
for-saleadjustments
securities

1,540

2

2

Total net
assets1,542

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

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

1,000

1

17

39

(0)

(0)

487

545

Notes for fiscal 2017
1. Matters related to the types and total number ofstocks outstanding and the types and number oftreasury stock(Stock)Issuedstock
Treasury
stock

(1)

(1)

(0)

(1)

(1)

(2)

1,539

0

0

1,540

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

Fiscal Year

Dividend per share
Net income (loss) per share

2015

2016

2017

–

–

–

(0.23 yen)

0.57 yen(0.34 yen)

Balance asof the endof fiscal
2016

Increase in
fiscal 2017

Decrease in
fiscal 2017

Balance asof the endof fiscal
2017

Dividend propensity

–

–

–

Net assets per share

775.61 yen

775.67 yen

774.54 yen

24,462

19,665

19,615

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.

40

(5)

(1)

Japan Earthquake Reinsurance Co., Ltd. Annual Report 2018

5. Balance Current Maturity of securities by category
As of the end of fiscal 2016

w Details of assets and liabilities(Yen in millions)

1.	Deposits
Division

Up to
1 year

1 overup to
3 years

3 overup to
5 years

5 over
up to
7
years

Government
bonds

12,57526,39537,4585,835

Municipal
bonds

18,9514,406

898

Corporatebonds

85,766

6,701(Yen in millions)Year
Division

As of the endof fiscal 2015

As of the endof fiscal 2016

As of the endof fiscal 2017

Deposits

189,215

260,534

333,194

Ordinary deposits

155,655

236,504

309,164

Time deposits

33,56024,03024,0302.	Average balance and trading amount of commodity
securities
Not applicable
3.	Balance of securities by category and percentage
distribution(Yen in millions)

Year

As of the end of
fiscal 2015

As of the end of
fiscal 2016

Percentage
distribution(%)

Division

As of the end of
fiscal 2017

Percentage
distribution(%)

92,467

–

–

–

–

–

–

–

8,797

15,838

1,800

–

–

–

26,435Other
securities

–

–

–

–

–

–

–

126,090

53,341

40,157

5,835– 9,155

234,580

Total(Yen in millions)

Municipal
bonds

8,834

6,960

2,327 1,928

17.4

Corporatebonds

12,45557,82910,642 1,856

–

–

–

–

9,858

17,615

7,348

–

–

–

–

–

35,297 119,512

32,3883,785

20,051

10.0

Corporatebonds

154,871

38.5

92,46739.4

82,784

41.3

–

–

–

–

–

109,523

27.3

26,435

11.3

34,822–200,239

–

–

10.3

100.0

–

–

24,257

234,580–

12,069

10.8

100.0

–

37,106

43,526

401,751

24,257

4,148

Municipal
bonds

Total

–

Government
bonds

31.3

–

–

5 over
up to
7
years

62,581––3 overup to
5 years

39.0–

91,4191 overup to
3 years

91,419–– 9,155

Up to
1 year

23.4

Othersecurities

Total

As of the end of fiscal 201793,829Foreignsecurities

Over
10
years

Foreignsecurities

StocksPercentage
distribution(%)

Government
bonds

Stocks7 over
up to
10
years

–
100.0

Division

StocksForeignsecurities
Other
securities

4. Yield on securities heldTotal

7 over
up to
10
years

Over
10
years

Total

– 9,256

62,581––

20,051––82,784

–

–

–

–

–

34,822–––– 9,256

200,239(%)


Division

Fiscal Year

2015

2016

2017

0.25

0.26

0.28

–

–

–

1.39

1.45

1.88

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

–

–

–

0.62

0.44

0.55

0.33

0.26

0.31

–

–

–

1.40

1.76

1.84

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

–

–

–

0.67

0.48

0.57

(0.09)(0.04)

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

0.80
–

–

–

0.66

1.01

(0.02)

–

–

–

0.75

0.07

(0.03)

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 2018

41

9.	
Present conditions of loans involving trust withcontact for replacement of losses
Not applicable
10. Credits classified in accordance with debtor
classification
Not applicable
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, 2018.

(Yen in millions)
As of the endof fiscal 2015Land

As of the endof fiscal 2016

As of the endof fiscal 2017

–

–

–

for underwriting

–

–

–

for investment

–

–

–

Buildings

27

25

24

for underwriting

27

25

24

for investment

–

–

–

–

–

–

Construction in progressfor underwriting

–

–

–

for investment

–

–

–

Total of property

27

25

24

for underwriting

27

25

24

for investment

–

–

–

–

–

–

Other tangible fixed assets

39

17

101

Total

66

43

125

Leased assets(Yen in millions)
Division–––

Reserve for individual bad debts

–

–

–

–

Reserve for specificforeign securities

–

–

–

–

Reserve for retirement benefits

145

23

17

151

Reserve for directors’ retirement
benefits

8

4

7

5

Reserve for bonus
payments

21

22

21

22

Total

Division

2
182

Balance asof the end of
fiscal 2016

Balance
Decrease
as of the end of
in fiscal 2017
fiscal 2017

Increase in
fiscal 2017

Reserve for ordinary
bad debts

–

–

–

–

Reserve for individual bad debts

–

–

–

–

Reserve for specificforeign securities

–

–

–

–

Reserve for retirement benefits

151

14

12

154

Reserve for directors’ retirement
benefits

5

4

–

9

Reserve for bonus
payments

22

21

22

21

Reserve for pricefluctuation

2

–

1

1

182

40

36

186

As of the endof fiscal 2016

As of the endof fiscal 2017

Outstanding claims

1,152

3,581

1,773

Underwriting reserves

627,345456,745495,634

Risk reserves

464,584

278,846

303,954

Unearned premium
reserves

162,760

177,899

191,679

628,497

460,327

497,407

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

42

3
50

(Yen in millions)(Yen in millions)

Total

–
49

As of the end of fiscal 201715.	Underwriting funds
As of the endof fiscal 20156
182

18. Detailed listing of shareholders’ equity
Please refer to the statement of changes in shareholders’ equity on page 40.

14. Special accountNot applicable

Year
Division

Balance
Decrease
as of the end of
in fiscal 2016
fiscal 2016

Increase in
fiscal 2016

–

Total

13. Unearned claims paid
Not applicable

Balance asof the end of
fiscal 2015

Reserve for ordinary
bad debts

Reserve for pricefluctuation

12. Tangible fixed assets by category
Year
Division

17. Detailed listing of liability reserves
As of the end of fiscal 2016

Japan Earthquake Reinsurance Co., Ltd. Annual Report 2018

7. D
 epreciation expenses by category
As of the end of fiscal 2016e Income and loss details(Yen in millions)

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

Division

Fiscal Year

2015

2016

Type of asset

2017

Government bonds

181

2

63

Foreign securities

12

144

–

Total

194

147

63

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

Division

Fiscal Year

2015

2016

2017

Government bonds

–

–

8

Foreign securities

–

10

13

Total

–

10

22

Rate of
Deprecia- Aggregated Balance as
Acquisition
aggregatedtion indeprecia- the end of
cost
depreciafiscal 2016
tions
fiscal 2016
tions %

Tangible fixed assets
Buildings

85

1

59

25

69.8

for
underwriting

85

1

59

25

69.8

for
investment

–

–

–

–

–

Other tangible
fixed assets

142

22

125

17

87.7

Total

228

23

185

43

81.0

Intangible fixed assets
Software

382

64

208

173

54.6

Software in
progress

52

–

–

52

–

3. Losses on valuation of securities
Not applicable

Other
intangible
fixed assets

1

–

–

1

–

Total

436

64

208

227

47.8

4. Gains on disposal of fixed assets
Not applicable

Grand total

665

88

393

271

59.2

As of the end of fiscal 2017
(Yen in millions)

5. Losses on disposal of fixed assets(Yen in millions)

Division

Fiscal Year

2015

2016

Type of asset

2017

Acquisition
cost

Land

–

–

–

Tangible fixed assets

Buildings–––

Buildings

Other tangible fixed assets

0

–

–

Total

0

–

–

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

Division

Fiscal Year

Personnel expenses
Non personnel expenses
Taxes

2015

2016

2017

Rate of
Deprecia- Aggregated Balance as
aggregatedtion indeprecia- the end ofdepreciafiscal 2017tions
fiscal 2017
tions %

85

1

61

24

71.4

for
underwriting

85

1

61

24

71.4

for
investment

–

–

–

–

–

Other tangible
fixed assets

153

33

52

101

34.1

Total

239

34

113

125

47.4

Intangible fixed assets

404

3,311

651

Software

504

81

244

259

48.5

1,527

11,914

2,633

Other
intangible
fixed assets

1

–

–

1

–

331

310

264

Commissions and brokeragefees

45,88046,67548,426

Total

48,14462,211

51,976

Total

505

81

244

261

48.3

Grand total

745

115

358

387

48.0

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 201843

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

(Yen in millions)Fiscal 2016

1. Matters related to financial instruments
For matters related to the status of financial instruments and matters related to the fair values of financial instruments, please refer to Note 2 on thebalance sheet (page 36).
2. Securities(i) Securities held for trading purposes
Not applicable(Yen in millions)Type

Acquisition
cost

Book value

Difference

Public &corporatebonds

186,891

189,396

2,505

–

–

–

20,503

21,275

772

–

–

–

Subtotal

207,394

210,672

3,278

Public &corporatebonds

18,757

18,747(9)

StocksForeignsecurities
OthersSecurities whosecarrying amount
does not exceed
their cost

–

–

–

5,252

5,159

(92)

–

–

–

OthersSubtotal
Total

24,00923,907(101)

231,404

234,580

3,176

As of the end of fiscal 2017Type
Public &corporate
bonds
Securities whosecarrying amountexceeds their cost

Securities whosecarrying amount
does not exceed
their cost

Difference

82,83784,766

1,928

–

–

–

500

502

2

Others–––Subtotal

83,337

85,268

1,931

Public &corporatebonds

80,70380,650

(53)

–

–

–

36,21434,320(1,894)–––

116,918

114,971(1,947)200,256

200,239(16)

StocksSubtotal

44

Book value

StocksOthers
Total

Acquisition
cost

Foreignsecurities

Foreignsecurities

Sales
price

Total ofgains onsale

Total oflosseson salePublic &corporate
bonds

3,504

2

–

26,029

63

8

–

–
13

Stocks––––Foreignsecurities

42,893

144

10

2,322

–

Others

–

–

–

–

–

–

46,397147

1028,35263

22

4. Derivative transactions(i) Derivative transactions to which hedge accounting is
not applied
Currency related
As of the end of fiscal 2016
(Yen in millions)Contract amount1 year or
longerones

Type

Appraisal
profit andloss

Marketprice

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

14,388

–

(363)

(363)

(363)

(363)

As of the end of fiscal 2017
(Yen in millions)Contract amount1 year or
longerones

TypeMarketprice

Appraisal
profit and
loss

711

711

711

711

Over-the-counter transactions(Yen in millions)

Division

Total oflosseson saleTotal

StocksForeignsecurities

Total ofgains onsale

3. Money trust
Not applicable(iii) Available-for-sale securities
As of the end of fiscal 2016

Securities whosecarrying amountexceeds their cost

Sales
price

Type

Total

(ii) Securities to be held to maturity
Not applicable

Division

Fiscal 2017 Forward foreign exchange contracts  Short positions   US dollar
Total

25,414–

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 provided by banks.

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

Japan Earthquake Reinsurance Co., Ltd. Annual Report 2018

Contents

1

Message from the President

2Japan Earthquake Reinsurance Co., Ltd.

11

Topics13

Earthquake Insurance in Japan

21

Reinsurance of Earthquake Insurance

25

Statistics

28

Financial Section

45

Corporate Data

CORPORATE DATA (as of March 31, 2018)
Established:

May 30, 1966

Capital:1 billion yen

Total assets:

549.2 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/

2018Annual Report
Introduction to Earthquake Reinsurance in Japan