2017
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, 2017)
Established:

May 30, 1966

Capital:1 billion yen

Total assets:

511.2 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

Let me begin by expressing my sincere gratitude to all our stakeholders for their continued support.
Japan is one of the most active seismic and volcanic areas in the world. The country has been repeatedly hit byearthquakes, volcanic eruptions, and tsunamis. In April 2016, successive earthquakes occurred in Kumamoto, inflicting
enormous damage.
Earthquake insurance was established in 1966 to stabilize the livelihoods of those affected by such natural disasters.
An earthquake reinsurance scheme consists of three players: the government, private non-life insurance companies
and Japan Earthquake Reinsurance Co., Ltd. (JER), with the public and private sectors working together to ensure thatearthquake insurance claims are paid promptly and reliably.
JER was founded with the launch of the earthquake insurance system as the only company in Japan permitted to
exclusively handle reinsurance for earthquake insurance covering dwelling risks. JER has always sought to makeearthquake reinsurance payouts promptly and reliably against disasters such as the Great Hanshin-Awaji Earthquake,the Great East Japan Earthquake and the Kumamoto Earthquakes.
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.
In earthquake insurance, the number of insurance policies has been increasing with each year, and the number of
insurance policies in force at the end of March 2017 reached a record high of 17.71 million. This rise reflected thegrowing public interest in preparing for earthquakes, which in turn was a result of various initiatives by the non-life
insurance industry, which worked as one in many parts of the country to encourage understanding of earthquake
insurance and the purchase of insurance policies.
In January 2017, the earthquake insurance system was revised mainly for the purpose of dividing the loss categories
into a larger number of segments and revising premium rates.
In these circumstances, under the fourth medium-term business plan “Strengthening Arrangements for Earthquake
Reinsurance Payouts,” which was launched in fiscal 2015, we have worked to develop an effective business continuity
management (BCM) in anticipation of an inland earthquake in the Tokyo Metropolitan area and to solve management
issues to that end to ensure our readiness for prompt and reliable earthquake reinsurance payouts in preparation forpotential large-scale earthquakes.
We are also working to enhance our asset management capabilities and increase our capacity to deal with financial
market fluctuations, as our asset management system, which invests primarily in bonds, faced a continuously
challenging investment environment with low interest rates. At the same time, we are also advancing our integrated risk
management.
Meanwhile, as management base-related measures, we are continuing to strengthen the IT governance system andcorporate governance system, and we are seeking to develop and hire human resources to support the enhancement ofcorporate value, with the aim of creating a rewarding and vibrant workplace.
Recognizing our social mission, we will strive to contribute to the development of the earthquake insurance systemand, understanding our role and responsibilities, we will step up efforts to execute our duties reliably, aiming 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 2017

Makoto Sugimachi
President
Japan Earthquake Reinsurance Co., Ltd.

Japan Earthquake Reinsurance Co., Ltd. Annual Report 20171

JAPAN EARTHQUAKEREINSURANCE CO., LTD.

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

FINANCIAL HIGHLIGHTSNet premiums written

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

250,000

130,000

240,000

238,645

243,099

121,986
120,000

230,000

110,000

220,000

100,000

210,000

90,0000
Fiscal Year

114,114

0
2015

2016

Fiscal Year

2015

2016

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

250

50

206.0%

2

200

4,000

150

3,000

100

2,000

1,000
50
Japan Earthquake
Reinsurance Co., Ltd. Annual Report 2017
5.3%

40
30

2,511

20

3

10
2

0

0
Fiscal Year

3,717

2015

2016

Fiscal Year
2015
2016
Net unrealized gains on available-for-sale securities

0Net premiums written

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

250,000

130,000

243,099

238,645

240,000

121,986
120,000

230,000

110,000

220,000

100,000
Assumed net premiums written

210,000

Net premiums written

90,000(Yen in millions)(Yen in millions)0
250,000
Fiscal Year2015

240,000

238,6450
130,000
Fiscal Year2016
243,0992015
121,986

2016

120,000

114,114
Net unrealized gains on available-for-sale
110,000 securities of earthquake insurance
and net unrealized gains on available-for-sale securities

230,000
Net loss ratio
220,000(Yen in100,000
millions)

250
210,000
200

114,114206.0%

5,000
90,0004,000

0Fiscal Year
150

2015

2016

3,000

0

50
3,717

40

Fiscal Year

2015

2,511

2016

30

2,000

100
50

Net loss ratio

5.3%

0
250 Year
Fiscal2015

2016
206.0%

200

20
Net unrealized gains on available-for-salesecurities of earthquake insurance
1,000
10
and net unrealized gains on available-for-sale securities
3
2(Yen in millions)
0
0
5,000
50
Fiscal Year
2015
2016
Net unrealized gains on available-for-sale securities
3,717 insurance
4,000 of earthquake
3,000

150

Net unrealized gains on available-for-sale securities
2,511
Breakdown of total assets

Total assets and net assets

2,000
Non-consolidated solvency-margin ratio

100

40
30
20

(Yen in millions)(Yen in millions)

Others104,0001,000
FY2015FY2016
Call loans
15,143 32
1,040(A) Total amount of non-consolidated solvency-margin469.3 billion yen
282.6 billion yen
0
0
0
3,000
600,000(B) Total
amountofnon-consolidated
risk
239.3
billionyen
188.9
Fiscal Year
2015
Fiscal Year20152016 billion yen
511,297 2016
Net unrealized gains on available-for-sale securities
Non-consolidated solvency-margin ratio
392.1%
299.1%
Securitiesof earthquake
insurance(A) / {1/2x(B)} x 100
2,000
400,000
234,580
1,542
1,542
Deposits
Net unrealized gains on available-for-sale
Breakdown ofsecurities
securities
260,53450
800,000

709,408 5.3%

200,000

Items(Yen in millions)(Yen in millions)0800,000
Fiscal Year709,408
2015

2016

Total assets

Net assets

600,000

0
4,000 Call loans
1,040

1,542

Breakdown of totalsecurities
assets26,435 Government

Others15,143bonds

Corporatebonds

91,41992,467 Municipal
bonds

24,2573,000

511,297

400,000

Foreign

1,000

Total assets and net assets

1,542

2,000

260,534
1,000

200,000

Securities
Deposits

234,580

Breakdown of securities
Foreignsecurities

26,435 Government
00

Fiscal Year

2015

2016

Total assets

Net assets

Corporate
bonds

bonds

91,41992,467 Municipal
bonds

24,257

Japan Earthquake Reinsurance Co., Ltd. Annual Report 2017

3

ORGANIZATION(As of April 1, 2017)
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

The Fuji Fire and Marine Insurance Co., Ltd.

123

6.2

The Toa Reinsurance Co., Ltd.

93

4.7

Nisshin Fire & Marine Insurance Co., Ltd.

61

3.1

The Kyoei Fire & Marine Insurance Co., Ltd.

34

1.7

The Asahi Fire and Marine Insurance Co., Ltd.

8

0.4

SECOM General Insurance Co., Ltd.

7

0.4

Financial dept.

Shareholders(As of March 31, 2017)
Shareholder

BOARD MEMBERS (FULL-TIME)(As of July 1, 2017)

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 2017

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 2016, the Task Force Against Earthquake Disaster took steps to respond to the 2016
Kumamoto Earthquakes that struck in April 2016, establishing the “Project Team (PT) Against
Earthquake Disaster” consisting of working-level employees to continuously discuss and examine issues for JER in earthquake disasters from a company-wide and cross-sectional perspective. We are working to increase the effectiveness of our readiness for earthquake disasters, raising the awareness of individual employees about BCM and disaster prevention
by increasing opportunities for working-level employees to be involved in measures against
earthquake disasters through their participation in the PT.
Drills by Department (drills at home and using a temporary
office)From November 2016 to February 2017, the Task Force Against Earthquake Disaster conducted drills by department, based on the assumption that employees were working at homeor in a temporary office, as an initiative to strengthen BCM. The Planning and Controller
Department reconfirmed the initial operation based on the assumption that an earthquake
strikes outside working hours and the operation that responses need to be made for systems
at a time when the persons in charge are absent. The Reinsurance Administration Department

Japan Earthquake Reinsurance Co., Ltd. Annual Report 20175

then ran drills for reinsurance claim payments based on rough estimates. In addition, members of the Financial Department checked the operation to raise funds in the temporary office
immediately after a major earthquake.
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 address this problem, the Task Force Against Earthquake Disaster conducted drills every
year for checking and inputting the loss assessment expenses, with all JER employees participating, to secure processing personnel. In fiscal 2016, the employees showed the resultsof their routine drills by actually checking and inputting the loss assessment expenses in theclaims for loss assessment of the 2016 Kumamoto Earthquakes. During normal conditions,
the Task Force will work to secure personnel that can make prompt payments to prepare JER
for an inland earthquake in the Tokyo metropolitan area and an earthquake in the Nankai
Trough, both of which are expected to produce claims outnumbering those made at the timeof the Great East Japan Earthquake.

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

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

6Japan Earthquake Reinsurance Co., Ltd. Annual Report 2017

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 2017

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 2017

Risk management system
We have developed a structure in which risk management is appropriately carried out to ensure
sound and safe management. This organizational framework and important risk management
issues are defined in our Risk Management Rules and Integrated Risk Management Rules.
Specific ways of managing various risks—namely, asset management risks, liquidity risks,and operational risks—are defined in our management rules for each type of risk and our annual risk management policies. Based on these rules, the planning and controller department,
which is the integrated risk management department, manages risks in an integrated mannerby monitoring the risk management situation. We have also established a company-wide Risk
Management Committee as an advisory board for officers in charge of risk management tomake proposals for various risk management issues.
ASSET MANAGEMENT RISKS
Risks relating to asset management are classified into “market risks” and “credit risks”
for risk management, and the management standards are stipulated in the “Standards forManagement of Investment Risks” for each fiscal year.
Market risksMarket risks include interest-rate risk, foreign exchange risk, and price volatility risk. These
are the risks of losses that investors may sustain with fluctuations in the value of assets or
debt, or in income, due to changes in a number of risk factors in the market. We manage
overall market risks both quantitatively and qualitatively. We measure the value at risk
(VaR) of interest rates and currency exchange as the amount of risk, while also monitoring
the unrealized gain/loss and price changes (sensitivity). We also apply an upper limitof retention or a loss-cut rule if necessary. In addition, we have separate divisions for
executing transactions and for handling administrative processes, respectively, thereby
enabling the supervisory and checking functions to work effectively.
Credit risks
Credit risks are the risks of a reduction in value or the disappearance of assets, which
results when the credit standing of the borrower has weakened, for example.
When purchasing securities, we limit their issuers to those with high credibility withreference to the credit rating made by rating agencies. We always check securities held
to determine credibility, and conduct individual controls to avoid a concentration on a
specific group of companies or type of business. We also measure the credit VaR based on
the default rate, etc. for managing credit risks.
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 20179

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 2017

TOPICS

Revision of Premiums Rates of Earthquake Insurance
on January 1, 2017 and Division of Loss Categories into
Four
Earthquake insurance has been revised as described below for policies the inception date ofwhich is on or after January 1, 2017. Outline of the revision is as follows.
1. Revision of insurance premiums
Insurance premiums have been raised 5.1% on national average in light of the renewal of theseismic source models to the 2014 version and the renewal of basic data in the Probabilistic
Seismic Hazard Maps (PSHM) by the Headquarters for Earthquake Research Promotion of
the government.
2. Division of loss categories into four
Based on discussions (it is desirable to better reflect the reality of losses in the loss categories
while ensuring the promptness of loss assessment) at follow-up meetings of the Ministry of
Finance’s Earthquake Insurance System Project Team, the “half loss” in the loss categories
has been divided into two, namely “large half loss” and “small half loss.” As a result, the three
categories of total loss, half loss and partial loss have been divided into four categories of
total loss, large half loss, small half loss and partial loss.

Participation in Forum to Commemorate the 50th
Anniversary of the Earthquake Insurance System
On September 5, 2016, a forum to commemorate the 50th anniversary of the earthquake
insurance system was held, sponsored by the General Insurance Association of Japan (GIAJ).
It sought to use the 50th anniversary of the earthquake insurance system as an opportunity tolook back on the history of earthquake insurance and seek the further take up and promotionof earthquake insurance.
A panel discussion by experts followed the keynote speeches by the Ministry of Finance and the
Financial Services Agency. During the discussion, panelists noted that the role of earthquake
insurance in Japan, a country highly susceptible to earthquakes, is very significant and thatto further facilitate the take up of earthquake insurance, it is important for consumers tohave a correct understanding of the need and mechanism of earthquake insurance. At theconclusion of the forum, the determination that “non-life insurance companies and agentswill unite and make concerted efforts with the cooperation of the government to inform theearthquake risk and further facilitate the take up of earthquake insurance” was expressed.
JER also set up a special booth in the venue to introduce the reinsurance system and therole of JER, which support the earthquake insurance system, by putting up posters anddistributing a booklet, among other activities.

Japan Earthquake Reinsurance Co., Ltd. Annual Report 201711

Response to the 2016 Kumamoto Earthquakes
We offer our deepest sympathy to all those affected by the 2016 Kumamoto Earthquakes.
The non-life insurance industry was united in taking initiatives to promptly, steadily and fairly
make insurance payouts to support the reconstruction of the lives of policyholders affected bythese earthquakes and sought to support the victims and timely provide information, making
use of its experience in the Great East Japan Earthquake. As a result, 247,048 earthquake
insurance claims of 377.2 billion yen had been paid as of March 31, 2017.
Number and amount of earthquake insurance claims paid in
the 2016 Kumamoto Earthquakes
As of March 31, 2017: The figures below were gathered from boththe member and non-member insurance companies of GAIJ.
Number of inquiries(Note 1)

Number of
settled cases(Note 2)

Number of claim
payments

Total amount ofclaims paid
(1,000 yen)

Fukuoka

24,11323,44017,18810,449,428

Saga

3,913

3,827

2,909

1,873,692

Nagasaki

1,002

982

671

389,377

Kumamoto

228,128

228,045

211,478

353,320,597

Oita

16,973

16,748

13,631

10,469,010

Miyazaki

702

681

481

342,933

Kagoshima

465

463

262

140,261

Other

760

742

428

302,371

Total

276,056

274,928

247,048377,287,669

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

(Source: Partially extracted from the GIAJ website on May 9, 2017)* The number and amount of reinsurance claims paid in the 2016 Kumamoto Earthquakes posted in the Top 20 Earthquakes as to Reinsurance Clams Paid on page 26 are the number and amount of reinsurance claims paid by JER to
non-life insurance companies as of March 31, 2017 and therefore are not the same as the number and amount above.

12

Japan Earthquake Reinsurance Co., Ltd. Annual Report 2017

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 201713

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 2017

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 201715

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 2017

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 201717

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 2017

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 201719

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 2017

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 201721

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 2017

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 201723

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 6
JER and non-life insurance companies save the risk premium of insurance premiums paid bypolicyholders as earthquake insurance risk reserves for the possible payment of earthquake
insurance claims while the government saves government reserves in the earthquake insurance special account under law. Additionally, it is necessary for all investment profits fromthese accumulated liability reserves to also be accumulated as liability reserves. In the eventthat an earthquake occurs and causes losses or damages, each of JER, non-life insurancecompanies and the government pays an insurance claim according to each liability as stipulated in the reinsurance scheme by withdrawing from reserves.
JER
Non-life insurance companies
The government

278.8 billion yen
46.8 billion yen
1,345.7 billion yen

Total

1,671.4 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 2016 is approved by the Diet.

24

Japan Earthquake Reinsurance Co., Ltd. Annual Report 2017

STATISTICS

Reinsurance claims paid in fiscal 201 6
Reinsurance claims paid in fiscal 2016 amounted to 388.5 billion yen, including earthquake
reinsurance claims paid to cover the 2016 Kumamoto Earthquake. In terms of numbers,
216,954 claims were paid (on the basis of insurance policies). See below for major claims
paid per earthquake.
Earthquake(Region name)Date of occurrence

1. The 2016 Kumamoto

April 14, 2016

2. Tottori-ken Chubu

Magnitude

No. ofpolicies

Reinsurance
claims paid
(million yen)

7.3

200,029375,299

October 21, 2016

6.6

5,538

4,596

March 11, 2011

9.0

5,898

4,244

April 18, 2016

5.8

598

1,014

5. Fukushima-ken-oki

November 22, 2016

7.4

1,116

653

Other earthquakes

—

—

3,775

2,719

Total

—

—

216,954

388,527

3. The 2011 off the Pacific coast of Tohoku
4. Kumamoto-ken Kumamoto

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

25,791

8,505

33.0

Nearly 0%–5%Tokyo metropolitan

18,232

6,143

33.7

About 70%

Nankai trough43,79013,602

31.1

About 70%

Earthquake(Region name)Note 1: Number of households is prepared based on data of the Ministry of Internal Affairs and Communications (asof January 1, 2016).
2: JER prepared the number of policies, assuming that major prefectures were stricken, based on the preliminary
figures as of the end of 2015 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 2016 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 201725

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, 2017)
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

807,152

1,274,855

2. The 2016 Kumamoto

April 14, 2016

7.3

200,029375,299

January 17, 1995

7.3

65,42778,346

4. Miyagi-ken-oki

April 7, 2011

7.2

31,00532,392

5. Fukuoka-ken Seiho-oki

March 20, 2005

7.0

22,066

16,973

6. Geiyo

March 24, 2001

6.7

24,452

16,941

7. Niigata-ken Chuetsu

October 23, 2004

6.8

12,60814,897

8. Niigata-ken Chuetsu-oki

July 16, 2007

6.8

7,869

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. Suruga-wan

August 11, 2009

6.5

9,518

5,170

13. Shizuoka-ken Tobu

March 15, 2011

6.4

5,354

4,671

14. Tottori-ken Chubu

October 21, 2016

6.6

5,538

4,596

15. Iwate-ken Engan Hokubu

July 24, 2008

6.8

7,756

3,973

16. Fukushima-ken Hamadori

April 11, 2011

7.0

2,373

3,679

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

3,307

2,733

20. Awajishima fukin

April 13, 2013

6.3

2,942

2,339

3. Hyogo-ken Nanbu

10. Tokachi-oki

Note 1: After the 2011 Great East Japan Earthquake, in accordance with our reinsurance scheme at the time, the government paid 579,927 million yen and JER and non-life insurance companies paid 694,927 million yen.
2: After the 2016 Kumamoto Earthquake, in accordance with our reinsurance scheme at the time, the government
paid 129,999 million yen and JER and non-life insurance companies paid 245,299 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 2017

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)

14. 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%
13. Shizuoka-ken Tobu (M6.4)

3. Hyogo-ken Nanbu (M7.3)

12. Surugawan (M6.5)

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

2. The 2016 Kumamoto (M7.3)

Japan Earthquake Reinsurance Co., Ltd. Annual Report 201727

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 2017

FINANCIAL REVIEWBusiness development, results, etc.
During fiscal 2016, the Japanese economy followed a moderate recovery path, with domestic demand remaining firmon improved employment conditions and growth in public investment, thanks to the monetary easing policy of the
Bank of Japan, in addition to benefits reaped by the export sector from the recovery of overseas economies.
Earthquake insurance premiums remained almost flat from the previous fiscal year, reflecting growing social interestin earthquake insurance in the wake of the Kumamoto Earthquakes that struck in April 2016 and the effect of lastminute demand associated with the hike of insurance premiums as a result of the revision of earthquake insurance
premiums in January 2017. These factors offset the negative impact of the reactionary fall after the last-minuteincrease in earthquake insurance policies associated with the revision of fire insurance in October 2015. Earthquake
insurance payouts and loss assessment expenses increased significantly from the previous fiscal year, mainly becauseof the Kumamoto Earthquakes.
Looking at asset management, earnings from investments fell below the level posted in the previous fiscal year, reflecting the advanced redemption of high-yield bonds amid a situation that remained difficult for new investments due tothe persistent ultra-low interest rate environment.
In fiscal 2016, we worked on a number of management measures as the second year of the fourth medium-termbusiness plan “Strengthening Arrangements for Earthquake Reinsurance Payouts,” as fiscal 2016 saw the milestoneof the 50th anniversary of the founding of JER and the establishment of the earthquake insurance system.
We pushed ahead with initiatives such as the development of an effective BCM to prepare for an inland earthquake in
the Tokyo metropolitan area, the most important issue of JER, the examination of the tenacity and merchantability ofthe earthquake insurance system, the information transmission and disclosure of JER and the earthquake insurance
system to facilitate the understanding and take up of earthquake insurance, the strengthening of information andtechnology governance and the consideration of the complete renewal of system infrastructure and the developmentof a new human resources system and skills development.
Summary of earthquake insurance results① Net premiums written and net claims paid
In the fiscal year under review, although premiums written
remained almost flat, net premiums written after deducting reinsurance premiums ceded declined to 114.1 billion
yen (down 6.5% year on year), the result of an increase inreinsurance premiums ceded to the government following
the revision of the reinsurance scheme of earthquake insurance in April and October 2016.
Meanwhile, net claims paid increased significantly to
220.9 billion yen (up 3,852.3% year on year), primarily
due to the Kumamoto Earthquakes.
② Risk reserves and underwriting reserves
Risk reserves added totaled 52.1 billion yen (down 3.2%
year on year), consisting of net premiums written of
51.8 billion yen, calculated by deducting assumed reinsurance commissions from net premiums written, andgains on investments of 0.2 billion yen.
Risk reserves at the end of the fiscal year under review
came to 278.8 billion yen (down 40.0% year on year) as
a result of the withdrawal from the reserves in the past
year of net claims paid of 220.9 billion yen as statedabove, loss assessment expenses of 14.1 billion yen, theprovision for outstanding claims of 2.4 billion yen andadvertising and publicity expenses of 0.3 billion yen.
Underwriting reserves at the end of the fiscal year underreview amounted to 456.7 billion yen (down 27.2% year
on year) as a result of the addition of unearned premium
reserves to the risk reserves stated above.
③ Risk reserves of direct insurance companies
A total of 4.5 billion yen (down 6.1% year on year),consisting of net premiums written and gains on investments, was added to the risk reserves of direct insurance companies recorded as entrusted reserves. The risk
reserves of direct insurance companies at the end of the

fiscal year under review came to 46.8 billion yen (down
40.0% year on year), the result of the withdrawal of reinsurance claims of 34.9 billion yen and advertising andpublicity expenses of 0.9 billion yen.
Outline of investments
The decline in domestic interest rates gained momentum in the wake of the introduction of the negative interest rate policy by the Bank of Japan. Subsequently,
the outlook for a further deepening of negative interest
rates faded, but the difficult investment environment remained, with the interest rate level of investment vehicles
of JER staying in negative territory in their maturities.
Looking at exchange rates, the yen gradually strengthened against the US dollar along with speculation thatthe interest rate hike in the US would be delayed. After
November, however, the yen weakened sharply against
the US dollar, reflecting growing expectations of thepolicies of the new U.S. administration. While the yen
initially appreciated against the euro, mainly due to political turbulence in Europe, the Japanese currency thengradually weakened, as the European economy began torecover.
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 0.2 billion yen in the business account and0.1 billion yen in the entrusted reserves account. Consequently, investment assets totaled 496.1 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 income for the fiscal year under review came to 1 million yen.

Japan Earthquake Reinsurance Co., Ltd. Annual Report 2017

29

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

Division

2012

2013

2014

2015

2016

Net premiums written
Percentage change over the previous term

92,996
11.1%

92,248(0.8%)

108,99418.2%

121,986
11.9%

114,114(6.5%)Net claims paid
Percentage change over the previous term

31,607(83.9%)

15,010(52.5%)

9,563(36.3%)

5,589(41.6%)

220,905
3,852.3%

Ordinary income
Percentage change over the previous term

110,370(61.5%)

104,703(5.1%)

119,82214.4%

129,1077.7%

289,485
124.2%

Ordinary expenses
Percentage change over the previous term

110,176(61.6%)

104,509(5.1%)

119,81814.6%

129,1077.8%

289,487
124.2%

Ordinary profit (loss)
Percentage change over the previous term

193
117.5%

194
0.3%

3(98.2%)

0(98.4%)(1)(3,537.5%)

Net income (loss)
Percentage change over the previous term

4
–

(82)
(2,045.2%)

3
–

(0)
(115.6%)

1
–

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

1,633

1,544

1,543

1,542

1,542

Total assets

536,808

577,305

640,137

709,408

511,297

Underwriting reserves
Percentage change over the previous term

461,480
7.1%

499,2748.2%

556,727
11.5%

627,34512.7%

456,745(27.2%)Of the balance, risk reserves
Percentage change over the previous term

352,830
6.4%

378,0417.1%

417,05610.3%

464.584
11.4%

278,846(40.0%)

Loans
Percentage change over the previous term

–
–

–
–

–
–

–
–

–
–

Securities
Percentage change over the previous term

476,979
6.4%

525,161
10.1%

391,034(25.5%)

401,751
2.7%

234,580(41.6%)

Non-consolidated solvency-margin ratio

160.0%

344.9%

354.5%

392.1%

299.1%

Dividend propensity

–

–

–

–

–

No. of employees

27

26

29

28

26

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

2014

2015

2016

Premiums written

222,014245,353

247,441Return premiums

4,341

6,708

4,342

Assumed net premiums
written (A)217,661

238,645

243,099

Reinsurance premiums
ceded (B)108,666

116,659

128,984

Net premiums written (A – B)

108,994

121,986

114,114

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

Domestic contract

2014

2015

2016

100%

100%

100%

2014

2015

2016

13,287

8,214

388,527

3. Net claims paid
(Yen in millions)

Division

Fiscal Year

Assumed net claims paid (A)Reinsurance claims
recovered (B)

3,723

2,625

167,622Net claims paid (A – B)

9,563

5,589

220,905

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 2017

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

Division

Fiscal YearNet loss ratio

2014

2015

2016
2014

2015

2016

10

10

11

734
46,675Rate of top fivereinsurers’ ceded
insurance premiums

90.4%

91.5%

89.8%

5.3%

206.0%

44,026

46,60647,409 Insurance related operating,general and administrative
expenses

710

725 Commissions and brokeragefees

43,31545,880Net expense ratio

40.4%

38.2%

41.5%

Combined ratio

50.5%

43.5%

247.5%

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

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

Division

Fiscal Year

No. of reinsurersthat ceded insurance
contracts

10.1%

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

2014

2015

2016

Underwriting income

112,468

123,681284,934

Underwriting expenses

111,757

122,956

284,200

Operating and generaladministrative expenses

734

710

725

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 201731

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

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

(Yen in millions)FiscalYear

Percentage
distribution(%)

Division

Percentage
distribution
(%)

0.10

34

0.06

7

0.00

23

0.03

8

0.02

0

0.00

Monetaryreceivablesbought

15

0.10

144

0.08

3

0.02

Total

34,1195.3 189,215

26.7 260,534

51.0Call loans

84,898

13.3

4,668

0.7

1,040

0.2

Monetaryreceivablesbought

113,991

17.8

94,596

13.3––

Money trusts

–

–

–

–

–

–

Securities

391,03461.1

401,75156.6

234,580

45.9

Buildings

28

0.0

27

0.0

25

0.0

Total ofinvestments
assets624,07297.5

690,258

97.3

496,18197.0

Total assets

640,137

100.0

709,408

100.0

511,297

100.0

–

–

–

–

–

–

2,642

0.59

2,280

0.62

1,283

0.44

–

–

–

–

–

–

2,710

0.47

2,468

0.38

1,294

0.24

Note:
Investment assets yield (income yield): indicator showing the result of investment assets from a point of income (interest and dividend income)

Percentage
distribution(%)

Deposits

Yield (%)

28

Buildings

As of the end of
fiscal 2016

Yield (%)

Call loans

Securities

As of the end of
fiscal 20152016

Deposits

Money trusts(Yen in millions)

As of the end of
fiscal 2014

2015

Yield (%)

Division

2. Total assets and investments assets
Year

2014

The numerator is composed of interest and dividend income from investment assets while the denominator is an acquisition cost based assets.
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)2014

Fiscal Year

2015

2016

Division

Amount ofnumerator

Amount ofdenominator

Yield onworking
assets (%)

Amount ofnumerator

Amount ofdenominator

Yield onworking
assets (%)

Amount ofnumerator

Amount ofdenominator

Yield onworking
assets (%)

Deposits

28

29,8240.10

3460,1810.06

7

233,671

0.00

Call loans

23

77,0580.03

838,187

0.02

0

1,471

0.00

Monetary receivables bought

15

15,5130.10

144

184,504

0.08

320,157

0.02

–

–

–

–

–

–

–

–

–

2,642

450,256

0.59

2,475

368,634

0.67

1,419

294,061

0.48

791

312,6400.25

818

250,3820.33

662

251,126

0.26

–

–

–

–

–

–

–

–

–

1,850

137,615

1.34

1,657

118,251

1.40

757

42,934

1.76–

Money trusts
Securities
Public and corporate bonds
StocksForeign securities

–

–

–

–

–

–

–

–

Loans

Other securities

–

–

–

–

–

–

–

–

–

Buildings

–

31

–

–

28

–

–

27

–

Derivatives(6,447)

–

–

3,954

–

–

3,329

–

–

Others

6,153

–

–

(4,494)––(3,791)

–

–

Total

2,416

572,684

0.42

2,124

651,5360.33

968

549,3900.18

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 2017

5. Market-price based overall yield (for reference)(Yen in millions)2014

Fiscal Year

2015

2016

Division

Amount ofnumerator

Amount ofdenominator

Yield onworking
assets (%)

Amount ofnumerator

Amount ofdenominator

Yield onworking
assets (%)

Amount ofnumerator

Amount ofdenominator

Yield onworking
assets (%)

Deposits

28

29,8240.10

3460,1810.06

7

233,671

0.00

Call loans

23

77,0580.03

838,187

0.02

0

1,471

0.00

Monetary receivables bought

15

15,5130.10

144

184,504

0.08

320,157

0.02

–

–

–

–

–

–

–

–

–

3,030

453,264

0.67

2,800

372,0300.75

212

297,783

0.07

1,253

314,369

0.40

2,014

252,572

0.80

(227)

254,512(0.09)

–

–

–

–

–

–

–

–

–

1,777

138,895

1.28

786

119,458

0.66

439

43,270

1.01

Money trusts
Securities
Public and corporate bonds
StocksForeign securities

–

–

–

–

–

–

–

–

–

Loans

Other securities

–

–

–

–

–

–

–

–

–

Buildings

–

31

–

–

28

–

–

27

–

Derivatives(6,447)

–

–

3,954

–

–

3,329

–

–

Others

6,153

–

–

(4,494)––(3,791)

–

–

Total

2,804

575,693

0.49

2,449

654,932

0.37

(239)

553,111(0.04)

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 2014

As of the end of fiscal 2015

As of the end of fiscal 2016

Percentage
distribution(%)

Percentage
distribution(%)

Percentage
distribution(%)

Division
Foreign currency denominatedForeign public and corporate bonds

93,63864.876,404

69.8

14,91056.4

Yen denominatedForeign public and corporate bonds
Total

50,76335.2

33,11830.2

11,525

43.6

144,401

100.0

109,523100.0

26,435

100.0

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

1.34%

1.39%

1.45%

Assets management (realized yield)

1.34%

1.40%

1.76%

Market-price based overall yield (for reference)

1.28%

0.66%

1.01%

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 201733

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-margin469,361

282,607

1,539

1,540

Price fluctuation reserves

6

2

Risk reserves––

464,584

278,846

Common stock, etc.

Catastrophe reserves
Reserves for ordinary bad debts

(A)

–

–

3,231

2,218

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––239,352

188,948

General underwriting risk (RI)––

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

Anticipated rate of return risk (R3)

–

–

9,958

7,343

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 2015 fiscal 2016

Management risk (R5)

4,693

3,704

Catastrophe risk (R6)

224,700

177,900

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

392.1%

299.1%

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

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

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 2017

ACCOUNTING CONCEPTS(NET ASSETS)

q Financial statements(Yen in millions)2015(As of March
31, 2016)

2016(As of March
31, 2017)

Item

AmountAmountCommon stock

1,000

1,000

544

546



Fiscal Year

1. Balance sheets(ASSETS)

(Yen in millions)2015(As of March
31, 2016)

2016(As of March
31, 2017)

Item

AmountAmount Other legal reserve of retained earnings

Cash and deposits
Deposits

189,215
189,215

260,534
260,534  Special reserves

17

17

Call loans

4,668

1,040

  Special price fluctuation reserves

39

39

Monetary receivables bought

94,596–  Retained earnings carried forward

487

488

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

234,580
91,41924,257
92,467
26,435

Tangible fixed assets
Buildings Other tangible fixed assets

66
27
39

43
25
17

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

151
150
–
1

227
173
52
1

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

18,957
12,357
1,227
46
45
5,280

14,87014,464
261
46
17
80

Total assets

709,408

511,297



Fiscal Year

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

Item

2015
(As of March
31, 2016)

2016(As of March
31, 2017)

AmountAmountUnderwriting funds
Outstanding claims
Underwriting reserves

628,497
1,152
627,345

460,327
3,581
456,745

Entrusted reserves

67,102

36,103

Other liabilities
Reinsurance accounts payable
Income taxes payable
Deposits payable
Accrued amounts payable
Derivatives

8,364
8,071
185
3
104
–

10,630
9,709
144
3
328
444

Reserve for retirement benefits

145

151

Reserve for directors’ retirement benefits

8

5

Reserve for bonus payments

21

22

Reserves under the special law
Reserve for price fluctuation

6
6

2
2

3,717

2,511

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

10

707,865

509,755

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

543

545

(5)

(5)

1,539

1,540

3

2

3

2

1,542

1,542

709,408

511,297

Notes for fiscal 2016
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 2017

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.

36(10) To prepare for a loss from price changes ofshares and others, reserve for price fluctuation isappropriated according to Article 115, Insurance
Business Law.
2. Matters relating to changes, etc. in accounting policies
Associated with the amendment of the Corporation
Tax Act, the “Practical Solution on a change in depreciation method due to Tax Reform 2016” (Accounting Standard Board of Japan (ASBJ) Practical
Issues Task Force (PITF) No. 32, issued June 17,2016) is applied to the fiscal year under review, andthe depreciation method of equipment attached tobuildings and structures that were acquired on orafter April 1, 2016 has been changed from the declining balance method to the straight-line method.
This change will not have an impact on financial
statements for the fiscal year under review.
3. 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.

Japan Earthquake Reinsurance Co., Ltd. Annual Report 2017

(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, 2017.
(Yen in millions)

Balancesheet
amountFair value

Difference(i) Cash and deposits

260,534

260,534

–

1,040

1,040

–

(iii) Securities
Available-for-sale securities

234,580

234,580–

Total assets(ii) Call loans

496,155

496,155–(iv) Derivatives* to which
hedge accounting is notapplied

(363)

(363)

–

Derivatives total

(363)

(363)

–

* 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.

4. Taxes are included when preparing accounts for
consumption tax and other items.
5. 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.

7. See below for a breakdown of outstanding claims.
(Yen in millions)

Outstanding claims (before the deduction ofoutstanding reinsurance claims)

5,872

Outstanding reinsurance claims related to theabove claims

2,290

Net outstanding claims

3,581

8. Total deferred tax assets amount to 351 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 258 million yen, a reserve for retirement benefits of 42 million yen, unpaid businesstaxes of 28 million yen and unpaid special local corporate tax of 11 million yen. Deferred tax liabilities
resulted mainly from unrealized gains on securitiesof 0 million yen.
9. 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.
10. Net assets per share are 775.67 yen. The basis forthis calculation is that net assets are 1,542 million yen, net assets accrued from ordinary sharesare 1,542 million yen and the number of ordinary
shares at the end of the term is 1.988 million.
11. Additional information
The “Implementation Guidance on Recoverabilityof Deferred Tax Assets” (ASBJ Guidance No. 26,
issued March 28, 2016) is applied from the fiscal
year under review.
12. Each amount is rounded down to the nearest
whole unit.

6. The accumulated depreciation of tangible fixed assets is 185 million yen.

Japan Earthquake Reinsurance Co., Ltd. Annual Report 201737

2. Statements of income(Yen in millions)

Fiscal Year

2015

2016

(from April 1, 2015
to March 31, 2016)(from April 1, 2016
to March 31, 2017)

Item

AmountOrdinary income

Notes for fiscal 2016
1. See below for a breakdown of net premiums written.
(Yen in millions)

Premiums written:

243,099

AmountReinsurance premiums ceded:

128,984

129,107289,485

Net premiums written:

114,114

Underwriting income

123,681284,934   Net premiums written

121,986

114,114  Investment income on savings
premiums

1,198

220

  Reversal of outstanding claims

497

–

–

170,599

Investment income

5,424

4,550

   Interest and dividend income

2,468

1,294

  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   Loss adjustment expenses  Commissions and brokerage fees  Provision of outstanding claims

194

147

3,954

3,329

4

0

(1,198)

(220)

1

0

129,107289,487

2,429

14,19046,67510  Foreign exchange losses

4,470

3,773

   Other investment expenses

28

19

1,394

1,345

257

138

257

138

Ordinary profit (loss)

0(1)

Extraordinary income–

3

Reversal of reserve for price fluctuation
Losses on disposal fixed assets

4,108

Net provision of outstanding claims

868
45,8803,803

Extraordinary losses(Yen in millions)

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

1,679

–

Other ordinary expenses

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

Provision of outstanding reinsurance claims
related to the above claims

4,498  Interest paid

220,905

284,200– Operating, general and administrative
expenses

167,622Net claims paid:

220,905

2,429

Investment expenses

388,527

Reinsurance claims recovered:

5,589

–

   Loss on sales of securities(Yen in millions)

Claims paid:

122,956

70,617   Provision of underwriting reserves

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

–

3

0

–

0

–

Provision of price fluctuation reserves

0–

Net income (loss) before income taxes(0)1

Income taxes

00

Total income taxes00

Net income (loss)(0)1

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

Deposits:

7

Call loans:0

Monetary receivables bought:

3

Securities:

1,283

Total:

1,294

5. Paper profit/loss involved in the gains on derivatives
is a loss of 363 million yen.
6. Net
income per share is 0.57 yen.
The basis for this calculation is such that net income is 1 million yen, net income accrued from
common stocks is 1 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 20.21%. The difference is
explained by the following breakdown: valuation reserve 6,379.81%, the amount of the write-off carried from publicity expenses related to risk reserves(6,429.46%).
8. Each amount is rounded down to the nearest whole
unit.

38

Japan Earthquake Reinsurance Co., Ltd. Annual Report 2017

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

Fiscal Year

Item

2015

2016

(from April 1, 2015
to March 31, 2016)(from April 1, 2016
to March 31, 2017)

AmountAmountNotes for fiscal 2016
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

(0)

1

82

88

Increase (decrease) in outstanding
claims

(497)

2,429

Increase (decrease) in underwriting
reserves

70,617

Increase (decrease) in entrusted
reserves(As of March
31, 2016)(As of March
31, 2017)

189,215

260,534

Call loans

4,668

1,040

Monetary receivables bought

94,596–(170,599)

Securities

401,751

234,580

4,089(30,999)

Deposits of a depository period
over three months(11,000)(14,000)

Increase (decrease) in reserve forretirement benefits

15

5

Monetary receivables bought other thancash equivalents(71,597)–

Increase (decrease) in reserve fordirectors’ retirement benefits

(13)

(3)

Securities other than cash equivalent(401,751)(234,580)

Cash and cash equivalents

205,882

247,574

Increase (decrease) in reserve forbonus payments(0)0Increase (decrease) in reserve forprice fluctuation

0(3)(2,468)(1,294)

Interest and dividend income
Losses (gains) on investment insecurities

(194)

(136)

Foreign exchange losses (gains)

5,723

3,865

Losses (gains) on tangible fixed
assets0–

Decrease (increase) in other assets(other than investment and financial
activities related)377(2,079)

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

311

1,862

Others(9,288)5,603   Subtotal

68,753(191,258)

4,211

3,009

Interest and dividends received
Income taxes paid
Net cash provided by operating activities–(0)72,965(188,249)–(3,000)(71,588)–

Cash and deposits

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

Cash flow from investing activities
Net decrease (increase) in cash anddeposits
Purchase of monetary receivablesboughtProceeds from sales and redemptionof monetary receivables bought

19,997

71,597Purchase of securities(217,876)(21,306)

Proceeds from sales and redemptionof securities

200,414

182,791    Total investment assets activities(69,052)

230,082

3,913

41,833    Total operating activities and   investment assets activities
Acquisition of tangible fixed assets

(1)

(0)

Others

(40)

(140)

(69,094)229,941

Cash flow in financing activities

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

 et increase (decrease) in cash andNcash equivalents

3,870

41,692

Cash and cash equivalents at the
beginning of the year

202,011

205,882

Cash and cash equivalents at the endof the year

205,882

247,574

Japan Earthquake Reinsurance Co., Ltd. Annual Report 201739

4. Statement of Changes in Shareholders’ Equity
Fiscal 2015 (from April 1, 2015 to March 31, 2016)(Yen in millions)

Valuation andtranslation adjustments

Shareholder’s equity
Retained earnings
Commonstock

Legalreserve ofretainedearnings

1,000

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

Specialprice
fluctuation
reserves

Retainedearnings
carriedforwardTotal
retainedearnings

17

39

487

545

(0)

(0)

Treasury
stock

Total
shareholders’equity

(5)

Net
Total
unrealized
valuation
gains onandavailabletranslation
for-saleadjustments
securities

1,539

4

4

Total net
assets1,543

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

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

1,000

1

17

39

(0)

(0)

487

544

(5)

(1)

(1)

(1)

(0)

(1)

(1)

(1)

1,539

3

3

1,542

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

Notes for fiscal 2016
1. Matters related to the types and total number ofstocks outstanding and the types and number oftreasury stock(Stock)Issuedstock
Treasury
stock

(1)

(1)

1

(1)

(1)

0

1,540

2

2

1,542

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

Fiscal Year

Dividend per share
Net income (loss) per share

2014

2015

2016

–

–

–

1.53 yen(0.23 yen)

0.57 yen

Balance asof the endof fiscal
2015

Increase in
fiscal 2016

Decrease in
fiscal 2016

Balance asof the endof fiscal
2016

Dividend propensity

–

–

–

Net assets per share

776.41 yen

775.61 yen

775.67 yen

22,07324,462

19,665

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 2017

5. Balance Current Maturity of securities by category
As of the end of fiscal 2015

w Details of assets and liabilities(Yen in millions)

1.	Deposits(Yen in millions)Year
Division

As of the endof fiscal 2014

Deposits

As of the endof fiscal 2016

34,119189,215

260,534559

155,655

236,504

33,56033,56024,030Ordinary deposits
Time deposits

As of the endof fiscal 2015

2.	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 2014

As of the end of
fiscal 2015

Percentage
distribution(%)

Division

As of the end of
fiscal 2016

Percentage
distribution(%)

85,971

43,526–––– 154,871

–

–

–

–

–

–

Foreignsecurities

60,24549,278–––– 109,523

Othersecurities

–

–

–

–

–

–

–

– 9,398

401,751

StocksTotal

152,660 178,556

47,744 13,391

–

11.3

Corporatebonds

85,766

6,701

–

–

–

–

–

–

8,797

15,8381,800–

15.9 154,871

38.5

92,467

39.4

–

–

–

36.9 109,523

27.3

26,435––(Yen in millions)

898

62,170234,580–4,406

Corporate
bonds

–

–

18,951

10.3

100.0

68,900–

Municipal
bonds

24,257401,751

–

–

10.8

100.0

21,2205,835

43,526

391,034

22,305

Corporate
bonds

Total

93,82937,4580.7

Total

Municipal
bonds

Over
10
years

– 9,398

26,3952,891–

47,744 13,391

12,575

Municipal
bonds–

22,085Government
bonds

39.0

–

1,208

5 over
up to
7
years

91,419Other
securities

Governmentbonds

3 overup to
5 years

23.4

144,401

3 overup to
5 years

1 overup to
3 years

93,829Foreignsecurities

1 overup to
3 years

Up to
1 year

46.4

–

Up to
1 year

7 over
up to
10
years

As of the end of fiscal 2016

181,570–

Division

Percentage
distribution(%)

Government
bonds

Stocks5 over
up to
7
years

–
100.0

Division

StocksForeignsecurities
Other
securities

4. Yield on securities held

Total

–

–

–

–

126,090

53,341

40,1575,835

7 over
up to
10
years

Over
10
years

Total

– 9,155

91,419––24,257––

92,467

–

–

–

–

–

26,435–––– 9,155

234,580(%)

Division

Fiscal Year

2014

2015

2016

0.25

0.25

0.26

–

–

–

1.34

1.39

1.45

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

–

–

–

0.59

0.62

0.44

0.25

0.33

0.26

–

–

–

1.34

1.40

1.76

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

–

–

–

0.59

0.67

0.48

0.80

(0.09)

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

0.40
–

–

–

1.28

0.66

1.01

–

–

–

0.67

0.75

0.07

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 2017

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, 2015.

(Yen in millions)
As of the endof fiscal 2014Land

As of the endof fiscal 2015

As of the endof fiscal 2016

–

–

–

for underwriting

–

–

–

for investment

–

–

–

Buildings

28

27

25

for underwriting

28

27

25

for investment

–

–

–

–

–

–

Construction in progressfor underwriting

–

–

–

for investment

–

–

–

Total of property

28

27

25

for underwriting

28

27

25

for investment

–

–

–

–

–

–

Other tangible fixed assets

62

39

17

Total

91

66

43

Leased assets(Yen in millions)
Division–––

Reserve for individual bad debts

–

–

–

–

Reserve for specificforeign securities

–

–

–

–

Reserve for retirement benefits

130

22

7

145

Reserve for directors’ retirement
benefits

22

4

17

8

Reserve for bonus
payments

21

21

21

21

Total

–

6

47

182

(Yen in millions)
Division

Balance asof the end of
fiscal 2015

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

Increase in
fiscal 2016

Reserve for ordinary
bad debts

–

–

–

–

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

Reserve for pricefluctuation

6

–

3

2

182

49

50

182

(Yen in millions)

As of the endof fiscal 2015

As of the endof fiscal 2016

Outstanding claims

1,650

1,152

3,581

Underwriting reserves

556,727

627,345456,745

Risk reserves

417,056

464,584

278,846

Unearned premium
reserves

139,671

162,760

177,899558,377

628,497

460,327

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

42

0
49

As of the end of fiscal 201615.	Underwriting funds

Total

5
180

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

14. Special accountNot applicableYear As of the end
Divisionof fiscal 2014

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

Increase in
fiscal 2015

–

Total

13. Unearned claims paid
Not applicable

Balance asof the end of
fiscal 2014

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 2015

Japan Earthquake Reinsurance Co., Ltd. Annual Report 2017

7. D
 epreciation expenses by category
As of the end of fiscal 2015

e Income and loss details(Yen in millions)

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

Division

Fiscal Year

2014

2015

Type of asset

2016

Government bonds

–

181

2

Foreign securities

–

12

144

Total

–

194

147

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

Division

Fiscal Year

2014

2015

2016

Government bonds

–

–

–

Foreign securities

–

–

10

Total

–

–

10

3. Losses on valuation of securities
Not applicable

Rate of
Deprecia- Aggregated Balance as
Acquisition
aggregatedtion indeprecia- the end of
cost
depreciafiscal 2015
tions
fiscal 2015
tions %

Tangible fixed assets
Buildings

85

1

58

27

68.1

for
underwriting

85

1

58

27

68.1

for
investment

–

–

–

–

–

Other tangible
fixed assets

142

24

103

39

72.4

Total

228

25

161

66

70.8

Intangible fixed assets
Software

294

56

144

150

48.9

Other
intangible
fixed assets

1

–

–

1

–

Total

295

56

144

151

48.7

Grand total

524

82

305

218

58.3

As of the end of fiscal 2016

4. Gains on disposal of fixed assets
Not applicable(Yen in millions)Type of asset

5. Losses on disposal of fixed assets

Acquisition
cost(Yen in millions)

Division

Fiscal Year

2014

2015

Tangible fixed assets

2016

Land

–

–

–

Buildings–––

Other tangible fixed assets

0

0

–

Total

0

0

–

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

Division

Fiscal Year

Personnel expenses
Non personnel expenses
Taxes

2014

2015

2016

417

404

3,311

2,037

1,527

11,914

293

331

310

Commissions and brokeragefees

43,31545,88046,675

Total

46,06348,144Rate of
Deprecia- Aggregated Balance as
aggregatedtion indeprecia- the end ofdepreciafiscal 2016
tions
fiscal 2016
tions %

62,211

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

–

Other
intangible
fixed assets

1

–

–

1

–

Total

436

64

208

227

47.8

Grand total

665

88

393

271

59.2

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 201743

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

(Yen in millions)Fiscal 2015

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 3 on thebalance sheet (page 36~37).
2. Securities(i) Securities held for trading purposes
Not applicable(Yen in millions)Type

Acquisition
cost

Book value

Difference

Public &corporatebonds

250,668

254,073

3,405

–

–

–

78,35883,798

5,440

–

–

–

Subtotal

329,026

337,872

8,846

Public &corporatebonds

38,17338,153(20)

StocksForeignsecurities
OthersSecurities whosecarrying amount
does not exceed
their cost

Stocks–––Foreignsecurities

26,301

25,724(576)

Others

94,596

94,596–

Subtotal

159,071

158,475(596)

488,098496,347

8,249

Total

Total ofgains onsale

Total oflosseson sale

Sales
price

Total ofgains onsale

Total oflosseson salePublic &corporatebonds

40,210

181

–

3,504

2

–

–

–

–

–
10

Stocks––Foreignsecurities

4,592

12

–

42,893

144

Others

–

–

–

–

–

–

44,802

194–

46,397147

10

3. Money trust
Not applicable(iii) Available-for-sale securities
As of the end of fiscal 2015

Securities whosecarrying amountexceeds their cost

Sales
price

Type

Total

(ii) Securities to be held to maturity
Not applicable

Division

Fiscal 2016

4. Derivative transactions(i) Derivative transactions to which hedge accounting is
not applied
Currency related
As of the end of fiscal 2015
(Yen in millions)Contract amount1 year or
longerones

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

60,484

–

4,148

4,148

   Euro20,366

–

1,132

1,132

5,280

5,280

Total

As of the end of fiscal 2016
(Yen in millions)Contract amount1 year or
longerones

Type

As of the end of fiscal 2016
(Yen in millions)

Division

Securities whosecarrying amountexceeds their costType

Acquisition
cost

Book value

Difference

Public &corporatebonds

186,891

189,396

2,505

–

–

–

20,503

21,275772

StocksForeignsecurities
OthersSecurities whosecarrying amount
does not exceed
their cost

–

–

–

Subtotal

207,394

210,672

3,278

Public &corporatebonds

18,757

18,747

(9)

–

–

–

5,252

5,159

(92)

–

–

–

24,00923,907(101)

231,404

234,580

3,176

StocksForeignsecurities
OthersSubtotal

Total

Marketprice

Appraisal
profit andloss

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

14,388

–

(363)

–

–

–

(363)
–

(363)

(363)

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

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

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

44

Appraisal
profit andloss

MarketpriceJapan Earthquake Reinsurance Co., Ltd. Annual Report 2017

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, 2017)
Established:

May 30, 1966

Capital:1 billion yen

Total assets:

511.2 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/

2017Annual Report
Introduction to Earthquake Reinsurance in Japan