Japan's P&C insurers can manage losses from Kyushu floods: analysis

Large industrial zones were not affected, which would limit potential losses.

Losses stemming from floods in Japan’s Kyushu region will only mildly hurt the country’s three major P&C insurers and hence will be manageable, according to a Moody’s Sector Comment.

Analysts Soichiro Makimoto and Sally Yim believe that losses will be lower than the $1.82b (¥196b) gross insured losses incurred from the devastating floods in western Japan in June-July 2018 because the latest rains only affected a smaller area and were confined to some prefectures in the region.

It also did not affect large industrial zones, which limits the potential for large property and business losses.

“With the smaller affected areas and the likelihood of limited damage on large industrial properties, the potential insured losses from the flooding will be well within the three major insurance groups' loss buffers,” they wrote.

The three insurance groups, namely MS&AD, Sompo, and Tokio Marine, have embedded expectations of domestic natural catastrophe losses into annual profit forecasts at the start of the fiscal year ending March 2021, making it unlikely that the current flooding will cause significant losses. If the annual aggregate amount of natural catastrophe losses is the same as the calculated $1.9b (¥205b) for current fiscal year, profit will be in line with group forecasts, Moody’s said.

Even if loss severity of the current Kyushu flooding will be similar to the Kanto-Tohoku flooding in 2015, which cost the insurance industry $484m (¥52b), the profit impact of the current floods will be insignificant, the report concluded.