March 14th, 2011

Update: Earthquake Strikes off Northeastern Japan

Posted at 9:14 AM ET

eq-jap-2-smallA powerful earthquake struck off the coast of northeastern Japan at 05:46:23 UTC (14:46:23 local time) on March 11, causing severe shaking near the epicenter region and triggering a massive tsunami that devastated coastal communities. There are fears the death toll could exceed 10,000 people, according to reports. Widespread property damage has been reported across northern Japan despite the country boasting the strictest building standards in the world and a state of emergency has been declared at nuclear reactors in the affected region. An early estimate issued by AIR Worldwide suggest insured losses (excluding demand surge and tsunami-related losses) could be between USD15 billion and USD35 billion. The U.S. Geological Survey (USGS) said the earthquake measured 8.9Mw while the Japanese Meteorological Agency said it recorded a magnitude of 8.4. Reports said the earthquake was nearly 8,000 times stronger than last month’s event in New Zealand that devastated the city of Christchurch. The USGS added that the earthquake was located 130 kilometers (80 miles) east of Sendai and 373 kilometers (230 miles) northeast of Tokyo, at a depth of 24 kilometers (15 miles). This is the fifth most powerful earthquake since 1900 and the largest in Japanese recorded history, according to the USGS. More than 120 aftershocks have hit the region since the main earthquake, the most powerful at 7.1Mw.

Reports from coastal gauges indicate that a tsunami was generated with official wave measurements showing a height of 7.1 meters (24 feet) along parts of Japan’s eastern coast. There have been unconfirmed reports in the local media that waves of 10 meters (33 feet) high hit Sendai City, severely damaging the city’s port before sweeping up to 10 kilometers (6 miles) inland. According to EQECAT, more than 2 million people live in cities that were inundated by the tsunami. The tsunami waves have reportedly caused widespread damage in the prefectures of Miyagi and Fukushima, with massive surges of debris-filled water sweeping away buildings, cars and ships. Reports indicate the tsunami damaged many port facilities along Japan’s eastern coastline (from Hokkaido in the north to Okinawa in the south). Earlier, the Pacific Tsunami Warning Center (PTWC) issued alerts for much of the Pacific basin, including the U.S. west coast, Hawaii, central and southern America, Australia and New Zealand. Although the tsunami wave lost much of its energy as it moved across the Pacific Ocean, wave heights of around 2 meters (6.6 feet) were recorded in Hawaii and California, damaging boats and causing some flooding. No major tsunami-related damage was reported elsewhere in the Pacific.

japan-earthquake-big1

Hazard data illustrated in the CAT-i map was taken from i-aXs®, Guy Carpenter’s web-based risk management platform. i-aXs users can view impacted areas on any map as well as see how their portfolios were affected. Please contact your broker or GC Analytics (SM)  representative for assistance or go to www.i-axs.info for further information.

The USGS said around 59 million people live in areas impacted by a Modified Mercalli Intensity (MMI) of V or higher (nearly 30 million people were subjected to shaking of intensity MMI VII). The cities of Sendai, Chiba, Funabashi, Matsudo, Ichikawa, Utsunomiya and Mito experienced intensity VII on the MMI scale, equivalent to very strong shaking with the potential for moderate to heavy building damage, the USGS said. The capital of Tokyo (population of more than 8 million), meanwhile, was hit by MMI intensity of VI, strong shaking that can cause light to moderate structural damage. EQECAT estimates an area of 35,000 square miles observed severe damage to property and infrastructure.

It is feared losses will be in the billions of dollars, according to early estimates. EQECAT estimates the economic damage from the earthquake could exceed USD100 billion (with property damage estimated at USD20 billion). EQECAT said the figure includes the extensive residential and commercial property damage, the restoration of critical infrastructure and the damage inflicted at the nuclear plants. AIR Worldwide, meanwhile, said insured losses from the earthquake could range between JPY1.2 trillion and JPY2.8 trillion (USD15 billion and USD35 billion), potentially making it one of the most expensive catastrophes in history. However, AIR stressed that the estimate is preliminary and does not factor in tsunami-related damage or any potential losses from nuclear damage. Earlier, AIR estimated there is about USD24 billion of insured property located in the 3 kilometer (1.8 mile) band along the coast of the four prefectures most affected by the earthquake. AIR added there is approximately USD300 billion of insured property in the area of Japan most directly affected by the earthquake’s shaking.

According to reports, extensive damage has been reported in the prefectures of Chiba, Ibaraki, Tochigi, Fukushima, Iwate and Miyagi. Reports said residents in Miyagi Prefecture had just 15 minutes to evacuate before the tsunami waves reached the coastline. The current official death toll stands at around 1,600 but officials have warned that the fatalities in tsunami-hit Miyagi Prefecture alone could exceed 10,000. Reports said the port of Minamisanriku in Miyagi Prefecture was reportedly swept away by the tsunami, while the town of Rikuzentakada in Iwate Prefecture was almost completely submerged. Dozens of towns and cities along the 2,100 kilometer (1,300 miles) stretch of Japan’s eastern shore were also violently shaken by the earthquake. Early reports indicate that the earthquake and tsunami severely damaged thousands of residential and commercial properties across the region, including 1,800 homes in Minami-soma (Fukushima Prefecture). Prime Minister Naoto Kan said the earthquake has caused “tremendous damage over a wide area”. About 310,000 people have been evacuated to emergency shelters, according to reports. Local media reported that farmland around Sendai was submerged by muddy water and the waves pushed debris across the runway of the city’s airport. Other towns and cities in the region reported severe tsunami damage. Over 100 fires were also ignited in the northern prefectures of Fukushima, Sendai, Iwate and Ibaraki, according to local media. A large section of the town of Kesennuma was burning hours after the earthquake and fires have been reported in the center of Sendai, prompting officials to evacuate some 70,000 people.

Some structural damage has also been reported in Tokyo after high rise buildings were violently shaken by the earthquake. About four million properties in the capital suffered power outages and a large fire reportedly broke out in the Odaiba district of the city. Hundreds of flights were cancelled after both airports in Tokyo (Narita Airport and Haneda Airport) were closed immediately after the earthquake, although reports say Haneda has now reopened and Narita is partially operational.

The earthquake also damaged nuclear and oil operations in the country. Several nuclear facilities were shutdown following the earthquake and officials have announced a program of rolling power cuts that would also affect water and gas supplies and some medical facilities, particularly in eastern regions of the country. Reports indicate three power plants were subjected to significant shaking during the earthquake (Onagawa, Fukushima Daiichi and Fukushima Daina), and since our initial CAT-i report concern has increased over the fate of the Fukushima Daiichi plant. Japan declared a state of emergency due to cooling systems failures at the plant. A subsequent explosion at the facility on March 12 blew apart the building housing reactor 1, but reports said the reactor and its containment system were not significantly damaged in the blast. A huge plume of smoke was seen coming from the plant after the explosion and Tokyo Electric Power (Tepco), the plant’s operator, said four workers were injured. Sea water is being used to cool the reactor down, meaning it is unlikely to be used again.

Officials say there is a risk of a second explosion at the Fukushima Daiichi plant as technicians battle to cool reactor 3. About 170,000 people have been ordered to evacuate the area within a 10 kilometer (6 mile) radius of the plant. Although Japan’s government has played down fears of a radiation leak, Tepco said radiation levels have now risen above permissible limits. Meanwhile, Japan’s nuclear energy agency has declared a state of emergency at a second nuclear facility in Onagawa, after excessive radiation levels were recorded there. According to Reuters, the insurance industry could be spared significant payouts from these nuclear incidents as coverage for such facilities generally exclude earthquake damage and many Japanese homeowners have nuclear exclusions in their own policies.

Elsewhere, reports said a massive blaze at the Cosmo oil refinery in Ichihara City (Chiba Prefecture) engulfed storage tanks and Japan’s largest oil refiner suspended refinery operations in Sendai, Kashima and Negashi. It is estimated that more than 30 percent of Japan’s refining capacity has been shut as a result of the earthquake. Manufacturing operations also remain offline, with plants in and around Sendai particularly badly hit. Several car manufacturers, including Toyota, Honda and Nissan, have suspended production following the earthquake while operations at some electronic firms such as Sony, Canon and Panasonic have been indefinitely shutdown. A major explosion was also reported at a petrochemical plant in Sendai.

Infrastructure, including roads, bridges, ports, trains, airports, utilities and communication networks, has also been badly damaged. In Iwate Prefecture, officials said roads were badly damaged by the tsunami waves while transport links in Sendai were cut due to damaged road, bridges and railways. Officials said an irrigation dam in Fukushima failed. Bullet train services to northern Japan were halted and rapid transit in Tokyo was suspended, stranding many workers in the city center.

The 8.9Mw earthquake is the latest in a series of quakes to hit offshore of northeastern Honshu over the last few days. A 7.2Mw earthquake struck off the same coast on March 9 and was followed a day later by a 6.3Mw quake. The March 11 event was the fifth most powerful earthquake since 1900 and the strongest in Japanese recorded history, according to the USGS. Japan is accustomed to powerful earthquakes and the country’s worst previous event occurred in 1923 when around 143,000 people were killed by an 8.3 magnitude earthquake, according to reports. A 7.2 Mw earthquake hit Kobe City in 1995, killing 6,400 people. Despite economic losses of around USD100 billion from the Kobe event, insured losses were approximately USD6 billion. According to AIR, earthquake insurance penetration in Japan is relatively low (ranging between 14 percent to 17 percent nationwide).

Table 1: Estimated Population Exposed to Significant Earthquake Shaking

Estimated MMI

Estimated Population Exposure

Perceived Shaking

VIII

2,144,000

Severe

VII

29,969,000

Very strong

VI

19,695,000

Strong

V

7,071,000

Moderate

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Guy Carpenter publishes CAT-i reports for major natural catastrophes worldwide. These reports cover catastrophes including worldwide tropical cyclones, earthquakes, major UK and European floods and any other natural event that is likely to incur a significant loss to the (re)insurance industry. Please email CAT.i@guycarp.com if you wish to be added to the free email distribution list.

Guy Carpenter compiles RISK-i reports for major technological or man-made events worldwide. These reports cover risks to property, transport and life including explosions, fires, crashes, engineering disasters and terrorist attacks that are likely to incur a significant loss to the (re)insurance industry. Please email RISK.i@guycarp.com if you wish to be added to the free email distribution list.

Sources: USGS, WSI, Reuters News, Associated News, Agence France Presse, CNN News, BBC News, Kyodo News, AIR Worldwide

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