March 15th, 2011

Update: 9.0Mw Earthquake Strikes off Northeastern Japan

Posted at 10:02 AM ET

eq-jap-3-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 nuclear facility in Fukushima has prompted fears of serious radioactive leaks. An early estimate issued by AIR Worldwide suggest insured losses could be between USD15 billion and USD35 billion. Both the U.S. Geological Survey (USGS) and the Japanese Meteorological Agency (JMA) have recently upwardly revised their measurements of the earthquake’s magnitude to 9.0, making it the fourth most powerful earthquake in the world since 1900 and the largest in Japan since modern instrumental recordings began 130 years ago. 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 kilometres (230 miles) northeast of Tokyo, at a depth of 32 kilometers (19.9 miles). More than 300 aftershocks have hit the region since the main earthquake, the most powerful at 7.1Mw.

Reports from gauges indicate the tsunami waves officially reached heights exceeding 7 meters (23 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 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. and Canadian 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. Reports said the tsunami damage in California is likely to exceed USD50 million. No major tsunami-related damage was reported elsewhere in the Pacific.

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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.

Following the magnitude revision by the USGS, it now estimates more than 70 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, Utsunomiya, Morioka, Fukushima, Yamagata 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. According to the JMA, the town of Kurihara in Miyagi Prefecture registered a maximum 7 on its seismic intensity scale. Twenty-eight towns and cities (including Wakuya, Tome, Osaki and Natori) in the prefectures of Miyagi, Fukushima, Ibaraki, and Tochigi recorded 6+ while Tokyo recorded 5+, according to the JMA. EQECAT, meanwhile, 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. RMS estimates that the direct economic loss from the earthquake and tsunami could be between USD200 and USD300 billion. Although RMS added it is still too early to provide an insured loss, it expects insured losses to be a modest fraction of the overall economic losses.

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. The estimate reflects insured physical damage to residential and commercial property resulting from shake and fire. AIR added its estimate includes Japan Earthquake Reinsurance Company (JER) payouts but is net of government recoveries. However, AIR stressed that the estimate is preliminary and does not factor in tsunami-related damage, business interruption costs 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 Fukushima, Miyagi, Ibaraki, Iwate, Tochigi and Chiba. Power was cut to millions of homes immediately after the earthquake. 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 2,400 but officials have warned that the fatalities in tsunami-hit Miyagi Prefecture alone could exceed 10,000. Another 10,000 people are still unaccounted for and estimates suggest that more than 500,000 people have been displaced. 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. 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. In the town of Soma (Fukushima Prefecture), a wave height of 7 meters (23 feet) was recorded. Other towns and cities in the region reported severe tsunami damage.

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 Minamisoma (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. Over 190 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 pockets of structural damage have also been reported in Tokyo after high rise buildings were violently shaken by the earthquake. Shattered glass and other debris was also scattered across several streets in the capital. About four million properties suffered power outages in Tokyo and its surrounding areas and a large fire reportedly broke out in the Odaiba district of the city (at least 20 other fires were reported elsewhere in Tokyo Prefecture). 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. Eleven nuclear reactors were shutdown following the earthquake and officials have announced a program of rolling power cuts that will affect 3 million customers, including large factories and buildings, particularly in eastern regions of the country. Officials said the blackouts are expected to continue until the end of April, although they may resume in the summer to meet peak demand. Reports indicate three power plants were subjected to significant shaking during the earthquake (Onagawa, Fukushima Daiichi and Fukushima Daina), and fears over the fate of the Fukushima Daiichi plant have increased since our last update.

Three explosions and a fire have hit the facility over the last few days. The explosions occurred at the buildings housing reactor 1, reactor 2 and reactor 3 and a fire also briefly broke out at the plant’s reactor 4. Tokyo Electric Power (Tepco), the plant’s operator, said four workers were injured in the first blast at reactor 1 and 11 people were hurt in the reactor 3 explosion. All explosions have followed cooling system breakdowns. Engineers are trying to prevent meltdowns by using sea water to cool the reactors down, meaning they are unlikely to be used again. The United Nations nuclear safety agency said the incident has been rated a 4 on a 0 to 7 scale. This compares to level 7 given to the Chernobyl disaster in 1986 and level 5 given to the Three Mile Island accident in 1979.

However, Tepco says there is particular concern over reactor 2, after the explosion seemingly damaged its containment system. Officials have warned that this raises the prospect of serious radioactive leaks. The fire at reactor 4 is also believed to have caused radioactive leaks. Indeed, the government has announced that radiation from the Fukushima Daiichi plant has now reached harmful levels. Consequently, around 185,000 people have been ordered to evacuate the area within a 20 kilometer (12 mile) radius of the plant and residents living between 20 kilometers (12 mile) and 30 kilometers (18 miles) of the plant have been advised not to leave their homes. According to Tepco, radiation levels around Fukushima for one hour’s exposure rose to eight times the legal limit for exposure in one year. The International Atomic Energy Agency said radiation dosages of up to 400 millisieverts per hour had been recorded at the site. Exposure to over 100 millisieverts a year is a level which can lead to cancer, according to the World Nuclear Association.

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 policies. Indeed, Swiss Re has announced that physical damage and liability coverage for nuclear facilities in Japan generally excludes earthquake, fire following earthquake and tsunami, according to Insurance Day.

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 shutdown as a result of the earthquake. Manufacturing operations also remain offline, with plants in and around Sendai particularly badly damaged. Several car manufacturers, including Toyota, Honda and Nissan, have suspended production while operations at some electronic firms such as Sony, Canon and Panasonic remain shutdown. A major explosion was also reported at a petrochemical plant in Sendai. The rolling power cuts are expected to hinder manufacturing production levels over the next several weeks, according to reports.

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 and all ports along Japan’s east coast were closed as many sustained tsunami damage. All forms of transportation were disrupted, with bullet train services to northern Japan halted and rapid transit in Tokyo suspended, stranding many workers in the city center. However, reports now indicate that train services outside the affected area have resumed. Several roads remain been closed.

The 9.0Mw earthquake is the latest in a series of quakes to hit offshore of northeastern Honshu recently. A 7.2Mw earthquake struck off the same coast on March 9 and was followed a day later by a 6.3Mw quake. 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

5,529,000

Severe

VII

28,603,000

Very strong

VI

18,482,000

Strong

V

18,381,000

Moderate

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

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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.

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