March 16th, 2011

Update: 9.0Mw Earthquake Strikes off Northeastern Japan

Posted at 1:54 PM ET

eg-jap-4-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 damage at a nuclear facility in Fukushima has prompted fears of serious radioactive leaks. Early estimates issued by AIR Worldwide and EQECAT suggest insured losses could be between USD12 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 kilometers (230 miles) northeast of Tokyo, at a depth of 32 kilometers (19.9 miles). More than 450 aftershocks have hit the region since the main earthquake, the most powerful at 7.1Mw.

Reports from coastal gauges indicate the tsunami waves officially reached heights exceeding 7 meters (23 feet) along parts of Japan’s eastern shoreline. 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. 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 another revision by the USGS, the agency now estimates that more than 69 million people live in areas impacted by a Modified Mercalli Intensity (MMI) of V or higher (as shown by Table 1). The towns and cities of Sendai, Hitachi, Ishinomaki, Shiogama, Iwanuma and Watari experienced intensity VIII on the MMI scale, equivalent to severe shaking with the potential for moderate to heavy building damage, the USGS said. Yokohama and the capital of Tokyo (population of more than 8 million), meanwhile, were hit by MMI intensity of VII, very strong shaking that can cause moderate to heavy 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. 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 loss. EQECAT estimates the economic damage from the earthquake could exceed USD100 billion (with property damage estimated at USD20 billion). In terms of insured losses, EQECAT estimates the insured cost will be between USD12 billion and USD25 billion, with between USD2 billion and USD4 billion of this amount expected to be ceded to the Japan Earthquake Reinsurance Company (JER). EQECAT said their estimate includes the effects of earthquake shaking, damage from the subsequent tsunami and fires, and losses to automobiles, marine, life and personal accident insurance lines.

AIR Worldwide, meanwhile, said insured losses from the earthquake could range between JPY1.2 trillion and JPY2.8 trillion (USD15 billion and USD35 billion). The estimate reflects insured physical damage to residential and commercial property resulting from shake and fire. AIR added its estimate includes 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. 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 more than 4,200 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. About 850,000 households in the north are still without electricity in near-freezing weather, according to officials. 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. A World Bank official has said it could take five years to rebuild the damaged buildings and infrastructure in the affected region.

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. Officials have reported more than 80,000 residential and commercial buildings totally or partially destroyed so far, 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 were 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 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 badly damaged nuclear and oil operations in the country. Eleven of Japan’s 55 nuclear reactors were shutdown following the earthquake, prompting officials to announce 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 remain over the fate of the Fukushima Daiichi plant (which contains six nuclear reactors).

Three explosions and two fires have hit the facility over the last few days. The explosions occurred due to hydrogen build up at the buildings housing reactor 1, reactor 2 and reactor 3, and two fires broke out at 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. The International Atomic Energy Agency (IAEA) has upgraded the seriousness of the incident from a rating of 4 to 6 (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.

Tepco now sees the situation at reactor 3 as the priority following the failure of its containment system. Prior to the heightened alarm at reactor 3, concern had centered on damage to the building housing reactor 4, where spent rods were being stored in pools of water, and also on reactor 2. The IAEA said radiation dosages of up to 400 millisieverts per hour had been recorded at the facility. Exposure to over 100 millisieverts a year is a level which can lead to cancer, according to the World Nuclear Association. Consequently, around 185,000 people have been ordered to evacuate the area within a 20 kilometer (12 mile) radius of the plant and another 140,000 residents living between 20 kilometers (12 mile) and 30 kilometers (18 miles) of the plant have been advised not to leave their homes. Radiation levels in Tokyo, meanwhile, were reported to be higher than normal at one point, but officials said the increase was too small to threaten residents in the area. On Wednesday, radiation levels were barely above average in the capital. Nevertheless, scores of flights to Japan have been halted or rerouted and reports said many Tokyo residents stayed indoors.

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. Operations at several manufacturing facilities also remain suspended, 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. The semiconductor industry has also been badly affected. A major explosion was also reported at a petrochemical plant in Sendai. To compound matters, reports said the rolling power cuts are expected to hinder manufacturing production levels over the next several weeks.

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 and out of Sendai were cut due to damaged roads, 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, however.

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).

Separately, a 6.2Mw earthquake struck eastern Honshu on March 15, around 116 kilometers west-south-west of Tokyo. According to EQECAT, the shaking from this event is likely to have damaged property in the region. Consequently, the economic damage from the 6.2Mw event is likely to be between USD1 billion and USD2 billion while the costs to (re)insurers could reach USD500 million, according to EQECAT.

Table 1: Estimated Population Exposed to Significant Earthquake Shaking 

Estimated MMI

Estimated Population Exposure

Perceived Shaking

IX

66,000

Violent

VIII

6,781,000

Severe

VII

36,088,000

Very strong

VI

10,864,000

Strong

V

15,269,000

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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