TOKYO -- The destructive typhoons and flooding endured by Japan in recent years have driven damage claims to record-high levels, draining the emergency reserves held by top insurers.
Catastrophe reserves held by Japan's three leading property insurers -- Tokio Marine Holdings, MS&AD Insurance Group Holdings and Sompo Holdings -- are expected to total about 385 billion yen ($3.54 billion) at the end of March 2020, down by half from two years earlier and from 538.3 billion yen this past March.
The figure had mostly hovered between 700 billion yen to 800 billion yen for the past several years.
These reserves, which are set aside from premium income and drawn down when claim payouts rise too high, have helped insurers sustain profit growth in the face of these disasters.
But a string of powerful storms like last month's Typhoon Hagibis has threatened this source of stability.
Industrywide, actual and estimated payouts related to last fiscal year's typhoons and heavy rain exceeded 1.5 trillion yen, smashing the fiscal 2004 record of 744.9 billion yen. Disaster-related payments for fiscal 2019 are expected to reach 1 trillion yen for the big three alone.
Meanwhile, the cost of reinsurance, which insurers use to spread out their risks, is rising worldwide.
Reinsurance payouts to Japanese property insurers more than doubled in fiscal 2018 to 1.17 trillion yen. Premiums on reinsurance coverage for natural disasters in Japan rose 10% this past April and are expected to increase again next April.
Customers are starting to feel the pinch. Major insurers plan to raise premiums on disaster insurance policies for individuals and businesses as early as January 2021, following a hike just last month. Further increases are likely if the current trends continue.
Each of the big three reported year-on-year net profit gains for the six months through September. Disaster-related claims payouts, while still substantial, declined from 2018. MS&AD and Sompo also logged rises in premium income.
But the damage from last month's Typhoon Hagibis is likely to weigh heavily on profits.
At MS&AD, drawdowns from catastrophe reserves "still exceed provisions," MS&AD Chief Risk Officer Fumiaki Ohkawabata told a news conference Tuesday.