Earthquake insurance premiums on residential real estate in Japan could rise by as much as 30% to reflect updated earthquake risk predictions.
Up until now, the highest premium hike was in July 2014 when premiums were raised by 15.5% in response to the 2011 Tohoku disaster. To lessen the immediate burden on consumers, the Financial Services Agency, which is in charge of approving insurance premiums, is considering applying the increase in stages over several years. The higher premiums could go into effect as early as next year.
From late 2015, Japan’s major home insurance companies will reduce the maximum insurance policy term from 36 years to 10 years.
Home buyers looking to take out a mortgage will have fewer insurance companies to choose from as lenders require the borrower to obtain insurance coverage for the full term of the loan.
Major insurers Sompo Japan Nipponkoa Insurance and Mitsui Sumitomo Insurance will limit policies to 10 years from October 2015. They will continue to honour any policies in place before the deadline.
Home insurance, which is typically called fire insurance, covers against damage from fire, strong wind, snowfall, flood and landslides. While it is possible to obtain coverage on a yearly basis, many choose to take out insurance for the maximum term.
The reason for the shorter term is due to the recent increase in abnormal weather such as heavy rainfall and other natural disasters which have led to a rise in insurance payouts.
Insurance premiums for residential properties are also set to rise next year.
47 News, September 14, 2014.
The Sankei Shimbun, September 14, 2014.
From July 2014, earthquake insurance premiums are set to rise by an average of 15.5% across Japan, with some areas seeing a price hike of as much as 30%.
The reason for the increase is due to expectations of another major earthquake that could affect the country in the future. Following the 2011 Tohoku disaster, insurers were left with nearly 1.2 trillion Yen in claims. This has severely drained the reserve fund.