japan Earthquake insurance to debut

japan Earthquake insurance to debut ; The nation’s non-life insurance companies and the government are considering offering earthquake insurance in the wake of Japan’s strongest earthquake ever last week, industry sources said Tuesday.

According to sources, some non-life insurers are considering suggesting that the government support their plan to sell insurance policies to cover potential earthquake damage.

Local insurers do not currently provide stand-alone insurance products covering damages from quakes.

“Korea needs to introduce insurance policies that compensate for losses, as Japan did,” said an official of the sector, while planning to propose the issue to policymakers.

Japan introduced the earthquake insurance in 1966 and the government shares 95 percent of the payouts, which range from 1.73 trillion won ($1.53 billion) to 5.5 trillion won, while the market players take care of the remainder via reinsurance and retrocession.

For the state-backed earthquake insurance policies that the insurance firms are looking to launch, the companies want to share with the government the burden of compensation for the high unpredictability of natural disasters.

The government is also considering adding earthquakes to coverage under the state-managed natural disaster insurance scheme, the sources said.

The current program covers losses from typhoons, flooding, heavy rain, tsunamis but not earthquakes.

“When potential volcanic activity of Mt. Baekdu became a sensitive issue in Korea, the government started to push for earthquakes to be included in insurance policies amid growing concerns that a volcano eruption-sparked quake could hit the nation hard,” said an official of the National Emergency Management Agency.

The move gained pace after Friday’s mammoth quake helped shed light on the considerable related risks.

Critics say that the earthquake insurance program will not be marketable due to the belief that the Korean Peninsula is safe from such seismic activity.

“With low recognition of earthquakes in Korea, it is questionable if local consumers will sign up for the insurance,” said a market observer. “It appears to be premature to launch earthquake insurance although it needs to be considered over the medium or long term.”

The record-setting 9.0-magnitude earthquake shook up Japan’s northeast coast and the death toll has topped 2,400 with 3,118 missing, as of Tuesday, according to police.
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