Key Events Recap in Asia

27 March 2019

APOORV DABRAL – Head of Catastrophe Modeling, APAC, JLT Re, Singapore

While insured losses from natural catastrophes in 2018 were lower compared to those of 2017 across the globe, 2018 was an active year throughout Asia, primarily driven by events in Japan, Hong Kong and Indonesia with insured losses for all events perhaps exceeding US$20 billion. Several of these events were distinctive and provided an opportunity to enhance JLT Re’s understanding of the complexities associated with natural perils in the region.

Key Earthquake Events in Asia

More than 13,500 recorded earthquakes of magnitude Mw 4.0 or greater occurred across the globe in 2018, with more than 9,000 recorded across the Asia Pacific region. The top two deadliest events for 2018 occurred in Indonesia: September 28 Sulawesi earthquake (Mw 7.5) and tsunami resulting in more than 2,200 fatalities, and the Lombok earthquake (Mw 6.9) causing more than 500 deaths. The Sulawesi earthquake was also the fourth largest recorded earthquake in 2018; these and other events are discussed in a separate article “Indonesia – The Year of Unique Geological Events”. Both Japan and Taiwan also experienced significant earthquake events last year.

Figure 1: A building teetered on February 7, 2018 after its first floor collapsed in an earthquake in Hualien, Taiwan. (Source: Central News Agency via © 2018 The Associated Press)

Asia insured losses

Mw 6.4 Hualien Earthquake, Taiwan

A Mw 6.4 earthquake struck north of Hualien, Taiwan on February 6. The earthquake occurred on the northeast coast of Taiwan and was the largest in a sequence of events, with the largest foreshock of Mw 6.1 on February 4 and a series of aftershocks, with the largest being a Mw 6.1 event on February 7.

The Hualien earthquake resulted in at least 17 deaths and injured more than 280 people. Almost 195 schools were damaged by the events across the affected region, and the most heavily impacted commercial buildings were all mid to high-rise buildings ranging from five to 12 floors. Engineers and architects had voiced concern over construction practices in the Yun Men Tsui Ti complex, where 14 out of 17 deaths occurred. The Marshal Hotel, one of the collapsed buildings, was constructed in the 1960s during which no official seismic provisions were in place. In addition, all of the collapsed buildings were commercial­residential mixed-use buildings such as restaurants and car parks. These buildings have wide openings on the ground floor level for commercial use and lack the structural reinforcement needed to support the heavy upper levels. This practice can result in a “soft-story”, which generally compromises a building’s seismic performance.

The Hualien earthquake cast a spotlight on the engineering practices in Taiwan, much like the 1999 Chi-Chi earthquake, when many of the building failures were due to engineering misses. This led to the introduction of stricter building code provisions which were further enhanced in 2005 by introducing performance-based design into the code. These updated code provisions in Taiwan have since been strictly enforced; however, this is limited to new buildings. Whilst the government provides subsidies and relevant policies to encourage the reinforcement of older buildings, the process is not widely adopted for privately-owned buildings due to concerns that building inspections may result in lower property prices. These older buildings still possess a threat to lives and property.

Mw 5.5 Osaka Earthquake, Japan

On June 18, an earthquake measuring Mw5.5 struck the densely populated Osaka prefecture in Japan’s Kansai region. It was a shallow earthquake, occurring at a depth of 10.3 kilometers with its epicenter located near Takatsuki. The affected region has several active faults and this event occurred close to the Arima-Takatsuki fault. The seismic waves were exacerbated by the soft soil in the region as the Osaka Plain has been formed in part by the deposited sediments from the Yodo River and its three tributaries. Past events impacting Kyoto and the Osaka region include the Great Hanshin earthquake of 1995.

Figure 2: Extensive roof damage across northern Osaka one month after the fault rupture. (Source: The Yomiuri Shimbun via © 2018 The Associated Press)

Asia insured losses

The earthquake was reported to have caused at least some degree of damage to more than 6,500 structures, primarily in the Osaka prefecture with four confirmed fatalities. The disruption of train services in the region was reported including the subway service in Osaka-shi. Localized ground deformations caused damage to roads and infrastructure in the high intensity regions around Takatsuki-shi and Ibaraki-shi. More than 170,000 homes suffered electric power outages in Osaka Prefecture, and several had their natural gas supply interrupted due to damaged underground gas lines. Automakers and other manufacturers had to shut down production for inspection following the event but fortunately, nuclear reactors in nearby Fukui Prefecture were not impacted. The losses reported by the General Insurance Association of Japan (GIAJ) for the Japanese insurance companies as of December 2018 is about JP¥103 billion (US$930 million). Final losses are expected to between US$1.0-1.5 billion.

Mw 6.6 Hokkaido Eastern Iburi Earthquake, Japan

A strong earthquake of Mw 6.6 struck the northern island of Japan, Hokkaido, on September 6, 2018. The highest ground shaking intensities were felt in Iburi sub-prefecture, with approximately two million people experiencing MMI VII (very strong shaking) or greater. The earthquake’s epicenter was approximately 80 kilometers from the large city of Sapporo (population of roughly 1.9 million). This event was an intraplate event of moderate size which is relatively uncommon in Japan. The USGS reported that in the last 100 years, 70 earthquakes of Mw 6.0 or larger have occurred within 250 kilometers of the September 6 earthquake, though only six of these occurred at shallow depths beneath Hokkaido.

In the days following the earthquake, more than 40 fatalities were reported. Several thermal power plants suffered damage, resulting in three million people losing electric power. Other services like transportation, telephone, and television were impacted by the earthquake and resulting damage to the thermal power plants. This event triggered several landslides in the region, exacerbated by the remnants of Typhoon Jebi in Hokkaido just a few days prior, saturating the soil. Damage from this event was heavily driven by such secondary impacts like landslides and infrastructure system interruptions; as of December 11, 2018, GIAJ reported losses to be about JP¥ 34 billion (US$300 million).

Key Typhoons in Asia

The 2018 West Pacific typhoon season was close to an average season, with 28 tropical storms and 14 typhoons recorded by the Japan Meteorological Agency (JMA). Whilst 2018 was an average season by storm frequency, the year produced some record breaking typhoons such as Jebi and Mangkhut.

Typhoon Mangkhut

On September 15, a Category 5 typhoon with an international name “Mangkhut” made landfall in the province of Baggao, Cagayan of the Philippines as an equivalent of a Category 5 hurricane, one of the strongest to strike northern Luzon. It traveled over the northern part of the country moving west-northwest towards Hong Kong and China. Mangkhut made its second landfall in China on the Taishan coast of Jiangmen City, Guangdong, on the afternoon of September 16 with wind speeds equivalent to a Category 2 hurricane.

 Typhoon Mangkhut brought extensive rain and intense wind to the Philippines. In the initial report by the National Disaster Risk Reduction and Management Council (NDRRMC), almost 218,000 families were affected by the typhoon while at least 1,300 houses were destroyed. There were 127 confirmed fatalities, mostly from the landslides in the Cordillera Administrative Region. The agriculture sector was severely affected with 550,000 hectares of agricultural land destroyed.

Commercial buildings were also affected by the high winds and flooding, with shattered windows and curtain walls damaged by the winds. Interestingly, winds surrounding high rise buildings can become accelerated, known as a "downdraft effect". As the air hits a tall building, it gets pushed up, down and around the sides, which increases wind speed at street level. If several towers stand near each other, like in Hong Kong, this phenomenon is known as "channelling", and winds become highly accelerated by air having to pass through a narrow space. The complex high rise building layout in Hong Kong can result in this channeling effect of wind – induced vortices and flying debris which exacerbated the damage to the buildings.

Insured losses are expected to be similar to or more than that of Typhoon Hato, the super typhoon that impacted Hong Kong and Macau last year. From the initial assessment, authorities are expecting record-high claims, exceeding that from Hato in Hong Kong. As of October, the insurance authority of Honk Kong reported the losses to be about US$450 million in Hong Kong alone, with cumulative insured losses expected to be well above US$1.0 billion. Hato and Mangkhut, striking Hong Kong in successive years, have led to greater awareness around typhoon risk in the region, with added concern of a major typhoon traveling through the adjoining Pearl River Delta region. As one of the largest urban areas in the world with a GDP of US$1.2 trillion (2016), a typhoon hitting the Pearl River Delta region can cause significant insured losses.

Typhoons Jebi & Trami, Japan

Typhoon Jebi was the strongest to strike Japan since 1993. On September 4, Typhoon Jebi made its first landfall on the island of Shikoku with an equivalent of a Category 3 hurricane wind speed. It soon made its second landfall in Honshu Island affecting Kobe and Osaka, one the main urban centers in Japan. The typhoon broke several historical wind speed records for both gust and observed 10-minute sustained wind speeds. Typhoon Jebi also resulted in significant storm surge in parts of the Osaka Prefecture with highest recoded storm surge tide of 3.9 meters. Intense rainfall accompanied the storm, with several coastal areas receiving more than 300 millimeters in 24 hours.

Significant damage was reported in the Kansai region from high winds and flooding associated with storm surge and rain. Kansai International Airport, one of the busiest airports and a major shipping hub for the region’s manufacturing industry, was shut down due to flooding. The insured losses reported from the General Insurance Association of Japan (GIAJ) exceeded JP¥735 billion (US$6.6 billion) from fire and motor policies. Munich Re has pegged the losses for this event to be US$9 billion – claims driven by the wind and flood losses, as well the business interruption caused due to the damage to the infrastructure. The most recent industry losses for Jebi are well above the initial publically available estimates from catastrophe modeling companies.

On September 30, Typhoon Trami made landfall in the Wakayama Prefecture with the magnitude of a strong Category 2-equivalent hurricane. The storm propagated north-northwest through Honshu at hurricane strength intensity only to weaken to tropical storm strength as it propagated offshore. Widespread damage was reported, with Kagoshima, Miyazaki, Wakayama, Kyoto, Tottori, and Tokyo the worst impacted prefectures. The losses reported by GIAJ for Typhoon Trami are at about JP¥231 billion (US$2 billion).

The losses for both Typhoon Jebi and Trami may creep up as claims develop, further emphasizing the uncertainty related to loss estimation. Modeling these perils is challenging enough, and factoring in secondary perils like flood and storm surge compounds the variability of loss.

Key Flooding Events in Asia

Several countries across Asia experienced major flooding events in 2018, causing several fatalities and large economic losses. In terms of insured losses and significance, the Japan and Kerala flooding were most relevant in 2018.

Japan Flooding

One of worst floods in Japan took place in the month of July. The flooding commenced late June due to the stalling of the seasonal Meiyu front and was further exacerbated by remnants of typhoon Prapiroon. This event was the deadliest flood event since 1982, resulting in 225 fatalities. The worst-hit areas included Okayama, Fukuoka, Hiroshima, Ehime, Kyoto, Yamaguchi, Gifu, and Kochi. Several records of accumulated rainfall were broken across several locations according to Japan Meteorological Agency (JMA). The JMA issued an emergency heavy rainfall warning for eight prefectures, the largest since the implementation of this warning system. Several rivers across the region experienced almost 500 year return period level streamflows.

According to the Fire and Disaster Management Agency (FDMA), more than 46,000 buildings were damaged or destroyed by the flooding. Rail services were disrupted due to debris on the rail track or damages due to landslides, and damage to several roads, bridges and other infrastructure was also reported. There was widespread shutdown to auto and electronics manufacturers; impacted companies included Mazda, Panasonic, Daihatsu, and Mitsubishi. The General Association of Japan has reported the losses to be JP¥176 billion (US$1.58 billion) for fire and motor lines of business, with motor contributing to about 15% of the losses. The industry loss from this event is expected to be between US$ 2-2.5 billion

Japan has one the world best disaster mitigation plans in place. After typhoon Vera in 1959, which caused significant number of fatalities due to record storm surge and flooding, there was a substantial investment in improving resilience against the storm surge and inland flooding. However, this flooding event, where several levees were breached and reservoirs overflowed, shows that the disaster mitigation plans by the government of Japan need to be further enhanced.

Figure 3: Flooded region impacted by mudslide in Mihara City, Hiroshima prefecture on July 11, 2018. (Source: The Yomiuri Shimbun via © 2018 The Associated Press)

Asia insured losses

Flooding in Kerala

Severe floods affected the southern Indian state of Kerala due to unusually high rainfall during the monsoon season, some of the worst in over 100 years. From the onset of monsoon season, June 1, through August 20, Kerala received 2,378.7 millimeters (94 inches) of rain – above normal by 42%. The highest excess rainfall was recorded over Idukki and Palakkad districts. The season started off above average, but not excessive as rainfall totals in June and July were 15% and 18% above average, respectively. However, the rainfall during August was exceptionally high, about 165% higher than the normal. An abnormally high spell of rainfall was experienced on August 8-9 in several districts in Kerala. The dams, which were already at full capacity, were forced to release water downstream with the gates of 35 dams out of the state’s 54 dams opened for the first time in history, resulting in severe flooding in 13 out of the 14 districts in Kerala.

The flooding damaged more than 200,000 houses and up to 10,000 kilometers of roads. Cochin International Airport, one of the busiest airports in India, was flooded and had to suspend all operations for two weeks. Many schools throughout the state were closed, and tourists were dissuaded or banned from some districts due to safety concerns. The seven worst hit districts were Alappuzha, Ernakulam, Idukki, Kottayam, Pathanamthitha, Thrissur, and Wayanad. The devastating floods and landslides affected 5.4 million people, displaced 1.4 million people, and took 433 lives. The economic cost for this event is expected to be about US$5 billion, with initial insured losses expected to be only 10-15% of the economic total. Flooding in Kerala has been attributed to the climate change by some researchers; however, insufficient disaster mitigation strategies, inadequate water management procedures and deficient urban planning, as evident from the observations in 2018, were major drivers of the devastation from this event.

Figure 4: Flooding in the Alappuzha district, in the southern state of Kerala, India on August 19, 2018. (Source: © 2018 The Associated Press/Charly K C)

Asia insured losses

Lessons Learned

The events of 2018 have highlighted the importance loss aggregation. A series of back-to-back events, as well as the significance of secondary perils, can often be overlooked from a catastrophe modeling standpoint. Despite its significant impact, flood still remains a non-modeled peril in several countries with varying rates of insurance penetration. Damage from landslides is accounted for in certain regions (like Japan) in traditional catastrophe models, however losses may be underestimated. While the focus of risk management from an insurance/reinsurance perspective is often focused on potential loss estimation, the major earthquake in Taiwan emphasized the importance of enforcing building codes and enhancing engineering practices. While many countries have adopted strong mitigation strategies and effective warning systems, not all countries are as prepared as was seen in the Kerala flooding. Lessons learned from past events will continue to shape current and future effective methods of reconstruction, both on an infrastructure level as well as individual risk level. In conjunction with the ability to improve modeling outcomes, financial risk transfer will not improve, thereby decreasing the protection gap between economic and insured losses.