The 100-year anniversary of Japan’s devastating Great Kanto Earthquake has highlighted the potential for up to $US150 billion ($232 billion) in insurance losses from a similar event today due to the concentration of population and wealth in the Tokyo region. 

Swiss Re says the earthquake that struck Japan in September 1923 with a moment magnitude (Mw) of 7.9 remains the country’s worst natural disaster. 

The region was already densely populated at that time and more than 100,000 lives were lost, mostly due to fires and aftershocks, while economic losses were close to a third of gross domestic product (GDP). 

“The disaster sparked the development of a strong culture of risk prevention and preparedness in Japan: necessarily so, given the high probability of further strong earthquakes there,” Swiss Re says. 

“However, despite the strict building codes and other measures, earthquakes in Japan could still trigger staggering losses.” 

The Kanto region now is home to about 39 million people, more than four times that of 1920, and produces 39.3% of Japan's GDP, as of 2019. Earthquake risk underwriting is shared between the government and private sectors. 

Swiss Re says the Tokyo Metropolitan Government last year estimated a Mw 7.3 quake below the city – an event with an expected 70% probability in the next 30 years – could claim 6000 lives and destroy or severely damage more than 190,000 properties. 

The estimated economic loss from direct and indirect damages would be $US940 billion ($1.5 trillion) in today’s values, which would be about 3.5 times the typical total economic loss from all natural disasters globally in a year. 

Swiss Re says it estimates the associated insured losses from residential and non-residential claims at about $US130-150 billion ($201-232 billion), which would be the biggest ever single-event loss to the global insurance industry. 

“Despite Japanese non-life insurance companies' capital resilience under stringent solvency regulation, earthquake risk in Tokyo remains a major threat that calls for continuous strengthening of worst-case scenario planning and modelling of all loss drivers,” Swiss Re says. 

The 2011 Mw 9 Tohoku earthquake and tsunami was the strongest to ever hit Japan, and the fourth-strongest worldwide. It struck a relatively rural region, causing inflation-adjusted economic losses of $US280 billion ($433 billion), which was the highest from any natural catastrophe globally since 1970.