AIR chief research officer Jay Guin said the many exposures in Tokyo could create significant multi-billion dollar losses
The re/insurance industry may have dodged a bullet with Hurricane Dorian, but Typhoon Fuxai has the potential to create multi-billion dollar losses.
Speaking to Global Reinsurance on the eve of Fuxai making landfall in Tokyo AIR chief research officer, Jay Guin, told Global Reinsurance there were several features about the city that could exacerbate losses.
“Tokyo is home to the biggest risk concentration in Japan and it has not experienced a typhoon of this intensity in a very long time,” Guin said. “For any region that has not experienced a storm in many years, usually the loss outcomes tend to be higher.”
Adding to this he said the ongoing construction work for the 2020 Olympics in Tokyo added several complexities.
“There is a lot of construction going on, and Tokyo is a very large, complex area, so we could be in for some surprises there.”
Losses made from Typhoon Jebi, which hit Osaka last year, are estimated to be around $15bn.
But Guin said Tokyo has far more risk exposures than Osaka, making the potential for losses very high.
However, while warning reinsurers to be braced for significant losses on Fuxai, he said the industry a lucky escape in Hurricane Dorian.
While Dorian caused huge destruction in The Bahamas, and Abaco Islands in particular, the storm changed path northwards to avoid hitting Florida.
“Florida especially dodged a bullet because where it was headed on the Eastern coast is densely populated and we would have been talking about a completely different picture,” Guin said.
Guin put the insured losses on The Bahamas at $1.5-3bn. He said there had also been losses in the low single billion dollar level in North Carolina.
But Guin said there are still lessons that the industry can learn from this event.
“The fact that it was a category five hurricane that intensified rapidly and set a record of intensifying in 24 hours to that level, and the fact it came so close to Florida just speaks to the risk that’s out there,” Guin said.
“There’s no room for complacency at all because nature doesn’t understand a soft market or different structural changes happening in the reinsurance industry.”