On the 8th, it has been one month since the “Massive Earthquake Warning” was issued as part of the Nankai Trough Earthquake Emergency Information. If a massive earthquake were to occur along the Nankai Trough, the government has estimated that the economic damage could exceed 200 trillion yen. With concerns over a Tokyo earthquake occurring directly beneath the capital, businesses are being called upon to once again prepare for earthquakes. In the financial industry, there is also a movement towards selling “earthquake derivatives,” which allow customers to receive money if an earthquake of a certain magnitude occurs, and attention is focused on whether this will become an option following earthquake insurance.

Generally, earthquake insurance for businesses provides compensation in the event of damage to buildings or factory equipment. In contrast, earthquake derivatives pay compensation if a certain seismic intensity is observed at a pre-determined location. Unlike earthquake insurance, it does not require the time and effort of calculating damage to equipment, etc. For businesses, it not only covers physical damage, but also risks such as reduced sales.

The earthquake derivatives proposed by Storm Harbor Securities (Minato Ward, Tokyo) to its corporate clients have a contract period of three years, with the company paying 610 million yen, which is equivalent to 12.3% (4.1% per annum) of the 5 billion yen compensation limit. The system works so that if an earthquake of intensity 6 or higher is observed at a pre-set seismic intensity observation point within the three-year period, the company can receive compensation. The specific amounts are set at 5 billion yen in the case of an intensity 7, 2.5 billion yen in the case of an intensity 6.5, etc.

Earthquake insurance inquiries surge, subscription rate at 35%