In the year under review the Japanese market was dominated by the devastating earthquake in March as well as the subsequent tsunami which led to a nuclear disaster in Fukushima. Along with this human tragedy, the repercussions for the country’s economy and of course also for the insurance industry were immense.

In view of the accumulation of natural perils, the Japanese reinsurance market is crucially driven by demand for covers for earthquake, windstorm and flood risks.

With an estimated market loss of USD 35 billion, the Great Tohoku Earthquake is the most expensive loss event to date in the country’s history. Faced with this enormous burden of losses, insurers were forced to re-evaluate earthquake risks with an eye to the potential exposures from tsunamis as well as contingent business interruption (CBI). The event caused original rates for earthquake covers to rise by an average of 30%. On the reinsurance side price increases for loss-impacted programmes ranged from 30% to 100%, while rates for other business with natural catastrophe exposure also improved by an average of 5% to 20%. Not only that, primary insurers were faced with tighter conditions in the form of increased retentions and/or reduced limits of liability.

For Hannover Re Japan is a very important market – and one in which business relationships are traditionally geared towards the long term. Through our service company in Tokyo we are closely familiar with our clients’ requirements and can draw on very good market know-how. We enjoy the status of “core reinsurer” with most primary insurers. Thanks to the commitment that we showed to our clients in the aftermath of the earthquake, we were able to further consolidate our relations with ceding companies.

Along with catastrophe covers (see also the section on “Global catastrophe business”) we transact business across all lines of property and casualty insurance; in particular, we enjoy a leading position in the casualty sector and personal accident insurance.

After years of moderate loss expenditure, the result for the 2011 financial year was adversely impacted by the severe earthquake. With a net loss burden in the order of EUR 229 million, this natural catastrophe was the largest single loss for our company in the year under review.