The deadly earthquakes in Niigata Prefecture caused catastrophic landslides and destroyed buildings, but they will not cause much damage to nonlife insurance firms because their high reserves and the state’s financial safety net will protect them, according to insurance specialists.

Under the earthquake insurance system, established in 1966, the greater the damage, the more the government pays.

If damages caused by this month’s earthquakes are assessed at 75 billion yen or lower, insurance companies will have to bear the full cost of payments. If damages reach between 75 billion yen and 1 trillion yen, the government will split the cost with insurers, while damages beyond this amount will be covered by the government to the tune of 95 percent.

Because of the potentially huge risks involved, nonlife insurers did not cover earthquake damage until 1966, when then Finance Minister Kakuei Tanaka created the quake insurance system — two years after a big temblor hit Tanaka’s home prefecture of Niigata. Tanaka later became one of Japan’s strongest prime ministers.

In the latest series of earthquakes, insurers say that if the damages are not large enough to qualify for government payments, they will be covered by a high level of reserves.

Outstanding reserves as of March stood at 1.6 trillion yen, according to Japan Earthquake Reinsurance, a private company owned by nonlife insurers to handle the quake insurance reserves.

Insurers said they are currently examining the scale of the damage. But “it is not likely to reach the 80 billion yen of the Great Hanshin Earthquake” in January 1995, said Nobuyasu Uemura, senior analyst at Rating and Investment Information Inc.

Rather, insurers’ earnings would likely be hurt by the record number of typhoons that have hit the nation this year, experts said. Unlike earthquakes, typhoon damage payments are not covered by the government.

Meanwhile, the Niigata earthquake is likely to cause an increase in the number of quake insurance policies.

“Every time a big earthquake occurs, the number of policies nudges up.” said Masafumi Yamamoto, a spokesman for the General Insurance Association of Japan. But the increase quickly slows as people’s interest fades, he added.

“The earthquake once again has raised people’s awareness about the necessity of having such insurance,” he said.

The total number of quake insurance policies is relatively low compared to other types of insurance.

As of the end of March, 17.2 percent of all households had quake insurance, up from 7.0 percent in 1994 — just before the Great Hanshin Earthquake. But the ratio is far below 53.5 percent for fire insurance and 70.9 percent for car insurance, according to the General Insurance Association of Japan.

The number of the contracts is also low in Niigata, at 11.2 percent against an overall 17.2 percent, it said.

Widespread misunderstanding about fire insurance coverage — including the belief that it includes fire damage caused by earthquakes — contributes to people’s reluctance to pay for earthquake insurance, Yamamoto said.

The association began a campaign in 1983 to raise people’s awareness. This year, it aired a TV commercial between Aug. 23 and Sept. 5.

But Rating and Investment’s Uemura said: “A rise in the number of (earthquake) policies would have little impact on insurers’ earnings. Rather, the earthquakes are likely to have a good effect by calling people’s attention to all types of damage insurance.”

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