New Trend of New earthquake resistance standard

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Japan's authorities move to impose tougher building standards

Four years after the devastating Tohoku earthquake and tsunami, governments, insurers, real estate owners and developers are taking steps to improve the ability of structures to withstand and survive such disasters in Japan.

Even before the recent legal changes to prod more property owners to follow stricter seismic building standards, structures stood up well to the strongest quake on record to hit Japan. But steps to deal with the impact of tsunamis -- which were the most deadly and destructive force in the catastrophe -- and long-period ground shaking that affects skyscrapers in cities, such as Tokyo, are still a work in progress.

Nearly 16,000 people died and almost 130,000 homes and buildings were destroyed, mainly in three northern prefectures on the Pacific coast in the March 2011 disaster. The financial tally for insurance companies was almost $37bn in earthquake and tsunami damage and business interruption claims paid -- making it the second costliest payout worldwide in the past four decades, after Hurricane Katrina's almost $79bn, says reinsurer Swiss Re.

Japan's current regulations, to protect residential and commercial structures against earthquakes, date to the 1981 Building Standards Law and subsequent minor revisions. The Tohoku quake and the most destructive one before that, Kobe in 1995, indicated that the 1981 law was sufficiently strict, because almost all of the damage occurred to structures built under the prior 1950 law, says Hiroshi Fukuyama, director of the National Building Research Institute's Structural Engineering Department.

Nonetheless, in 2013, Japan made further revisions to a 1995 law promoting seismic retrofits passed after the Kobe quake, to push more structures to meet the 1981 code. It compels owners of large buildings used by the public, such as hotels and shopping centres, to have third parties assess whether they meet the 1981 law and for public disclosure of the results by the end of 2015.

The goal, by the end of the year, is to increase the percentage meeting the code to 90 per cent from about 80 per cent in 2007. The national government and most local governments will provide financial assistance, up to 80 per cent in some instances, to pay for seismic retrofits to meet tougher standards. For assessments, the assistance can cover the entire cost.

Nikkei

Floating shelter being installed on the top of a tsunami evacuation tower

Miyagi, the prefecture hit hardest in Tohoku, has some of the most generous residential subsidies in Japan and had promoted quake insurance before the 2011 earthquake. Half the households now have coverage, up from one-third before the quake, compared with the national average of 28 per cent.

Insurers offer discounted premiums for residential property that follow the 1981 code, with larger reductions for meeting greater quake-resistance standards. The maximum discount jumped to one-half last year from 30 per cent in 2010, according to the General Insurance Rating Organization of Japan, after regulators assessed the efficacy of quake-resistance features and also drew up new hazard maps.

For corporations insuring property from quakes and tsunamis, there are no across the board rates or discounts and coverage is not guaranteed, in contrast to residential quake insurance.

In general, says insurer Sompo Japan Nipponkoa Holdings, the conditions for setting rates include location, seismic resistance and the risk of tsunamis and liquefaction -- the rate the strength and stiffness of soil is reduced by earthquake shaking.

Atsuhiro Dodo, head of property treaty underwriting at Swiss Re in Japan, says: "The key determinant is which building code/seismic resistance is installed." Corporate quake insurance, which is a rider on fire coverage, is harder to attain, because the national government does not act as the reinsurer, as it does for dwelling insurance.

High-grade buildings that exceed seismic standards are often better located and receive higher rents

Norio Morioka, general manager of the planning department at Tokio Marine & Nichido Risk Consulting, a subsidiary of insurer Tokio Marine Holdings, says reducing risk is the priority for companies: first protecting personnel; then structures used for production and providing services; and thirdly, ensuring business continuity. The last step is insurance or other coverage such as catastrophic bonds.

Property owners and developers have an incentive to meet or exceed the 1981 standards to attract customers and tenants. Hiroshi Okubo, head of research at the real estate group CBRE in Tokyo, says: "Relocation demand on the back of facility upgrades [to quake-resistant buildings] and for [business continuity planning] compliance has been the trend, particularly after the Tohoku earthquake."

High-grade buildings that exceed seismic standards are often also larger and better located and therefore receive higher rents, he adds.

The government is working on regulations to help deal with the stresses that tsunamis can put on structures, in addition to the current tsunami evacuation and shelter requirements and improved hazard maps. It is also looking at rules to deal with long-period ground motion of one to two seconds, which affected skyscrapers in Osaka, nearly 800km from the Tohoku quake epicentre.

Japan has taken significant steps to protect itself from future earthquakes, but only time will tell if these preparations are sufficient.

The Financial Times