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High Risk Regions and the Importance of Resilience

Climate Check Podcast

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    About this episode

    Haruka Narahashi, head of Treaty Reinsurance for Munich Re Japan, talks about the evolving risk of natural catastrophes that Japanese communities face. (Part 1), followed by a discussion about  how awareness of the impact of climate change is affecting how financial institutions approach risk mitigation (Part 2).

    About the guest

    Haruka Narahashi has more than 20 years of Property & Casualty reinsurance experience. She joined Munich Re in 2017 as Head of Property Treaty Underwriting and now in a role of Head of Non-Life Treaty Underwriting and Green Tech Solutions at Munich Re’s Japan Branch. Prior to joining Munich Re, she held various roles at Swiss Re, including Client Management, Property treaty underwriting, Credit & Surety, Business Development (P&C and L&H) and Structured Solutions. The roles were primarily covering Asia, but also US when stationed in NY for Property treaty underwriting.

    Part 1

    Mark Maroon:

    So, hey, everybody. Welcome to Climate Check. This is Mark Maroon, Vice President of Portfolio Management and Reinsurance at American Modern, a US subsidiary and specialty carrier of the Munich Re company. Today I'm joined by Haruka Narahashi, Head of Treaty Reinsurance for Munich Re Japan. Haruka, thank you so much for joining us today.

    Haruka Narahashi:

    Thank you, Mark, for having me here.

    Mark Maroon:

    So, to start off, I understand that Japan, like so many other places in the world, is experiencing extreme weather related natural catastrophes that are hitting with seemingly increasing frequency and intensity. Could you maybe give us a little bit of an overview of the types of Nat Cat events Japan tends to see, and then, perhaps, the scale of what you're seeing compared to what you've experienced in the past?

    Haruka Narahashi:

    Sure, Mark. Thank you very much for that question. So you are right in understanding that Japan is a very Nat Cat prone country and probably most people are aware of the earthquakes that tend to happen once in a while, and you probably have seen devastating pictures around it. Of course, at the same time, we do have typhoons hitting us as well. Every summer it's a topic that we have typhoons, dozens of them actually, popping up in the southern part. And then, would it strike or not strike? That's always a concern.

    But now when it comes to extreme weather events, what quickly comes to my mind are the higher frequency and severity of heavy rains and extremely hot days. And heavy rains cause not only the rivers to flood, landslides to happen, but also, nowadays, causing urban cities to experience surface and flash flooding.

    And, for the numbers that you asked, Japanese Meteorological Agency, we call JMA, reports the 10-year period between 2011 to 2020, the average annual occurs of heavy rain with hourly rainfall of more than 80 millimeters is 1.9 times that of the 10-year period between 1976 to 1985 when the statistics started. One contributing factor to that is an increase in sea surface temperatures around the Japan Sea, Japan, due to climate change which is providing higher moisture levels into the atmosphere.

    Also apparent is the heat, as I mentioned. In the recent years, nationwide in Japan, every summer there is news of some cities experiencing record high temperatures and people are warned to stay indoors to avoid heat shocks. According to the same JMA statistics, recent 30-year average annual day counts for 35 degrees Celsius or higher is 3.1 times that of 30-year period 1910 to 1939 at the beginning of the recording started. Increasing heat level, one could say, is the very essence of the global warming. These are just two of the phenomenas that people feel the impact of climate change in your everyday lives.

    Mark Maroon:

    Right. Thank you for that. I think that's actually a couple of important points. First off, I think it's pretty cogent to point out that, yeah, when people think of Nat Cat events in Japan, I think the first thing that does come to mind is probably earthquakes, and, I mean, who could forget the Tōhoku earthquake from 2011? But, in terms of typhoons, I think we're seeing similar things here, stateside, as well as across the different continents on the planet.

    And so one of the things that I think that you brought up was pretty important was the increased rainfall that we're potentially seeing from these events as well. So what are the ways in which some of those unexpected losses that you're seeing from round after round of this extreme weather is hampering communities' ability to gain traction in their recovery?

    Haruka Narahashi:

    Yeah. Let's, then, focus on the flooding because you mentioned the heavy rain. So what does the severe level of or more frequent occurrence of heavy rain could mean? Naturally, more devastating events lead to a larger impact to the businesses and people's lives, as you mentioned.

    Let's take an example of a business. Okay. The flooding caused by a heavy rain resulting in part of the factory being inundated and business may need to be shut down for a prolonged period because the waiting period for the water level to subside is definitely longer. For this business, historically, the flooding damage may have been just once in a lifetime event for just one company president, but in the recent years it may be happening more often.

    The damage it can cause is not only the loss of revenue or profit, there are additional costs, cleanup costs, equipment replacement and, as you fear that event may happen again, one might want to implement flood defense measures, et cetera, or even to relocate away from the area.

    Furthermore, it becomes more difficult or more expensive to take out commercial loans, for example, if the location of the business is recognized to be in more hazardous area. With impact of the access to finance, business stability into the future is being very much challenged.

    Mark Maroon:

    Right. So one of the things that Munich Re has definitely placed a priority on is getting a better understanding of some of the climate related risks that we are seeing across the globe. So maybe can you talk a little bit about some of the solutions or products that you find best respond to the needs of the people on the ground who are dealing with the fallout from these events?

    Haruka Narahashi:

    Maybe I, say, take one example of life insurance. Did you know that Japan has a very high penetration rate for life insurance, being the third-largest market in the world in terms of direct premium written? On top, people do take out accident, illness and other insurance to cope with unexpected events, and insurance does provide support in times of stress. This shows that people consider about their life events in the future. With climate change it may be that we will need to have similar preparedness for extreme weather events going forward.

    And topic is also applicable to business too. Small to medium-sized companies, they could review their hazard map and consider actions to mitigate and hedge or transfer risks. For business, what could climate change impact mean? It could be flood, heat, drought, heavy rain, landslide, typhoon. Risk awareness is really crucial. It's the starting point for risk prevention, mitigation, and risk transfer.

    Munich Re has tools on Location Risk Intelligence. The Climate Change version gives such an insight for just one location to a portfolio of locations around the globe. And looking to our customers, the Japanese insurance industry, for them, they have actually expanded abroad in pursuit of growth opportunities since many years and their portfolios, in the overseas, have grown significantly. And we contribute by bringing Munich Re's view of risk around the globe to complement and assist formulation of the comprehensive view of the risk.

    Re reinsurers use our proprietary Nat Cat models to assess the risk of portfolio which we underwrite. When we compare the different markets, the data we currently use in Japan can be improved in terms of volume and granularity when compared against, for example, US. Yet even with better set of data, past climate does not tell us all of what climate future holds. It is therefore important to continue the dialogue and be the partner in this journey of climate change.

    Mark Maroon:

    So I'd like us to pause there because I'd like to hear about how the discussion of climate change is playing out in Japan. So folks, please join me for part two of our discussion with Haruka Narahashi. And head on over to for more information.

    Part 2

    Mark Maroon:

    Hi everyone, this is Mark Maroon, Vice President at American Modern, a Munich Re company. Continuing my interview with Haruka Narahashi, Head of Treaty Reinsurance for Munich Re Japan about the role that reinsurers can play in strengthening resilience. Haruka, in the first part of our conversation, you talked a little bit about how Munich Re has played a role in raising awareness about the impact of climate change, not only among insurers, but also among institutions and communities. So are you finding that in Japan there's still the need to convince parties of the influence of climate change? Or are your efforts more around identifying partners who can collaborate and take meaningful action?

    Haruka Narahashi:

    I think my reaction would be that Japan is on good track to tackle this climate change. The Task Force for Climate-Related Financial Disclosures, also known as TCFD, is a framework that works to improve and increase reporting of climate related financial institutions. And as of last month or September 2021, 504 corporates and financial institutions from Japan support the disclosure principle. 504 is the largest number globally of roughly 2,600 companies and from 89 countries and jurisdictions. What this tells is that many people corporate in Japan find the topic of climate change highly important and willing to take actions. And this is encouraging to me as the efforts on financial disclosure will enable quantification of what needs to be tackled. And with that quantification, concrete actions can be planned and implemented. And Munich Re around the globe are actively engaging in dialogue with various stakeholders to promote awareness of climate change and searching ways how we could be part of the solution.

    In Japan too, we are reaching out, first and foremost is our insurance clients. Because we are able to take part in being part of the social infrastructure of protection against typhoons, earthquakes and cyber, et cetera, through the wide reach of primary insurers. So it is very important that Munich Re work with primary insurance companies and we are committed to be the partner of our clients and they can rely on with the challenge of climate change too. We also, as you mentioned, reached further out and we've spoken and tried to work with startup companies, system integrator, consulting companies, financial institutions and academia, et cetera. Still searching for ways to collaborate and cooperate so that we are all looking to multiply the effects of our actions and voices. We in Japan are not a large operation, hence our approach has been rather selective, but it will be fascinating to reach more people.

    Mark Maroon:

    It's interesting that you brought up the multiplier effect because I think industry can do certain things on their own, academia can do certain things on their own, governments can do certain things on their own, but when we all start working together, especially on a global scale, that's when I really think the sum becomes greater than each of its individual parts. So if I were to ask you to predict the future in five to 10 years, which I know is impossible, but can you give me a little bit of a sense for where you think this is all going in terms of finding ways to work together to achieve that multiplier effect?

    Haruka Narahashi:

    Certainly. In five to 10 years time, my hope, and I am hoping that this is going to come true to some extent, is that there is going to be a huge collaboration between the weather startups and the insuretech startups and the conventional or the traditional primary insurance companies and the public entities like the municipalities or prefecture or even at the nation level, to be able to find a solution that all looks to promote the resilience of the community. And we can of course start in smaller parts and to expand it to the wider partnership network. We in Japan, I think, have the experience of working together in times of stress. As you mentioned Mark about the Tohoku 2011 was one of the examples that the community have come together nationwide to tackle this devastating event.

    We Japan, the nation, because we are so Nat CAT prone, we know how we need to focus the attention of the people across the nation to tackle the Nat CAT event that happens quite frequently. Now, it's not only an earthquake, but rather it's also typhoon and also landslide, heavy rains and heat shocks. So there are multiple things that we need to tackle quite quickly as well as on a focused manner. In five to 10 years, the devastating events may be multiplying also, we should quickly gather our actions and start to build our solutions together. And hopefully, and I do want to believe that Munich Re is going to be part of that solution building.

    Mark Maroon:

    It does seem like, as you've rightfully pointed out, Japan gets hit by just about every sort of Nat CAT imaginable. And so with the impacts of climate change going forward, potentially increasing the severity of some of these events, certainly from heat, water, wind speeds perhaps as well, I think it places an increased importance on resilience and making sure that the building infrastructure is such that it can withstand some of these more extreme events and more extreme hazard. So can you talk a little bit about some of the building codes that are put in place and how perhaps the reinsurance industry can work with the individual construction companies and/or governments to build a more resilient building stock?

    Haruka Narahashi:

    Sure, Mark. As you pointed out, the building code in Japan are quite good when it comes to earthquake, for sure. If you recall the time of Tohoku earthquake 2011, Tokyo was actually met by a severe shake as well. And of course there were some building that were a little bit damaged, but there wasn't so much of a destruction in the cities that were apparent. Of course, in the northeast area where actually the tsunami has hit, that's a different story. But the building code is built to withstand the heavy earthquake shakes. Now, when it comes to typhoon, of course the building codes in the southern part such as Kyushu or Shikoku, where the typhoon actually is normally hitting them every year, the standard of the building is quite high. And therefore, even if a large typhoon hits that region, the damage that we see from that region is quite manageable. I wouldn't say we should dismiss it, but rather it's manageable, they have learned from the lessons in the past.

    What we saw in the 2018, '19, especially Typhoon Jebi that hit the Osaka area was a bit of a different phenomenon because it went through an area where the typhoon of that strength was rare to go through. And because of that, the building were rather old in that area and therefore it is said that the building stock was one of the reasons why we saw a rather elevated level of damage coming through from the Jebi event. Learning from that, I'm sure that area is going to rebuild the houses in a more resilient manner. And of course, we have to count on the construction companies and the regulations imposed by the municipalities that in future, in expectation of the climate change, to have a severe wind speed that may come their way, build a stronger houses and buildings in the areas where it was less prone to have typhoons.

    We shouldn't only look at the household and the building codes, but also the infrastructure that needs to be a bit more fortified to be able to withstand the wind speed and the heavy rains and whatnot that can happen. And for that, I think, as I was mentioning, the location risk intelligence with the climate change that's overlaid on top of it might be a very good source to reference to be able to infer what could be the resilience that needs to be implemented for the years to come.

    Mark Maroon:

    I think that's a great point to close on. Haruka, thank you so much for taking the time to talk with us on this today.

    Haruka Narahashi:

    Thank you very much, Mark. It was a pleasure.

    Mark Maroon:

    Absolutely. So folks, if you enjoyed this episode, please subscribe to our podcast. And as always, for more information, go to We'll see you next time.

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