While the floods caused by the heavy rain in western Japan in recent days are credit negative for Japanese P&C insurers -- because of the losses from property and business interruption coverage -- the overall credit impact on insurers is seen as small, says Mr Soichiro Makimoto, Vice President - Senior Analyst, Financial Institutions Group, Moody's Japan.
For consumer lines including coverage for residential properties and automobiles, as the affected areas are limited to areas adjacent to small rivers rather than “first-grade rivers”, Moody's expects the number of policies affected will not be large enough to cause significant losses among insurers.
For commercial coverage on mid to large enterprises, losses can come from both property and business interruption losses. Nevertheless, because the insurers have generally excluded flood risks from their base policies for these enterprises — opting instead to only provide flood coverage to selected customers under special provisions — Moody's does not expect losses to be significant either.
The death toll from the floods and landslides has reached at least 179, and is expected to rise. Dozens reportedly are still missing and thousands remain stranded in shelters.
A number of Japanese automakers and electronic firms continued to suspend operations yesterday at plants in the affected parts of the country.