Adaptation to Climate Change

Weather Index Insurance in Southeast Asia

Products & Service

Weather index insurance is an insurance product that pays out a contractually predetermined insurance amount when a weather index — such as for temperature, wind speed, or rainfall — fulfills certain conditions. Using Sompo Risk Management & Health Care’s expertise, we provide a weather index insurance aimed at reducing agricultural business risk in Southeast Asian countries, where agriculture is a key industry that is also vulnerable to climate change.
We began providing weather index insurance in Northeast Thailand in 2010 to alleviate the losses borne by rice farmers when their crops were damaged by drought. Cooperating with the Thai Bank for Agriculture and Agricultural Cooperatives (BAAC), we developed a scheme for farmers who have loan contracts with BAAC to easily participate in an insurance program, and have been steadily expanding the program’s geographical reach. In Myanmar, we developed a weather index insurance that covers drought risk for rice and sesame farmers in the central arid region.
This insurance, developed in partnership with the Remote Sensing Technology Center of Japan (RESTEC), makes use of rainfall data obtained by earth observation satellites. In the Philippines, we offer Typhoon Guard Insurance which pays out a predetermined insurance amount to agricultural producers if the center of a typhoon passes through a specified area. We are also developing a weather index insurance in Indonesia with assistance from the Japan International Cooperation Agency (JICA).
In recognition of these achievements, we have been approved as a member of the Business Call to Action (BCtA) alliance led by the United Nations Development Programme (UNDP), which challenges private companies to develop business models that can achieve both commercial success and sustainable development.
In 2016 we received Japan’s Environment Minister’s Award for demonstrating the Principles for Financial Action towards a Sustainable Society. For our initiative in Myanmar we received the Minister of State for Space Policy Prize, at the Second Space Development and Utilization Grand Prize presentation.
Aiming to provide weather index insurance to 30,000 farmers in Thailand and other Southeast Asian countries by 2025, we will move forward on our continued efforts in this field.

Pacific Catastrophe Risk Insurance Pilot Program

Products & Service

Sompo Japan Nipponkoa has been supporting the Pacific Catastrophe Risk Insurance Pilot Program since it was established in January 2013 by the World Bank and the Japanese government. An action to support Pacific Island countries, which are vulnerable to natural catastrophic damage, has been discussed under the leadership of the World Bank as large-scale natural disasters (e.g. cyclones and tsunamis) are occurring with greater frequency due to a climate change.
Meanwhile, Sompo Japan Nipponkoa has underwritten derivative contracts both in Japan and abroad, and developed advanced financial techniques and know-how for enhancing adaptability to climate changes. We have also been proactively involved in a study project for the Pilot Program since it was proposed at the Pacific Islands Leaders Meeting (PALM) in Hokkaido in May 2009, and took a leading position for launching the program.

●Program Outline

Five Pacific Island countries (Samoa, Tonga, Vanuatu, Marshall Islands and Cook Islands) have concluded derivative contracts with the World Bank, which established the Trust Fund to compensate for the loss incurred by the member countries in the event of a natural disaster exceeding a prescribed level. The World Bank has also concluded derivative contracts with insurance companies to transfer risks underwritten from the Pacific Islands countries to private insurance companies.

Insurance Products that Promote Renewable Energy

Products & Service

With Japan’s Renewable Electric Energy Feed-In-Tariff system starting to operate in July 2012, and a growing number of companies and other entities have been participating in renewable energy projects. For entrants into the renewable energy electricity market, we offer insurance to cover emergencies as well as risk analysis services for the project facilities’ site environments.

●Electricity Revenues Compensation Rider for Photovoltaic Power Generation Businesses

Sompo Japan Nipponkoa has developed an “Electricity Revenues Compensation Rider” to compensate for reduced business profits, considering the features of each project, based on situations associated with a reduction in electricity revenues—having calculated the projected revenues from electricity sales based on per-month and per-site data on hours of sunlight published by the New Energy and Industrial Technology Development Organization (NEDO). If a photovoltaic power generation system suffers damage due to a fire, natural disasters or other cause, the rider reduces the risk for the photovoltaic power generation business by compensating the owner for the reduction in business profits if the project’s planned electricity generation is not achieved. Through this product, we are working to encourage and promote renewable energy businesses.

●Fire Insurance for Wind Power Companies: Special Clause Covers Costs to Prevent Recurrence of Accidents

Sompo Japan Nipponkoa offers fire insurance for wind power companies with a rider that covers costs for actions to prevent accidents from recurring. For wind power companies, if accidents occur, the losses can tend to be expensive, and similar accidents are likely to recur. Thus, it is important for the management of wind power companies to identify the causes of an accident, and take measures to prevent recurrence. To address these issues, Sompo Risk Management & Health Care is supporting the stable management of wind power companies by developing this rider, which incorporates our accident recurrence prevention knowhow, to provide insurance and risk management services.

●Property and Casualty Insurance for Offshore Wind Power Companies

For offshore wind power projects, insurance coverage was arranged separately for the construction process and project operations after completion. But from the perspective of preventing gaps in insurance coverage and improving the efficiency of project management, many businesses were asking for unified insurance. In response, Sompo Japan Nipponkoa now offers insurance in the event of the occurrence of damage to offshore wind power facilities due to unforeseen or sudden accidents during facility construction and operations.
Also, Sompo Canopius has established a special in-house department and in Europe it offers property and casualty insurance for offshore wind power generation companies. The company shares their knowhow across the Group that has been developed in the European market which has some of the world’s leading underwriting techniques in the areas of property and casualty insurance for offshore wind power generation companies. We will conduct insurance underwriting that more closely matches risk in Japan as well.

●Risk Diagnosis Services for Renewable Energy

Since September 2012, Sompo Risk Management & Health Care has been offering risk diagnosis services for renewable energy. These services make use of knowledge accumulated through our risk analysis services relating to natural disasters such as earthquakes, flooding, and lightning strikes, as well as the development of risk maps. The services aim for a stable electricity supply from renewable energy, which has a low environmental impact, and involve analysis and diagnosis of site risks for renewable energy facilities such as photovoltaic and wind power electricity generation facilities.

●Consulting on Fire and Crime Risk for Mega Solar Installations

Since March 2013 Sompo Risk Management & Health Care has been offering risk consulting services relating to fire and crime prevention for mega solar power plants, in partnership with Sohgo Security Services Co.

●Risk Diagnosis Services for Wind Power Businesses at the Planning Stage

Sompo Risk Management & Health Care analyzes and grades various risks during the operation of both land-based and offshore wind power operations when they are at the planning stage. These services are aimed at reducing the potential risks of projects by encouraging the operators to take steps to reduce risks based on assessments, thereby reducing the amount of risk exposure before starting the projects.

●Risk Inspections and Diagnosis Services for Wind Power Facilities in Operation

Sompo Risk Management & Health Care selects turbines at power generation sites that have a high probability of major accidents or breakdowns, then conducts third-party inspections and diagnosis of business risk. These are considered to be detailed inspections of critical risks.

●Development of Risk Assessment Model for Wind Power Facilities

Sompo Risk Management & Health Care has developed a risk assessment model for wind power facilities. Identifying the risk of electrical or mechanical breakdowns and accidents due to natural disasters and other factors using the risk assessment model enables us to quantitatively ascertain the risk of wind power projects and calculate the appropriate insurance premiums. We will further develop our services that use the risk assessment model and contribute to the spread of wind power.

●Financial Impact Analysis Service for Wind Power Projects

Sompo Risk Management & Health Care offers a service for wind power projects that evaluates the probability of losses occurring due to accidents from natural disasters and typical breakdowns, as well as losses due to a halt of operations when a breakdown or accident occurs, and then quantitatively evaluates the impacts of identified risks on the cash flows of business plans.

●Second Opinion Service for Wind Power Companies

Sompo Japan Nipponkoa and Sompo Risk Management & Health Care started offering a second opinion service in November 2016 for wind power companies that have purchased a fire insurance policy from Sompo Japan Nipponkoa. Through this service, we offer advice on how to handle various types of trouble that could occur in operations and maintenance. When consulted on wind power operations and maintenance, Sompo Risk Management & Health Care compiles advice from wind power maintenance companies, experienced engineers and experts, and then provides it to the client.

Development of Flood Risk Assessment Methods for Japan and Asian Countries

Products & Service

To deal with flood risk, which can be affected by medium- and long-term climate change, Sompo Risk Management & Health Care is engaged in research and development into flood risk assessment methods for Japan and Asian countries to offer new insurance services and risk consulting services that support adaptation to climate change.
In Japan, we are utilizing a flood risk assessment system*1, developed jointly with Kyoto University and Kobe University, for insurance risk management and natural disaster risk consulting.
For Thailand, we are using a flood risk assessment system developed jointly with the Foundation of River & Basin Integrated Communications, Japan, to manage insurance risk and develop insurance products. We have also developed new flood scenario risk assessment methods*2 for major urban areas in Indonesia, the Philippines, Malaysia, Singapore, and Brazil. With these methods, we now have methods in place that enable us to assess flood scenario risks in seven countries in Asia (methods have already been developed for China, Vietnam, and Thailand), and one country in South America. We plan to steadily expand the area to which we can apply these flood risk assessment systems and methods.
In fiscal year 2015 we started new joint research with the Disaster Prevention Research Institute at Kyoto University and the Research Center for Urban Safety and Security at Kobe University, with the aim of enhancing the precision of flood risk assessments in Japan and Asian countries. Going forward, we intend to actively apply our flood risk assessment expertise to the management of insurance risk in Japan and other countries, the development of insurance and derivative products, and risk consulting services, in order to propose concrete and practical solutions.

  1. Flood risk assessment system: A system to assess flood damage stochastically over year, based on various assumed rainfall scenarios.
  2. Flood scenario risk assessment method: A method to assess flood damage under certain pre-set rainfall scenarios, including past heavy rainfall that has been measured, and probable heavy rainfall (e.g., rainfall of a certain intensity with the likelihood of once in 100 years).