The risk at hand for clients:
- Japan is one of the world's most seismically active countries, yet most contractor-arranged construction insurance policies exclude earthquake damage.
- 2025 earthquake losses globally reached approximately $18 billion.
- If a contractor fulfills their "duty of care," they are legally exempt from liability for damages caused by force majeure events such as earthquakes.
- Even without direct physical damage to the site, infrastructure disruptions and construction delays can trigger cascading profit losses—something traditional ALOP policies struggle to fully compensate for.
Our solution:
- Rapid payouts within days or weeks of a qualifying event—no damage assessment required.
- Coverage for both direct losses and indirect financial impacts, including lost profits and emergency evacuation costs.
- Up to $80 million (approximately 13 billion yen) available per contract.
How it Works
- Insured Location Definition: At policy inception, the construction site is defined using its address or GPS coordinates, establishing the precise location against which seismic intensity will be measured throughout the construction period.
- Seismic Intensity Monitoring: When an earthquake occurs, seismic intensity data is automatically collected from the official observation point closest to the insured construction site, using Japan's Shindo scale as the trigger index.
- Trigger Evaluation: The recorded seismic intensity is compared against the predefined payout structure agreed upon at policy inception. If the intensity at the nearest observation point meets or exceeds the trigger threshold, the policy is activated.
- Independent Data Validation: Certified seismic data is collected and validated to confirm the intensity level recorded at the relevant observation point, ensuring full transparency and accuracy in the trigger determination.
- Transparent Payout Calculation: The payout is calculated by multiplying the policy limit by the percentage corresponding to the recorded seismic intensity.
- Rapid Claims Settlement: Once the event report is confirmed and the Declaration of Loss Statement is received, funds are disbursed rapidly in accordance with policy terms, enabling project owners to address recovery costs, manage delays, and sustain financial commitments without disruption.
Why Choose Descartes & HDI’s Parametric Earthquake Insurance for Construction?
☑️ Closes the Gap Left by Standard Construction Policies – Most contractor-arranged construction insurance policies do not cover earthquake damage. This product is specifically designed to fill that gap, providing standalone earthquake coverage for project owners—independently of whether the contractor's policy includes any earthquake protection or not.
☑️ Covers Losses Beyond Physical Damage – Unlike traditional indemnity policies, this solution can cover the full scope of earthquake-related financial losses, including lost profits arising from construction delays, emergency evacuation costs, and business interruption—even in the absence of direct physical damage to the construction site itself.
☑️ Payouts Calibrated to Construction Progress – Because this is not an actual loss policy, the coverage limit dynamically increases in line with the progress of the construction project, ensuring that the insured amount remains proportionate to the financial exposure at each stage of the build.
- Rapid Liquidity, No Damage Assessment Required – Parametric triggers eliminate the need for on-site loss adjustment or damage surveys. Once the seismic intensity threshold is met, the claims process follows a clear and pre-agreed sequence, delivering funds within days or weeks—allowing project owners to respond immediately to cost overruns, contractual penalties, and operational disruptions.
Want to Learn More?
Download our product sheet (PDF) to:
- Learn more about our parametric earthquake solution for construction projects in Japan, quote requirements, and more.
- View an example payout structure based on the Shindo Scale.
- Discover additional details about the product in our Frequently Asked Questions section.
Interested in a solution?
Contact our commercial team.
