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By CYRIL TUOHY, managing editor of Risk & Insurance®.

In the City Massive Buildings Sway as Tokyo Office Workers Scramble for the Exits

Kannan and his boss, huddled in a third-floor conference room to discuss 2010 staff bonus allocations, suddenly felt the office building shake with a force he'd never felt before.

"I said to my boss,'This is extremely serious,' and he said'I know,''' Kannan said.

A former resident of Hong Kong, Kannan was familiar with howling winds and driving rains generated by typhoons.

But the swells of March 11 were entirely different. The swaying motions of the building were so violent that it seemed as if the epicenter was directly under the building. In truth, Kannan had no idea, only that he was hunched under a table, inside a 12-story building with more than 80 colleagues.

He had no idea where the epicenter was located, nor how it would all end.

"It was like the earth was violent, it was primordial," said Kannan, in a June telephone interview from Tokyo. "Then we turned on the TV and we saw that in effect we were 200 miles or more from the epicenter, and that the event had taken place off the island of Honshu."

Now, more than three months after the quake, life has returned to normal, but it isn't quite the same, Kannan said. Beneath the grace, the control and the discipline of the Japanese character, the Japanese psyche has taken a hit.

"There's a lesson to be learned about the resilience of the human spirit and the importance of helping each other to pick up the pieces," he said. "It's tough. People's lives have been affected; it's not just a one week or two of inconvenience."

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In the Provinces a Black Tide Surges Forth; Commercial Structures Hold, Residential Dwellings Fold

For Ruud Bosman, vice chairman of commercial property insurer FM Global, the three days spent in Japan in June were ones of stunning contrast:

In the cities, Tokyo and Yokohama, there was nary a sign of damage three months after the March 11 Tohoku earthquake. All appeared normal. The business districts hummed, public services briefly suspended after the quake, had returned. People went about their daily chores.

But in the villages of some provinces affected by the tsunami spawned by the 9.0 magnitude quake, the devastation was unlike any he'd ever seen in 40 years in the insurance business.

"There was nothing left," Bosman said. "All the debris has been pushed aside on the road by cleanup crews and it was just block after block after block of complete destruction. There was nothing left standing."

Across from the residential neighborhood, commercial buildings adjacent to the port withstood the wall of water, even as they suffered extensive flood damage inside -- electrical systems, interior walls and partition, inventory, and furniture.

"Even in Sendai, I saw very little structural damage," he said. "The airport was flooded but the water didn't get to the city center."

The lesson from this quake is clear, he said. Modern high-rise buildings built to the latest construction codes performed as they were designed to do. They absorbed the ground's energy, and released it gradually through dampening systems and swaying back and forth.

Valves shut off gas lines to buildings with the first ground motion, and the sprinkler systems, designed to move with the buildings, avoided rupture and interior water damage.

"Our losses at FM Global were 80 percent flood-and-tsunami as opposed to quake-related," he said.

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In the Executive Suite, a Nervous Calm as the Disaster Tests Business Interruption Coverage.

From a corporate perspective, the earthquake and subsequent tsunami is shaping up to be a test of Japanese businesses and their ability to operate despite a major setback, said Ryan D. Pratt, senior manager of assurance services with financial consulting firm Ernst & Young.

Companies in Japan, he said, had exhibited "a very quick reaction time" in their ability to look to Thailand or to other countries to secure suppliers to replace the domestic ones knocked out by the damage.

"It was very impressive the way that they've been able to get back to business as usual," he said.

Pratt was in Japan to visit clients. After talking with several of them and visiting their offices, he came away with the impression that the disaster preparedness varied from one company to the next.

Generally speaking, though, among the business community there was "a high level of resourcefulness in terms of recovery, particularly on the supply chain side," Pratt said.

It was Pratt's first trip to Japan. He called the visit an "eye-opening experience," and was struck by the sense of normalcy, at least in Tokyo, home to 13 million people or 10 percent of the Japanese population.

"Everybody is impacted and everybody has heard about it. Everybody has to get back to real life but things have fundamentally changed," he said.

"It's a test case for contingent business interruption and contingent business interruption wording." he said. "Coverage was tested to some extent after Sept. 11, and Hurricane Katrina."

Because contingent business interruption is relatively new and sometimes convoluted, however, many companies are going to their insurance brokers for help, Pratt said.

August 1, 2011

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