The tragic earthquake and tsunami that devastated Japan in March has come up in virtually every conversation I’ve had at RIMS 2011 Vancouver. Whether we’re talking about the timing of the inevitable market turn or the new era of costly catastrophes or the growing concern over supply chain risks in an increasingly globalized world, the focus always drifts to Japan.

The only thing I’ve talked about more this week is how beautiful Vancouver is.

It’s no wonder considering this dual disaster will likely become the costliest in history. And as the globe rethinks nuclear safety, learns the engineering lessons of strict building codes and ponders the value of just-in-time manufacturing, I got the chance to sit down with FM Global CEO Shivan Subramaniam to discuss all the risk management implications.

We started out talking about the magnitude of both this event and the recent tornadoes that devastated the Southeast United States. On top of their grand scale, Subramaniam was somewhat puzzled by how quickly forecasters churned out their damage estimates.

“I don’t understand how people could come out of the box with some of those estimates that they did because you weren’t even allowed within 20 miles of the [Fukushima Daiichi power plant],” said Subramaniam. “And the transportation systems were not allowing you to go to some of the affected places. And thirdly, the defense forces were preventing you from easily driving in and out of those places. So how do you even make some of those estimates?”

More importantly, the talk turned to the radiation crisis emanating from the Fukishima Daiichi — something it was relieving to hear he believes might not turn out as badly as some have been prognosticating.

“It might turn out to be completely overplayed,” said Subramaniam. “What might actually turn out, which is the camp I’m in, is that people are going to start to recognize that the Japanese preparation and the way they’ve come at this is singularly better than virtually any other democratic country would have reacted to a disaster — especially a radiation disaster.”

Some people have said that Japanese officials seemed slow to act. But Subramaniam thinks that the pre-emptive actions made to keep people out of the potentially-radiation-exposed areas will prove wise with hindsight. “It’s very possible that all of this is just good pre-emptive risk management,” said Subramaniam. “I think that’s what might come out more than anything else.”

In addition the radiation threat, the other longer-term issue he sees continuing to affect businesses and insurance in the area is power interruption. Given the complexity and fine-tuned nature of the Japanese economy, every disruption that occurs going forward could have significant business interruption ramifications. “They have just-in-time manufacturing. They have single source suppliers. Everything is tuned to be very, very efficient,” said Subramaniam. “To now encounter rolling power blackouts, that’s going to be the longer-term issue more so than a lot of the reconstruction efforts. From a business interruption standpoint, that’s going to be the wild card. Everything has been made so tight that even the smallest break just throws everything off.”

As is usually the case with matters of risk, however, where there is downside, there is upside.

In this instance, the silver lining will be most apparent for those companies who managed their risks before the disaster hit. “When you have a competitive product and you manage your risks properly,” he said, “these kind of disruptions [can] actually give you a competitive advantage because the others aren’t producing as much and you are. And in some cases you might actually end up with pricing power.”

This is something Sony is currently learning first-hand.

In the digital camera market, it has long looked upward at industry giants Canon and Nikon. But due to supply chain disruptions suffered by the two leading digital camera producers, Sony, which is number three in the market, has the chance to make a splash with sales in the near term.

It’s too early to expect the market to completely change, but Subramaniam said he wouldn’t be surprised to see Sony out-pace pre-quake sales expectations for up to the next 24 months. Ten years ago, I’m not sure anyone thought an earthquake in Japan could affect what cameras people were buying in Nebraska.

Brave new world, and all that, I guess.

FM Global CEO Shivan Subramaniam believes some companies that maintained good risk management before the Japanese quake may gain competitive advantages.

It wasn’t just FM Global’s chief who was talking Japan — it was everybody.

I also sat down with Nancy Sher Cohen, a partner at Proskauer Rose who focuses on insurance recovery for policyholder clients. Cohen was moderating a hot topic panel session on the insurance implications the next day, and she had some unique thoughts to share beforehand that piqued my curiosity. Specifically, she wondered whether or not cultural differences in Japan may play into there being fewer claims filed than we might otherwise expect.

“It’s one thing for Japanese companies to make insurance claims in the United States because, in the United States, people make claims — it’s just part of our culture,” said Cohen. “But in Japan, it’s not so clear to me that Japanese big business is going to want to pursue significant claims against Japanese insurers.”

To me, it certainly seems that when it comes to global big business, in 2011, there is now only one culture: money. Ultimately, I would expect capitalist motivations and bottom line prioritization to trump any other concerns. But Cohen wasn’t as certain that that would be the case. “Maybe that’s the way it will come out, but we’re not getting that sense … We’re being told by some of the brokers that they’re not yet seeing big claims being filed.”

She wasn’t saying that cultural factors were the reason but just that it was one of several factors, which also included policy specifics. “There are lots of exclusions in policies for earthquake or sublimits for earthquakes,” she said. “So, many of our clients are telling us they only have a couple million dollars in coverage for earthquake anyway. Some of them have flood exclusions so the tsunami raises issues about that. The nuclear aspect of it actually is the one where there might be more coverage, believe it or not.”

So perhaps in part because of this, perhaps because people are still recovering rather than doing paper work, perhaps because of the human tragedy element, perhaps in part because business interruption claims can take a long time to figure out, and perhaps in part because of the cultural issues, this is why Cohen and her firm are not seeing quite as many claims in the immediate aftermath of the disaster as they did following 9/11 and Katrina.

And this is why she is asking the cultural question.

“Are there cultural issues there that suggest, maybe, the Japanese are going to be less likely to make these kinds of claims,” said Cohen. “I don’t know the answer myself. But I do know they’re not a naturally litigious society. So those companies may not gravitate towards making those claims.”

Could cultural differences in Japan lead to fewer insurance claims than expected?

At the session Cohen moderated the following day, RIMS President Scott B. Clark led the panel discussion with his story of being in Tokyo when the earthquake struck. Fortunately, he remained unharmed as the ground shook, and the only major fallout for him was the tumultuous decision surrounding when and how to evacuate the affected region. The bullet train to Osaka was temporarily halted, but once service resumed, Clark, along with RIMS Japan Chapter President Yoshi Hamaji, was able to board and get to a safer area. In Osaka, they were even able to carry out their their planned meeting.

From there, he was able to fly out to Honolulu a day earlier than expected, which came as quite a relief to Clark — for obvious reasons but also because he felt as though his presence was a nuisance to Yoshi, who in Clark’s view should have been focusing on his family and personal concerns, not the logistical issues of helping a colleague get out of the country.

After the story the panel got down to the insurance nitty gritty, mostly focusing on the business interruption aspects. One simple question from Cohen helped explain exactly why the resulting BI claims are so difficult to gauge. “We know when [business interruption] begins: when the physical damage starts. But when does the business interruption end?”

Does it end when the company turns the lights back on and restarts production? Or, as panelist Duncan Ellis of Marsh noted, is it truly “covering losses of profits you would have made.” The second view is a more nuanced, long-term outlook that weighs in factors like resulting supply chain limitations and doesn’t end until the company can resume operations in a way that gets it back to prior revenue levels. That can take a long time.

The answer may more often be the former than the latter, but the policy language — as always — will be the determining factor. Cohen said she worked with one company, for example, that had a business interruption policy that, due to odd language, didn’t even trigger when the event happened. This highlights something Ellis said: property damage claims are relatively easy, business interruption can be a pain.

Examining policy language becomes critical, then, for risk managers. Sub-limits remain a concern. If you have low sub-limits and are struck by a major earthquake, is $2 million really going to help?

And what if the trigger is something particularly strange? Remember when the Icelandic volcano Eyjafjallajökull erupted last year? For most, the resulting business interruption was not coverable. As far as the policies were concerned, this was a “non-incident event,” as Ellis termed it. Without a defined incident, it’s like the BI never happened. Except that it did.

But if you purchase a policy that provides coverage for everything but those events specifically excluded, said Cohen, you will have a much easier time getting your claims paid. Cohen called this an “everything but” approach and recommended risk managers negotiate for such language.

Really, these are just a few of the more notable discussions I had or heard about Japan.

There were plenty more that I will try to post when I return to New York.

And honestly, I wouldn’t be surprised to find myself talking about the catastrophe just as much next year. Unfortunately at RIMS 2012, however, I won’t also be able to off-set those depressing conversations about disasters with chats about how beautiful Vancouver is.