of course underestimate.

99% VaR can be understood by worst lose result when u simulate 100 times.

Thus, here we can regard the question as 500 times simulating. If the 99% VaR is fair, then we should have 5 days which loses over 1. Actually, here we have 7, which can be interpreted as 98.6% VaR @ 1, or 99% VaR @ over 1.