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Dec 2018

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Japan: Non-life insurers to enjoy stable pricing conditions

Source: Asia Insurance Review | Dec 2018

Private companies operating in Japan’s non-life insurance market hold solid risk-adjusted capital positions and profitable underwriting results despite economic- and weather-related pressures, noted A.M. Best which has a stable outlook on the sector, despite the elevated risks of catastrophe losses and modest economic expansion.
 
In a report on the non-life market, the agency notes that in addition, the market has demonstrated stable pricing conditions. 
 
However, the industry has been facing medium- to long-term challenges to grow its premium base, due to modest economic growth, falling accident rates resulting from advanced driver-assistance systems and the gradual shift in population demographics. Despite these ongoing and escalating challenges, most private non-life insurers in Japan have continued to grow premium revenue, generate underwriting profits and maintain solid risk-adjusted capital positions that are supportive of their risk profiles.
 
Japan’s overall market performance has remained quite profitable. Based on the results disclosed by the three largest groups, which collectively account for more than 85% of net premiums within the domestic insurance market, the weighted average combined ratios for the private insurance segment generally remained under 95% over the most-recent five-year period.
 
A.M. Best believes two main factors will continue to foster stable pricing conditions among the non-life insurers in Japan: The presence of an effective reference-rate system and an oligopolistic industry structure. Additionally, in spite of the performance pressures arising from recent weather-related events, the agency expects the industry to maintain very strong risk-adjusted capital positions. A 
 
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