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Japan: Non-life insurers to see underwriting gains on premium hikes

Source: Asia Insurance Review | Feb 2016

Japanese non-life insurers are likely to maintain satisfactory underwriting gains this year, as they are raising premiums based on underwriting risks, while exposures to catastrophe risks and domestic equities remain challenging, Fitch Ratings said.
   Fitch has revised the rating outlook for Japanese non-life insurers to “Stable” from “Negative”, to be consistent with the outlook for the Japan sovereign. This reflects the insurers’ high concentration of Japanese government bonds in their investment portfolios. The sector outlook remains stable supported by recovery in operating performance and sufficient capitalisation at group levels.
   Non-life insurers expect their combined ratio, excluding the impact of catastrophe losses in the financial year ending March 2016, to improve to 92% on average from 94.4% at 31 March 2015, largely due to strong demand in fire business lines ahead of the premium adjustment in October 2015.
   Fitch expects the rise in premium growth in the financial year ending March 2017 to be moderate, reflecting the completion of the pricing adjustments in the mainstay automobile business lines. 
   However, domestic and overseas catastrophe exposure remains one of the main causes of volatility in operating performance. The insurers’ capitalisation is also vulnerable to movements in the equity markets because of their significant stock holdings.
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