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Jul 2020

Japan: April renewals keep reinsurers' hopes up

Source: Asia Insurance Review | Jul 2019

April reinsurance renewals, which were largely Asia Pacific centred with Japan being by far the largest market, were good from the reinsurers’ perspective, even though expectations going in were slightly stronger, says S&P Global Ratings.
In a report titled ‘For Global Reinsurers, 2019 Pricing’s Green Shoots Look Promising’, released in June, S&P says that in the run-up to the renewal season, loss estimates worsened for typhoon Jebi, which occurred last year and was the strongest typhoon to hit mainland Japan in 25 years. 
The initial loss estimates of $6bn more than doubled to about $13bn in 1Q2019, which forced some reinsurers to strengthen their reserves to a level where the losses started affecting retrocession accounts as well. 
This development played into the rate expectations for the Japanese programmes. Retrocession rates remained elevated as well, continuing a trend from the January renewals, though it may have had a lesser role to play. Nevertheless, as a result, the Japanese loss affected programmes took 15%-25% rate increases, although rate changes were somewhat subdued in non-loss affected programmes and regions. 
The Japanese market is relationship driven and the concept of loss payback is broadly accepted, which helps incumbents maintain their market shares. With incumbents keen to maintain their long-term relationships, reinsurers were willing to provide sufficient traditional capacity to meet the demand of the Japanese market. A 
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