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Mar 2024

Japan: Non-life insurers' underwriting gains expected to be pulled down by auto business

Source: Asia Insurance Review | Nov 2022

The underwriting results of most major domestic non-life insurers in Japan are expected to retreat moderately for the financial year ending 31 March 2023 (FY2022), said AM Best.
 
In a new Best’s Market Segment Report, ‘Market Segment Outlook: Japan Non-Life Insurance’, the agency said that while it expects premium revenue to increase, mainly driven by fire, personal accident and other specialty insurance, it is probable that underlying underwriting profit will contract from a higher loss ratio for voluntary automobile insurance.
 
Potentially higher loss ratios for business lines, such as personal accident and marine, could also impact insurers’ underwriting profitability, albeit to a lesser extent.
 
Given the increase in catastrophe occurrences in recent years, most major non-life companies in Japan recognise the need to raise the profitability and sustainability of their fire insurance products. Other than transferring some of the reinsurance cost hikes to policyholders, several major insurers have also sought to improve their understanding of the potential impact of climate risk.
 
The agency is maintaining its stable market segment outlook on the Japan non-life insurance segment given recent profitable underwriting performance and the likelihood carriers will maintain positive results in the face of expected economic headwinds.
 
The global credit rating agency noted that Japan’s economic recovery continued in FY2021, although certain business segments still faced pressures. Over the next 12 months, it remains to be seen how the unfolding situation in Ukraine; elevated commodity prices; the possibility of economic slowdown in several of Japan’s trading partners; and the development of the COVID-19 pandemic at home and abroad will impact the country’s economy. A 
 
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