Japanese insurers tighten underwriting amidst Q2 market challenges

This called for a careful evaluation of risk retention and risk transfer strategies, Aon said.

Whilst the Japanese insurance market experienced moderate conditions during the second quarter (Q2 2024), prolonged poor underwriting results have continued to impact its property segment and challenges continued in liability as well, especially for risks with US exposures.

These challenging market conditions called for a careful evaluation of risk retention and risk transfer strategies as insureds sought to control the impacts of rising insurance costs, according to Aon’s Insurance Market Insights report.

Most risks renewed with flat pricing, with the key exceptions of property and casualty (P&C) or liability placements, especially those with US exposures, which experienced upward pricing pressure.

Capacity overall was constrained, especially for P&C placements.

Meanwhile, local Japanese insurers shifted their focus toward profit-driven underwriting which led to a strengthened underwriting rigour, making support from foreign insurers and reinsurers ever-more important.

Limits saw decreases, especially for property placements, where hardening market conditions continued. Expiring limits could often be achieved by utilising coinsurance to fill gaps.

Expiring deductibles were available for most placements and some insureds seeking to minimise the impact of rising premiums sought deductible increases.

Most placements achieved expiring coverage terms and conditions, with per- and poly-fluoroalkyl substances (PFAS) exclusions mostly mandated on liability risks regardless of confirmed PFAS exposure.

Japan product trends

Domestic insurers in the P&C market were cautious in their underwriting and capacity deployment. Risks that included significant US exposures or had high limits experienced moderate rate increases, with exclusions related to PFAS and punitive damages mostly mandated.

The cyber insurance market’s conditions remained somewhat challenging overall, with underwriting caution staying strong across the international and domestic markets alike. International insurer pricing remained elevated but plateaued, whilst price decreases were available in the domestic market.

Directors and officers insurance’s capacity was sufficient as several international insurers increased, and expiring pricing and coverages were available for most placements.

The prince increases in property insurance in Q2 2019 continued into this Q2 2024, with domestic insurers continuing to limit their capacity for fire and flood risks regardless of industry. Additionally, underwriting rigour was strong.