Japan non-life insurance market stable outlook maintained - AM Best report

KUALA LUMPUR, July 23 -- Global credit rating agency, AM Best holds its stable market segment outlook on Japan’s non-life insurance industry, predominantly driven by carriers’ profitable underwriting performance amid the COVID-19 pandemic.

According to the new Best’s Market Segment Report, titled, ‘Market Segment Outlook: Japan Non-Life Insurance’, premium rate adjustments, which are likely to improve the profitability of the fire insurance line; and solid risk-adjusted capitalisation to weather potential financial market volatility are also key supporting factors behind the stable outlook.

For fiscal-year 2020, the economic fallout from the pandemic led to a slowdown in economic activity domestically and regionally, with most major domestic non-life insurers seeing negative impact on certain lines of business due to the pandemic, such as the premium revenue of marine and travel insurance.

Nonetheless, the overall underwriting performance of non-life insurers in Japan generally has been positive despite the impact of COVID-19, based on a statement.

According to the report, this is because the increase in claims related to COVID-19 have been relatively low, as domestic non-life insurers typically have limited net retained exposure to event cancellation and business interruption risks in Japan.

Net incurred losses of most major domestic non-life insurers declined in fiscal-year 2020, primarily due to a decrease in large-scale natural catastrophe occurrences, as well as the positive effect of stay-at-home policies on the claim frequencies of voluntary automobile and travel insurances.

Furthermore, with increases in the premium rates for voluntary automobile insurance and fire insurance, most major domestic non-life insurers reported a material improvement in their combined ratios for private insurance. Voluntary automobile insurance accounts for over half of Japan’s non-life insurance net premium written, excluding compulsory automobile liability insurance.

Most domestic non-life companies have very strong capital positions, with excess solvency margin held by most domestic insurance companies also sizable relative to the value of equities and foreign securities, suggesting significant amount of excess capital available to cushion against market volatility.

For more information, visit www.ambest.com.

-- BERNAMA