A new AM Best report has revealed that Japan’s life insurers have increasingly relied on reinsurance in recent years, driven largely by the segment preparing for the new J-ICS solvency regime, which took effect at the end of March 2026.
According to the rating agency, the overall cession rate, as a percentage of total gross premium written for the segment, climbed to more than 24% in 2023 and 2024, up from just under 10% in 2020.
Cynthia Ang, senior industry research analyst, AM Best, added, “Japanese life insurers have been increasingly using asset-intensive reinsurance to transfer investment, longevity and insurance risks from capital-intensive annuity and long-term life insurance blocks to third-party reinsurers ahead of the implementation of J-ICS.
“The maturity and size of Japan’s life/annuity insurance market make it an attractive opportunity for reinsurers providing asset-intensive reinsurance solutions.”
Under the J-ICS, the new economic value-based solvency ratio will reportedly be more sensitive to fluctuations in interest rates, lapses, asset-liability management mismatches and longevity/mortality risks.
AM Best’s report suggested that the heightened volume has led to reinsurance leverage (reinsurance ceded as a percentage of capital and surplus) rising sharply for some life companies, with the industry aggregate tripling to 14.8% at the end of 2024 from 4.8% in 2020.
“This trend reflects an increasing reliance on reinsurance to manage risks relative to the company’s own capital base,” the rating agency explained.
Per market estimates, AM Best stated that just 1-2% of total in-force individual life insurance and annuity business in fiscal years 2023-2024 was ceded to reinsurers, but cessions are expected to increase as asset-intensive and offshore reinsurance becomes an increasingly important tool for Japanese life insurers.
“As usage widens, Japan’s Financial Services Agency is tightening oversight of these transactions due to risks associated with private equity involvement, asset liquidity and complex cross-border collateral,” the firm’s report added.
