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Japanese reinsurance renewals see broader coverage, lower rates

7th April 2017 - Author: Steve Evans

According to reinsurance broker Willis Re, Japanese reinsurance renewals saw an expansion of coverage achieved by many ceding companies, and rates continued to decline in the region.

View of Mt Fuji, JapanThe April 1st reinsurance renewals see a significant proportion of Japanese property insurance and property catastrophe reinsurance renewed and in 2017 market forces continued to push terms wider and pricing lower.

Reinsurance rates have been under significant pressure in Japan, as the country is considered a key diversifying region for the major global players and has also been the target of the capital markets and ILS funds.

At April 1st 2017 Willis Re reported that Japanese property reinsurance structures remained largely unchanged, but that cedents benefited from improved terms and conditions.

“Further broadening of coverage to enhance efficiency and reduce differences in conditions with primary business; this includes coverage to cater for property damage/contingent business interruption accumulation arising from the same event,” the broker explained.

Rate reductions in straight property reinsurance were mixed, with differences dependent on performance of accounts and exposure changes.

In property catastrophe reinsurance, the level of capacity targeting the Japanese renewals remained abundant, with Willis Re explaining that; “Japan remains a core territory for existing reinsurers and a key target for a number of new reinsurers.”

This oversupply of capital led to further rate reductions in Japanese property catastrophe reinsurance renewals, despite margins being a challenge for reinsurers still.

In fact, some Japanese renewals were written at levels approaching expected loss, suggesting there is little to no margin in the business for some larger players and these are purely written for their diversification benefits.

But some reinsurers show discipline, Willis Re explained that it saw; “A modest uptick in the number of reinsurers reducing written lines and declining business was observed.”

On the brighter side, demand continues to rise with some increases in both Japanese earthquake and wind protection buying being seen.

“Non-Life companies typically drove the additional wind/combined purchases and the mutual companies drove the increased purchases of earthquake,” Willis Re said, with the additional cover typically at the upper end of programs, and some increases in aggregate layers.

Price was the focus on property catastrophe renewals in Japan, as terms remained relatively static and buyers focused on cost of coverage.

There was an increase in multi-year reinsurance limit being purchased, according to Willis Re, as well as some general restructuring of programs to reduce layers and simplify placements.

Quota share reinsurance for earthquake risks remains in high demand, Willis Re said, with some re-evaluation of commissions and event limits in the wake of the Kumamoto earthquake.

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