The premium growth of Japanese non-life insurers will shrink in the financial year ending March 2021 (FYE21) due to the slowdown in economic activity – revealed a recent report from Fitch Ratings titled ‘Japanese Non-Life Insurance Dashboard: FYE20 Results’.
At the same time, reinsurance costs are rising after two years of substantial catastrophe losses and higher reinsurance coverage.

However, the agency anticipates pricing improvements in commercial business lines in addition to retail fire insurance business lines – to support bottom-line profitability if the catastrophe losses remain at the historical average.

The underwriting performance of non-life insurers was dragged down by the typhoons Faxai and Hagibis in FYE20. These losses were lower than those incurred in FYE19, yet this pushed up the average combined ratio by 6 percentage points.

Now, Fitch Ratings expects that potential market volatility due to heavy exposure to stocks and uncertainty on the ultimate claims of the non-life insurers’ US and Lloyd’s business due to the outbreak of coronavirus will affect their earnings in FYE21.

Concurrently, investment risk remains the largest risk for each non-life group as a result of the high strategic share held at their domestic non-life business despite the ongoing reduction.

Fitch also sees the exposures to business interruption of these non-life insurance groups as small. Their policies generally contain an exclusion clause for new pandemics such as COVID-19 while the ultimate insured losses from event-cancellation insurance, business interruptions, credit and surety insurance business lines of group’s overseas business remains uncertain at the moment.

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