Asia’s insurance market is experiencing broad softening across most regions and product lines, according to Aon’s Q4 2024 Global Insurance Market Insights Report. However, Japan remains an outlier, with capacity constraints and firm pricing expected to continue into 2025.
The report highlights a widening pricing gap between international and domestic insurers, and predicts that competition for preferred risks will likely drive further market softening in 2025. Despite the overall trend, energy transition capacity remains a significant issue for insurers, insureds, and regulators.
Market Softening, With Exceptions in Japan
Pricing remains competitive across Asia, with rate reductions achievable for desirable risks. However, Japan stands out with firm pricing, where insurers remain focused on profitability amidst ongoing capacity constraints. The Japanese market is expected to maintain these challenges in the coming year.
Across the region, competition from international insurers and new market entrants has led to ample capacity. However, Japan’s capacity for Property and Casualty lines remains tight, with insurers prioritizing more profitable sectors.
In Thailand, the aftermath of recent flooding has prompted expectations of measures to manage Natural Catastrophe exposures in the local market.
Underwriting Discipline Across Asia
Underwriting practices across Asia are marked by discipline, particularly in Japan. Insurers remain flexible for preferred risks but enforce strict underwriting guidelines elsewhere. While expiring limits are generally available, some insureds are utilizing premium savings to increase their limits.
In Japan, however, some insureds are responding to rising premiums by reducing coverage limits or opting for coinsurance to maintain adequate protection.
Deductibles and Coverage Trends
Deductibles across the region are generally stable. However, in Singapore, deductibles for Automobile insurance are on the rise due to increasing claims costs, while Cyber deductibles are trending downward. In Japan, some insureds are opting for higher deductibles as a strategy to control premiums.
Coverage terms remain stable, but competition outside of Japan is driving more flexibility. Exclusions for PFAS (per- and polyfluoroalkyl substances) are becoming more common in various markets.
Regional Market Conditions
The Automobile market remains stable, with increasing competition in Hong Kong. Insurers in other regions are raising rates to offset higher vehicle repair costs, particularly due to trends involving electric vehicles. China is facing some capacity limitations in this sector.
Casualty and Liability conditions are favorable in most markets, though Japan continues to face challenges. While PFAS exclusions are being applied more broadly, they are negotiable in some cases. Insurers remain cautious about large exposures, particularly from U.S. businesses.
Cyber and D&O Markets
The Cyber insurance market is softening, with price reductions observed in Singapore and Hong Kong. Insurers are continuing to develop localized coverage and incident response services to address emerging risks.
Directors & Officers (D&O) insurance is also seeing a softening trend, with price reductions and broader coverage options in most Asian markets, though Japan’s market remains more moderate.
Insurers are generally cautious regarding non-traditional risks, particularly crypto firms and companies with significant U.S. exposure.
Property Market Trends
The Property market is showing signs of improvement for lower-hazard risks, with more favorable pricing and occasional rate reductions. However, placements with significant Natural Catastrophe exposures, particularly in Thailand, are under pressure, driven by extreme weather events in 2024.
Overall, while competition is driving price reductions and flexible coverage terms in many parts of Asia, Japan’s market is expected to remain firm due to ongoing capacity issues and a focus on profitability.
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