Japan’s commercial insurance sector is experiencing a significant tightening, with major insurers moving away from growth-driven sales to more profit-focused underwriting strategies. This shift, highlighted in Aon’s Q4 2024 Global Insurance Market Insights Report, has led to stricter terms across the market.
Four of Japan’s leading insurers, who together dominate 90% of the commercial lines market, have implemented more stringent underwriting practices. These changes include reduced coverage capacity, higher premiums, and the removal of some favorable policy terms.
Shinichi Kandatsu, Head of Commercial Risk Solutions in Japan, noted that this marks the first time since the country’s insurance market deregulation in 1996 that large corporations with substantial insurable assets are facing such challenging conditions.
The market is expected to remain restrictive into the first half of 2025, with most insurance lines seeing price hikes. Property insurance premiums, in particular, have risen sharply by double digits, while automobile and casualty insurance have seen more moderate increases in the single to low double digits.
Despite these price hikes, the cyber and directors & officers (D&O) insurance sectors have seen stable rates, thanks to sufficient available capacity. However, capacity for property and casualty insurance remains constrained, prompting some insured parties to reduce coverage limits or opt for coinsurance to maintain adequate protection.
Reinsurance is likely to play a larger role in supplementing capacity moving forward, though deductibles have largely remained unchanged. Some insureds, however, are opting for higher deductibles as a strategy to manage rising costs.
Insurers are maintaining strict risk selection and underwriting discipline, with most coverage terms remaining stable. However, some insurers have started to introduce additional restrictions, particularly related to liabilities concerning per- and polyfluoroalkyl substances (PFAS) and breaches of US privacy regulations.
In the automobile sector, conditions remain moderate, with single-digit price increases reflecting higher repair costs. The casualty market, however, is becoming more restrictive, with insurers tightening capacity, imposing exclusions, and applying claims-made loss triggers.
While cyber insurance premiums remain high, they have stabilized, and D&O insurance coverage is generally renewed at the same terms, although some international insurers have increased their capacity. Property insurance, however, remains the most challenging area, with insurers continuing to limit per-risk capacity and raising prices, particularly for larger risks.
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