Japanese non-life insurers navigate uncertainty despite stable outlook: AM Best

AM Best emphasises the need for a strategic approach to risk management.

The outlook of Japanese non-life insurance segment will remain stable, supported by profitable underwriting performance, efforts to enhance fire insurance line profitability, and a solid capital base, an AM Best report said.

Challenges include heightened macroeconomic uncertainty, potential higher insurance claims due to inflation, and market volatility. 

The report notes a year of substantial catastrophe losses in fiscal year 2022 but expects the earnings base to be sustainable, driven by consistently profitable underwriting and potential rate increases in the fire insurance line. 

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Despite losses, most non-life insurers reported improved premium income, supporting an overall underwriting profit. 

Measures to enhance fire insurance profitability include premium rate increases and shorter policy terms. AM Best emphasises the need for a strategic approach to risk management amid uncertainties in Japan's macroeconomic environment and monetary policy. 

Whilst the non-life segment's solvency capital declined slightly, it remains significantly higher than regulatory requirements, providing a cushion against financial market volatility.