Profitability of Japanese non-life insurance to recover in 2024

It is anticipated that Japanese non-life insurance groups will uphold robust capital adequacy. 

Domestic underwriting profitability of Japanese non-life insurers is seen to return to pre-pandemic levels from the fiscal year ending 2024, said Fitch Ratings in a commentary.

This is attributed to the Japanese regulator's revision of the "deemed hospitalisations" rule in September 2022 and the gradual relaxation of pandemic-related restrictions by the government since May 2023. 

It is assumed that natural catastrophe losses will stay within the historical average for 2024.

In 2024, it is also anticipated that Japanese non-life insurance groups will uphold robust capital adequacy. 

Their economic solvency ratio has consistently met the requirements for their ratings, bolstered by substantial core capital comprised of retained earnings and capital reserves. 

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Nevertheless, the non-life groups in Japan continue to face notable credit challenges stemming from equity risk linked to significant strategic shareholdings and interest rate risk associated with their life business.

In 2023, the average combined ratio of major Japanese non-life insurers – MS&AD Insurance Group Holdings, Inc., Tokio Marine Holdings, Inc. and Sompo Holdings, Inc. – rose by 6 percentage points year-on-year, reaching 100%. 

To cope with higher reinsurance costs and the impact of tighter global financial markets and more frequent natural catastrophes, Japanese non-life insurers opted to increase their retention of domestic catastrophe risk starting from April 2023.