Japan P&I shows stable investment income: AM Best

Despite potential for volatility from large claims, the insurer maintains flexibility.

Japan Ship Owners’ Mutual Protection & Indemnity Association’s (Japan P&I) balance sheet strength remains very strong, supported by its risk-adjusted capitalisation at the strongest level, as measured by AM Best’s Capital Adequacy Ratio (BCAR). 

Despite the potential for volatility from large claims due to its relatively small capital base, the Club maintains financial flexibility through its ability to levy additional calls on members, demonstrated by an unbudgeted supplementary call during the fiscal year ending March 2023.  

The Club’s investment portfolio is conservative, primarily allocated to cash and high-quality fixed-income securities, ensuring liquidity and stability. 

Whilst the Club relies heavily on reinsurance to cover large risks, this dependence is mitigated by the International Group of P&I

Clubs’ pooling agreement and joint reinsurance arrangements with highly rated reinsurers.  

Operationally, Japan P&I's performance aligns with the global protection and indemnity sector. 

Over the past five years, the Club reported an average return-on-equity of 6.5% and a combined ratio of 106.5%. 

Despite underwriting challenges, including significant losses in FY2021 caused by large claims and COVID-19-related impacts, the Club has shown recent improvement through general rate increases and supplementary calls. 

Stable investment income has partially offset underwriting volatility, though foreign exchange movements present a moderate risk.  

With a stable outlook, AM Best expects Japan P&I to maintain its strong financial foundation, supported by prudent risk management and consistent performance within the competitive global P&I insurance sector.