Japan faces harsher commercial insurance terms

Four major insurers have adopted stricter underwriting practices.

Japan's commercial insurance market is tightening as major domestic insurers shift from growth-driven sales to profit-focused underwriting, according to Aon’s Q4 2024 Global Insurance Market Insights Report.

Four leading insurers, which control 90% of the commercial lines market, have adopted stricter underwriting practices, reducing capacity, raising prices, and eliminating some favourable coverages.

Shinichi Kandatsu, head of Commercial Risk Solutions in Japan, said this marks the first time since deregulation began in 1996 that large Japanese corporations with significant insurable assets are facing such difficult conditions.

Market tightening is expected to persist through the first half of 2025.

Most insurance lines are seeing price increases, with property premiums rising by double digits. 

Automobile and casualty insurance costs have increased by single to low double digits, whilst cyber and directors & officers (D&O) insurance rates remain stable due to sufficient capacity. 

Capacity for property and casualty insurance remains constrained, with some insureds reducing coverage limits or using coinsurance to maintain protection. 

Reinsurance is expected to play a greater role in supplementing capacity. Deductibles are mostly unchanged, though some insureds are opting for higher deductibles to manage costs.

Underwriting remains strict, with insurers maintaining disciplined risk selection. 

Coverage terms are largely stable, but some insurers are adding restrictions, particularly for liability related to per- and polyfluoroalkyl substances (PFAS) and breaches of US privacy regulations.

Automobile insurance faces moderate conditions, with single-digit price increases reflecting higher repair costs. 

The casualty market is becoming more restrictive, with insurers tightening capacity, introducing exclusions, and applying claims-made loss triggers. 

Cyber insurance premiums remain high but stable, whilst D&O coverage typically renews at expiring terms, with some international insurers increasing capacity. 

Property insurance remains the most challenging sector, with Japanese insurers continuing to limit per-risk capacity and raise prices, particularly for large risks.