Japans three major primary insurance groups all reported their half-year results this morning, with all declaring a significant dip in profitability as natural catastrophe losses from typhoons and severe rainfall events took their toll.
Back in September the three insurance groups, Tokio Marine Holdings, MS&AD (Mitsui) Insurance Group Holdings and Sompo Japan Nipponkoa Holdings, said that they expected to pay around a combined 100 billion yen ($822 million). That total has risen considerably, raising the possibility of some reinsurance support being called on.
However the half-year results show that the impact was possibly even higher, as Tokio Marine disclosed 70 billion yen of natural catastrophe losses and loss development for Tokio Marine & Nichido Fire Insurance Co., Ltd. and 5 billion yen for Nisshin Fire & Marine Insurance Co., Ltd.
So that’s over $600 million of natural catastrophe loss and development for the one group, contributing to a decline in profitability of over 93 billion yen compared to the first six months of 2014.
Meanwhile Mitsui reported a decline in profitability of almost 23%, driven by its non-life businesses. Mitsui reported 63.3 billion yen of non-life catastrophe incurred losses, around $514 million.
Sompo Japan Nipponkoa estimates 68.5 billion yen ($556 million) of natural disaster claims from the first-half of 2015, with an estimated 40 billion yen from a single typhoon event.
So the total across these Japanese primary insurers has clearly gone up quite significantly, although not enough to concern any of the Japanese typhoon exposed catastrophe bonds we believe (such as Mitsui Sumitomo’s 2012 issuance the $130m Akibare II Ltd. and Sompo Japan and Nipponkoa Insurance Company’s 2014 transaction, the $100m Aozora Re Ltd.)
However there is a good chance of some level of recovery from reinsurance programs for at least a portion of the natural catastrophe losses suffered by these insurers, which could bring into question whether any collateralised reinsurance or private ILS have been exposed.