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Japanese wind & aggregates see biggest April renewal rate rises


The April reinsurance renewals in Japan look set to deliver their largest rate increases to wind and aggregate layers of reinsurance towers, with severely loss impacted lower layers of programs seeing rises of 20% to 30%, we’re told.

Japan imageUnderwriting market sources said that negotiations are completed for many Japanese reinsurance renewals already and that the insurers who suffered the heaviest impacts from catastrophe loss events such as typhoons Jebi and Trami, as well as the extreme rainfall and floods that struck the country, are those paying the highest rate increases.

Conversely, despite the earthquakes in Osaka and Hokkaido, catastrophe excess of loss layers for quake risk in Japan appear set to price at relatively flat levels, with some increases for insurers particularly exposed in Osaka, the larger of the two events.

The Japanese reinsurance renewals were always going to see rate increases, after the numerous billion dollar plus catastrophe losses.

But the loss creep that emerged, especially with typhoons Jebi and Trami, is what has driven most of the increase, we understand.

Jebi in particular has seen its industry loss estimate more than double, to around $10 billion or just over at this time.

As a result, analysts had been expecting some significant rate increases across Japanese reinsurance layers and this appears to have been realised, at least in the most loss affected areas of the renewal.

Wind exposed catastrophe reinsurance renewals have risen by 20% and even higher in isolated cases on lower layers, we’re told.

But the highest increases have been seen on riskier aggregates, where we’ve heard of rates quoted as much as 30% up on the prior year.

At higher layers, rate increases have been more subdued and reserved for loss affected accounts it seems.

It’s important to note that we’ve also been told that some terms have been adjusted for aggregate layers and that this means risk-adjusted pricing is harder to understand and not always a clear-cut case of rate alone.

In fact, relying on percentage rate increase figures alone rarely tells a true picture of a reinsurance renewal anyway. But as indicators go, the figures being cited in underwriting circles are healthy and show that the market remained disciplined around its need to achieve some increase in Japan after the heavy losses of 2018.

It’s not clear how much participation from ILS markets there has been, but some sources suggest a little market share may have been gained in Japan at this renewal, especially in areas where demand rose and ceding companies did not want to increase their commitment too much to traditional reinsurance markets.

We also understand that there is a chance of some Japanese catastrophe bond activity in the coming months, as some layers remain unfilled as ceding companies look to the best and most efficient sources of capital to satisfy their needs.

The coming weeks will likely reveal whether any risk will flow into cat bond form from Japanese typhoon risk in 2019.


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