INSURED LOSSES FROM JAPAN EARTHQUAKE TO HAVE LIMITED CREDIT RATINGS IMPACT - AM BEST

KUALA LUMPUR, Jan 5 (Bernama) -- Global credit rating agency, AM Best has expected the earnings impact on the major domestic non-life insurers of losses stemming from Jan 1 earthquake in Japan to be manageable relative to the sector’s net profit.

“While the earthquake losses would drag the proportional treaties results, if losses were to hit individual companies’ earthquake reinsurance excess-of-loss layers, it might fuel rate increases in the upcoming April 1 reinsurance renewal,” said AM Best director, analytics, Chanyoung Lee in a statement.

The Best’s Commentary notes that the Japanese government supports residential earthquake risks via a state-backed reinsurance scheme, so most losses to domestic non-life insurers are expected to come from commercial and industrial risks.

Titled “AM Best Expects Insured Losses from Japan’s January 2024 Earthquake to have Limited Credit Ratings Impact”, the commentary adds that Japan’s insurers’ adoption of generally conservative reinsurance strategies and the low earthquake reinsurance attachment point relative to their capital positions have largely transferred earthquake risks to the international reinsurance market.

Following a fiscal year of sizeable catastrophe losses from Typhoons Nanmadol and Talas in 2022, Japan’s non-life insurance segment had experienced a relatively benign natural catastrophe year in 2023.

AM Best expects the negative impact on profitability for the fire segment, in which most losses from the earthquake are expected, to be offset by profits from other lines of business, while most non-life lines of business have reported growth in premium income in the past 12 months, supported by primary rate increases.

-- BERNAMA