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Fitch : stable outlook for Japanese insurers

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Fitch ratings has said in a new report that the outlook for the Japanese non-life insurance industry is stable. The ratings company outlines the main reason for this as a recovery in the core automobile business line.

Fitch says that, while the core automobile business line has already improved in recent months, further recovery is expected. It also credits its judgment to an adequate capital buffer, diversified earnings from their life subsidiaries and strong over seas business.

The report notes that the new premium scheme announced by the Non-Life Insurance Rating Organization in Japan in October will further improve underwriting profit as insurers will be able to charge higher premiums for drivers with accident history. Automobile lines accounted for about half of domestic non-life insurers’ net premium written for the financial year ended March 2011.

“Japanese non-life insurers are fairly well capitalised and able to maintain their current Insurer Financial Strength ratings, despite recent natural disasters such as the typhoons in September and flooding in Thailand,” says Akane Nishizaki, Associate Director in Fitch’s Insurance team. Estimated net insured loss of the flooding in Thailand was JPY260bn for the three major non-life insurance groups, which is greater than the impact of March earthquake.

Despite this, Fitch outlines investment volatility as the main risk facing the sector today.

They also predict that Japanese non-life insurance companies will continue their strong operations overseas as the market outside of Japan is particularly strong at the moment. Operating overseas will be made easier for Japanese companies, with the Japanese FSA’s proposed deregulation of cross boarder mergers and aquisitions for non-life insurance groups.