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Editorial Advisory Board

  • Professor Andrea M. Armani, University of Southern California
  • Ruti Ben-Shlomi, Ph.D., LightSolver
  • James Butler, Ph.D., Hamamatsu
  • Natalie Fardian-Melamed, Ph.D., Columbia University
  • Justin Sigley, Ph.D., AmeriCOM
  • Professor Birgit Stiller, Max Planck Institute for the Science of Light, and Leibniz University of Hannover
  • Professor Stephen Sweeney, University of Glasgow
  • Mohan Wang, Ph.D., University of Oxford
  • Professor Xuchen Wang, Harbin Engineering University
  • Professor Stefan Witte, Delft University of Technology

Best’s Market Segment Report: AM Best Maintains Stable Outlook on Japan Non-Life Insurance Segment

AM Best is maintaining a stable outlook on Japan’s non-life insurance industry, citing improved profitability in the fire insurance line and heightened regulatory oversight, which is driving industry reforms.

The Best’s Market Segment Report, “Market Segment Outlook: Japan Non-Life Insurance”, notes that Japan’s Financial Services Agency has increased scrutiny of non-life insurers in the past 18 months, outlining stricter governance requirements for insurers, including stronger oversight of agency networks and eliminating improper incentives provided by insurers to distributors. While the new regulatory measures may lead to higher compliance costs for insurers in the short term, these shifts should increase transparency and foster fair market competition, as well as help insurers improve acquisition cost efficiency over the long term.

The non-life industry also will see the implementation of the Insurance Capital Standard in fiscal-year 2025, whereby assets and liabilities will be measured at market value. While the new solvency regime should have a greater impact on life insurers, most Japanese non-life insurers have been preparing for this transition by augmenting their risk management frameworks over the past few years.

“AM Best expects that the regulatory shift will lead to increased transparency and comparability for Japanese non-life insurers with global counterparts under similarly advanced regulatory frameworks, equipping them to navigate economic uncertainties more effectively and enrich global competitiveness over the long term,” said Chanyoung Lee, director, analytics, AM Best.

According to the report, Japan’s non-life insurers have implemented various measures to combat significant underwriting volatility in their homeowners-related fire insurance products, given the increase in the occurrence and severity of natural catastrophes. The measures are aimed at ensuring that policies are more accurately priced according to actual risk exposure and reduce the likelihood of underwriting losses over time.

Japan’s interest rate environment also has become more favourable for insurers, and the paradigm shift, transitioning from a focus on deflation avoidance to inflation control, has benefited non-life insurers with substantial bond portfolios. This trend is expected to persist over the next 12 months and contribute positively to non-life insurers’ investment income.

Conversely, the report notes that Japan’s automobile insurance segment continues to face profitability challenges. “A key issue is the persistent increase in repair costs, driven by higher prices for spare parts and rising labour costs,” said Charles Chiang, senior financial analyst, AM Best. “Our analysis shows that the loss ratios of major non-life insurers have been trending upward in recent quarters.”

To access the full copy of this report, please visit http://www3.ambest.com/bestweek/purchase.asp?record_code=353781.

AM Best is a global credit rating agency, news publisher and data analytics provider specializing in the insurance industry. Headquartered in the United States, the company does business in over 100 countries with regional offices in New York, London, Amsterdam, Dubai, Hong Kong, Singapore and Mexico City. For more information, visit www.ambest.com.

Copyright © 2025 by A.M. Best Company, Inc. and/or its affiliates. ALL RIGHTS RESERVED.

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