Japan market shows signs of softening

Reinsurance rates in Japan have moderated significantly, with risk-adjusted catastrophe excess-of-loss rates decreasing by 10% to 15%, according to the latest report from Howden Re, the reinsurance arm of global insurance intermediary Howden.

The April 1 renewal period has delivered welcome relief for Japanese insurers following years of hardening that began in 2018 after a series of devastating typhoons including Jebi, Hagibis, Trami, and Faxai. According to the report, this moderation comes amid increased competition among reinsurers and a relatively quiet catastrophe season in the Asia-Pacific region during 2024.

“This renewal is, on balance, a welcome reprieve for buyers in Japan and throughout Asia Pacific on the back of an extended period of significant rate increases,” said Andy Souter, head of Asia Pacific at Howden Re International.

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The report highlighted that while recent natural disasters like the Noto earthquake (January 2024), Taiwan’s Hualien earthquake (April), and Typhoon Yagi (September) have occurred, their impact on the market has been limited. Even California’s wildfires earlier this quarter didn’t significantly constrain capacity availability.

In the specialty reinsurance market, outcomes were more varied:

• Aviation reinsurance rates remained flat, showing stability compared to the 3.5% year-on-year reduction seen in January
• Marine and energy losses in 2024 were well distributed with minimal impact on programs
• Terrorism reinsurance rates saw modest reductions as direct market conditions softened

The direct and facultative (D&F) market demonstrated resilience despite early 2025 loss activity. While the market continues to soften overall, reinsurers displayed greater pricing discipline at the April renewal compared to January, particularly regarding California wildfire exposures.

^{Source: Howden Re}

“Whilst pricing softened in some areas, reinsurers remained selective and disciplined. Capacity was available but placement success depended on structure, exposure and underlying risk quality,” said Chris Medlock, director of global specialty treaty at Howden Re.

The report attributes this moderation largely to rising levels of dedicated reinsurance capital and robust insurance-linked securities (ILS) market inflows. Capital levels have now surpassed their previous peak following the significant impairment experienced in 2022.

Japan remains an attractive market for reinsurers due to its high volume, relatively uncorrelated risk profile, and deep pool of underwriting expertise backed by extensive experience and data.

As the market enters a new phase, Howden Re suggests that reinsurers will need to focus more on product development, underwriting strategies, and capital management rather than pricing momentum alone to achieve profitable growth.

How do you see the reinsurance market evolving in the Asia Pacific region? Share your thoughts below.

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