George Sherriff, CEO of Gallagher Re Japan, said Japan remains an attractive diversified market from a reinsurance perspective. He pointed out that reinsurance companies are well-capitalized and are still seeking opportunities for renewal after April 1, 2026.
In an interview with Reinsurance News on April renewals, mainly for Japan, Sharif said trends were broadly consistent with 1.1, with the market still characterized by well-capitalized reinsurers seeking growth amid weak overall interest rates.
From a Japan-specific perspective, he said, “Reinsurers are still looking for opportunities at renewal time. But in this market, new demand at this renewal time is very limited. So with limited demand and a well-capitalized reinsurer base, demand dynamics will tilt in favor of customers. That’s the first point.”
“The second point is that in 2018 and 2019, a series of very severe typhoons hit the market, which resulted in a significant recovery for Cat XL. But after that, rates went up, and then we went into the global hard market in ’22 and ’23, where rates went up again. Generally speaking, what we’re finding is that these plans are now recouping their costs, that is, those losses are now fully repaid, so customers will be looking for post-loss compensation. So that’s the second important dynamic that’s unique to Cat plans.”
Sharif noted that this year marks the second consecutive year of meaningful double-digit risk-adjusted reductions in Japan’s disaster space.
“If we look at the Cat Plan, generally speaking, the Gallagher Re range is -15% to -17.5%, not too different from what we observed last year. Japan is already ahead of the curve in that sense because from a calendar year perspective it should have followed 1.1. But last year, 1.4 has delivered a more significant rate reduction than 1.1 and we are seeing that again this year,” he explained.
He continued, “At -5% to -15% per risk, you’ll notice those risk-adjusted movements are lower than the catastrophe plans. That’s just because the exposure has gone down, so they’re seeing a significant decrease in premiums.
“The number of casualties may have increased slightly on a risk-adjusted basis, but again, this is due to a significant reduction in risk exposure and therefore a significant reduction in premiums. From our perspective, this is justified by the significant effort put into underwriting remediation.”
Sharif stressed that a major theme in Japan is for large companies to repair their original portfolios, meaning they are addressing inherent issues that have posed earnings challenges in recent years, such as those resulting from commercial fires and challenges from U.S. debt portfolios.
“What they’ve been doing in recent years is significantly lowering limits, raising rates, increasing deductibles, reducing stock or discontinuing operations that no longer meet their guidelines,” he said. “So really bringing a very strict underwriting culture into the market.
“That brings two things to light in this update. One, the results for these thematic reinsurance programs have been very positive. Covering commercial fire, you have per-risk property programs, including surplus treaties, and for casualty, you have stand-alone liability XL or joint casualty programs. Their performance has improved, but the risk going into those programs has also been significantly reduced. So in that regard, the risk adjustment change per risk and casualty appears to be lower than the cat, but the real story is in the risk change and therefore the associated premium change for those plans.”
Sharif added that improved portfolio performance, coupled with strong interest from reinsurers, has enabled clients to negotiate for higher commissions.
“In property surplus treaties, commissions have increased as the underlying portfolio has improved, and in seismic quota share treaties, commissions have also increased. Seismic quota shares continue to be one of the more attractive businesses in Japan. The original rating environment remains very good. The loss history after Tohoku has been very good. So commissions are another area where clients have improved the terms and conditions of their reinsurance programs this year,” he explained.
He also noted that personal accident insurance schemes have been severely impacted by COVID-19 losses, but this year Gallagher Re is seeing significant and strong demand for these placements from the reinsurance industry.
“They’re diversifying and they’re relatively far attached compared to the potential exposure, so customers are also taking the opportunity to bring back some of the coverage that was restricted post-COVID. The COVID-19 exclusions are still in place, but other communicable disease restrictions have been lifted, so that’s an additional improvement that we’re seeing.
“But when we step back and look at the broader market, this is not really an update focused on coverage and structure. This is an update on clients looking for rate cuts and reflects a significant effort on the underlying portfolio,” Sharif said.
He added that cyber remains an attractive business area in Japan, consisting mainly of smaller businesses focused on small and medium-sized enterprises. Clients have already seen commission growth, which he said reflects strong demand for the product line and very good performance.
Sherriff returns 1.4 Giving an overview of the wider Asian market, he said: “I wouldn’t say it’s too different from what I’ve explained, except of course the nuances of underwriting, return on investment, etc., which are very much focused on Japan. But if you look at other parts of Asia, you’ll generally find that the projects are smaller, so sometimes, that’s Overcapacity is going to feel more pronounced in some markets. But again, I think the softening trends we’re seeing in Japan, of course, are as relevant as the rest of Asia, outside of any projects with losses, so I think you’ll see the risk-adjusted movement for the first few projects be roughly in the same range.”
