Overview of Japan’s Reinsurance Market Trends
At the April 1st, 2025 reinsurance renewals, Japan’s risk-adjusted catastrophe excess-of-loss (XoL) rates experienced reductions between 10-15%. This decline in pricing, described as an ‘easing from a high base’, was observed as sellers aimed to protect or expand their market positions while buyers capitalized on support for programs that were harder to place. This is according to insights from reinsurance broker Howden Re.
Market Dynamics and Regional Analysis
Howden Re’s analysis highlighted that across the Asia Pacific (APAC) region, the risk-adjusted rate reductions signaled a ‘hard market softening’, particularly evident in the Japan-focused 1.4 renewals. After initial signs of softening during the 1.1 2025 renewals, the relatively mild natural catastrophe year in Japan and APAC during 2024, in comparison to previous years, set the stage for property catastrophe rates to decrease year-on-year.
Specifically, there were notable 10-15% risk-adjusted reductions on catastrophe XoL programs, while global specialty and direct and facultative reinsurance placements showed variable outcomes depending on class, as explained by Howden Re.
Historical Context and Recent Losses
The broker noted that both Japanese wind and earthquake XoL pricing had adjusted from a high base at 1.4 2024 following consecutive years of hardening driven by market forces and post-loss adjustments, beginning in 2018 and 2019 due to significant typhoons such as Jebi, Hagibis, Trami, and Faxai. Notable events over the past 18 months included the January 2024 Noto earthquake, the Taiwan Hualien earthquake in April, and Typhoon Yagi in September.
There was some debate about the potential impact of the January 2025 California wildfires on the Japanese April 1 renewals. However, Howden Re notes that while this event affected reinsurer performance, it did not ‘meaningfully constrain supply at 1 April’.
Buyer Strategies and Market Attractiveness
In general, for Japanese catastrophe XoL programs, less limit was acquired at the lower end, with buyers seeking additional top-layer reinsurance to address specific risk concerns. On average, ceding commissions for proportional quake cover rose by about two percentage points, indicating improved terms for cedants, with per-risk commissions varying based on program performance.
Despite rate reductions reaching up to 15%, Japan continues to be an attractive market for reinsurance companies due to its high volume, relatively uncorrelated risk, and the strong level of underwriting expertise supported by experience and exposure data.
Specialty Sectors and Global Implications
Andy Souter, Head of Asia Pacific at Howden Re International, remarked, ‘This renewal offers a welcome reprieve for buyers in Japan and throughout Asia-Pacific following an extended period of significant rate increases. With recent pricing easing and stable renewals, it’s an opportune time for cedents to secure more favorable terms and address specific risk concerns.’
Outside the property and property cat space, Howden Re’s 1.4 renewal report reveals varied outcomes for the global specialty reinsurance sector, influenced by ongoing uncertainty regarding war-related losses and macroeconomic volatility.
Aviation reinsurance risk-adjusted pricing remained mostly flat at April 1, with a slight hardening compared to a 3.5% year-on-year decline observed at 1.1 2025. Both buyers and sellers engaged ‘unusually early’, with Russian leasing losses adding complexity to treaty renewals. A clear trend identified by Howden Re was the growing imbalance between the direct market, characterized by significant overcapacity, and the reinsurance market, which is bracing for future losses and potential hardening.
In the marine and energy sector, downstream losses in 2024 had little effect on programs at 1.4, although the Baltimore bridge collapse remained a focal point. Despite discussions on wildfire exposures, specie was a key focus within the marine and energy space.
In the terrorism insurance sector, reinsurance rates fell further amid softening on the direct side of the market. Howden Re explains that the market continues to evolve, although consistent event definitions provided some stability, while new capacity seeks entry via MGAs on both the primary and reinsurance sides.
Capacity and Strategic Insights
In terms of the direct and facultative market, Howden Re highlights resilience with strong demand for XoL capacity despite early 2025 loss activity. Reinsurers, according to the broker, demonstrated greater price discipline at 1.4 than at 1.1, notably in response to California wildfire exposures that were largely retained by cedents.
Capacity deployment remained healthy, with reinsurers preferring to write across towers rather than chase minimum attachments. Buyers seeking to reduce retentions too far encountered resistance, with terms and conditions largely maintained at 1.1 2025 levels, as explained by Howden Re.
Chris Medlock, Director of Global Specialty Treaty, commented, ‘The April renewal reflected a diverse range of outcomes across specialty and D&F lines. While pricing softened in some areas, reinsurers remained selective and disciplined. Capacity was available, but placement success depended on structure, exposure, and underlying risk quality.’
The moderation in pricing across most business classes at the 1.4 2025 reinsurance renewals was supported by increased levels of dedicated reinsurance capital and robust insurance-linked securities (ILS) inflows. According to the reinsurance broker, capital levels now exceed their previous peak.
David Flandro, Head of Industry Analysis and Strategic Advisory at Howden Re, stated, ‘At this stage of the pricing cycle, profitable growth increasingly demands a focus on product development, underwriting strategies, and capital management. With comprehensive, integrated capabilities spanning treaty, facultative, MGAs, strategic advisory, and capital markets, Howden Re is uniquely positioned to support cedents and reinsurers as they navigate this next critical phase of the cycle.’
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