April 1 reinsurance renewals are expected to be orderly for Japanese insurers even as the ongoing war in the Middle East begins to affect negotiations.
While Jan. 1 is the key date for global reinsurance renewals in the US and Europe, the April 1 renewals are important for Japan's property catastrophe programs and insurers such as Tokio Marine Holdings Inc., MS&AD Insurance Group Holdings Inc. and Sompo Holdings Inc. The upcoming renewals appear orderly and competitive, according to Marcos Alvarez, managing director of global financial institution ratings at Morningstar DBRS, who added that standard property and casualty contracts exclude war.
Market capacity remains ample and pricing has continued to soften from the peak levels seen in recent years as reinsurers compete for business, Alvarez said in an email to S&P Global Market Intelligence.
Limited impact
The war has introduced some uncertainty to the renewals, but overall effects appear constrained for now.
"While there is a move towards risk aversion in the relevant region, particularly concerning P&I (protection and indemnity) insurance, concerning the reinsurance treaty renewals on April 1st, the impact on our company at this time is limited," a Sompo spokesperson wrote in an email to Market Intelligence. "Reinsurers are requesting appropriate information disclosure and the application of rates that reflect the crisis."
Tokio Marine and MS&AD did not respond to requests for comment.
Sven Althoff, executive board member in charge of property and casualty at Hannover Re, expects the trend seen Jan. 1 to remain for the rest of the year, with a further softening in property catastrophe reinsurance prices likely. It is far too early to see if there are any impacts from the war, Althoff said in a March 12 press call. With the lack of any noticeable losses reported up to that date, Althoff does not expect significant effects.
The conflict has already become part of renewal discussions, but disruption has been concentrated in specialty lines with direct exposure to war risk, Alvarez said. Reinsurers have largely adopted a measured response rather than withdrawing capacity. In marine and aviation war segments, underwriters are adjusting rates and tightening contract wording, but coverage remains available. The market structure already allows for rapid repricing through restricted-area clauses and voyage-based premiums, which helps absorb geopolitical shocks, Alvarez said.
Upcoming renewals
Insurers providing war cover in Persian Gulf countries face higher risks as the US and Israel continue their air campaign against Iran, which has fired back not only at American military assets, but nonmilitary targets in the Gulf. If the situation becomes prolonged, Sompo anticipates an impact on reinsurance renewals later in the year, the spokesperson said.
Steve Tunstall, general secretary of the Pan-Asia Risk and Insurance Management Association, has not seen a direct impact from the war outside the marine segment, noting that there have already been losses.
"If this continues to develop as an issue, if there's more losses, then those markets are going to be suffering as a consequence," Tunstall said in an interview with Market Intelligence. "They would then reflect the implications of that in the pricing. If this continues for any length of time, then I think we're definitely going to see an impact across the market."
