Japanese non-life insurers’ balance sheets strong despite typhoons: S&P

Despite one of the worst typhoon seasons in memory in 2004, Japanese non-life insurers maintain strong balance sheets and hold an overall stable outlook, according to a new report by Standard & Poor’s.
In addition to the spate of typhoons weathered during the past few months, Japanese insurers are also dealing with stagnant premium growth and the resultant pressure on underwriting profitability in the first half of 2004 (ending September 30), S&P notes.
For the first half of the fiscal year, the nine Japanese non-life writers produced an underwriting loss of 119.2 billion Yen (Cdn$1.37 billion), compared to a profit of 149.5 billion Yen (Cdn$1.72 billion) at the same point last year. This is largely attributable to substantial reserves set aside for expected typhoon claims, but also a drop in auto insurance premiums, with auto accounting for about 50% of the total insurance market. In total net premiums declined 0.2% in the first half of fiscal 2004, with a 2% drop in auto premiums.
Investment performance has been stable, mirroring a period of relative stability in domestic Japanese equity markets where insurers are heavily invested. At the same time, many insurers are moving towards more stable investment in corporate and public bonds and other fixed income assets.
S&P says overall the industry will handle the unusually high payouts for natural disasters the General Insurance Association of Japan puts the price tag for natural disasters up to and including Typhoon Tokage on October 19 at more than 500 billion Yen (Cdn$5.8 billion) before reinsurance. The nine companies have built up more than 1.5 trillion Yen (Cdn$17.3 billion)in cat reserves, S&P notes.