April 1 marks 'watershed moment' for Japanese cedants: Gallagher Re

By Rebecca Delaney

April 1 - (The Insurer) - The April 1 renewals were "something of a watershed moment" for Japanese cedants, Gallagher Re said on Tuesday, with improved terms and conditions surpassing those obtained in January 2025.

Gallagher Re's 1st View report said headline rate changes in Japan demonstrated accelerated softening compared with this year's January 1 renewals.

Consistent with earlier commentary, the broker said pricing was down on average by 10% to 15% for Japanese cedants at April 1.

Gallagher Re CEO Tom Wakefield outlined that prior to the recent period of market hardening, Japanese insurers had faced material price increases following typhoon activity in 2018 and 2019.

"We therefore entered the 2024 renewals with catastrophe pricing at close to historical highs and with the impact of previous losses largely addressed," said Wakefield.

The broker added that challenging losses across many other lines of business (including property per risk, casualty and personal accident) had resulted in significant price increases across these lines and restrictive terms and conditions.

"However, the Japanese market has a long and respected code of conduct around the notion of payback," said the report.

"With such significant rate increases on domestic cat programs in recent years, payback has been expedited and therefore the April 2025 renewal represented something of a watershed moment."

Gallagher Re noted that clients sought to unwind post-loss loading and improve terms and conditions, aided by significant improvements in underlying portfolio management and demographic changes that reduced exposures in some sectors.

Clients were also supported by a shift in supply-demand dynamics in cedants' favour, with an increased appetite for growth among reinsurers and a willingness from cedants to retain more risk.

This resulted in improved terms and conditions for Japanese cedants, which Gallagher Re said surpassed those achieved in January 2025.

In property per risk, while reinsurers increasingly recognised underwriting improvements, the amount of new capacity was "moderate" compared to catastrophe business.

"With significant underwriting actions having been taken in recent years (and still ongoing), the property risk and casualty placements proved more attractive compared with recent prior renewals and therefore required less leverage across the large cat programs in order to complete these placements," Wakefield continued.

"Overlay the fact that less cat limit in JPY was being bought year on year and – given the strong desire from reinsurers to grow across many lines of business – it was no surprise that Japan experienced favourable movement for buyers."

Gallagher Re added that the California wildfires in January have had very little bearing on the Japanese market, bar "very specific instances" where losses have come through in intra-group acceptances.