Japan’s commercial insurance sector is experiencing a continued trend towards stricter underwriting, as major domestic property and casualty insurers adopt more cautious approaches to risk. According to Shinichi Kandatsu, Head of Commercial Risk Solutions at Aon Japan, underwriters are increasingly requesting detailed information at policy renewals to ensure profitability and strengthen risk assessment processes.
Since 2024, it has become increasingly common for insurers to reduce coverage limits on large property and liability placements. At the same time, deductibles for property insurance are rising, reflecting a cautious stance by carriers, while other insurance lines have remained relatively stable.
Domestic insurers are also implementing a series of new exclusions. Policies now commonly exclude coverage for punitive damages, terrorism-related incidents, and earthquake risks. These changes have led a number of corporate clients to explore alternative coverage options through foreign insurers, particularly for complex or high-value exposures.
In terms of pricing trends, directors and officers (D&O) liability insurance has seen a modest decline, whereas cyber insurance rates have largely remained flat. Capacity remains limited for property and liability lines, prompting insurers to reassess their risk appetite carefully. Conversely, capacity for other classes of insurance is generally sufficient, allowing for more flexibility in coverage.
The sector’s tightening measures are part of a broader effort to maintain financial discipline and long-term profitability in the face of evolving risk landscapes and potential catastrophe exposures. Analysts suggest that clients should anticipate more detailed underwriting processes and consider diversifying their insurance sources to include foreign carriers if domestic coverage proves restrictive.
Key Details of Japan’s Commercial Insurance Market
| Topic | Details |
|---|---|
| Market Status | Strong and hardening |
| Pricing | Generally increasing; property rises slower |
| Exceptions | Directors & officers slightly declined; cyber stable |
| Limit Reductions | Common for large property & liability placements |
| Deductibles | Property rising; others stable |
| New Exclusions | Punitive damages, terrorism, earthquake risk |
| Capacity | Limited for property & liability; sufficient for others |
| Client Trends | Seeking foreign alternative coverage |
Industry observers note that this trend of disciplined underwriting is likely to continue throughout 2026, as insurers balance market competitiveness with the need to manage emerging risks and maintain financial stability.