Howden Re has reported that risk-adjusted catastrophe excess-of-loss (XoL) reinsurance rates-on-line for Japan saw reductions of 10-15% at the April 1st 2025 reinsurance renewals, as pricing “eased from a high base” and sellers sought to protect or grow positions at the renewal amidst higher competition and greater supply.
Risk-adjusted rate reductions in Asia-Pacific (APAC), combined with varied specialty renewal outcomes, reflects “hard market softening” at the Japan-focused April renewals, according to the reinsurance broker’s latest analysis.With many property catastrophe reinsurance treaties having experienced relatively loss free outcomes for the last contract year, a continuation of January’s softening trend had been largely anticipated for the April renewals, as we reported.
“There were 10-15% risk-adjusted reductions on catastrophe excess-of-loss programmes, whilst global specialty and direct and facultative reinsurance placements varied by class,” the broker added.
The broker also revealed that both Japanese wind and earthquake XoL pricing adjusted from a high base at the April renewals, following consecutive years of market-driven and post-loss hardening, which began in 2018 and 2019 following the impacts of typhoons Jebi, Hagibis, Trami, and Faxai.
You can see Howden Re’s updated rate-on-line index chart for Japanese catastrophe excess-of-loss reinsurance contracts below:
“The natural catastrophe loss landscape in Japan and the Asia-Pacific region in 2024 was subdued relative to previous years, contributing to moderation at renewals,” Howden Re explained.
“The most significant losses of the last 18 months have been the Noto earthquake in January 2024, the Taiwan Hualien earthquake in April and Typhoon Yagi in September.”
Additionally, there had been some debate across the industry surrounding the potential impact of the January 2025 California wildfires on the Japanese April 1 renewals, however, Howden Re notes that the event, while impactful to reinsurer operating performance, did not “meaningfully constrain supply at 1 April.”
Overall, for Japanese catastrophe XoL programmes, less limit was purchased at the lower end of programmes with some buyers of coverage seeking additional top-layer reinsurance limit to address specific risk concerns, Howden Re continued.
The broker also noted, on average, ceding commissions for proportional quake cover increased by approximately two percentage points, signalling improved terms for cedants, as per-risk commissions varied by programme performance.
However, despite rate reductions of up to 15%, Howden Re says that “Japan remains an attractive market for reinsurers due to its high volume, relatively uncorrelated risk and deep pool of underwriting expertise backed by experience and exposure data.”
Andy Souter, Head of Asia Pacific, Howden Re International, commented: “This renewal is, on balance, a welcome reprieve for buyers in Japan and throughout Asia-Pacific on the back of an extended period of significant rate increases. With the recent easing in pricing and stable renewals, it’s a good time for cedents to secure more favourable terms and address specific risk concerns.”
Further in Howden Re’s analysis, the broker highlighted how the price moderation witnessed in most classes of business at the April renewals was facilitated by rising levels of dedicated reinsurance capital and strong insurance-linked securities (ILS) inflows, while also noting that capital levels now exceed their previous peak.
“This increase has been bolstered by record catastrophe bond issuance, which has continued in earnest during the first quarter of this year. Whilst reinsurers have reported healthy earnings and strong book value growth, it is becoming clear that future gains will increasingly depend on strategic innovation, rather than pricing momentum alone,” the broker added.
You can see Howden Re’s estimates for reinsurance and ILS sector capital levels in the chart below, which shows the significant growth seen in recent years:
David Flandro, Head of Industry Analysis and Strategic Advisory, Howden Re, commented: “At this stage of the pricing cycle, profitable growth increasingly requires a greater focus on product development, underwriting strategies and capital management.
“In order to navigate this market phase, 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.”
Howden Re’s April renewal report also revealed mixed outcomes at April 1st for the global specialty reinsurance sector, primarily driven by ongoing uncertainty around war-related losses and macro volatility.
The broker explained that aviation reinsurance risk-adjusted pricing was largely flat at April 1st, showing a slight hardening compared to the 3.5% year-on-year decline seen at the January renewals earlier this year.
Moving over to the marine and energy space, Howden Re states that the downstream losses experienced in 2024 had little impact on programmes at April 1st, although the Baltimore bridge collapse remained in focus, due to the incident taking place within days of last year’s renewal and was therefore largely unaccounted for.
Although wildfire exposures were widely discussed, Howden Re noted that within the marine and energy space, specie was the main focus.
Switching attention over to terror, reinsurance rates reduced further amid softening on the direct side of the market.
“Consistent event definitions continued to provide stability in an otherwise evolving market. New capacity is simultaneously seeking entry through the MGA channel on both the insurance and reinsurance side, as observed in previous renewal cycles,” Howden Re explained.
On the other hand, the direct & facultative (D&F) market “continues to show resilience with strong demand for excess-of-loss capacity despite early 2025 loss activity,” says Howden Re.
The broker explained that reinsurers demonstrated greater pricing discipline at April 1st, compared to January 1st, particularly in response to California wildfire exposures which were largely retained by cedents.
Chris Medlock, Director, Global Specialty Treaty, said: “The April renewal reflected a broad range of outcomes across specialty and D&F lines. Whilst pricing softened in some areas, reinsurers remained selective and disciplined. Capacity was available but placement success depended on structure, exposure and underlying risk quality.”
Read all of our reinsurance renewals news and analysis.
