Page 19 - WTW Asia Insurance Market Report
P. 19

Japan	

  With the exception of earthquake insurance, the                         D&O Coverage
  insurance market in 2016 was characterised by
  depressed rates across all lines of business. Due to        In 2016, a large corporation became embroiled in a high-
  global warming and changes in the temperature of the        profile accounting scandal in which attempts were made
  sea, a number of typhoons such as Typhoon Chaba             to understate project costs and to overstate profits. In a
  and Typhoon Lionrock have hit Japan since August,           separate event, a manufacturer came under scrutiny in the
  almost once every week. Property insurance, which           USA due to the defective installation of air bag inflators
  covers damage from typhoons, has a large market in          in cars, prompting the largest auto safety recall in history.
  Japan so the impact of these losses has not been            These two scandals have shown light on the importance of
  visible in the market yet. However, it is expected          Directors and Officers Coverage. Previously, multinationals
  that the first quarter of 2017 could see the property       did not consider covering liability arising from the actions
  market harden.                                              of their executives. As news of these scandals broke and
                                                              the monetary impact became evident, a number of clients
  In April 2016, two earthquakes on the southern              have expressed interest in covering executive risks and are
  Japanese island of Kumamoto brought the biggest             preparing to purchase D&O coverage.
  losses of the first half of 2016. Within a span of 2 days,
  the earthquakes (6.2 and 7.0 Magnitude respectively)        M&A Activity
  destroyed countless buildings and resulted in the
  death of 69 people. Tens of thousands of people had         In 2016, the insurance industry saw a continuing trend
  to be temporarily housed in emergency shelters. As of       of mergers and acquisitions by Japanese insurers. This
  end June 2016, USD 3 billion had been paid in claims.       trend is mostly driven by the search for larger markets
  This amount is expected to rise further as more cases       in countries such as the US and well as the ambition of
  are resolved.                                               Asian insurers to make a mark in the global insurance
                                                              arena. In 2016, Sompo Holdings announced that it would
  A number of manufacturing facilities in the region          be acquiring property and casualty insurer Endurance
  were also damaged and had to suspend operations             Specialty Holdings Ltd for USD 6.3 billion. Following its
  for several weeks. Certain car manufacturers were           acquisition of Amlin Plc, MS&AD announced that it is still
  severely impacted as the production of important            on the lookout for international acquisitions in China, India,
  components took place at Kumamoto. A large-scale            Southeast Asia or the US in order to boost earnings. Tokio
  manufacturer of smartphone camera modules also              Marine Holdings is also in exclusive talks to buy RHB
  had to halt production. The overall loss from the two       Bank’s general insurance unit in a deal that also includes
  quakes amounted to USD 25 billion, of which only USD        an agreement to distribute Tokio Marine’s products through
  5.9 billion was insured due to the low insurance density    the Malaysian bank, and could potentially be one of the
  for earthquake risks.                                       most expensive non-life insurance deals in Southeast Asia.
                                                              Continued international investment by Asian institutions
“The Property Insurance market,                               can be expected in 2017. If there is a deterrent to M&A
                                                              activity, it is unlikely that there is a lack of ready buyers, but
despite being flooded with capacity,                          rather a lack of suitable targets.

is expected to harden in 2017 owing

to the impact of losses from frequent

typhoons”

                                                              19Asia Insurance Market Report 2016
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