We expect a stable 1.4 renewal as demand for re/insurance continues to rise in Japan: Swiss Re’s Dodo

Global reinsurance giant Swiss Re continues to see increased demand for property insurance and reinsurance protection in Japan amid elevated large natural catastrophe threats and the impact of inflation, and with little sign of a significant influx of capital heading into 2025, the expectation is for a stable April 1st renewals, according to Atsuhiro Dodo, the company’s Head and Country President of Japan.

Swiss Re has more than a century of history and experience in Asia, having signed its first contract in the region with a Japanese insurer in 1913, and the re/insurer has been underwriting risks in the country ever since. In 2004, the company established its Japan branch, and over the years has been working with non-life and life clients to provide vital reinsurance for both domestic and overseas business.

Against this backdrop, and around the 20th Singapore International Reinsurance Conference (SIRC), Reinsurance News spoke with Dodo, who first joined Swiss Re in 2005 and has led Swiss Re Japan since July 2016, about the carrier’s Japan business, the outlook for the 2025 renewals, and broader reinsurance sector trends.

To start, he explained that Swiss Re “continuously sees higher demand for property re/insurance, given heightened large natural catastrophe threats we face everywhere in the country and large single loss potentials arising out of complex manufacturing facilities.”

In more recent times, he continued, demand is also being driven by the impact of inflation, which for the first time in two decades has caused rising repair and repurchase costs in the country.

Beyond property, Dodo told Reinsurance News that “clients are growing fast in casualty and specialty spaces, such as directors and officers liability insurance, credit and surety, and cyber insurance.”

Expanding on cyber, Dodo noted that penetration in Japan remains relatively low but is growing rapidly at an annual rate of around 20%, which is in line with other parts of the world, which is promising considering cyber insurance in the region is still at an emerging state.

“The notable difference of the cyber coverage between Japan and the rest of the world is that payments in response to ransomware are not covered here, and compensation for business interruptions is limited,” said Dodo.

Japan is the main market that renews at April 1st each year, and in 2024 it was described as a stable renewal, a trend that Swiss Re expects to persist at 1.4 2025.

Dodo explained: “The world continues to be faced with heightened geopolitical instability and economic uncertainty. On top of this, natural catastrophes continue to increase with average insured losses above USD 100 billion annually in recent years. We expect this combination to continue to drive demand for more reinsurance and we don’t see signs of a large increase in supply.”

At the 20th SIRC conference, data, and advanced technologies such as artificial intelligence (AI) have been in focus, and Dodo was keen to highlight the significant possibilities through leveraging generative AI to use unstructured data and respond the most probable outcomes. However, he also stressed the importance of recognising the risks it creates and the need to continuously work to mitigate and manage them.

“The applications of gen AI generally fall into two categories: automation and augmentation. Automation involves replacing existing processes with technology, while augmentation focuses on improving efficiency, speed, and cost-effectiveness. Most applications in our industry are likely to support augmentation.

“At Swiss Re, we are focused on the potential for operational aspects like contracts and claims. One example is our Rapid Damage Assessment platform, which draws on our proprietary hazard models, analysis of a client’s portfolio and artificial intelligence on aerial imagery to assess the impact of natural catastrophes. This enables faster, smarter claims decisions during natural catastrophe events, as demonstrated during Hurricane Ian in Florida in 2022,” said Dodo.

He went on to explain that in underwriting, there’s clear potential for gen AI to help the re/insurance industry cover more people around the world, but warned that it also poses the risk of introducing bias, which could actually increase exclusions rather than expand coverage.

“We need to balance the positive aspects of reaching, and protecting, more people with the potential unintended consequences. It is our collective responsibility as an industry to approach AI with a keen awareness of its vast benefits and potential risks. Taking a balanced approach of careful regulation, international collaboration and responsible innovation, we can harness AI’s potential while safeguarding against its pitfalls, propelling industries toward a more secure and efficient future,” he said.

To end, Dodo discussed data and technology within the industry more broadly, alluding to the fact both have helped to deepen the way the risk transfer space assess risk and makes underwriting decisions.

“Underwriters today can tap into a granular and broader set of exposure and claims data, risk insights and predictive models than in the past. This can help us better understand, evaluate and price risk. The ability to properly leverage these insights is a major advantage in creating robust and resilient portfolios. By pairing the intelligence that underwriters bring with automation that technology enables, we believe we can enhance efficiency and competitiveness in our industry.

“The increased use of data and technology in underwriting is advancing the re/insurance industry, to one that enables better use of forward-looking models rather than purely relying on historic data. These models support insurers to anticipate emerging threats before they become realities, gauge the likely impact, and tailor policies accordingly,” said Dodo.

Late in 2023, Swiss Re took a step in this direction with the acquisition of Fathom, the UK-based firm specialising in the development of intelligence and models for water-related risks under current and future climate scenarios.

“The data Fathom provides covers Japan with high granularity, and it adds to our efforts to understand the complex loss behaviours flood events leave to us – and demonstrates where we can help our clients understand and manage what lies ahead, with an even greater degree of precision,” he said.

Adding: “Data and claims information, combined with application of human knowledge and expertise, has the power to steer underwriting strategies, define risk appetites and help determine where adjustments are needed for the industry to stay competitive and sustainable.”

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