S&P Outlook Negative For Japanese P/C Insurance Sector

International Rating Agency Standard & Poor’s announced that it was “maintaining its negative outlook on the Japanese nonlife insurance sector following the disclosure of the industry’s financial results for fiscal 1999 (ended March 31,200).”

“1999 revealed a deterioration in the industry’s average loss ratio,” said the report, which blamed intense price competition, especially in the recently deregulated auto insurance sector, for the decline.

Japanese p/c insurers have been trying to cut costs, but still face intense competition, which puts increased pressure on small and medium sized insurers.

In addition to competition S&P also forecast a “flight to quality among consumers following the collapse of Dai-Ichi Mutual Fire; accelerated restructuring, consolidation and rationalization; expansion of nontraditional activities and lines of business, with insurers assuming a higher exposure to risk; and balance sheet restructuring, aimed at enhancing capital efficiency.”