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Why Corporate Insurance Price and Capacity Are Constrained — Reading the GIAJ's December 2025 Paper

Why corporate insurance premiums are rising and lines are shrinking in Japan: the main points of the paper the General Insurance Association of Japan submitted to a METI/FSA study group in December 2025, the link to the reinsurance market, risk financing tools, and what companies and agencies can prepare before renewal.

More companies in Japan are seeing higher premiums and smaller lines when they renew commercial fire and earthquake cover. In December 2025, the General Insurance Association of Japan (GIAJ) explained the background in a paper titled "Changing risks facing companies and the non-life insurance industry's response", submitted to the Study Group on Advancing Corporate Risk Management, for which the Ministry of Economy, Trade and Industry (METI) and the Financial Services Agency (FSA) act as secretariat. This article introduces the main points of that paper and sets out what companies and non-life insurance agencies can prepare before renewal.

Main points of the paper

Topic	What the paper says
Natural catastrophe losses	Natural catastrophe losses in the global insurance market have grown about fourfold over the past 30 years (citing reinsurer Swiss Re's sigma research)
Drivers of loss growth	More frequent and severe disasters, plus higher costs from inflation and other factors; expected to keep growing
Price and supply	Rising claims and reinsurance costs have constrained the price and supply of insurance
Corporate premium rates	Japanese corporate premium rates have risen over the medium to long term, driven by more natural disasters, social inflation and the review of business practices
Underwriting terms	Terms have tightened, mainly in some lines
Liability costs	Larger lawsuits and higher awards have raised liability costs

The paper argues that, in this environment, companies need a multi-layered approach to risk rather than relying on insurance alone. The study group later issued its report on April 17, 2026.

Why reinsurance affects a company's premium and line

Insurers prepare for large losses by transferring part of the risk they write to reinsurers. When natural catastrophe losses grow worldwide, reinsurers raise their prices and tighten terms. Primary insurers then review how much they can keep and how much they can reinsure, and this is reflected in corporate premium rates and in the line they will write per policy.

In other words, renewal terms can change because of the global reinsurance market even if the company has had no losses. The more a risk can affect many policies in one event, as earthquake and windstorm or flood do, the more it is affected.

Reinsurance terms vary from year to year

Within the medium- to long-term upward trend, reinsurance terms vary each year. The FSA's insurance monitoring report notes that Japanese non-life insurers' reinsurance renewals are concentrated in April, and that at the April 2025 renewal, Japanese reinsurance rates fell by around 15% overall. A lower reinsurance rate in a given year does not necessarily feed straight into an individual company's premium or line, but it helps to know the state of that year's reinsurance market when negotiating a renewal.

What the paper asks of companies

The paper says that companies' risk management needs risks to be made visible and quantified. Specifically, it says it is important to use loss estimates such as the probable maximum loss (PML) to decide, as a management decision, which risks to retain and which to transfer.

It then groups risk financing tools as follows.

Category	Examples
Retention (internal funds)	Equity capital, captives
Retention (external funds)	Committed credit lines, contingent debt
Transfer	Traditional insurance, derivatives, catastrophe bonds

Notably, captives are positioned not as a substitute for insurance but as one way to retain risk. How a captive works is explained in What is a captive.

Deciding what to retain and what to transfer

The choice between retention and transfer is easier to think about in terms of the frequency and severity of losses.

Nature of loss	Approach	Examples
High frequency, low severity	Predictable, and insuring it tends to be costly, so the company bears it	Higher deductibles, investment in loss prevention
Medium frequency, medium severity	Retain what the company's capital can absorb and transfer the excess	Insurance with a deductible, captives
Low frequency, high severity	Too large to bear alone, so transfer it; but insurer capacity is limited	Insurance (with capacity secured through coinsurance and reinsurance), funding such as credit lines

* A general framework. Actual design depends on the company's finances and the nature of its risks.

When capacity is constrained, trying to transfer everything to insurers either raises the cost or leaves the required limit out of reach. A realistic response is to rebalance: bear small losses yourself in exchange for securing cover for large ones.

What you can prepare before renewal

Organize your risk information

Insurers and reinsurers can assess a risk only from the information they are given. Organizing information on building construction and age, location hazards, fire protection, business continuity plans and loss history, and preparing a PML assessment, makes it easier to negotiate acceptance and terms. With too little information, insurers tend to quote conservative terms.

Review retention and transfer levels

Redesigning the program can sometimes keep the cover you need: for example, raising the deductible so you bear small losses and redirecting the saving to cover for large losses, or setting the limit to match the PML. For earthquake, our insight on earthquake cover for businesses explains the types of cover and how to set the limit.

Widen the panel of insurers

If the existing insurers cannot reach the line you need, the risk can be placed as coinsurance among several insurers, with the additional insurer's share backed by facultative reinsurance. The mechanism is explained in our insight on coinsurance and facultative reinsurance.

Start early

Widening the panel takes time: preparing the submission, approaching markets and comparing terms. Options are limited just before expiry, so it is important to start several months ahead.

Approximate timing	What to prepare
About six months before expiry	Review the current program (cover, limits, deductibles); organize risk information and loss history
A few months before expiry	Confirm the existing insurers' renewal stance; if a shortfall is expected, start approaching additional insurers
One to two months before expiry	Compare and adjust terms; check that all insurers' terms are aligned
By expiry	Fix shares and bind the contract

* A guide only. The time needed depends on the size and nature of the contract.

For non-life insurance agencies

When a client's line is reduced, simply telling the client that the insurer will not write it does not solve the client's problem. As the paper shows, the constraint stems from conditions across the market, some of which no single insurer can change. What matters is whether you can explain the background to the client and also offer options such as revisiting the deductible or adding insurers.

Notes on reading the paper

The paper is an explanation by an industry body and does not indicate premiums or lines for any individual contract.
Renewal terms depend on the nature of the risk, past losses and each insurer's underwriting policy.
Whether cover is offered, and on what terms, depends on the review by insurers and reinsurers.

How Credit Hills can help

As an insurance broker, Credit Hills designs corporate insurance programs and approaches insurers, and when capacity falls short, arranges an additional insurer and facultative reinsurance. For existing contracts of non-life insurance agencies, the agency keeps the solicitation of the primary contract and its commission, and we handle arranging the shortfall.

See our corporate insurance services →　For non-life insurance agencies →

References (in Japanese)

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