Japanese non-life insurers’ underwriting profits have bottomed out, according to Fitch analysis of the past financial year.

Earnings will be hit by rises in consumption tax – from 5% to 8% in April next year, then to 10% in October 2015, the ratings agency says.

Premiums are expected to increase in response, although insurers “have yet to make any announcements on their pricing strategy from 2014”.

Capitalisations are improving in line with expectations, but “vulnerability to a stock market downturn remains the major credit challenge for non-life insurers, along with the occurrence of a major catastrophe that could deplete the capital buffer”.

The combined ratio of insurers’ core motor business remains above 100%, Fitch says.

Growth in net premium written (NPW) is likely to continue next financial year as insurers increase rates on motor business lines, which account for about half of NPW.

The five companies reviewed are Tokio Marine & Nichido Fire Insurance, Mitsui Sumitomo Insurance, Sompo Japan Insurance, Nipponkoa Insurance and Aioi Nissay Dowa Insurance.