Ratings agency Fitch says Japanese non-life insurers are vulnerable to unexpected rises in insured catastrophe losses or falls in the domestic stock market, as they try to restore capitalisation after last year’s natural disasters.

Fitch’s “stable” outlook is based mainly on the view the three major non-life groups – Tokio Marine Group, MS&AD Insurance Group and NKSJ Group – are “adequately capitalised”, supported by the strong performance of their life subsidiaries.

Thai flood losses from the groups totalled ¥513 billion ($6.2 billion) at the end of March this year.

“This loss is more than double the impact of the Japanese earthquake in March 2011, excluding residential lines reinsured by the Government, and underlines flaws in the groups’ risk management outside Japan,” Fitch Associate Director Akane Nishizaki said.

“In response, Japanese non-life insurers are tightening their overseas catastrophe risk management by reviewing cumulative risks and applying stricter underwriting.”

On a more positive note, the recovery of automobile business lines, which account for half of net premiums written in the domestic non-life market, will increase profitability.

Fitch expects life subsidiaries to continue posting strong profits by expanding new business margins as they cross-sell protection-type products to customers of their associated groups.