Howden Re sees opportunities to shake up the status quo in Japan

For decades, the same three reinsurance brokers have dominated the Japanese market, restricting the options that cedents have for arranging insurance cover. Howden Re has a strategy to change this.

“This is a fundamental cultural and systemic issue,” says Hiro Miyamoto, Board Director at Howden Re Japan tells (Re)in Asia. Until last year, Miyamoto was Asia CEO for UIB. “Fewer people are quoting and fewer people are broking in the Japanese market, so there’s minimum competition.”

In July Howden announced that it would be establishing a reinsurance brokerage arm in Japan to serve both life and non-life entities.

As part of the move into the country, Howden has also invested in Keystone, a Japanese insurance-linked securities (ILS) structuring and capital market advisory firm.

The Howden group has also just announced the acquisition of Foresight, a Japanese retail insurance broking and captive consulting company, which is likely to feed into Howden Re’s strategy as it goes after business that the established broking giants in the country are overlooking.

Structural shift

The three dominant reinsurance brokers in Japan these days are Aon, Gallagher Re and Guy Carpenter (owned by Marsh). Gallagher Re purchased the reinsurance operations of Willis Towers Watson in 2021. The majority of quotes come from one of three reinsurers: Munich Re, Swiss Re or Hannover Re.

Miyamoto says that, as capacity returns to the Japanese market, this structure is negatively impacting buyers.

Three years ago, at the height of Covid-19, capacity in the reinsurance market dried up and no one wanted to deploy any more. While there is now more capacity ready to be deployed, deploying such capital remains challenging, says Miyamoto.

Battle lines

A couple of big scandals last year, most notably fraud at Bigmotor and a massive price-fixing scandal, with further concerns arising in 2024.

This has shaken faith in Japan’s insurance market about anti-competitive behaviour and forced the regulator to issue a series of business improvement orders and look at whether the market should be openedto other players.

This potentially creates opportunities for other brokers in the market. However, winning new business requires a carefully considered approach, focusing on those areas currently under-served by the incumbents.

“I think the established brokers are just waiting for us to fail,” says Miyamoto. “We’re not really a threat to them, but there are some things we can do that the big brokers cannot – not because we have better capabilities but because of the way we are structured.”

Miyamoto is understandably reluctant to give too much away about Howden Re’s strategy in Japan, for fear of revealing trade secrets. However, the broker clearly believes that it has spotted some areas that are under-served by the current incumbents.

“If we could pool the premium of a dozen mid-sized carriers to support this captive market, that would be a business without even going after the business that the large brokers in Japan are involved with,” says Miyamoto. “Because of their size, large brokers in Japan often don’t pay a great deal of attention to more niche areas. This creates an opportunity for Howden Re in Japan.”

The fact that Howden Re doesn’t have any legacy issues is a clear advantage, says Miyamoto. He adds that the established brokers are unlikely to change the way in which treaty business is brought for fear of upsetting their existing revenue stream.

“On the other hand we are a newcomer to the market and have nothing to lose,” he adds.

Miyamoto’s hope is that, over the next decade or so, a greater number of quoting markets will start appearing in the country.

“New capacity and new quoting markets would be beneficial for everyone,” insists Miyamoto. “Many Lloyd’s syndicates and Bermuda-based reinsurers are frustrated with the current status quo. They want to do more in Japan, but they cannot get the business that they want.”

The theory of supply-and-demand would work better if an alternative channel could be created for capacity that is not being efficiently deployed in the market, asserts Miyamoto.