According to GlobalData, the general insurance market in Japan is set to grow at a compound annual growth rate (CAGR) of 3% from $101.6 bn in 2021 to $133.1bn in 2026, in terms of gross written premiums (GWP), driven by a rise in demand for commercial insurance lines.
The report also suggests that there will be an increased frequency of Natural-Catastrophic (Nat-Cat) events, cyber-attacks, and geopolitical risks that will drive demand for commercial insurance lines such as property and liability insurance. Sequentially, the demand for reinsurance will also rise.
Shabbir Ansari, Senior Insurance Analyst at GlobalData, commented, “The Japanese general insurance industry is expected to grow by 1.1% after registering a slower growth of 0.4% in 2021.”
“The slow growth can be primarily attributed to a decline in motor insurance which accounts for over 50% of general insurance premiums. The general insurance industry is expected to gain momentum from 2023 onwards supported by growth in all major insurance lines.”
In terms of GWP in 2021, motor insurance is the leading insurance line in Japan’s general insurance segment, accounting for a 50.5% share.
It registered a decline in premium since the onset of the Covid-19 pandemic as frequent lockdowns impacted vehicle sales. This trend is expected to continue in 2022 as the global automobile chip shortage and rising inflation will impact vehicle sales, says GlobalData. The segment is expected to witness a gradual recovery from 2023.
Ansari added, “Reduction in the premium rates for the mandatory motor third party liability (MTPL) insurance will also impact premium growth in motor insurance. The rates were reduced in April 2021 by the General Insurance Rating Organization of Japan as the number of road accidents declined by a CAGR of 12.7% during the last five years.”
Property insurance was the second largest segment, accounting for a 25.5% share in terms of GWP in 2021.
The high frequency of Nat-Cat events in Japan will support the growth of property insurance which is forecasted to grow at a CAGR of 4.9% over 2021-26.
Ansari continued, “The growth of property insurance will also be supported by increased spending on infrastructure projects. The major infrastructure projects such as K2 Manufacturing Facility, Abukuma Onshore Wind Farm, and Logiport Nagoya that started in the first half of 2022 were together valued at around $24.7 billion.”
Liability insurance was the third largest segment, accounting for 8.1% of general insurance GWP in 2021.
The segment registered 8.1% growth in 2021 driven by demand for cyber liability and political risk insurance products.
The report states the number of cyberattacks has increased since 2020 due to remote working, which in turn has pushed the demand for cyber insurance products.
Demand for political risk insurance products has increased amid the ongoing Russia-Ukraine crisis. As a result, liability Insurance is expected to grow at a CAGR of 4.7% during 2021-26.
Personal Accident and Health (PA&H), Marine, Aviation and Transit (MAT), and Financial Lines insurance accounted for the remaining 15.9% GWP share in 2021.
Ansari concluded, “The Japanese general insurance industry is expected to maintain an upward growth trend during the next five years, supported by large-scale infrastructure projects and demand for cyber risks and Nat-Cat insurance. The profitability of insurers, however, will remain shadowed due to rising inflation.”
