Japan’s general insurance market is anticipated to expand to JPY12.7 trillion ($93.9 billion) in gross written premiums (GWP) by 2028, according to projections from GlobalData.
The sector is expected to grow at a compound annual growth rate (CAGR) of 2.2%, starting from JPY11.7 trillion ($81.1 billion) in 2024.
Growth in Japan’s general insurance industry is likely to be supported by increasing demand for natural catastrophe (Nat-cat) insurance and workers’ compensation policies, with GWP projected to rise by 1.7% in 2024, based on data from GlobalData’s Insurance Database.
GlobalData noted that the Japanese economy slipped into a recession in early 2024 following a contraction during the latter half of 2023, leading to a 0.5% decline in the general insurance industry in 2023. This downturn followed a 3.4% growth rate in 2022.
Sneha Verma, an insurance analyst at GlobalData, said the sector is expected to recover in 2024, driven by increased premium rates across several lines of insurance, in response to inflation and growing claims from extreme weather conditions.
Motor insurance, which is forecasted to comprise 47.5% of Japan’s general insurance GWP in 2024, saw a slight decrease of 0.1% in 2023 despite an increase in vehicle sales. This decline was largely due to insurers lowering premiums in response to fewer traffic accidents.
A similar trend is expected to continue into 2024. However, Verma pointed out that an increase in the frequency and severity of extreme weather could lead insurers to reevaluate their risk models, potentially driving up motor insurance premiums in 2025.
The General Insurance Association of Japan (GIAJ) reported that 79,468 claims were processed for vehicle damage caused by the hailstorm in Hyogo Prefecture in April 2023, leading to insured losses totalling JPY31.4 billion ($0.21 billion).
Motor insurance is projected to grow at a CAGR of 1.5% from 2024 to 2028.
Property insurance, the second-largest sector, is expected to account for 27.6% of general insurance GWP in 2024 and is forecasted to grow by 5.4% during that year. This growth is driven by rising premium rates due to the increased frequency of nat-cat events.
In June 2023, the General Insurance Rating Organization of Japan (GIROJ) announced a 13% increase in the “reference net rate” for personal fire insurance, marking the largest increase in six years. This adjustment reflects the growing insurance payouts following a series of natural disasters, alongside rising repair costs.
Property insurance is expected to grow at a CAGR of 2.8% between 2024 and 2028.
Liability insurance, projected to represent 8.9% of general insurance GWP in 2024, is expected to grow by 4.2% that year, largely due to heightened demand for cyber insurance and workers’ compensation policies.
Data from the Ministry of Health, Labor, and Welfare showed a 21% increase in workers’ compensation claims in 2023 compared to the previous year.
Liability insurance is forecasted to grow at a CAGR of 3.9% over the period from 2024 to 2028.
The remaining 15.9% of Japan’s general insurance GWP in 2024 is anticipated to come from personal accident and health (PA&H), marine, aviation, and transit (MAT), and financial lines insurance.
Verma said the relatively slow growth in motor insurance, which represents nearly half of the total general insurance market, indicates a moderate overall growth outlook for Japan’s general insurance sector over the next five years.
“Persistently high claim payouts led by frequent Nat-cat events and high inflation will prompt insurers to reassess their risk exposure and increase premium rates in the short term,” she said.
