The latest research from GlobalData indicates that the Japanese general insurance industry is estimated to expand by 2.8% in 2023 underpinned by various factors, including increased automobile sales, infrastructure projects, growing demand for policies covering natural catastrophic events, and a rising number of cyberattacks.
The Japanese general insurance sector is poised for steady growth in the coming years, with a projected compound annual growth rate (CAGR) of 3.4% from JPY11.9 trillion ($89.8 billion) in 2023 to JPY13.6 trillion ($116.5 billion) in 2027 in terms of gross written premiums (GWP).
“Japan’s economy expanded by 1.5% in Q2 2023, which is expected to translate into 6% annual growth in 2023, much stronger than the initially forecasted annual growth of 1.0%, as per the Economic and Social Research Institute of Japan. The growth is supported by key sectors of the economy such as automobiles, construction, real estate, and tourism as well as export activities, which will drive general insurance growth in the country,” GlobalData insurance analyst Manogna Vangari said.
Motor insurance takes the lead in the Japanese general insurance landscape, accounting for an estimated 48.0% share of the GWP in 2023. It is projected to grow at a CAGR of 1.9% from 2023 to 2027, driven by the surge in automobile sales. Notably, new vehicle registrations increased by 17.5% in H1 2023 compared to the same period in 2022, with electric vehicle (EV) sales rising by 77.9% in H1 2023 compared to H1 2022. Additionally, insurers’ focus on launching innovative products, such as insurance plans for autonomous driving robots, will support motor insurance growth.
Property insurance ranks as the second-largest general insurance line, with a projected 27.4% share of GWP in 2023. It is expected to grow by 5.4% in 2023, fuelled by increased demand for policies covering nat cat events. Japan’s susceptibility to natural disasters, including floods, landslides, earthquakes, and volcanic eruptions, drives the need for such coverage. Recent events, such as the Khanun typhoon and heavy rainfall causing floods and mudslides, have underscored the importance of property insurance.
“Property insurance will also benefit from the growth in the construction sector, supported by a recovery in housing demand, the construction of new dwellings, and increased sales of residential homes. The property insurance GWP is forecast to grow at a CAGR of 5.8% over 2023-27,” Vangari said.
Liability insurance is estimated to account for an 8.2% share of premiums in 2023, with a projected CAGR of 3.5% from 2023 to 2027. The increasing incidence of cyberattacks globally has created a high-risk environment for companies, leading to higher demand for liability coverage. The number of damages caused by ransomware attacks in Japan surged by 57.5% in 2022 compared to 2021.
Financial lines, marine aviation and transit insurance, and miscellaneous insurance are expected to collectively account for the remaining 33.9% share of GWP in 2023.
“The general insurance penetration in Japan, at 1.8% in 2023, which is lower as compared to the advanced APAC economies like Australia (3.6%), and New Zealand (2.3%), provides ample growth opportunities for insurers. Increasing automobile sales, innovative product developments, and rising demand for nat cat policies present a positive growth outlook for the general insurance sector over the next five years,” Vangari said.
Optimism in Japan’s general insurance sector continues despite the recent scandals that have surfaced – most notably, the Bigmotor insurance fraud and alleged cartel activities surrounding four non-life carriers. The Bigmotor scandal recently came to a head as Sompo Japan’s president resigned after it was reported that he tried to push for a resumption with dealings with the disgraced car dealer even after knowledge of the wrongdoings emerged.
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