Japan’s general insurance industry is expected to contract by 0.9% in 2020, compared to the 1.7% growth registered in 2019, according to GlobalData, a leading data and analytics company.

GlobalData has revised Japan’s general insurance forecast in the aftermath of COVID-19 outbreak. As per the latest data, Japan’s general insurance business is forecasted to grow at a compound annual growth rate (CAGR) of 0.5% during 2019-2023 against the 2.1% growth as per pre-COVID-19 estimates, primarily due to the economic uncertainty following the pandemic.

Sangharsan Biswas, Insurance Analyst at GlobalData, comments: “The Japanese economy is projected to contract by 5% in 2020 due to the COVID-19 pandemic. Consumer spending in May 2020 had declined by 16% year-on-year. This translates to lower premium collections for general insurers, as businesses scale down their operations.”

The impact on Japan’s general insurance business is most visible in motor and property insurance, which together account for over 75% of the premiums. As per the data from Japan Automobile Dealers Association, new vehicle sales declined by 23% in June 2020, on a year-on-year basis.

This will further impact motor insurers who are already facing pressure due to decline in premium rates following recent regulatory changes. The Financial Services Agency of Japan scheduled cuts in premium rate by an average 16.4% from April 2020.

Property insurers are also facing similar situation. As of June 2020, Japanese companies reported rise in bankruptcies for the first time in a decade. Businesses, which were already grappling with rising input costs and hike in sales tax, are now facing disruption from the pandemic-led restrictions.

Biswas concludes: “The second wave of COVID-19 infection in the country has dampened the prospects of recovery in general insurance business. Even as business activity is expected to pick up from 2021, growth in general insurance business is expected to be a subdued one.”