The Japanese general insurance industry is set to grow at a 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), forecasts GlobalData, a leading data and analytics company.

GlobalData’s Insurance Database reveals that the Japanese general insurance industry is estimated to grow by 2.8% in 2023, supported by an increase in automobile sales, new infrastructure projects, an increasing demand for policies covering natural catastrophic (NatCat) events, and rising cases of cyberattacks.

Manogna Vangari, Insurance Analyst at GlobalData, comments: “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.”

Motor insurance is the leading line in the Japanese general insurance industry, which is estimated to account for a 48.0% share of the GWP in 2023. It is forecast to grow at a CAGR of 1.9% over 2023-27, backed by increased automobile sales. According to the Japan Automotive Dealers Association and the Japan Light Motor Vehicle and Motorcycle Association, new vehicle registrations increased by 17.5% in H1 2023 as compared to the same period in 2022. Additionally, EV sales increased by 77.9% in H1 2023 as compared to H1 2022.

Insurers’ focus on launching innovative products in the market will also support motor insurance growth. In May 2023, Aioi Nissay Dowa Insurance Company collaborated with ZMP Inc., a robotics company in Japan, to offer an insurance plan dedicated to an autonomous driving robot. It covers bodily injury and property damage, injuries while riding an autonomous driving robot, and damages to the robot’s body.

Property insurance is the second leading general insurance line, which is estimated to account for 27.4% share of the GWP in 2023. It is forecast to grow by 5.4% in 2023, supported by the increased demand for policies covering NatCat events.

Japan is prone to floods, landslides, earthquakes, and volcanic eruptions. In August 2023, the Khanun typhoon caused 194 injuries, damaged 52 houses, and killed two people, according to Asian Disaster Reduction Center. Moreover, southwestern parts of Japan witnessed heavy rainfall causing floods and mudslides in July 2023, which resulted in the payment of JPY23.8 million in claims for the damages caused, according to the General Insurance Association of Japan.

Vangari adds: “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.”

Liability insurance is estimated to account for an 8.2% share of premiums in 2023. It is forecast to grow at a CAGR of 3.5% over 2023-27. Increasing instances of cyberattacks have created a high-risk environment for companies globally. According to the Metropolitan Police Department in Japan, the number of damages caused by ransomware attacks in 2022 increased by 57.5% as compared to 2021.

Financial lines, marine aviation and transit insurance, and miscellaneous insurance are expected to account for the remaining 33.9% share of GWP in 2023.

Vangari concludes: “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 NatCat policies present a positive growth outlook for the general insurance sector over the next five years.”