The general insurance market in Japan will grow at a compound annual growth rate (CAGR) of 3.0% from JPY11,155.4 billion ($101.6 billion) in 2021 to JPY12,920.7 billion ($133.1 billion) in 2026, in terms of gross written premiums (GWP), driven by a rise in demand for commercial insurance lines, forecasts GlobalData, a leading data and analytics company.

According to GlobalData, increased frequency of Natural-Catastrophic (Nat-Cat) events, cyber-attacks, and geopolitical risks will drive demand for commercial insurance lines such as property and liability insurance.

Shabbir Ansari, Senior Insurance Analyst at GlobalData, comments: “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.”
Motor insurance is the leading insurance line in Japan’s general insurance segment, accounting for a 50.5% share, in terms of GWP in 2021. 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 global automobile chip shortage and rising inflation will impact vehicle sales. The segment is expected to witness a gradual recovery from 2023.

Ansari adds: “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. Japan is prone to frequent Nat-Cat events like earthquakes and volcanic eruptions. In February 2021, an earthquake in Fukushima caused an insured loss of more than $2.5 billion. The high frequency of Nat-Cat events will support the growth of property insurance which is forecasted to grow at a CAGR of 4.9% over 2021-26.

Ansari continues: “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 number of cyberattacks has increased since 2020 due to remote working which has pushed 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 concludes: “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.”