Frequency of nat cat events to drive demand in commercial insurance in Japan

The general insurance industry in the country is growing at a CAGR of 3%.

The frequency of natural catastrophic events, cyber-attacks, and geopolitical risks will drive demand for commercial insurance lines such as property and liability insurance as the general insurance market grows at a compound annual growth rate (CAGR) of 3%, data and analytics firm GlobalData revealed.

GlobalData expects the general insurance industry to grow from $101.6b in 2021 to $133.1b in 2026, in terms of gross written premiums.

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 fact, just in 2021, an earthquake in Fukushima drove an insured loss of more than $2.5b. Because of the frequency of such nat cat events, GlobalData predicts the property insurance market will grow at a CAGR of 4.9% between now and 2026.

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“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,” Shabbir Ansari, Senior Insurance Analyst at GlobalData said.

Liability insurance will also help boost the growth of the general insurance industry as demand for cyber liability and political risks products grow.
“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% from 2022 to 2026,” Ansari said.

Meanwhile, Japan’s leading insurance line is expected to register a slow decline in premiums. Because of the COVID-19 pandemic and frequent lockdowns, vehicle sales impacted the sales of premiums in the country. GlobalData expects this trend to continue in 2022 as the global automobile chip shortages and rising inflation will impact vehicle sales. The segment is expected to witness a gradual recovery from 2023.

“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,” Ansari said.