The property insurance sector in Japan is set to experience a significant transformation in the coming years. According to GlobalData, it is projected to reach a value of $26.5 billion by 2028, with a compound annual growth rate (CAGR) of 2.8% from 2024 to 2028. However, the sector faced a contraction of 0.9% in 2023. The main culprit was the insufficient underwriting of natural catastrophe (Nat-cat) policies, as the increasing number of disaster-related claims put a strain on insurers’ profitability. But there is light at the end of the tunnel, with a recovery anticipated in 2024.
This recovery is expected to be driven by a high demand for Nat-cat coverage, especially in the wake of events such as the Noto Peninsula earthquake on 1 January 2024, which led to payouts totaling $579 million by May. Other events like the magnitude 7.1 earthquake in Kyushu on August 8 and Typhoon Shanshan later that month have also contributed to insurers’ challenges. Fire and natural hazard insurance policies are predicted to make up 84.7% of property insurance premiums in 2024. Aarti Sharma, an Insurance Analyst at GlobalData, points to increased risk awareness, inflation-driven premium adjustments, and insurers’ efforts to enhance their retentions despite rising reinsurance costs as factors contributing to the market’s resilience.
The construction and energy sectors are set to play a crucial role in the sector’s growth. The construction industry’s output is projected to grow at an annual average of 1.1% between 2025 and 2028, thanks to renewable energy and commercial investments. Government initiatives to increase the share of renewable and nuclear energy by 2030 are also expected to boost property insurance demand, particularly for infrastructure related to clean energy. Additionally, in agriculture, the use of AI-equipped robots is reducing crop losses and claims on crop insurance. The increasing use of artificial intelligence and the Internet of Things is also anticipated to support property insurance, as data integrations will improve decision-making in pricing, underwriting, and risk management, ultimately enhancing insurers’ response time and efficiency. Despite recent hurdles, the market appears poised for steady growth as insurers adapt to changing risks and technological advancements.
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