Japanese insurance companies are increasingly focusing on overseas markets and acquiring foreign businesses as domestic growth opportunities become more limited, according to a recent report by AM Best.
The slowdown in Japan’s insurance sector is largely attributed to the country’s aging and shrinking population, which has resulted in stagnant demand for traditional life insurance products. While premium income has remained high since 2021, driven primarily by increased sales of single-premium savings-type products, these products are less profitable and vulnerable to fluctuations in interest and exchange rates, limiting their long-term contribution to earnings.
AM Best has forecast continued strength in new business sales but predicts sluggish growth in in-force premiums.
The domestic market remains highly consolidated, particularly in the non-life insurance segment, and modest GDP growth further restricts opportunities for organic expansion. As a result, Japanese insurers are looking abroad for growth, with a particular focus on markets like the United States, Australia, and other developed economies.
In the U.S., Japanese-owned insurance subsidiaries reported over $68 billion in direct premiums written in 2024. This growth has been bolstered by significant acquisitions, such as Meiji Yasuda Life’s purchase of Legal & General’s U.S. business, which expands access to the individual life and pension risk transfer markets. Similarly, Nippon Life has made strategic acquisitions, including Resolution Life and the remaining 20% stake in MLC Life in Australia, furthering its goal of international expansion and technical expertise.
Annuity providers now account for over a quarter of premium income among Japanese-owned U.S. subsidiaries. However, the business mix remains diverse, with five different lines of business each contributing over 9% of premiums.
Meanwhile, asset-intensive reinsurance (AIR) transactions are gaining traction among Japanese life insurers as a tool for improving capital efficiency and managing interest rate risk. While the volume of ceded liabilities remains relatively low, capital released through AIR transactions can support broader growth initiatives, including further overseas investments.
In addition to international expansion, major Japanese non-life insurers are freeing up capital by accelerating the sale of strategic equity holdings, following pressure from Japan’s Financial Services Agency. Companies such as Tokio Marine, MS&AD, and Sompo have committed to eliminating these holdings over the next five to six years, unlocking additional capital for reinvestment.
While these strategies present opportunities for revenue diversification and stronger global positioning, they also introduce potential credit risks. Integration challenges, overpayment in acquisitions, or other execution issues could weaken credit profiles, posing risks to the long-term success of these expansion efforts.
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