This marks a compound annual growth rate (CAGR) of 2.8% from JPY3.2 trillion ($22.4 billion) in 2024.
While the industry faced a decline of 0.9% in 2023, largely due to underwritten policies for natural catastrophes (Nat-cat), recovery is expected in 2024. High demand for Nat-cat insurance, coupled with increased construction and energy sector activity, is anticipated to fuel this rebound.
Japan’s geographical susceptibility to natural disasters, including earthquakes and typhoons, is a key factor behind the rising demand for property insurance. According to GlobalData’s insurance analyst Aarti Sharma, this heightened risk perception is leading insurers to retain more policies as reinsurance costs soar.
In 2024, the nation has already experienced multiple natural disasters. The Noto Peninsula earthquake on January 1 resulted in insurance payouts of JPY90.97 billion ($579 million) by May, while a magnitude 7.1 earthquake hit Kyushu in August, triggering concerns about a potential megaquake along the Nankai Trough. Shortly after, Typhoon Shanshan also hit Kyushu, further increasing insured losses.
The rise in Nat-cat events has boosted demand for fire and natural hazard insurance, which is expected to account for 84.7% of property insurance premiums by 2024.
The construction industry is also set to contribute to the growth of property insurance, with an expected annual average growth rate of 1.1% between 2025 and 2028. Investments in renewable energy, manufacturing, and commercial sectors are expected to drive this expansion.
Government efforts to increase renewable energy production, with plans for 36-38% of electricity to come from renewable sources by 2030, will further support property insurance demand. As Japan scales its renewable energy infrastructure, insurers may need to adjust coverage models to account for new risks associated with clean energy installations.
Technological innovations, including the use of artificial intelligence (AI) and the Internet of Things (IoT), are also poised to transform the property insurance market. Data integrations are expected to enhance pricing, underwriting, and risk management, improving insurers’ efficiency and responsiveness.
Sharma highlights that the growing role of automation, particularly in agriculture, will also impact insurance. AI-equipped robots are helping to improve crop yields and reduce claims, providing insurers with more tools to manage risks effectively.
GlobalData anticipates steady growth for Japan’s property insurance market in the coming years, driven by increased demand for Nat-cat coverage and expansion in the construction and energy sectors. As the industry adapts to an evolving risk landscape, technological advancements will play a key role in ensuring the industry’s resilience and profitability.
