Japan insurers face decline as premiums fall and growth stalls

FY 2024 ends a 4-year expansion streak, forcing firms into new revenue strategies

Japan’s life insurance market should be stable in the medium term, as annualised premiums in force are expected to remain broadly steady along with greater demand for savings-type products, according to AM Best.

Whilst insurers face higher operating costs due to inflation, investment income has become a vital part of core profits, the agency said in a report published in 27 February.

To manage persistent inflation, the Bank of Japan raised its benchmark interest rate to 0.75% in December 2025.

Senior financial analyst Charles Chiang noted that despite economic uncertainty and a weak yen, the segment’s fundamentals remain sound. 

Higher domestic interest rates are expected to drive demand for savings-type products that offer inflation protection. 

AM Best director Chanyoung Lee expects the market to shift toward Japanese yen-denominated products over the next year as domestic rates stay high, whilst foreign interest rates begin to fall.

The industry’s total premium income saw a slight decline in fiscal year 2024, ending a four-year growth trend. 

This was largely caused by a drop in sales for single-premium foreign currency products. 

Additionally, Japan’s aging and shrinking population continues to limit overall market growth, keeping annualised premiums in force at a steady but flat level.

To counter the shrinking domestic market, major Japanese insurers are expanding overseas and moving into non-insurance business sectors to diversify their earnings.

Companies are also investing in digital tools for agencies and developing new "third-sector" products to support long-term sales of protection-type policies.

On the regulatory front, insurers are currently transitioning to a new economic value-based solvency regime, which becomes mandatory by 31 March.

AM Best reports that this transition is proceeding smoothly. Most insurers maintain capital levels well above regulatory requirements through active asset management and the strategic use of reinsurance.