Japan motor cover buckles as 60% loss ratio erodes margins: Gallagher Re

Motor lines account for around 47% of gross written premiums, amplifying the 2024 deterioration.

Japan remains one of the world’s top 10 non-life insurance markets, but the sector faces a range of structural and risk-related challenges despite recent improvements in underwriting performance.

Demographic decline remains a key headwind. Japan’s population fell for the 14th consecutive year in 2024 to 123.8 million, reducing long-term growth prospects for personal lines and intensifying competition across the market, Gallagher Re's Asia Pacific October 2025 Market Watch report said.

Natural catastrophe exposure continues to weigh on risk management and capital allocation. 

Major events in 2024, including the Noto Peninsula earthquake with estimated insured losses of $2b and the Hyogo hailstorm at about $935m, highlighted 
Japan’s vulnerability to earthquakes, typhoons and secondary perils such as floods and hail. 

Whilst recent typhoon losses have been limited, catastrophe risk remains a persistent concern.

Rising claims costs are another pressure point. In motor insurance, which accounts for around 47% of gross written premiums, loss ratios in the voluntary segment deteriorated to 60% in 2024, driven mainly by higher repair costs. 

Rate increases are planned in 2025, but affordability and retention risks remain.

Exposure to US casualty risks continues to be a challenge for Japanese insurers. 

Although companies are reducing capacity and tightening underwriting on US-exposed general liability business, this segment remains a source of volatility compared with domestic portfolios.

In marine insurance, weaker global trade linked to US tariff policy is expected to reduce cargo premiums, whilst claims inflation in Japan is likely to put further pressure on profitability. Hull insurance remains structurally challenging.

The market also faces operational constraints. Legacy IT systems continue to slow digital adoption, whilst regulatory reforms under the revised Insurance Business Act, effective from May 2026, may disrupt existing distribution relationships and increase compliance costs.

Although underwriting discipline has improved and profitability has stabilised, Japan’s non-life insurers continue to navigate demographic decline, catastrophe exposure, cost inflation and regulatory change, which are likely to shape market performance in the coming years.