Japanese insurers expand overseas amidst domestic slowdown

AM Best forecasts sluggish growth in in-force premiums.

Japanese insurance companies are increasingly expanding overseas and acquiring foreign businesses due to limited growth opportunities in the domestic market, AM Best revealed.

The slowdown is largely driven by Japan’s shrinking and aging population, which has resulted in stagnant demand for traditional life insurance products.

Since 2021, premium income has remained elevated, primarily due to increased sales of single-premium savings-type products. 
However, these products offer narrow profit margins and are vulnerable to interest rate and exchange rate fluctuations, limiting their long-term contribution to earnings. 

AM Best forecasts continued strength in new business sales but sluggish growth in in-force premiums.

The domestic insurance market remains highly consolidated, especially in the non-life segment, and modest GDP growth further constrains organic expansion. 

As a result, insurers are diversifying their revenue streams by targeting international markets such as the United States, Australia, and other developed economies.

Japanese-owned US insurance subsidiaries reported over $68b in direct premiums written in 2024. 

Growth has been supported by deals such as Meiji Yasuda Life’s acquisition of Legal & General’s US business, which provides access to the individual life and pension risk transfer markets. 

Nippon Life’s acquisitions of Resolution Life and the remaining 20% stake in MLC Life in Australia also reflect a broader strategy to expand internationally and build technical expertise.

Annuity providers account for over a quarter of premium income amongst Japanese-owned US subsidiaries, though their business mix remains diverse, with five different lines each contributing over 9% of premiums. 

In parallel, asset-intensive reinsurance (AIR) transactions are gaining traction amongst Japanese life insurers as a tool for capital efficiency and interest rate risk management.

Whilst the volume of ceded liabilities remains relatively low, capital released through AIR can support broader growth initiatives, including overseas investments.

Major non-life insurers are also freeing up capital by accelerating the divestment of strategic equity holdings, following regulatory pressure from Japan’s Financial Services Agency. 

Tokio Marine, MS&AD, and Sompo have all committed to eliminating such holdings within the next five to six years, unlocking additional disposal income.

Whilst these strategies offer potential for revenue diversification and stronger global positioning, they also introduce credit risks. 

Execution challenges, integration issues, or overpayment in acquisitions could weaken credit profiles.