Facing a mature domestic market with limited growth potential due to a shrinking and aging population, Japanese insurers are expanding into international markets, like the US and Australia, and making acquisitions to diversify revenue and sustain long-term growth, a recent AM Best report has revealed.

Japan’s insurance industry is highly consolidated, AM Best’s new Best’s Commentary, titled, “Japan Insurers See Growth Through Reinsurance, Acquisitions” notes, with the country’s non-life insurance market dominated by a few major companies.

The high market concentration of Japan’s non-life insurance market further limits organic growth opportunities.

Consequently, insurers are strategically diversifying their revenue streams to maintain long-term growth and capture growth opportunities in international markets, particularly in the US, Australia, and other developed economies, AM Best highlighted.

The report also noted that US insurers owned by Japanese companies have continued to provide growth and earnings. These companies have continued to see ongoing growth in direct premiums written in recent years, which has contributed to rising profits.

“US insurers owned by Japanese companies have seen growth in direct premiums written the last four years, exceeding $68 billion in 2024,” said Charles Chiang, senior financial analyst, AM Best.

Adding: “This trend is likely to continue in light of recent deals such as Meiji Yasuda Life’s acquisition of Legal & General’s US business or Nippon Life’s recently announced acquisition of Resolution Life.”

Moreover, asset-intensive reinsurance (AIR) transactions have been gaining momentum in Japan’s life insurance segment in recent years as companies look to improve capital efficiency and for better interest rate risk management.

“AM Best expects large Japanese insurers to continue seeking growth opportunities overseas, and even in non-insurance areas, supported by their strong capital,” said Chanyoung Lee, director, analytics, AM Best.

He continued: “Additionally, Japan’s life insurers are likely to expand reinsurance transactions as a long-term capital management strategy, while major non-life insurers also are likely to have more excess capital in the coming years by divesting their strategic equity holdings.”