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Investing.com -- As Japan's insurance market grapples with a dwindling and aging population, leading to limited growth potential, domestic insurers are increasingly setting their sights on overseas expansion, according to a recent commentary by AM Best.
The commentary, titled "Japan Insurers See Growth Through Reinsurance, Acquisitions," indicates that Japanese insurers are capitalizing on growth opportunities in international markets, predominantly in the United States, Australia, and other developed economies. This strategy is aimed at maintaining long-term growth and diversifying revenue sources.
Charles Chiang, a senior financial analyst at AM Best, noted that American insurance companies owned by Japanese firms have experienced a rise in direct premiums over the past four years, surpassing $68 billion in 2024. This upward trajectory is likely to persist, buoyed by recent deals such as Meiji Yasuda Life's purchase of Legal & General (LON:LGEN)'s U.S. business and Nippon Life's announced acquisition of Resolution Life.
The Japanese insurance industry is highly consolidated, particularly in the non-life segment, with a handful of prominent companies dominating the market. This consolidation restricts opportunities for organic growth.
In addition to acquisitions, asset-intensive reinsurance (AIR) transactions have been gaining traction within Japan's life insurance sector in recent years. These transactions allow companies to enhance their capital efficiency and manage interest rate risk more effectively.
Chanyoung Lee, director of analytics at AM Best, anticipates that large Japanese insurers will continue to pursue growth opportunities overseas, and potentially even in non-insurance sectors, bolstered by their robust capital. Furthermore, Japan's life insurers are expected to increase reinsurance transactions as a long-term capital management strategy, while major non-life insurers may accumulate more excess capital in the future by selling off their strategic equity holdings.
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