In December 2018, the Japanese government has reported that the number of children born in 2018 has dropped to the lowest level since records began in 1899. Based on current estimations, the population could decline from the current 127 million to less than 100 million people in 2049. This dramatic development not only affects social security systems, but also puts substantial pressure on the financial sector, including Japanese insurers who are confronted with a stagnating domestic market over the upcoming decades. While the Japanese insurance market is currently still stable and profitable, it sioffers only limited growth opportunities as the shrinking population negatively affects premium income in almost all insurance classes.
While expansion into new intangible risk classes such as cyber insurance or digitalization initiatives still offer leeway for potential domestic growth within Japan, there is no doubt that the future of Japanese insurers lies abroad such as in growth markets in Asia-Pacific where premium growth rates of more than 7% annually until 2025 are estimated on average – the highest level in the world. Economic development in Asia, supported by infrastructure investments via the ADB or the Chinese government’s global trade initiatives, in conjunction with high population growth, growing middle classes and a relatively low insurance penetration offer rising opportunities for Japanese insurers to provide their insurance capacity, know-how and customer service capabilities to respond to local insurance needs.
Large Japanese insurance groups such as the MS&AD Group, the largest non-life insurance group in Japan, are responding to these opportunities by adapting their corporate strategies to generate significant profits via their international businesses in the long-term. This aspiration is supported by a compelling proposition based on offering globally distinguished Japanese service standards that are well-known around Asia with first-rate local underwriting know-how as a source of competitive advantage.
However, it is evident that the execution of this proposition is not easy and requires rigorous planning. The markets especially in Asia-Pacific are characterized by a remarkable diversity of people, languages, cultures, economies, political circumstances and geographies, with countries ranging from the highly developed and affluent Singapore to Myanmar that only recently has started to open itself for foreign investment and trade…