Japan’s four major non-life insurance companies—Tokio Marine, MS&AD, SOMPO, and AIG—announced plans to raise fire insurance premiums in October 2024 in response to the increasing number of natural disasters caused by climate change. This marks the largest increase in the past five years, with an average nationwide rise of 13%.
Rising Insurance Costs Driven by Climate Change
Behind these hikes is the escalating occurrence of natural disasters caused by climate change. Extreme rains, typhoons, and wildfires are becoming more and more frequent worldwide. In Japan, for example, the frequency of short-duration heavy rains exceeding 50mm per hour has increased approximately 1.4 times over the past four decades.
Such an increase in natural disasters has led insurers to payouts higher than estimated, necessitating a rise in premiums to cover the increased costs. It is not just the premiums that are being changed. Due to the unforeseeable long-term risks brought on by climate change, insurers are also shortening policy periods. In 2014, the maximum policy term was reduced from 36 years to 10 years.
The new premiums are set based on the disaster risk levels of each area. Therefore, consumers in high-risk areas will face greater financial pressure. Fire insurance policies are typically renewed over long periods. The continued increase in extreme weather events could drive premiums even higher, further straining households.
The issue of rising fire insurance premiums due to extreme weather is not unique to Japan. In some parts of Australia and the US, insurers have dramatically increased premiums or even withdrawn from providing coverage in areas prone to climate disasters. For instance, Tokio Marine has announced it will cease offering new fire insurance policies for individuals in California by 2026 due to the frequent wildfires in the state.
Insurers’ Continued Support for Fossil Fuel Industries Behind the Premium Raise
We may highlight that these same insurers raising their premiums—Tokio Marine, MS&AD, SOMPO, and AIG— continue to support the fossil fuel industry, a primary driver of climate change.
These companies have yet to stop underwriting for fossil fuel projects, which are major emitters of greenhouse gasses. While they cite climate change impacts as the reason for raising premiums, their ongoing support for fossil fuel projects exacerbates the very problem.
If major insurers withdraw their support from the fossil fuel industry, it would become significantly challenging for these projects to move forward. As experts in risk management, insurance companies should act responsibly by ceasing their support for fossil fuel industries to protect consumers from the increasing threats of climate change.
The contradiction is clear: insurers are contributing to climate change while passing the costs onto consumers through raised premiums. At Insure Our Future, we are proactively urging major insurers to withdraw from fossil fuels. We will continue to work with partner organizations both domestically and internationally to press for an end to insurance support for fossil fuel industries.
