Fitch Ratings has revised the Outlooks on 10 Japanese insurers to Stable from Negative and affirmed the ratings on all of them.
The 10 insurers are:
- Dai-ichi Life
- Daido Life
- Fukoku Life
- Meiji Yasuda Life
- Mitsui Sumitomo Insurance
- Nippon Life Insurance
- Sompo Japan Nipponkoa Insurance
- Sumitomo Life Insurance
- Taiyo Life Insurance Company
- Tokio Marine & Nichido Fire Insurance
The ratings of all the insurers, except Dai-ichi Life and TMNF, are capped at Japan's Long-Term Local-Currency IDR.
In Fitch's view, only insurers with very good credit quality and large international business diversification can be rated above the sovereign rating if they hold high levels of government debt; that is, more than 20% of invested assets. Fitch views insurance groups that generate 20% or more of their net premiums from international business sources on a sustained basis as having large international business diversification.
Fitch maintains its view that only Dai-ichi Life and TMNF out of the 10 insurers under review have achieved the necessary international business diversification that counterbalances their heavy Japanese government debt holdings. This allows the ratings on the two insurers to be up to one notch higher than the sovereign rating.
The other eight Japanese insurers have high levels of Japanese government debt without the necessary level of international business diversification. As a result, they cannot be rated above the sovereign.
However, MSI's parent, MS&AD Insurance Group Holdings, has been expanding its international insurance businesses by acquiring foreign insurers and is approaching the threshold of large international business diversification. Therefore, Fitch may consider allowing the ratings on MSI to exceed Japan's sovereign rating by a maximum of one notch, taking into consideration MSI's other rating triggers.