News Life and Health07 Jun 2024

Japan:Life insurers' capitalisation and earnings to remain robust in FYE25

| 07 Jun 2024

Japan's life insurers' capital adequacy will remain appropriate for their ratings for the foreseeable future, thanks largely to consistent accumulation of core capital, forecasts Fitch Ratings.

Fitch, in its report, "Japanese Life Insurance Dashboard: FYE24 Results", also projects that the credit fundamentals of Japanese life insurers will stay strong in the financial year ending March 2025 (FYE25).

The agency believes most life insurers will continue working to mitigate interest-rate risk in anticipation of a new regulatory framework set to be implemented in Japan from FYE26. The overall statutory solvency margin ratio was a robust 934% at end-March 2024, only slightly down from 955% a year earlier.

Fitch thinks the easing of pandemic-related restrictions by the government in May 2023 will contribute to robust overall profitability in FYE25, boosted by solid underwriting performance. The strong earnings will also be supported by Japanese life insurers’ efforts in reinforcing their sales force and agency channels to revive sales to pre-pandemic level.

The combined core profits of the nine traditional Japanese life insurers surged to JPY2,080bn ($13.3bn), marking a 35% year-on-year increase in FYE24, primarily due to the significant reduction in insured losses related to the pandemic.

Fitch believes the life insurers continue to face significant risks from the financial markets. A clear negative impact may arise if there is a flattening of yen bond yields, an appreciation of the Japanese yen against the US dollar, a widening of foreign credit spreads, or a Japanese equity market crash in FYE25.


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