Life insurers in Asia Pacific are pursuing quality growth through cautious investment strategies, while non-life insurers are focused on efficiency and expense control according to a non-rating action commentary by Fitch Ratings.
The commentary said the outlook for China and Taiwan life insurance sectors has, however, been revised to ‘deteriorating’, from ‘neutral’, amid rising challenges. “China's ‘deteriorating’ life insurance outlook is driven by slower growth prospects and earnings volatility. Changes in products and their distribution, along with increased domestic equity exposure under new regulatory initiatives, pose challenges.
“Premium growth may also weaken due to business mix transitions and commission cost tightening, exacerbated by the drop in agent numbers. Negative spread risk will persist in the continued low-interest rate environment. Increased debt issuance will lead to higher leverage for the sector.”
Speaking about the outlook for Taiwan's life insurance sector which also stands revised to ‘deteriorating’ due to risks from the sharp appreciation of the New Taiwan dollar, the commentary says, “This currency shift exposes insurers to potential losses, affecting capital and earnings. Insurers are vulnerable to significant currency mismatches as most liabilities are backed by US dollar assets. Insurers are likely to boost hedging, and increase sales of US dollar policies, despite higher costs.”
Fitch Ratings has maintained its 2025 sector outlook for APAC insurance at ‘neutral’, supported by resilient underlying earnings and capital buffers, despite heightened market volatility.
The Rating agency said, “We expect the increased investment market volatility since the start of the year to weigh on insuers’ earnings in the near term. However, we expect the insurers to have sufficient capital buffers to withstand related losses. At the same time, Japanese life insurers’ capital and earnings are unlikely to be directly affected by rising yields on yen-denominated bonds because both the bonds and insurance liabilities are recorded at book value, rather than market value, under Japan’s accounting regulations.”
Insurers across APAC are preparing for new solvency regulations, supported by ongoing capital-raising activities. Non-life insurers stand to benefit from premium rate hikes, but face risks from extreme weather and rising reinsurance costs. The sector is poised to navigate investment volatility, regulatory changes and catastrophe claims through proactive measures in underwriting efficiency, capital management and asset-liability management.
Fitch Ratings said we believe insurers will continue to focus on higher-margin products and rate increases to manage rising claim costs.
It said, “The APAC insurance sector is generally well positioned to manage the challenges we anticipate. The focus remains maintaining stable performance through efficient operations and strong capital management. Regulatory changes, extreme weather activity and investment-market volatility are key factors influencing the outlook, but the sector's robust capital position and strategic initiatives are likely to support stability and growth.”