While insurers in APAC remain resilient to Nat CAT due to sound risk and capital support, it does not mean that they are not being tested on other fronts.
According to a S&P Global Ratings report, it was found that “a confluence of geopolitical and market risk, regulatory change and cyber security threats” are pushing up insurer costs.
These factors are:
More complex ALM
S&P noted that as rate-cut expectations remain constrained as energy-driven inflation sustains market instability and keeps policy rates near neutral, “insurers are therefore proactively managing duration and interest rate sensitivities to navigate these shifts”.
As a result, they expect “heightened capital adequacy volatility following equity market swings”, especially in countries such as South Korea and Taiwan.
Capital reassessment in the wake of regulatory updates
“Rapid regulatory evolution in APAC is driving a transition toward economic value-based reporting and higher capital standards,” said the report.
“This started in 2026 and has been most notable in Japan and Taiwan.”
This shift means that insurers may “to pursue more adaptive management strategies and increase their use of debt and hybrid instruments”, in order to sustain capital strength, according to S&P.
They also highlighted that reinsurance remains a highly valued risk mitigation strategy, and insurers continue to enjoy ready access.
Investment risk appetite remains steady
S&P’s report found that low yields and intense competition in investments “are driving insurers in Southeast Asia toward increased equity and alternative investments”. Japanese insurers were also observed to rotate out of “loss-making bonds and domestic equities in favour of higher-yield bonds and alternative investments”.
At the same time, they expect Chinese insurers to “gradually increase equity exposure over the next two years”.
The agency also called regulatory advocacy for equity investment “a recurring theme over the past decade”, and noted that 2025 was an inflection point, following intense pressure from the market for higher investment returns.
“Tightened regulatory capital requirements are pushing insurers in Korea and Taiwan to reduce risk and extend investment tenors,” the report stated.
Cyber security
“Rapid AI adoption and converging cyber security issues are risks to sector stability and issuer credit quality,” said the report.
As such, insurers in APAC have turned their focus to strengthening AI governance and defensive protections, even as they “continue to report a low level of cyberbreach events compared with other sectors in the region”.
Content reproduced with permission from S&P Global Ratings.