Japanese life insurers' operating performance still resilient despite pandemic

| 08 Jun 2021

The overall credit fundamentals of Japanese life insurers are likely to remain healthy in the financial year ending March 2022 (FYE22), said Fitch Ratings (Fitch) in a new report.

Fitch believes that overall underwriting profits are likely to remain stable, backed by stable in-force businesses, which have been accumulating for decades, and the insurers' continued moderate growth in the more profitable third (health) sector. However, Japanese life insurers' new business may continue to be limited in FYE22 by a reduction in face-to-face meetings due to social distancing measures to curb the spread of COVID-19.

“We believe mortality losses caused by the pandemic will continue to be small, considering the number of deaths relative to population size in Japan has been much smaller than in US and Europe,” said Fitch.

“Other relevant net insured losses in popular medical insurance products would be small as claim payments for hospitalisation costs will be minimal due to the structure of typical medical insurance products in Japan.”

Fitch expects Japanese life insurers’ capital adequacy to continue to be sufficient for their ratings for some time, supported by accumulated capitalisation, including continued hybrid-debt issuance.

In addition, the ratings agency expects most Japanese life insurers to make efforts to reduce interest-rate risk so that they can cope with the new regulatory regime, which will be introduced in Japan from around 2025. The aggregate statutory solvency margin ratio remained high at 998% at end-March 2021, from 1,000% a year earlier.