HONG KONG, Oct 17 (Bernama-BUSINESS WIRE) -- AM Best has maintained its stable outlook on Japan’s life insurance market segment, citing in part the prospects for higher premium income based on rising interest rates, according to a new AM Best report.
In a new Best’s Market Segment Report, titled, “Market Segment Outlook: Japan Life Insurance,” AM Best notes an increase in sales for foreign currency-denominated savings products amid the rise in foreign interest rates, which should bolster premium income for Japan’s life insurers. Additional factors include potentially higher domestic interest rates and expected improvement in core profits due to the decline in COVID-related benefit payments.Japan’s life insurers have posted positive top-line growth in recent years; however, their core profits were adversely affected by pandemic-related losses and higher foreign-currency hedging costs in fiscal year 2022, which ended 31 March 2023. In view of Japan’s current operating environment and the significant drop in COVID-related claims, AM Best expects that the Japanese life insurers’ premium income will be stable for the remainder of the current fiscal year (ending 31 March 2024).
“Most life companies have maintained very strong capital positions amid heightened financial market volatility over the last 12 months,” said Charles Chiang, senior financial analyst, AM Best. “In our view, the Japanese life insurers’ adequate capital buffers will help them withstand the potential impact of volatility in both the domestic and global financial markets, as well as potentially higher domestic interest rates.”
The report also notes that, despite several long-term challenges—including an aging and shrinking population that limits the growth of Japan’s economy and life insurance market—life insurers’ operating performance will benefit from the improvement in core profits and a rise in investment income due to potentially higher domestic interest rates over the near term.
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