The credit fundamentals of Japanese life insurers are expected to remain strong in the financial year ending March 2027 (FYE27), according to Fitch Ratings.
Capital adequacy, as measured by economic solvency ratios under the new regulatory regime effective from end-March 2026, will remain sufficient for their ratings Fitch added, primarily due to the steady accumulation of core capital and the issuance of hybrid capital.
“In addition, fluctuations in Japanese government bond yields have only a limited direct impact on capitalisation and earnings, partly because yen-denominated liabilities and bonds are both recognised at book value using amortised cost under Japan’s generally accepted accounting principles, Fitch stated.
Fitch said it believes the impact of further increases in Japanese yen bond yields is likely to remain limited, partly because the economic value of insurance liabilities declines more rapidly than the value of yen bonds when yields rise. The surrender and lapse rate of Japanese traditional life insurers remained stable at 4.6% in FYE26, compared with 4.3% a year earlier, despite rising bond yields, as life insurance products in Japan are not typically purchased for their yield.
“We project that major Japanese life insurers will continue acquiring foreign life insurers to support further growth, as expansion in profitable protection-type life insurance products is likely to peak within the next several years due to Japan’s gradually contracting population. We expect life insurers’ earnings growth to rely increasingly on an expanding positive investment spread, partly supported by steadily rising yen bond yields.”
