JAPAN LIFE INSURANCE MARKET NEGATIVE OUTLOOK MAINTAINED - AM BEST

KUALA LUMPUR, June 29 (Bernama) -- AM Best is maintaining its negative market segment outlook on Japan’s life insurance segment, citing social and economic impacts of the COVID-19 pandemic on life insurers’ top-line growth and significantly dampened investment income due to low interest rates.

The United States-headquartered global credit rating agency’s new Best’s Market Segment Report, ‘Market Segment Outlook: Japan Life Insurance’, notes Japan continues facing ongoing pressure domestically and abroad from the economic fallout from the COVID-19 pandemic.

Consequently, AM Best’s negative outlook primarily reflects an anticipation of headwinds for the near-term operating performance metrics of Japan life insurers, and in its view, the current and forecast macroeconomic conditions are likely to suppress top-line growth and profitability of most domestic life insurance companies.

However, AM Best notes most life insurers maintain very strong risk-adjusted capitalisation, and are expected to be able to withstand the potential impact on capital changes that may result from volatility in the global financial markets.

According to the report, domestic life insurance sales in Japan recovered gradually over the second half of fiscal year 2020-2021, on the back of a slow but steady resumption of sales activity, and the implementation of new business strategies.

Based on a statement, these new initiatives include the increased use of online and digital tools to mitigate the impact of reduced face-to-face sales activity, as well as the promotion of new product features addressing heightened and emerging customer needs.

Downward pressure on economic activity may be exacerbated by uncertainty over the country’s vaccination rollout, although the risk of reduced activity is skewed toward business sectors that involve extensive face-to-face interaction.

AM Best is confident most Japanese life insurers’ will be able to maintain at least very strong levels of risk-adjusted capitalisation, while the major threat to Japan life insurers’ prospective economic solvency ratios continues to be the possibility of a steep reduction in domestic interest rates, especially excessive declines in super long dated bond yields.

For more information, visit www.ambest.com.

-- BERNAMA