Japan's Life Insurance Market Outlook Remains Stable - AM Best

KUALA LUMPUR, Oct 17 (Bernama) -- Global credit rating agency, 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 its new 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, according to AM Best in a statement.

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 March 31, 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 March 31, 2024).

The report also notes that, despite several long-term challenges, 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.

Japan’s life industry posted an increase of nearly 16 per cent in premium income, to 34.5 trillion Japanese yen (US$232.4 billion) in fiscal year (FY) 2022. The double-digit growth was also due to a low base effect from depressed new business premiums in FY2021 due to the pandemic. (US$1=RM4.72)

The rating agency expects the United States interest rates to remain at the current elevated level but Japan’s interest rates to remain at a significantly lower level.

However, the report notes that the rise in sales of foreign currency-denominated products owing to foreign interest rate movements is usually temporary in nature and cannot be sustained over the medium term.

-- BERNAMA