Credit rating agency Fitch Ratings has forecasted that Japanese life insurers will uphold strong credit fundamentals through the financial year ending March 2025 (FYE25).
The agency predicts that capital adequacy for these insurers will remain stable and sufficient for their ratings, primarily due to the consistent build-up of core capital.
It anticipates that life insurers will continue to address interest-rate risk in preparation for a new regulatory framework set to be introduced from FYE26. At the end of March 2024, the statutory solvency margin ratio was reported at 934%, slightly down from 955% the previous year.
Fitch expects the easing of pandemic-related restrictions by the Japanese government in May 2023 to contribute to overall profitability in FYE25. This will be supported by solid underwriting performance and efforts to reinforce sales forces and agency channels to recover sales to pre-pandemic levels.
In FYE24, the combined core profits of nine major Japanese life insurers surged to JPY2,080 billion, marking a 35% year-on-year increase, mainly driven by reduced pandemic-related insured losses.
Despite these positive indicators, Fitch warns of potential risks from financial markets. These risks include the flattening of yen bond yields, yen appreciation against the US dollar, widening foreign credit spreads, or a potential crash in the Japanese equity market during FYE25.
The release of Japanese life insurers’ credit rating comes on the heels of the Health, Labour, and Welfare Ministry’s announcement of its plan to launch a comprehensive survey to gather data on health insurance and pension premium payments made by foreign residents.
This initiative aims to understand the current and future impact of foreign nationals on Japan’s social security system. It is part of the country’s broader strategy to address labour shortages by inviting more foreign workers.
It follows the Lower House’s recent approval of a bill to amend immigration laws, including a provision to revoke the permanent residency of foreign nationals who evade taxes. This clause has drawn criticism from some rights groups, who view it as discriminatory.
The immigration law revisions also propose replacing the technical intern training program with a new system that allows foreign workers to switch employers and extend their stay in Japan.
