Fitch sees APAC insurers stable in 2025 with capital buffers

Life insurers are focusing on quality through conservative investment strategies.

Fitch Ratings expects Asia-Pacific's (APAC) insurance sector to remain resilient in 2025, backed by solid earnings and capital buffers despite persistent market volatility.

The outlook for China and Taiwan’s life insurance sectors has been downgraded to ‘deteriorating’. In China, weakening growth, volatile earnings, and structural shifts in products and distribution are weighing on the sector. 

Increased equity exposure, declining premium growth, and negative spread risks in a low-interest environment are further challenges. 

Taiwan’s downgrade follows a sharp appreciation of the New Taiwan dollar, exposing insurers to currency mismatch risks as most liabilities are backed by US dollar assets. Firms are expanding hedging and shifting toward more US dollar-denominated policies.

Across the region, life insurers are pursuing quality growth via conservative investments, whilst non-life insurers focus on operational efficiency and cost control. 

Underwriting, capital management, and asset-liability strategies are being adjusted to meet market conditions.

Despite short-term earnings pressure, Fitch believes most insurers can absorb market shocks, aided by robust capital buffers. Japan’s life insurers remain stable, supported by accounting rules that limit volatility from rising bond yields.

APAC insurers are also preparing for new solvency rules, supported by capital-raising efforts. Non-life insurers are expected to benefit from premium hikes but face risks from natural catastrophes and reinsurance costs. 

Focus on high-margin products and pricing adjustments is expected to continue as insurers manage claims inflation and broader market challenges.