Japanese life insurers pursue overseas deals as domestic growth slows

Insurers are expected to keep issuing hybrid capital to preserve credit quality.

Major Japanese life insurers are likely to continue pursuing overseas acquisitions or domestic non-insurance deals, as the potential for growth in protection-type products may diminish over the next decade amidst Japan’s declining population, according to Fitch Ratings.

Insurers are expected to keep issuing hybrid capital to preserve credit quality during cross-border M&A activity or periods of market volatility.

Japanese life insurers’ capital adequacy is expected to remain sufficient to support current ratings, driven by consistent core capital accumulation and ongoing hybrid capital issuance, Fitch added.

The ratings agency noted that fluctuations in government bond yields are not expected to have a significant direct impact due to

Japan’s accounting standards, which value both yen-denominated bonds and liabilities at amortised cost.

The impact of rising yen bond yields is projected to be limited, as the value of insurance liabilities is expected to fall more rapidly than the value of bonds in such a scenario. 

The surrender and lapse rate for traditional life insurance products remained unchanged at 4% in both FY 2024 and FY 2025, indicating stability despite increasing bond yields.