Japanese life insurers increase US exposure for stable returns

Fitch expects the share of overseas business from North America to grow steadily.

Japanese major life insurers are expected to intensify their expansion into the US market, driven by limited domestic growth opportunities, according to Fitch Ratings. 

Over the past decade, these insurers have increasingly focused on acquiring medium-sized, high-quality US life insurance companies as part of their international diversification strategy.

Fitch views these acquisitions positively, citing the insurers’ strong credit profiles, robust capital positions, and long-term investment strategies. 

The US market, supported by stable population growth, offers earnings potential that aligns with the strategic objectives of Japanese insurers.

As of now, North American operations contribute approximately 20% to the total business of Japan’s major life insurers, with over 70% of activities still concentrated in Japan. 

However, Fitch expects the share of overseas business, particularly from North America, to grow steadily in the coming years as international markets outpace Japan in terms of growth.

Despite the opportunity, Fitch notes that the expansion carries risks. 

Volatility in financial markets, persistent inflation, and broader macroeconomic pressures could affect performance. 

A downturn in US real estate or private credit markets, for example, could pose significant challenges. 

Should North American operations grow to a larger share of total business, these risks may have a more pronounced impact on the insurers' overall credit profiles.