Best’s Market Segment Report: AM Best Maintains Stable Outlook on Japan’s Life Insurance Segment

HONG KONG--(BUSINESS WIRE)--AM Best has maintained its stable outlook on Japan’s life insurance segment, noting among other factors annualised premiums in force that are expected to remain broadly steady along with greater demand for savings-type products.

Also underpinning the stable outlook, as detailed in the Best’s Market Segment Report, “Market Segment Outlook: Japan Life Insurance”, is life insurers’ investment income, which is increasingly becoming a crucial component of core profits, although partially offset by rising operating expenses amid structural inflationary pressures. In response to persistent above-target inflation, the Bank of Japan has continued to normalise its monetary policy, raising the benchmark interest rate to 0.75% in December 2025.

“Despite economic uncertainties, including the pace and magnitude of further benchmark rate hikes and persisting depreciation pressure on the Japanese yen, the fundamentals of Japan’s life insurance segment remain sound, supported by steady premium growth and an improving investment environment with higher domestic interest rates,” said Charles Chiang, senior financial analyst, AM Best.

According to the report, the life industry’s annualised premiums in force have remained broadly steady due to consistently low economic growth and an ageing and shrinking population. The industry’s overall premium income declined slightly in fiscal year 2024, interrupting the upward trend observed in the previous four years, primarily due to weaker sales of single-premium savings-type products, particularly foreign currency-denominated products.

“Over the next 12 months, AM Best expects the current macroeconomic environment to support demand for asset-accumulation products, offering some degree of inflation protection,” said Chanyoung Lee, director, analytics, AM Best. “The life industry’s product mix is likely to shift further toward Japanese yen-denominated products as domestic interest rates remain elevated while foreign interest rates ease.”

Other factors supporting the stable outlook include:

• Major Japan-based insurers have accelerated overseas expansion and diversified into adjacent domestic non-insurance market segments, reducing structural dependence on a contracting domestic insurance market and supporting medium-term earnings resilience.
• The mandatory transition to the economic value-based solvency regime for all insurers by fiscal year ending 31 March 2026 is proceeding in an orderly manner, with the market capitalisation well above regulatory thresholds, underpinned by active asset-liability management and the strategic use of asset-intensive reinsurance.
• Insurers’ investments in agency digitalisation and new third-sector products are expected to support protection-type sales over the medium term.

To access the full copy of this commentary, please visit http://www3.ambest.com/bestweek/purchase.asp?record_code=362794.

AM Best is a global credit rating agency, news publisher and data analytics provider specialising in the insurance industry. Headquartered in the United States, the company does business in over 100 countries with regional offices in London, Amsterdam, Dubai, Hong Kong, Singapore and Mexico City. For more information, visit www.ambest.com.

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