Japan’s Non-Life Insurance Segment Outlook Remains Stable - AM Best

KUALA LUMPUR, June 23 (Bernama) -- Global credit rating agency, AM Best has maintained its stable outlook on Japan’s non-life insurance segment, citing factors including rising interest rates and the introduction of the Japan Insurance Capital Standard (J-ICS).

According to Best’s Market Segment Report, heightened regulatory oversight, successive rate revisions and tighter underwriting terms continue to improve fire insurance profitability, supporting the stable outlook.

The report stated that interest rate hikes are widely anticipated for the remainder of 2026, although the pace and magnitude remain uncertain amid a slowing economy and a depreciating Japanese yen.

AM Best senior financial analyst, Charles Chiang said a higher interest rate environment provides Japanese non-life insurers with improved reinvestment yields.

“However, the sustained depreciation of the Japanese yen has cut both ways for the non-life market, generating translation gains on overseas earnings while simultaneously driving up claims costs in the voluntary and fire lines,” he said in a statement.

The J-ICS, which became effective from the fiscal year ended March 31, 2026, is expected to enhance the transparency and global comparability of Japanese non-life insurers, strengthening their credibility in cross-border transactions and supporting capacity for international expansion over time.

The report also noted that major non-life insurers are likely to remain focused on reallocating capital towards overseas expansion to offset long-term structural headwinds from large natural catastrophe exposures and the limited growth prospects of the domestic market.

As investment performance has remained a vital contributor to the non-life segment’s overall profitability over the past 12 months, AM Best expects it to remain an important earnings tailwind.

The report added that lower-than-expected natural catastrophe insured losses over the past year have supported underwriting results across the segment.

-- BERNAMA