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

AM Best has maintained its stable outlook on Japan’s life insurance market segment, citing in part the growth in premium income and stable core profits that are supported by higher levels of investment income, according to a new AM Best report.

In a new Best’s Market Segment Report, titled, “Market Segment Outlook: Japan Life Insurance”, AM Best notes premium income has increased significantly over the past two years, driven mainly by rising sales of single-premium savings-type products. The report also cites the diversification of revenue streams among Japan life insurers by expanding into new markets and adjacent business lines.

Even with a surge in sales of foreign currency-denominated products since 2022, due to rising foreign interest rates, sales of Japanese-yen denominated products have gained traction in the past year, following the Bank of Japan’s interest rate hike. While many advanced economies started easing monetary policy amid persistent disinflation, Japan entered a tightening cycle in March 2024.

The increase in sales of savings-type products in Japan’s higher interest rate environment also led to a strong year-over-year surge in the annualised premiums of new policies in fiscal year 2023. “Despite Japan’s aging and shrinking population, total annualised premiums of policies in force have been fairly stable in recent years,” said Charles Chiang, senior financial analyst, AM Best. “We expect the sales of savings-type products likely to continue over the next 12 months, owing to the favourable interest rate environment both in Japan and overseas.”

According to the report, the industry’s overall premium income may still fall short of levels seen in fiscal year 2023, as the growth in premiums driven by savings-type product sales is typically transient and vulnerable to unfavourable fluctuations in interest rates. Robust demand for savings-type products may enhance the industry’s premium income in the near term, but these products tend to have relatively narrow profit margins, offering a limited positive impact on the bottom line of most of Japan’s life insurers.

To access the full copy of this market segment report, please visit http://www3.ambest.com/bestweek/purchase.asp?record_code=349627.

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

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