Japanese life insurers' capitalisation and earnings to remain strong in FYE26

Written by Adam Cadle

11/06/2025

The credit fundamentals of Japanese life insurers will remain robust in the financial year ending March 2026, Fitch Ratings has said.

Fitch forecast that the capital adequacy of Japanese life insurers will continue to be sufficient for their ratings in the near future, primarily due to the steady accumulation of core capital and hybrid capital issuance.

"We expect minimal direct impact from fluctuating government bond yields, as yen-denominated liabilities and bonds are both recognised at book value using amortised costs under Japan’s generally accepted accounting principles.

"We assess the impact of further increases in yen bond yields as likely to remain limited, partly because the economic value of insurance liabilities will decrease more rapidly than the value of yen bonds when the bond yields rise. The surrender and lapse rate of Japanese traditional life insurers remained stable at 4% in FYE25 (unchanged from 4% in FYE24), despite rising bond yields, as life insurance products in Japan are not typically purchased for yields."

Major Japanese life insurers are likely to continue acquiring foreign life insurers or Japanese non-insurance companies to facilitate further growth, as expansion of profitable protection life insurance products is likely to peak within the next decade due to Japan's gradually contracting population, Fitch added. Japanese life insurers are actively issuing hybrid capital despite their already strong capital adequacy, to uphold their credit ratings when executing significant international M&A or when facing unexpectedly volatile global financial markets.

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