KUALA LUMPUR, May 13 -- AM Best has revised its market segment outlook on Japan’s life insurance industry to negative from stable, citing growing pressures the COVID-19 pandemic is placing on current and forecast economic conditions in the country.
In a Best’s Market Segment Report, AM Best states that the reasons for the revised outlook factor the global and Japan economies, with each facing probable recessions.
Also taking into account is the perennial hunt for yield that is increasingly difficult with the combination of interest rate cuts abroad and higher hedging costs.
There is also the greater likelihood of sharp reductions in corporate earnings, which likely will lead to declines in dividend income.
Although the ultimate impact of COVID-19 on the insurance industry remains uncertain, the global credit ratings agency expects that most major life insurers in Japan will record lower new business premiums and premium income for fiscal-year 2020-2021.
In addition, AM Best expects the majority of life insurance companies will see dividend income from equity securities shrink owing to deterioration in the overall economic and business environment.
AM Best also expects most life insurance companies in Japan to continue maintaining very strong risk-adjusted capitalisation, and likely to withstand potential impact on capital changes that may result from volatility in the global financial markets.
-- BERNAMA
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