Overall, APAC's life insurance sector overall has a 'neutral' outlook at the moment, Fitch Ratings head of APAC insurance ratings Jeffrey Liew said at the company's media briefing.
“That is mainly due to resilient earnings and strong capital buffers, even though there has been a lot of market volatility and regulatory changes,” said Mr Liew.
China and Taiwan deteriorating
“But it is worth noting that we have revised the life sectors in both China and Taiwan to ‘deteriorating’ because of growing market and operational pressures, while other markets in the region are still looking stable.”
China’s outlook is due to its slower growth, earnings volatility and increased exposure to domestic equities, he said.
He also noted that premium growth is likely to remain weak in the country, as shifts in business mix, stricter commission structures and a shrinking agent workforce are expected to affect the segment.
“Persistently low interest rates, negative spread risk remains a concern and rising debt issuance could push leverage higher,” he said.
Additionally, Taiwan’s life sector’s outlook has been contributed to the New Taiwan dollar (TWD) appreciating sharply in May.
“Most Taiwanese life insurers hold a lot of USD-denominated assets to get higher yields and offset negative spreads from older policies, while most of their liabilities are in TWD,” said Mr Liew, even as he noted that overseas investments make up about 70% of the sector’s total invested assets.
He said, “The sudden appreciation of the TWD against the USD in early May led to FX-related net losses for many insurers. We have seen that recent FX volatility has been sharper than in the past, and with high hedging costs and ongoing market uncertainty, especially from US tariffs, a quick recovery does not seem likely.”
Hong Kong and Japan expected to remain strong
Life insurers in Hong Kong are “expected to maintain strong capital positions as the new HKFRS17 accounting standard and the Hong Kong risk-based capital regime”, according to Mr Liew.
He said, “These reforms are already driving changes in business mix, investment strategies and capital management, with a transition period set until June 2027.
“Many insurers, especially those supported by international groups or banking parents, are adopting more advanced capital and asset-liability management to keep their financial strength intact.”
Likewise, Japanese life insurance companies have enjoyed strong performance, with traditional players reporting a jump in core profits and positive investment spreads, he said.
“The positive spread should widen further, partly because guaranteed yields are declining,” he said.
“Domestic bond yields are rising in Japan, but capital and earnings are not greatly affected under the local accounting rules, and our sector outlook remains ‘neutral’ with solid profitability expected in the near term.”
Korea under pressure
In South Korea, life insurance companies are under some “capital pressure due to falling interest rates and stricter regulations,” said Mr Liew, even as he highlighted lower liability discount rates and updated actuarial assumptions.
“Still, their capital positions should improve with new business, capital securities issuance, greater use of reinsurance and active asset-liability management. Profitability looks stable for now, but market volatility continues to be a challenge,” he said.
In closing, Mr Liew noted that across APAC, life insurers are actively responding to regulatory changes and market challenges.
He said, “They are focussing on quality growth, prudent investment and strong capital management. Even though regulatory shifts, currency fluctuations and market uncertainty are likely to persist, the sector’s financial resilience and adaptability should help maintain stability through 2025.”