The Asia-Pacific (APAC) life insurance industry is expected to maintain its resilience through 2025, according to Fitch Ratings.
While the overall sector outlook remains “neutral,” the ratings agency has identified diverging trends within the region, particularly in China and Taiwan, where sector outlooks have been revised to “deteriorating” due to mounting operational and market pressures.
Fitch’s latest briefing in Hong Kong highlighted that, despite ongoing market volatility and evolving regulatory environments, most APAC life insurers continue to demonstrate stable earnings and robust capital positions.
However, the agency noted that the situation in China and Taiwan warrants closer attention.
In China, the life insurance sector is grappling with slower premium growth, increased volatility in earnings, and heightened exposure to domestic equity markets.
The industry is also contending with changes in business mix, stricter commission frameworks, and a contracting agent workforce.
Persistently low interest rates are contributing to negative spread risk, while increased debt issuance could lead to higher leverage ratios.
Taiwan’s life insurance sector, meanwhile, has been affected by significant currency movements.
The appreciation of the New Taiwan dollar against the US dollar earlier this year resulted in foreign exchange losses for many insurers.
As a large proportion of Taiwanese insurers’ assets are held in US dollar-denominated investments, while liabilities are primarily in local currency, these currency fluctuations have had a direct impact on financial results.
The sector’s high reliance on overseas investments – accounting for around 70% of total invested assets – has heightened sensitivity to foreign exchange volatility and hedging costs.
Across the region, regulatory reforms are prompting insurers to adjust their business models and capital management strategies.
In Hong Kong, the introduction of the HKFRS17 accounting standard and the new risk-based capital regime, both effective from July 2024, are influencing insurers’ approaches to product design, investment allocation, and risk management.
The transition period for these reforms will continue until June 2027, providing insurers with time to adapt their operations.
Japanese life insurers have reported improved core profits and positive investment spreads, supported by declining guaranteed yields and rising domestic bond yields.
Despite these changes, the sector’s capital and earnings remain stable under local accounting practices, and the outlook for Japan’s life insurance market remains neutral.
In South Korea, life insurers are experiencing capital pressures linked to lower interest rates and updated regulatory requirements, such as revised actuarial assumptions and discount rates.
However, Fitch expects capital positions to improve through new business generation, issuance of capital securities, expanded reinsurance use, and active asset-liability management. While profitability is currently stable, insurers continue to navigate ongoing market volatility.
Looking ahead, APAC life insurers are expected to prioritise quality growth, prudent investment, and strong capital management in response to regulatory changes and market challenges.
Fitch Ratings anticipates that the sector’s financial resilience and adaptability will help maintain overall stability through 2025, despite continued regulatory shifts, currency fluctuations, and market uncertainty.
Beyond the life segment, the broader insurance industry in Asia-Pacific is projected to face another year of uncertainty.
Fitch Ratings has maintained a neutral outlook for the region’s insurance sector, citing steady capital adequacy and earnings resilience as key factors supporting the forecast.
