The outlooks and ratings on Japanese insurers will not be directly affected by Fitch Ratings’ recent outlook revision on the Japan sovereign to negative from stable, the international credit rating agency says.
This is mainly because the outlook on the Japanese insurance sector was already revised to negative and the outlooks on half of Japanese insurers’ public Insurer Financial Strength Ratings were also already revised to negative due to uncertainties over the coronavirus pandemic.The agency revised the outlook on the Japan sovereign on 28 July 2020 due mainly to the concern about the increasing public debt burden under the weak Japanese economy caused by the coronavirus pandemic.Both the Japanese life and non-life sector and rating outlooks were revised in March to reflect the comprehensive negative effects from the global COVID-19 contagion, before the outlook revision on Japan.Fitch revised the outlooks on the four Japanese insurers to negative from stable in April and May, considering the negative effects from the pandemic. The four insurers are Nippon Life Insurance (IFS Rating: A+/Negative), Meiji Yasuda Life Insurance (IFS Rating: A+/Negative), Mitsui Sumitomo Insurance (IFS Rating: A+/Negative), and Sompo Japan Insurance (IFS Rating: A+/Negative). Fitch took the negative action on these four companies due mainly to their high exposure to domestic equities.Fitch is maintaining the current industry profile and operating environment score for Japanese insurers, after the outlook revision on the Japan sovereign. This is because their underwriting businesses seem to remain rather resilient – despite the negative effects from the pandemic, such as social distancing – backed by their stable and seasoned insurance contract books and consistently favourable premium pricing, based on the agency’s recent observation.

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