In 2025, Asia-Pacific insurers are anticipated to make significant strategic alterations, as forecast by CreditSights, a Fitch Solutions company. The focus is set to shift from savings policies towards better-margin protection products, a move that aligns with the ICS and IFRS 17 standards. This shift is likely to have a profound impact on the market landscape, with insurers reorienting their product portfolios to enhance profitability and meet regulatory benchmarks.
Japanese life insurers are poised to continue their overseas acquisition spree, particularly in the US, in an attempt to diversify and expand their operations. In contrast, Hong Kong insurers are more inclined to pursue organic growth within Asia. Interest rate movements will be a crucial determinant of market dynamics. Expected hikes in Japan could provide a boost to growth and solvency ratios, while further rate declines in Taiwan, Korea, and Hong Kong might exert pressure on returns and growth. Additionally, regulatory changes and foreign exchange risks will remain at the forefront of concerns. Korean insurers will have to contend with tighter lapse risk treatment and discount rate adjustments under the K-ICS framework, and Taiwan is gearing up to implement a new solvency regime by 2026. The depreciation of the US dollar also poses risks for Taiwanese and Japanese insurers with substantial overseas investments.
When it comes to investment opportunities, Nippon Life, Meiji Yasuda, and QBE Insurance have received outperform recommendations. However, Kyobo Life and Cathay Life are lagging behind. Kyobo Life is grappling with valuation pressures due to regulatory and market challenges, and Cathay Life’s tight spreads and lower solvency ratios make it less appealing compared to its Japanese and Korean counterparts. Looking forward, the primary market is expected to witness increased activity in Japan and Hong Kong, with major players like Nippon Life and AIA spearheading refinancing initiatives. Taiwanese insurers are likely to issue dollar bonds to comply with new solvency and accounting requirements, while South Korea may concentrate on local currency debt in light of stricter regulatory demands. These developments signal a period of significant transformation and strategic decision-making for Asia-Pacific insurers.
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