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Fitch Ratings is out with a note lowering its outlook on Japanese insurers. They lowered their rating to stable from positive. See biggest risks for Japanese insurers will continue to stem from financial markets in 2020.

Japan Typhoon Hagibis

Fitch Ratings revised its outlook on Japanese life and nonlife insurers to stable from positive


  • Japanese Insurers Investment Risks Likely to Rise in 2020
  • Biggest risks for Japanese insurers will continue to stem from financial markets in 2020
  • Fitch expects insurers to boost their investments in foreign credit-spread products in search of yield amid the 'super-low' interest rates in Japan.
  • Fitch expects most Japanese traditional life insurers to raise exposure to unhedged foreign fixed-income securities as long as they expect volatility in the US dollar/Japanese yen rate to be limited, and as currency-hedging costs are likely to stay high.

A number of powerful typhoons struck Japan recently and affected the country’s non-life insurers, with japan's industry giants likely forced to pay a combined $8 billion in insurance payments in the current fiscal year that ends in March Reuters reported. Japan’s top three non-life insurers - MS&AD Insurance Group Holdings (8725.T), Sompo Holdings (8630.T) and Tokio Marine Holdings (8766.T) said on Tuesday that insurance payments for damages from two recent strong typhoons will reach a combined 868.8 billion yen ($8 billion). That followed 1.5 trillion yen in insurance payments in the previous year, when torrential rain in western Japan led to severe flooding and landslides that killed more than 200 people in the country’s deadliest weather disaster in 36 years.

Sompo Holdings also downgraded its net profit estimate for the current fiscal year to 118 billion yen, down 19.5% from the previous year and a turnaround from an initial estimate of a 14.6% profit increase on last year.

The rising risk from natural disasters has become hard to ignore for Japanese companies.

Some non-life insurers are considering raising insurance fees to make up for the cost. “We’d like to consider raising fees” in response to a series of big natural disasters in the current year and a rising number of old houses suffering from water leaks, said Hirokazu Fujita, senior managing director of Tokio Marine.

Last month, Typhoon Hagibis caused 71 rivers to burst 140 levees over vast areas in eastern Japan, following massive floods and power outages from Typhoon Faxai in September.  The vulnerability of corporate Japan to the fallout from huge natural disasters is real. Three quarters of Japanese companies have been hurt by natural disasters over the past two years, suffering damage to factories, office buildings, distribution networks and supply chains, a Reuters survey found.

Fitch said that Japan’s government debt level has ballooned over the past three decades, rising from 65 per cent of gross domestic product at the end of 1991 to 233 per cent at the end of last year. Fitch stripped the country of its triple A rating in 1998, and now rates Japan five notches below at A. Despite having the highest public debt in the world, Japanese yields have stayed very low, largely thanks to huge bond purchases by the Bank of Japan.

Source: "Fitch Ratings 2020 Outlook: Japanese Life and Non-Life Insurance" via Reuters

From The TradersCommunity News Desk

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