Fitch Ratings has maintained a ‘neutral’ sector outlook for Asia-Pacific (APAC) insurance in 2025, citing stable underlying earnings and strong capital buffers across most markets despite persistent investment volatility and macroeconomic headwinds.
Life insurers in the region are pursuing more selective growth through cautious asset allocation, while non-life insurers focus on operational efficiency and cost control.
However, Fitch revised its outlook on China and Taiwan’s life insurance sectors to ‘deteriorating’ from ‘neutral’, citing specific market pressures that could affect earnings stability and capital strength.
In China, the downgrade reflects rising earnings volatility, slower premium growth, and regulatory shifts that are reshaping product distribution and increasing equity exposure.
A continued reduction in the agent workforce, tighter commission structures, and low interest rates have heightened negative spread risks. Life insurers are also facing higher leverage levels due to increased debt issuance.
Taiwan’s life sector faces pressures from the sharp appreciation of the New Taiwan dollar in May. The resulting currency mismatch poses a threat to earnings and capital, as many insurers have liabilities in local currency backed by U.S. dollar assets.
Fitch expects insurers to ramp up hedging strategies and boost sales of U.S. dollar-denominated policies to manage exposure, despite the added costs.
The report notes that while investment market volatility is expected to weigh on earnings in the near term, insurers’ capital reserves are sufficient to absorb potential losses.
Japanese life insurers are relatively shielded from rising domestic yields due to the country’s book-value-based accounting treatment of bonds and liabilities.
Across APAC, insurers are preparing for updated solvency regulations and continue to engage in capital-raising efforts.
Non-life players may benefit from premium rate hikes but remain exposed to natural catastrophe claims and higher reinsurance costs.
Fitch believes insurers will rely on underwriting discipline, asset-liability management, and a shift toward higher-margin products to manage evolving risks and maintain stable performance.
Business News Asia