Kathmandu. Fitch Ratings expects the Asia Pacific insurance sector to remain strong in 2025 with solid earnings and capital buffers, despite continued volatility in the market.
Fitch downgraded China and Taiwan’s outlook for the life insurance sector to “deteriorating”. China’s weak growth, unstable incomes and structural changes in production and distribution are weighing on the sector. Rising equity risk, falling premium growth and negative spread risk in an environment of low interest rates are the challenges ahead, Fitch said.
Taiwan’s downgrade followed the sharp valuation of the new Taiwan dollar. As a result, insurers are at risk of currency mismatch. Because most liabilities are backed by U.S. dollar assets. Firms are expanding hedging and returning to more US dollar-determined policies.
Across the Asia Pacific region, life insurers are pursuing quality growth through conservative investments. While non-life insurers are focusing on operational efficiency and cost control.
Underwriting, capital management and asset-liability strategies are being adjusted to meet market conditions. Despite short-term earnings pressures, Fitch believes that most insurers can cope with market shocks with the help of a strong capital buffer.
Fitch predicts that life insurers in Japan, backed by accounting rules that limit volatility from rising bond yields, will remain stable.
Insurers in the Asia-Pacific region are also preparing for new solvency rules backed by capital enhancement efforts. Non-life insurers are expected to benefit from premium increases. However, they may face risks from natural disasters and reinsurance costs.
Insurers are expected to focus on adjusting high margin production and pricing as they manage rising claims and wider market challenges.
