Kathmandu. Insurance companies in the Asia Pacific region are better positioned against natural calamities because of their strong exposure and capital backing.
That’s what S&P Global Ratings reports. However, that doesn’t mean insurance companies aren’t being tested on other fronts.
According to the report, a combination of geopolitical and market risks, regulatory changes and cybersecurity threats are driving up costs for insurers. “Energy-driven inflation maintains market volatility and keeps insurance rates close to neutral,” the report said, “because expectations for rate cuts are limited.” Therefore, insurance companies are pre-emptively managing the duration and interest rate sensitivities to address these changes. ’
As a result, insurers in countries such as South Korea and Taiwan expect more volatility in capital adequacy following equity market volatility.
According to the report, rapid regulatory changes in Asia Pacific are driving a shift towards economic value-based reporting and higher capital standards. “It began in 2026 and is most pronounced in Japan and Taiwan,” the report said.
According to S&P, this change means insurance companies can adopt more efficient management strategies to maintain capital strength and increase the use of debt and hybrid instruments. “Reinsurance remains an important risk mitigation strategy, and insurers continue to have ready access to it,” the report said.
The report found that low returns and intense investment competition are pushing insurers in Southeast Asia towards more equity and alternative investments. Japanese insurers were also seen moving from loss-reducing bonds and domestic equities to high-yield bonds and alternative investments.
S&P also expects Chinese insurers to gradually increase their equity exposure over the next 2 years. The agency also called regulatory support for equity investments a recurring theme over the past decade and noted that 2025 was a turning point after major market pressures for higher investment returns.
“Tighter regulatory capital requirements are forcing insurers in Korea and Taiwan to reduce risk and expand their horizons of investment,” the report said. ‘
The report warns that the rapid adoption of AI and related cybersecurity issues pose risks to the stability of the sector and the credit quality of issuers. That’s why insurers in the Asia Pacific region are focusing on strengthening AI governance and protective protection. However, they are reporting lower levels of cyber breaches in the insurance sector than other sectors. –Agency
