The insurance industry across Asia-Pacific is expected to face a year of continued market uncertainty in 2025, according to Fitch Ratings, which retained its sector outlook for the region as “neutral.”
The ratings agency cited steady capital adequacy and earnings resilience as key reasons behind the stable forecast, despite ongoing financial volatility and regulatory reform.
Life insurance providers in several markets are taking a more conservative investment stance to maintain profitability, while general insurers are prioritising cost controls and operational efficiency.
However, Fitch revised its outlook for China and Taiwan’s life insurance segments from “neutral” to “deteriorating,” citing increased exposure to domestic and external pressures.
In China, the downgraded outlook is tied to slowing growth and greater income variability. Shifting product structures and new distribution requirements are altering revenue streams.
Additionally, increased investment in domestic equities, in line with updated policy guidance, introduces further market risk.
Life insurers in the market may experience subdued premium growth, driven by a shift in business mix and regulatory changes to commission structures. A decline in agent numbers has compounded these concerns.
The ongoing low-interest rate environment continues to exert pressure on investment returns, leaving many firms vulnerable to negative spread risk.
Fitch also highlighted that rising debt issuance across the sector could elevate overall leverage levels.
Taiwanese life insurers, meanwhile, are grappling with foreign exchange volatility.
The significant appreciation of the New Taiwan dollar in May heightened the mismatch between US dollar-denominated assets and local currency liabilities. This currency exposure may result in valuation losses that impact capital strength and earnings performance.
Insurers are anticipated to expand hedging programs and raise sales of foreign currency policies, although these measures may increase costs.
APAC insurers are expected to experience near-term strain on investment income due to continued financial market turbulence.
Despite this, Fitch believes most insurers have adequate capital to weather losses.
In Japan, the sector’s capital position is not expected to be materially affected by rising domestic interest rates, as local accounting methods value bonds and liabilities on a book-value basis.
Insurers across the region are preparing for changes in solvency requirements, supported by proactive capital-raising initiatives.
General insurers may benefit from rising premium rates, but face offsetting pressures from reinsurance cost increases and exposure to climate-related catastrophes.
Strategies focused on improving underwriting margins and refining asset-liability management are expected to remain central in the year ahead.
Higher-margin product development and targeted rate increases are among the tools being used to counteract rising claims costs.
