Japan’s financial regulator reviewing life insurers’ exposure to reinsurance risks

Japan’s financial regulator is assessing life insurers to evaluate the risks associated with their increasing reliance on transferring policy liabilities to reinsurers supported by global investment firms, as per a recent report from The Japan Times.

Japan’s total value of individual life insurance and annuity policies in force reached nearly $6 trillion.

As Reinsurance News understands, the market is driven by a combination of factors, including Japan’s aging population, high savings rates, and a strong cultural emphasis on financial security.

According to The Japan Times, in recent years, the country’s life insurers have increasingly entered contracts in which assets underwritten by reinsurance companies are invested to obtain higher returns.

“Reinsurers controlled by U.S. investment giants, including KKR & Co. and Apollo Global Management, are doing deals to manage billions of dollars backing the policies, which they are largely investing in high-yielding, low-liquidity private credit,” the report added.

With this in mind, Japan’s Financial Services Agency is investigating life insurers to assess the risks associated with their increasing reliance on reinsurers backed by global investment firms.

The Financial Services Agency is said to have inquired about the extent of this practice, the specific types of contracts insurers have in place, and the concentration of reinsurers based in Bermuda.

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