Starr International's insurance ratings soar after AM Best's positive outlook

Japan's life insurance market has demonstrated resilience, with AM Best maintaining a stable outlook despite the nation's aging and shrinking population. This stability is attributed to a notable growth in premium income, driven primarily by rising sales of single-premium savings-type products. These trends emerged over the past two years, correlated with the increased investment income and profitability for insurers. The report also notes significant diversification in revenue streams as companies expand into new markets and related business sectors. Since the Bank of Japan's interest rate hike, sales of Japanese-yen denominated products have gained momentum, indicating a shift in consumer preference amidst the global economic climate. The industry's performance has remained robust, particularly with the significant increase in annualized premiums for new policies observed in fiscal year 2023. AM Best's analysis highlights that even with the rise in foreign currency-denominated products, local sales have maintained their ground. Despite potential vulnerabilities tied to fluctuating interest rates and the transitory nature of premium growth, the outlook for the next 12 months remains optimistic due to favorable interest conditions both domestically and abroad. Analysts predict ongoing interest in savings-type products as they align with current market conditions. However, there are warnings regarding the future health of the market. The growth driven by savings-type products might be temporary, potentially yielding lower premiums as interest rate fluctuations occur. Sales of such products tend to provide narrow profit margins, thus limiting their impact on the overall profitability of Japan's life insurers. As the sector navigates these challenges, a cautious approach is necessary to safeguard long-term stability. Simultaneously, AM Best has shifted its outlook on Starr International Insurance (Thailand) to positive due to the company’s strong balance sheet, strategic integration with Starr Group, and projected improvements in operational performance. The company is adapting its focus toward specific industries, including construction and engineering, which is likely to bolster its presence in the Asian market. Overall, these developments reflect a shifting landscape in the insurance sector across Japan and Thailand, driven by changing economic factors and consumer behaviours.