As at 13 June 2016, Fitch Ratings has revised the Outlooks on 11 Japanese insurers to Negative from Stable.

The ratings on all of the insurers have been affirmed.

The eleven insurers are:
The Daiichi Life Insurance Company, Limited (Daiichi Life)
Daido Life Insurance Company (Daido Life)
Fukoku Mutual Life Insurance Company (Fukoku Life)
Meiji Yasuda Life Insurance Company (Meiji Yasuda Life)
Mitsui Life Insurance Company, Limited (Mitsui Life)
Mitsui Sumitomo Insurance Company, Limited (MSI)
Nippon Life Insurance Company (Nippon Life)
Sompo Japan Nipponkoa Insurance, Inc. (Sompo Japan Nipponkoa)
Sumitomo Life Insurance Company (Sumitomo Life)
Taiyo Life Insurance Company (Taiyo Life)
Tokio Marine & Nichido Fire Insurance Co., Ltd. (TMNF)

The rating action follows Fitch’s revision of the Outlook on Japan to Negative from Stable and affirmation of the sovereign’s Long Term IDR at ‘A’. (see Fitch Affirms Japan at ‘A’; Outlook Revised to Negative ( ) dated 13 June 2016).

The ratings of all the insurers, except TMNF, are capped at Japan’s Long Term Local Currency IDR.

In Fitch’s view, only insurers with very good credit quality and sizeable international business
diversification can be rated above the sovereign rating if they hold high levels of government debt (that is, more than 20% of their invested assets). Fitch views insurance groups that generate 20% or more of their net premiums from international business sources on a sustained basis would be considered as having sizeable international business diversification.

Fitch maintains its view that only TMNF out of the 11 insurers under review has achieved the
necessary international business diversification that counterbalances its heavy Japanese government debt holdings. This would allow the rating on the insurer to be up to one notch higher than the sovereign rating.

The Insurer Financial Strength (IFS) rating on TMNF is ‘A+’, one notch higher than Japan’s IDR, but Fitch has revised its Outlook to Negative from Stable. This is to ensure the rating is capped at a maximum of one notch above Japan’s rating.

The other 10 Japanese insurers have high levels of Japanese government debt and have not achieved the necessary level of international business diversification. As a result, Fitch will not allow them to be rated above the sovereign.

Source: Fitch Ratings Press Release 16 June 2016