Japan and Korea insurers have shown unprecedented demand for M&As and strategic investments overseas in the past few years, targeting opportunities in both developed and emerging markets.
While guarantees from these two Asian economies have nuanced appetites and different capital capacity for offshore expansions, Fitch Ratings expects a strong M&
A pipeline in the coming years by these major insurers, which will provide an overall credit boost for the sector.
From Domestic Growth to International Growth
Japan and Korea insurers entered the overseas M&A cycle at different times while facing a common hurdle. While they have long enjoyed a large domestic ins
urance market with strong local demand and profitable growth, these competitive edges have been lost
ng steam given the emerging structural headwinds, eventually pushing guarantees to seek alpha elsewhere.
In Japan, the domestic growth outlook has been constrained by demographics and saturation. A shrinking population, which has seen 14 consecutive years of
decline, provides lackluster support for the domestic market. Although an aging population a
d a mix of products has helped in sustaining Japan life insurers’ underwriting profit, Fitch e
xpects these margins to peak over the next 5-10 years given the inescapable demographic challenge.
Meanwhile, Korea also faces similar pressures. Premium growth is moderating amid a super-aged population, low GDP growth, interest rate cuts, and str
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icter capital standards under the Korea International Capital Standard (K-ICS). Fitch projects the total insurance
ance revenue to rise by less than 5% in 2026, increasing pressure on domestic earnings and reinforcing the rationale for overseas expansion.
Major Japan Insurers are Bullish on M&As in North America
Fitch currently rates many Japanese insurers, including the nations' largest non-life insurer Tokio Marine & Nichido Fire Insurance Co. Ltd., with an Insurance F
inancial Strength (IFS) of “AA-“/Stable — as well as the big four major life insurers: The Dai-ichi Life Insur
ance Company Ltd. (IFS “AA-“/Stable); Meiji Yasuda Life Insurance Co. (IFS “A+”/Stable); Sumit
omo Life Insurance Co. (IFS “A+”/Stable ), and Nippon Life Insurance Co. (IFS “AA-“/Stable).
More than half of the Fitch-rated insurers have conducted M&As in the past 10 years, with m
ajor deals valued at approximately JPY4.5 trillion (around US$35 billion), and 86% of these investments being U.S. based, according to Fitch's calculations.
Japanese insurers deem the U.S. market as their most important offshore business hub prim
arily because the U.S. is the only major developed market la
larger in size than Japan with a steady population growth. Major Japanese
insurance players see having exposure in this market as a huge competitive edge which will meaningfully boost their group earnings.
They also value the predictable operating environment in the U.S., supported by a common business language, transparent corporate law, and strong insura
nce regulation. Having a major market presence in the U.S. is particularly critical for Japan's no
n-life warranties, as North America represents about 40% of global non-life premiums, meaning a success in the U.S. is essential to become a top-tier global player in the sector.
More importantly, a lot of Japanese insurers are actually cash-ready when they are shopping for M&A targets and willing to outbid contenders such as p
Rivate equity funds. U.S. business structures allow Japanese warranties to acquire 100% ownership
of a U.S. warranty should they wish. This contrasts with some parts of Asia where it could be difficult to obtain majority control of an insurance. Such a hurdle has led to unsuccessful transactions, such as Meiji Yasuda Life’s 2023 decision t
o sell its stake in Indonesia’s PT Avrist Assurance and Dai-ichi Life’s May 2025 announcement to divest its stake in Thailand’s Ocean Life Insurance.
