Fitch Ratings, the international credit ratings agency, believes Japan’s leading non-life insurers are well placed to continue delivering strong underwriting results.
The agency said robust earnings from overseas operations and improving conditions in the domestic motor and property insurance markets are expected to support performance, although profits generated from the disposal of strategic shareholdings are likely to reduce during the financial year ending March 2027 (FYE27).
According to Fitch, Japan’s three largest non-life insurance groups – MS&AD Insurance Group Holdings, Inc. (operating entity Mitsui Sumitomo Insurance Company, Limited; Insurance Financial Strength (IFS) Rating: A+/Stable), Sompo Holdings, Inc. (operating entity Sompo Japan Insurance Inc; IFS Rating: AA-/Stable) and Tokio Marine Holdings, Inc. (operating entity Tokio Marine & Nichido Fire Insurance Co., Ltd.; IFS Rating: AA-/Stable) – reported combined profits of more than JPY2 trillion in the financial year ended March 2026 (FYE26). Fitch Ratings said the result was primarily driven by significant gains from the sale of strategic shareholdings.
Fitch noted that all three groups recorded healthy underwriting performances across their international businesses during FYE26. The agency attributed this to continued expansion in US speciality insurance, supported by both organic business growth and mergers and acquisitions, together with stronger underwriting results across European operations.
At the same time, domestic underwriting improved as revised pricing in Japan’s motor and property insurance markets and lower catastrophe-related claims offset increasing vehicle repair costs.
The agency said the insurers’ aggregate combined ratio improved to 94% in FYE26, compared with 99% in the previous financial year, reflecting stronger underwriting discipline and a more favourable claims environment.
Fitch also believes the three insurance groups remain well capitalised and have sufficient financial strength to support future growth. Their economic solvency ratios stayed above 200% throughout FYE26, underpinned by strong levels of core capital and reserves.
The agency added that the introduction of IFRS 17 is expected to improve consistency when comparing Japanese insurers with international peers, without materially changing the groups’ underlying credit profiles.
Looking ahead, Fitch expects underwriting performance to remain resilient despite lower anticipated gains from strategic shareholding disposals. As the value of remaining holdings continues to decline, proceeds from future sales are expected to reduce. During FYE26, these disposals generated aggregate investment profits of JPY2 trillion, accounting for 90% of the insurers’ combined ordinary profit of JPY2.2 trillion, compared with 97% in the previous financial year. Fitch noted that these gains are excluded from net income under IFRS 17 accounting rules.
The ratings agency expects overseas operations to remain a significant source of earnings. According to Fitch Ratings, continued investment in US speciality insurance through acquisitions and organic expansion should continue to support underwriting profitability, while stronger European performance provided an additional boost to MS&AD Insurance Group’s results during FYE26.
Fitch also highlighted continued improvements in underwriting quality across the domestic market. Fewer natural catastrophe claims and higher premium rates for motor and property insurance contributed to the lower combined ratio, helping insurers absorb the financial impact of rising repair costs.
From a capital perspective, Fitch Ratings considers all three groups to be in a strong position to support ongoing expansion. Economic solvency ratios remained comfortably above 200% in FYE26, with Tokio Marine Holdings reporting a ratio of 268%, calculated using a 99.5% confidence level.
On accounting standards, Fitch Ratings said the transition from Japanese GAAP to IFRS 17 will improve transparency and comparability with international insurers while having no material effect on the credit fundamentals of the three groups. Sompo Holdings adopted IFRS 17 from FYE26, while MS&AD Insurance Group Holdings and Tokio Marine Holdings are expected to implement the standard from FYE27.
