A.M. Best Briefing: Bank Of Japan's Introduction Of Negative Interest Rates Further Challenges Insurers

HONG KONG, Feb 10 (Bernama) -- The introduction of the negative interest rate by the Bank of Japan (BOJ) should put pressure on insurers' balance sheets and operating performances, according to a new A.M. Best briefing.

The Best's Briefing, titled, "Bank of Japan's Introduction of Negative Interest Rates Further Challenges Insurers," states that the BOJ's application of a negative interest rate of -0.1% on a portion of the excess reserves it holds will drive Japanese government bond (JGB) yields lower and increase volatility. This should put increasing pressure on insurers' profitability and capital management going forward, especially for life insurers, given their high exposure to JGBs. The JGB balance held by the life insurance sector reached about 43% of total invested assets at the end of November 2015. A.M. Best expects the extent of the impact from a further decrease in rates to be partly offset by insurers' efforts, including diversification of businesses and a reduction of asset risks.

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