Moody's Investors Service Inc. said Tuesday it has put the financial strength ratings of seven Japanese life insurers under review for possible downgrade, citing the weak economy and high incidences of policy surrenders.
The seven include Nippon Life Insurance Co., which has a Aa3 rating; Dai-Ichi Mutual Life Insurance Co., A3; and Sumitomo Life Insurance Co., Baa1.
The other four are Daido Life Insurance Co. and Fukoku Mutual Life Insurance Co., both of which are rated A3; and Meiji Life Insurance Co., A2; and Mitsui Mutual Life Insurance Co., Ba1.
The national life insurance industry has sunk to a perilous state because the deteriorating economy and share prices have induced "high instances of policy surrenders, lapsation" and sluggish sales of new policies, Moody's noted.
In addition, Japan's historic low interest rates are making it next-to-impossible for insurers to invest pooled premiums in domestic vehicles that will allow them to deliver promised yields to policyholders.
The so-called negative spreads have resulted in a long-term decline in the insurers' profitability, Moody's said.
Although life insurers have been pursuing consolidation and alliance strategies to shield themselves from the harsh conditions, this is unlikely to be sufficient to end their woes, it said.
"The difficult situation is further exacerbated by the lack of resources of those entities from where external support could potentially be derived," it added.