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Research Announcement:

Moody's - Japan and Korea insurers remain at risk from coronavirus-related claims; sales and investment returns to weaken

 The document has been translated in other languages

20 March 2020

Tokyo, March 20, 2020 --

  • Insurers face risk of rising infections, along with business disruption and financial market volatility
  • Medical claims mitigated by government support and insurance caps

Moody's Japan K.K. says in a new report that despite so far low numbers of infections and accordingly low claims, insurers in Japan (A1 stable) and Korea (Aa2 stable) will face business disruption and financial risk from the coronavirus outbreak, with further downside risk should infections rise significantly.

Direct claims related to the coronavirus outbreak will come from two main sources: claims related to medical expenses and death benefits from infected victims; and claims related to specific conditions such as event cancellations and business interruptions.

"We expect insurers in both countries will see impact on capital both from increased death benefit claims and financial market volatility, but for medical claims otherwise to be limited with most expenses borne by governments and public health systems and the remainder typically capped," says Soichiro Makimoto, a Moody's Vice President and Senior Analyst.

"Moreover, many insurance policies do not cover for event cancellations and business interruptions if caused by infectious diseases," adds Makimoto.

While the potential cancellation of the Tokyo Olympics and Paralympics would trigger event cancellation insurance, Moody's believes the impact to Japanese P&C insurers will be manageable because of the low net exposure of the insurers to that risk.

"However, like other companies, insurance firms are seeing lower sales, with primary distribution channels affected by reduced in-person interaction," says Young Kim, a Moody's Analyst. "In addition, the insurers could see investment income decline as central banks push interest rates lower for a longer period."

In Korea, both life and non-life premiums are primarily generated from direct sales channels, including financial consultants and bancassurance, while in Japan captive sales agents remain key distributors of life insurance products.

Subscribers can access the report "Insurance - Japan and Korea: Coronavirus-related claims remain a risk; policy sales and investment gains to weaken" at: http://www.moodys.com/researchdocumentcontentpage.aspx?docid=PBC_1216515

For more research and insight on the coronavirus (COVID-19) outbreak, please see moodys.com/coronavirus

NOTE TO JOURNALISTS ONLY: For more information, please call one of our global press information hotlines: New York +1-212-553-0376, London +44-20-7772-5456, Tokyo +813-5408-4110, Hong Kong +852-3758-1350, Sydney +61-2-9270-8141, Mexico City 001-888-779-5833, São Paulo 0800-891-2518, or Buenos Aires 0800-666-3506. You can also email us at mediarelations@moodys.com or visit our web site at www.moodys.com.

This publication does not announce a credit rating action. For any credit ratings referenced in this publication, please see the ratings tab on the issuer/entity page on www.moodys.com for the most updated credit rating action information and rating history.

Soichiro Makimoto
VP-Senior Analyst
Financial Institutions Group
Moody's Japan K.K.
JOURNALISTS : 81 3 5408 4110
Client Service : 81 3 5408 4100

Young Kim
Analyst
Financial Institutions Group
Moody's Investors Service Hong Kong Ltd.
JOURNALISTS : 81 3 5408 4110
Client Service : 81 3 5408 4100

Sally Yim, CFA
Associate Managing Director
Financial Institutions Group
Moody's Investors Service Hong Kong Ltd.
JOURNALISTS : 81 3 5408 4110
Client Service : 81 3 5408 4100

Releasing Office :
Moody's Japan K.K.
Atago Green Hills Mori Tower 20fl
2-5-1 Atago, Minato-ku
Tokyo, 105-6220
Japan
JOURNALISTS : 81 3 5408 4110
Client Service : 81 3 5408 4100

© 2020 Moody’s Corporation, Moody’s Investors Service, Inc., Moody’s Analytics, Inc. and/or their licensors and affiliates (collectively, “MOODY’S”). All rights reserved.

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Additional terms for Japan only: Moody's Japan K.K. (“MJKK”) is a wholly-owned credit rating agency subsidiary of Moody's Group Japan G.K., which is wholly-owned by Moody’s Overseas Holdings Inc., a wholly-owned subsidiary of MCO. Moody’s SF Japan K.K. (“MSFJ”) is a wholly-owned credit rating agency subsidiary of MJKK. MSFJ is not a Nationally Recognized Statistical Rating Organization (“NRSRO”). Therefore, credit ratings assigned by MSFJ are Non-NRSRO Credit Ratings. Non-NRSRO Credit Ratings are assigned by an entity that is not a NRSRO and, consequently, the rated obligation will not qualify for certain types of treatment under U.S. laws. MJKK and MSFJ are credit rating agencies registered with the Japan Financial Services Agency and their registration numbers are FSA Commissioner (Ratings) No. 2 and 3 respectively.

MJKK or MSFJ (as applicable) hereby disclose that most issuers of debt securities (including corporate and municipal bonds, debentures, notes and commercial paper) and preferred stock rated by MJKK or MSFJ (as applicable) have, prior to assignment of any credit rating, agreed to pay to MJKK or MSFJ (as applicable) for credit ratings opinions and services rendered by it fees ranging from JPY125,000 to approximately JPY250,000,000.

MJKK and MSFJ also maintain policies and procedures to address Japanese regulatory requirements.

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