23-D-0239
June 2, 2023

Trends in Economic Value-Based Solvency Regulations andOthers
The following is Japan Credit Rating Agency, Ltd. (JCR)'s opinion on the progress toward the introductionof new regulations for financial health on insurance companies in Japan.
(1) With the introduction of new economic value-based solvency regulations (new regulations) for
domestic insurance companies just around the corner, life insurers are increasingly disclosing theireconomic solvency ratios (ESRs). The ESRs of the four major life insurance groups are now available
for the fiscal year ended March 31, 2023. In assessing the creditworthiness of life insurers, JCR
focuses on capital adequacy in quantitative terms. The higher the rating range, the higher theweighting of the assessment on the sufficiency of capital, taking into consideration the sufficiency not
only under the current regulations but also the sufficiency on an economic value basis.
(2) The new regulations, which will focus on the calculation of ESR, are expected to be finalized in thespring of 2024, following discussions at an expert panel and analysis of the results of ongoingdomestic field tests, and to go into effect in 2025, with the calculation of regulatory capital based on
the new standards assumed to begin at the end of March 2026. Currently, the ESRs disclosed byindividual companies are figures based on internal control-based risk management. Since these ESR
figures reflect their risk characteristics, and the assumptions used are different among them, it is not
appropriate to simply compare them, and JCR does not see the high and low figures as astraightforward indication of differences in capital adequacy. However, a certain degree of uniformity
in assumptions and other factors will be achieved after the introduction of the new regulations, whichshould increase the comparability of ESRs based on regulatory compliance in terms of capital
adequacy.
(3) In reviewing the ratings of life insurers over the past two years or so, JCR has in a phased mannerincorporated into its ratings a reduction in the total amount of interest rate risk through efforts suchas lengthening asset durations and reviewing liability structures, and a progress in reduction in thesensitivities of economic value-based indicators including ESR through a reduction in the risk amount.
The current ESRs disclosed by individual companies are generally consistent with the assumptions
used in the assessment of capital adequacy that JCR has incorporated into its ratings so far. Inaddition, although the new regulations are expected to be more complex than the current regulations
and to impose considerably heavier administrative burdens, JCR believes that each company is fully
capable of responding to these challenges and will be able to make a smooth transition to the newregulations.
Kiichi Sugiura, Tomohiro Miyao, Seito Achiha, and Kota Matsuzawa
Japan Credit Rating Agency, Ltd.
Jiji Press Building, 5-15-8 Ginza, Chuo-ku, Tokyo 104-0061, Japan
Tel. +81 3 3544 7013, Fax. +81 3 3544 7026
Information herein has been obtained by JCR from the issuers and other sources believed to be accurate and reliable. However, because of the possibility of human or mechanical error as well as other factors,
JCR makes no representation or warranty, express or implied, as to accuracy, results, adequacy, timeliness, completeness or merchantability, or fitness for any particular purpose, with respect to any suchinformation, and is not responsible for any errors or omissions, or for results obtained from the use of such information. Under no circumstances will JCR be liable for any special, indirect, incidental orconsequential damages of any kind caused by the use of any such information, including but not limited to, lost opportunity or lost money, whether in contract, tort, strict liability or otherwise, and whether
such damages are foreseeable or unforeseeable. JCR's ratings and credit assessments are statements of JCR's current and comprehensive opinion regarding redemption possibility, etc. of financial obligations
assumed by the issuers or financial products, and not statements of opinion regarding any risk other than credit risk, such as market liquidity risk or price fluctuation risk. JCR's ratings and credit assessments
are statements of opinion, and not statements of fact as to credit risk decisions or recommendations regarding decisions to purchase, sell or hold any securities such as individual bonds or commercial paper.
The ratings and credit assessments may be changed, suspended or withdrawn as a result of changes in or unavailability of information as well as other factors. JCR receives a rating fee paid by issuers for
conducting rating services in principle. JCR retains all rights pertaining to this document, including JCR's rating data. Any reproduction, adaptation, alteration, etc. of this document, including such rating
data, is prohibited, whether or not wholly or partly, without prior consent of JCR.
JCR is registered as a "Nationally Recognized Statistical Rating Organization" with the U.S. Securities and Exchange Commission with respect to the following four classes. (1) Financial institutions, brokers
and dealers, (2) Insurance Companies, (3) Corporate Issuers, (4) Issuers of government securities, municipal securities and foreign government securities.
JCR publishes its press releases regarding the rating actions both in Japanese and in English on the same day. In case that it takes time to translate rating rationale, JCR may publicize the summary version,
which will be replaced by the full translated version within three business days. (Regarding Structured Finance products, JCR only publicize the summary version in English.)

1/1
Copyright © Japan Credit Rating Agency, Ltd. All Rights Reserved.