Four of Japan's largest life insurers, including Dai-ichi Life Insurance Co., Meiji Yasuda Life Insurance Co., Sumitomo Life Insurance Co., and Nippon Life Insurance Co., recorded a combined $67 billion (¥9.838 trillion) in unrealized losses on their domestic bond holdings by the end of June. This figure represents an increase of $8.8 billion (¥1.293 trillion) from three months prior, primarily attributed to a significant selloff in super-long yen debt.
Nippon Life Insurance Co., Japan's largest life insurer, specifically saw its unrealized losses on domestic bonds reach a record $28 billion (¥4.164 trillion) in June. This was an approximately 16% increase from the previous quarter, driven by concerns about rising debt supply which caused bond yields to climb. The company also reported a loss of $1.3 billion (¥197.2 billion) from selling bonds purchased when yields were low.
In a related development, Nippon Life booked its first impairment loss since March 2024, amounting to $440 million (¥70 billion) in the fiscal year ending March 31. This impairment was due to the market value of some bonds falling over 50% from their acquisition price, indicating little prospect of recovery. This occurred after the Bank of Japan shifted its policy towards raising interest rates.
Japan's Financial Services Agency has initiated a review of major life insurers' financial health, sending inquiries to companies like Nippon Life to gather details on unrealized securities losses, their responses to these losses, and future investment strategies. Meanwhile, the Japanese Institute of Certified Public Accountants is proposing to ease accounting rules for bond losses, potentially allowing bonds held by insurers to match long-term policies to be treated as held-to-maturity, thus exempting them from certain impairment criteria.
