Japan Post taps KKR for overseas business access.
Japanese life insurers are expected to form more partnerships with global asset managers as they increase their exposure to private credit and other alternative investments.
The insurers are seeking greater diversification and access to investment expertise, particularly in private credit, structured credit, real estate and overseas markets, according to an S&P Global insight.
Nippon Life Insurance Co. has signed a memorandum of understanding with Blackstone Inc. for a strategic partnership covering private credit and real estate. Nippon Life expects to allocate about $9.5b (JPY1.5t)in new capital to Blackstone over the next five years for private credit and structured credit strategies.
Japan Post Insurance Co. Ltd. has also entered into a strategic partnership with KKR & Co. Inc. and KKR subsidiary Global Atlantic Financial Group Ltd.
The agreement gives Japan Post Insurance access to Global Atlantic’s platform as it seeks to expand and diversify its business overseas.
Japanese life insurers are expected to continue increasing their private credit allocations over time.
S&P Global Ratings said in a July 13 report that Nippon Life has adequate controls for managing investment risks under its enterprise risk management framework.
It also said the insurer has a sufficiently diversified investment portfolio and manages risks related to foreign exchange movements and concentration in individual investments.
The shift towards alternative assets comes as domestic interest rates rise. In a June report, S&P Global Ratings said major Japanese life insurers were replacing lower-yielding bonds with higher-yielding securities.
The rating agency also noted that unrealised gains on insurers’ equity holdings had exceeded unrealised losses on bonds. At the same time, insurers have been reducing or maintaining their domestic equity holdings whilst gradually increasing allocations to alternative assets.