Sumitomo Life plans to invest 300 billion yen in private credit

[TOKYO] Sumitomo Life Insurance is considering allocating about 300 billion yen (S$2.4 billion) to private credit in the fiscal year starting April.

This is the latest push by a Japanese financial firm into alternative assets to boost returns. The Osaka-based insurer has been gradually increasing its private credit holdings.

Yukinori Takada, chief executive officer, said: “We’ve accumulated considerable expertise.”

He added that the asset class was attractive because “it offers the prospect of high spreads”.

Global investor sentiment towards the US$1.8 trillion private credit industry has soured, as weaker performance triggers a wave of redemptions from funds.

However, that has not damped Japanese insurers’ enthusiasm for the debt. The companies are considering putting more of their cash in riskier products such as private credit as interest rates rise, and they meet new regulations measuring their ability to pay insurance claims.

Sumitomo Life holds about 1.6 trillion yen in such debt, including collateralised loan obligations, said Takada.

The insurer did not disclose its earlier annual investment data on private credit. It held about 37.5 trillion yen in assets overall as at end 2025, making it one of the nation’s four biggest life insurer by that measure, data from the companies show.

Private credit, which is lending by firms that are not banks, tend to have longer investment periods. That is an attractive trait for life insurers that are keen to match the lengthy duration of their insurance products.

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Takada acknowledged that there are concerns about excessive investments in certain sectors of alternative debt where conditions may be deteriorating.

He said that his company has designated such credit as “priority” assets for the investment and risk management departments to jointly monitor.

The CEO also said that under a new three-year management plan starting in fiscal 2026, the company aims to raise its annual “spread income” from about 159 billion yen currently to around 300 billion yen, with a medium-term target in the 400 billion yen range.

Spread income is the difference between investment returns and yields promised to policyholders.

Toshiya Matsushita, a manager in the firm’s responsible investment team, said that the company, which aims to execute 700 billion yen of ESG-related investments and financing over the three-year period, will continue to examine opportunities in transition-labelled segments.

He noted: “One area we are especially focused on is transition finance. We intend to continue being proactive in this area in the next medium-term plan period.”

Transition finance typically describes the funding for activities intended to help polluters pay for the process of decarbonisation.

Japan has been the major market for the category, though global issuance of bonds and loans labelled to the theme declined to US$10.5 billion in 2025 from US$23.4 billion in 2024, based on data compiled by Bloomberg Intelligence. BLOOMBERG