Asia Insurance Summer Series: Leverage in insurance; attractive ROE, but no free lunch

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Asia Insurance Summer Series: Leverage in insurance; attractive ROE, but no free lunch

J P M O R G A N Asia Pacific Fundamental Research

29 July 2026

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Asia Insurance

Summer Series: Leverage in insurance; attractive ROE,

but no free lunch

Leverage is a defining feature of insurance economics. Premiums are collected Insurance

ACupfront, claims are paid later, and the resulting float allows insurers to run larger MW Kim

balance sheets relative to their capital base. This is how the sector converts thin (852) 2800-8517

underwriting margins, often below 10%, into attractive ROE. The trade-off is equally mw.kim@jpmorgan.com

clear: higher leverage brings greater sensitivity to underwriting cycles, asset markets, J.P.MorganMorganBrokingSecurities(Hong (AsiaKong)Pacific)LimitedLimited/ J.P.

funding conditions and solvency pressures. For equity investors, leverage sits at the AC Matthew Hughart

centre of the valuation debate. Too much excess capital dilutes ROE, but excessive (852) 2800-6518

leverage raises the implied cost of equity and can drive a valuation discount. The right matthew.hughart@jpmorgan.com

question is not whether leverage is good or bad, but whether it is being used with J.P. Morgan Securities (Asia Pacific) Limited

sufficient capital resilience and earnings quality. In this report, we assess insurance Koki Sato AC

leverage through three lenses: underwriting leverage, asset leverage and financial (81-3) 6736-8609

leverage.