Japan’s biggest life insurers are stepping up lending, with a focus on overseas projects including data centers, as higher interest rates make loans more attractive and surging investment in artificial intelligence and power networks fuels demand for capital.

Nippon Life Insurance Co., Daiichi Life Insurance Co. and Meiji Yasuda Life Insurance Co. said at investment briefings this month that they plan to increase lending in the second half of the current fiscal year ending March 2027, with much of the expansion focused overseas. Meiji Yasuda plans to boost lending for the first time in six years.

The shift highlights how the normalization of interest rates is reshaping portfolios at Japan’s giant insurers, which spent years reducing domestic corporate loans as ultra-low borrowing costs squeezed returns. Loans are now becoming more attractive as a source of steady income and portfolio diversification, while global spending on data centers, infrastructure and energy networks is creating opportunities for project financing.

“Rising interest rates have made the investments more attractive,” Kenichiro Kitamura, general manager and operating officer of Meiji Yasuda’s investment planning and research department, said at a briefing on Oct. 21. The insurer plans to expand project finance — loans repaid primarily from cash generated by the project — mainly overseas, while it will also respond to increased funding needs among Japanese companies.

Daiichi Life said at its briefing on Oct. 22 that it plans to increase investment in overseas infrastructure as well as leveraged-buyout loans in Japan. The LBO loan market is active and the insurer wants to expand investment in areas where it can earn higher yields, according to Naoto Ichimura, head of the investment planning department. Its loan balance declined in the first half because of heavy repayments.

Sumitomo Life also plans to increase overseas project finance but intends to “meet that demand selectively,” said Tadakazu Izumi, general manager of investment planning, at its briefing on Monday. “Corporate earnings are strong at the moment,” he said. “We’re seeing inquiries from companies about loans, and we’ve confirmed that corporate demand for funding is quite strong.”Nippon Life also plans to increase overseas project financing as US companies seek funding for projects including data-center construction.

“Floating-rate assets for project finance offer the prospect of earning a spread,” said Daisuke Ishida, executive officer of the firm’s finance and investment planning department, at a briefing on Oct. 23. The insurer is more cautious on conventional lending to Japanese companies as spreads remain tight and expected returns are low compared with other assets, Ishida said.

The four major insurers had about ¥15.7 trillion ($99.7 billion) of loans outstanding as of the end of June. Sumitomo Life expects its overall balance to decline because of repayments but remains willing to make new loans.

Loans made by the 41 members of Japan’s life insurance industry as of March 2025 were about ¥28 trillion, accounting for 6.7% of their assets. That contrasts with the roughly 70% level during the late 1960s and early 1970s, when insurers played a much larger role in financing Japanese companies.

A return to those levels is unlikely. Major insurers have increasingly provided credit through investment funds rather than direct lending, which may limit growth in loans held directly on their balance sheets.

Still, higher rates are putting lending back on insurers’ radar both in Japan and overseas, according to Kentaro Mukoyama, an analyst at S&P Global Ratings. As insurers make progress managing interest-rate risk, they have greater capacity to take credit risk, while rising yields have improved the appeal of loans as a diversification tool, he said.

The biggest insurers are nevertheless likely to remain selective rather than move aggressively into lower-quality credit because of their risk-management requirements, Mukoyama said.