Moody’s is considering a downgrade for Tokio Marine & Nichido Fire Insurance after Japan’s sovereign rating was cut to A1 with a stable outlook, down from Aa3.

The company has an Aa3 insurance financial strength rating, and the review will focus on whether its geographical diversification is enough to warrant maintaining a one-notch difference from the Japanese government bond rating.

“The review will also focus on a stressed capital analysis of Tokio Marine assuming a severe deterioration in the credit profile of the Japanese Government,” Moody’s says.

The Tokyo-based insurer has a significant exposure to Japanese government bonds and sub-sovereign bonds, but it has recently increased its overseas operations through mergers and acquisitions and organic growth.

“Tokio Marine’s insurance business is the most globally diversified among Japanese insurers on both a top-line and bottom-line basis,” Moody’s says.

It is the one of the largest property and casualty insurance companies in Japan, with consolidated total assets of ¥11.3 trillion ($112 billion).

Meanwhile, Moody’s has downgraded the insurance financial strength ratings of Nippon Life Insurance and Sony Life Insurance to A1 from Aa3.

Japanese life insurers have high investment levels in government bonds and relatively concentrated positions in the domestic insurance market.