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Japan Insurance Report Q1 2012
Business Monitor International, Jan 2012, Pages: 79
Business Monitor International's Japan Insurance Report provides industry professionals and strategists, corporate analysts, insurance associations, government departments and regulatory bodies with independent forecasts and competitive intelligence on Japan's insurance industry.
This is BMI’s inaugural report on the insurance sector of Japan. In spite of the ongoing stagnation of the Japanese economy, and the shrinking of the total population, the sector continues to present enormous opportunities. Because of their domination of both the non-life and the life segments (with overall market shares that exceed 90%), the main beneficiaries of these opportunities will be the leading Japanese companies. However, there will also be opportunities for the foreign multi-nationals who have the capital, the global scale and the vision to establish a presence years ago.
The Great East Japan Earthquake of March 11, 2011 presented the insurers with enormous challenges: however, the latest reports of every company highlight how each has moved swiftly to pay the claims and meet the needs of their customers who suffered as a result of this tragedy. As is the case with other industries in Japan, the logistical and organisational strengths of the country’s insurers are formidable. Far less important have been the financial challenges. For the non-life insurers, much of the risks were laid off with Japan Earthquake Reinsurance, with the government and with the global reinsurance industry.
The life insurers have extremely high solvency margins and have been easily able to absorb the costs. Just three titanic listed companies account for 90% of the premiums in the non-life segment. All three companies are the result of mergers conducted over recent years that would rank as large and complex transactions in any country. All three continue to achieve rationalisation benefits. They are now moving to merge and rationalise their life subsidiaries – which are important sources of current and future earnings. Cross-selling of non-life and life products is a possibility. In an orderly market, rates for autorelated lines are being increased. To a greater extent than the major life companies, the leading non-life groups have expanded into foreign markets and will continue to grow their businesses outside Japan in the coming years.
The absolute scale of the Japanese life insurance companies means that the absolute gains which can be made from increasing the productivity of the various distribution channels, and/or from reducing operating costs, are enormous. Most are actively seeking to make their products easier for clients to understand. Some are focusing on products that should appeal to people who are aged over 50 – a growing demographic in Japan. Others are developing strategic partnerships with foreign companies which have a proven track record with annuities and other retirement savings products. As yet, a wildcard remains Postal Reform. The legislation that provides for the government to sell down its investment in Japan Post Insurance, and for that company – the largest life insurer in the country – to broaden its activities remains stuck in the National Diet. Depending on the details of how it is implemented, Postal Reform could be an opportunity or a threat for the other life companies.
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