Follow-up Meeting of Japan-US Insurance Talks(June 10, 1998

With the Financial System Reform Bill passing the Diet in June 1998, liberalization and deregulation measures which were initiated by the Japanese Big Bang (November, 1996) and the Japan-US Insurance Talks (December, 1996) will be implemented.

A follow-up meeting of the Japan-US Insurance Talks is taking place in Tokyo from June 9, and is discussing the crucial issue regarding the development of deregulation in the insurance sector.

1. Position of the Non-Life Insurance Industry

Following the passage of financial system reform bills, and with the reform of the rating organization to be implemented on July 1, 1998, the deregulation measures in the primary sectors which are stated in the Japan-US Insurance Agreement will be implemented totally.
Therefore, the measures to avoid radical change in the third sector should be removed by January 2001 in line with the Supplementary Measures concluded by Japan-US governments on December 24, 1996.

2. Explanation

(1) In line with the Japan-US Insurance Agreement, the subsidiaries of Japanese life and non-life insurance companies who are currently under substantial restrictions (the measures to avoid radical change) will be able to enter into the third sector from January 2001, two and half years later from July 1, 1998, by accomplishing the implementation of the primary sector deregulation by July 1, 1998.

[Third Sector]
The "Third Sector" are such insurances as cancer, medical, and personal accident insurance which are not classified into either life or non-life insurance.

Products sold by Life Insurers Products sold by Non-Life Insurers
First Sector Third Sector Second Sector
Life Insurance(Whole life,Endowment, etc.) Cancer, Medical Insurance Personal Accident Insurance, etc. Fire, Automobile Insurance, etc.

(2) With the Financial System Reform Bill passing the Diet, the following deregulation measures have been implemented in the primary sectors.

* Approval of automobile insurance policy with differentiated premium rates.
>> implemented in Sept., 1997

* Decreasing the minimum insured amount of commercial fire insurance to which advisory rates are applied with respect to the loading premium rates.
>> implemented in Jan. 1997 and Apr. 1998

* Expansion of insurance products to which the notification system applies.
>> implemented in Jan., 1997

* Abolition of obligation to use premium rates calculated by the rating organizations.
>> to be implemented in July, 1998

* Approval of application for differentiated products within the standard processing period.
>> implemented on case by case basis

Furthermore, at an early stage of the deregulation process, a supplementary resolution was adopted in the Diet when the current Insurance Business Law stipulating the mutual entry between the life and the non-life insurance through subsidiaries was approved in 1995, wherein it was stated that "due consideration should be paid not to leave intact for a long time the measures to avoid radical change in the third sector".

(3) However, the US government argues that, according to its own interpretation, the measures to avoid radical change in the third sector have not been fully followed and the deregulation of the primary sectors has not been fully implemented either. And, it maintains that the removal of the measures to avoid radical change in the third sector should be postponed.

(4) We can not accept such argument of the US side because we have to say that the above-mentioned argument of the US side is motivated to restrict substantially the subsidiaries of Japanese life and non-life insurance companies from entering into the third sector in which the U.S. insurance companies are enjoying advantageous position in the market.