Chairman's Statement (Translation)
released on December 19th, 2002
(Dec. 19, 2002

I would like to report and comment on the major activities and events after the previous regular press meeting held in September 2002. Mr. Kunio Ishihara, Chairman
Mr. Kunio Ishihara, Chairman

1. Events in the non-life insurance industry

Severe economic conditions still continue to prevail in Japan with the advance of deflation and a drastic fall in stock prices. Comprehensive economic measures aimed at accelerating the disposal of bad loans to stabilize financial systems and at revitalizing industries are being put into practice. The non-life insurance industry, which plays a significant role in the financial sector, hopes the planned measures will be steadily implemented and contribute to the revitalization of the economy.

According to the figures of the 10 member non-life insurance companies which published their interim business results in November 2002, the business results of the non-life insurance industry for the first half of fiscal 2002 were as follows: although net premiums income increased by 3.5% compared with the same period in the previous year (a 0.2% increase excluding the effect of the revision of Compulsory Automobile Liability Insurance system), direct premiums income (including savings premiums) remained at a 1.0% increase. The loss ratio was improved by 3.2 percentage points, thanks to the lack of huge natural catastrophes. The expense ratio was also improved by 1.3 percentage points. However, the devaluation of the book value of securities, due to low stock prices, was still a factor which had an adverse impact on profits.

2. Practical measures

We have taken the following measures to date.

2.1. Measures for consumer protection

2.1.1. Review of the financial safety net

The working party on the financial protection system established in the Association drew up an interim report on the review of the policyholders protection system in September 2002. In the report, the working party confirmed that it is more important for the protection of policyholders to secure the payment of claims for an insurance contract when an accident occurs than to secure the continuity of an insurance contract. Although the working party has proceeded deliberately with the study on points of issues including the period of securing full amount of payments, the scope of "small-sized entities" to be protected and the range of long-term insurance contracts which need special measures, the party has not yet reached a final conclusion. The Association will continue its study on the review to ensure the stable operation of the protection system, and it wishes to map out practical directions as soon as possible.

2.1.2. Activities to respond to consumers

The Association has established its non-life insurance counseling offices in 14 regions and its automobile insurance claims counseling centers in 50 regions nationwide. For the first half of fiscal 2002, the number of requests for consultations the Association accepted amounted to 45,000, and that of complaints amounted to 265. These numbers have been increasing due to the diversification of insurance products following liberalization of the market. The Association will promptly report the results of these consultations and complaints to its member companies as well as analyze them to ensure the findings are utilized in its member companies' activities for consumers.
In fiscal 2002, the Association also implemented the essay contest titled "Safety and Security in Life" for high school students, in conjunction with the Non-Life Insurance Institute of Japan. The contest was the 40th since the first contest was held in 1963, and it received 12,208 responses from 240 high schools all over Japan including 2 responses in Braille. On December 12, 2002, the Association held a ceremony to award prizes to the excellent works selected by the judges.

2.2. Promotion of reform

2.2.1. Regulatory Reform Requests2

On December 12, 2002, the Cabinet Office Council for Regulatory Reform published the "Second Report Regarding Promotion of Regulatory Reform", and on December 17, the Cabinet decided that the government shall promote the necessary measures promptly, taking the Second Report into account as best as possible. 10 requests the Association submitted, including the review of the policyholders protection system and the introduction of electronic means of applications and filings in the government procedures, have been described in the Second Report. The Association will work with relevant authorities including the Financial Services Agency to realize the 10 items and other items of the industry's requests.

2.2.2. Tax Reform Requests

On December 13, 2002, the general principles for the amendment of the taxation system for fiscal 2003 drawn up by the ruling coalition party were disclosed and treated the request items the Association submitted as follows: 1) The request for the elimination of dual taxation on received dividends shall be studied and concluded in the amendment in fiscal 2004. 2) The request for the establishment of premium tax deduction systems (for insurance products which supplement the public social security system and for Earthquake Insurance on Dwelling Risks) which respond to changes in society shall be studied for a fundamental review of the future shape of the systems immediately. 3) The request for the creation of tax exemption measures for liability reserves which correspond to investment income from Compulsory Automobile Liability Insurance premiums shall be studied to reach a conclusion soon. The Association will continue to persuade relevant authorities to realize these requests as soon as possible.

2.3. Response to Globalization

2.3.1. Response to the Establishment of International Standards

The Association participated as an observer member in the 9th annual conference of the International Association of Insurance Supervisors (IAIS) held in Santiago, Chile in October 2002. At the conference, the principle on the supervision of reinsurance was adopted, and such issues as the supervision of the financial security of insurers and responses to terrorism risks in individual countries were discussed and reported.

2.3.2. Promotion of International Communication and Cooperation

The 21st Conference of the East Asian Insurance Congress (EAIC) was held at the Tokyo International Forum from October 20 to 25, 2002. With 1,126 participants from both the life and non-life insurance industries of 29 countries or regions, the Tokyo Conference was successfully concluded. At the conference, the "EAIC Declaration 2002, Tokyo" was adopted for the first time in the 40-year history of the EAIC. Under the Declaration, the East Asian insurance industry confirmed guiding principles such as commitments to rising to the challenges of meeting the changing and increasingly sophisticated needs of consumers and to doing its best in further strengthening its financial solvency and profitability by improving business efficiency, etc.

2.4. Response to social problems

2.4.1. Response to Automobile Theft

The number of automobile thefts for the first half of the year 2002 reached 30,728, a decrease of 2.9%, compared with the same period in the previous year, according to the National Police Agency. The amount of claims paid under the physical damage coverage of automobile insurance for automobile thefts also decreased by 7.2% to 28.5 billion yen. However, both the number and the amount still remain at a high level. The Association is carrying out a 2nd public awareness campaign from November 2002, following the positive results of the first campaign implemented in the first half of 2002. The Association will strengthen measures for the prevention of automobile theft in those regions which have witnessed an upward trend in thefts. It will also work with regional police departments and relevant organizations to establish regional automobile theft prevention councils in the 20 prefectures where the councils have not yet been established. At the meeting of the Joint Automobile Theft Prevention Project Team comprising of government agencies and the private sector held on October 15, 2002, the Project Team agreed to add thefts of construction machinery including power shovels to the targets for its preventive measures. As the number of secondary crimes of robbing banks of cash by destroying Automatic Teller Machines with stolen construction machinery has been increasing, the Association will take positive measures to prevent the theft of construction machinery from construction sites.

2.4.2. Response to terrorism risks

As a result of the approval of the Terrorism Insurance Bill signed by President Bush on November 26, 2002, major developed countries excluding Japan have all established terrorism risk compensation schemes supported by governments. The Association has studied a terrorism risk compensation scheme in its relevant committee, as it believes that Japan also needs to establish a terrorism insurance pool combined with government financial aid. The Association will persuade the government to realize the scheme as soon as possible.

2.4.3. Response to Insurance-related Crimes

In order to maintain social trust in the non-life insurance business and to promote the sound operation and development of the insurance system, the Association has carried out various activities for the prevention of insurance-related crimes. The Association established the Subcommittee on the Prevention of Insurance-related Crimes in 2001, and has implemented measures taking special emphasis on the following matters:

a. Improvement of Registration System of Contract Terms of Personal Accident Insurance
The Association implemented the Registration System of Contract Terms of Personal Accident Insurance in June 2001 to identify duplicate contracts of personal accident insurance with high insured amounts. The Association also improved the Registration System in 2002 to be utilized in checking payments for claims at the claims handling department.

b. Cooperation with Police
The Association has promoted the provision of information to and cooperation for criminal investigations with police departments through the "Non-Life Insurance Crime Prevention Councils" established in 47 prefectures nationwide, in order to prevent insurance-related crimes.

c. Participation in the "Joint Taskforce for Development and Dissemination of Building Components with High Ant-Burglary Protection"
Recently, the number of burglaries using picklocks has been increasing. The National Police Agency and the Ministry of Land, Infrastructure and Transport jointly established a joint taskforce comprising of government agencies and the private sector in November 2002. The purpose of this taskforce is to study measures for the development and dissemination of building components with high ant-burglary protection. The Association has also decided to participate in the joint taskforce to promote cooperation for the protection of trespassing crimes into houses and offices that adversely affect non-life insurance.

2.4.4. Measures to Promote Earthquake Insurance on Dwelling Risks

The ownership of Earthquake Insurance on Dwelling Risks policies per household is 16.2% in Japan, and the ratio of the number of residential fire insurance policies attached with this insurance to the total number of residential fire insurance policies is 30%. (Earthquake Insurance on Dwelling Risks shall be concluded when attached to any fire insurance policy, and cannot be concluded alone.) As the Association thinks it necessary to raise further public awareness of earthquake risks and the necessity of earthquake insurance (it will be eight years in January 2003 since the Great Hanshin-Awaji Earthquake occurred in 1995), it will hold a joint symposium with Shizuoka Prefecture entitled "Suggestions for the preparation for a Tokai earthquake" on January 25, and a symposium entitled "Suggestions for the preparation for a Tokai earthquake and an earthquake on the Ina-Dani fault line" on February 1, 2003, in conjunction with Nagano Prefecture, Ina City, etc.

2.5. Activities contributing to Society

Since 1952, as part of its activities contributing to society, the Association has made donations of fire fighting equipment to the Fire and Disaster Management Agency and local municipalities. On October 21, 2002, the Association received a letter of appreciation for its contribution from the Fire and Disaster Management Agency of the Ministry of Public Management, Home Affairs, Posts and Telecommunications. In fiscal 2002, the Association also made donations of fire prevention posters, fire engines, ambulances and various fire fighting equipment such as small-sized powered water pumps, to help promote regional fire and disaster prevention activities.

3. Conclusion

I will continue to make every effort to carry out measures to make non-life insurance open and consumer-friendly, listening to all consumer voices. I would like to ask for your continued support and cooperation.