Chairman's Statement (Translation)
released on December 16, 2004
(Feb. 9, 2005

Mr. Hirano I would like to refer to our activities and events which were implemented or occurred after this past September when I made a Chairman's Statement. Mr. Hiroshi Hirano, Chairman
Mr. Hiroshi Hirano, Chairman

1. Repeated natural disasters

We had several typhoon landfalls and the Chuetsu Earthquake in Niigata Prefecture from September to December. I pray for the souls of those who perished in these natural disasters and would like to express my heartfelt sympathy to those who suffered damage from these natural disasters. The General insurance industry has made all-out efforts for consultation activities and prompt and proper claim payments by setting up a special task force in each area of distress so that the victims of such disasters can return to a normal life as early as possible. I realize once again the mission and responsibility of the general insurance industry which provides insurance payment against unexpected disasters and/or accidents with our customers.

The amount of claims payment for such natural disasters has been the largest over a decade. The General Insurance Association of Japan (GIAJ) is now calculating the estimated amount of claims payment for large scale natural disasters from member companies. Estimated amount of claims payment for storms and floods (from April 1 to December 4, 2004 when we had heavy winds) is 515.1 billion yen. The amount is the second largest behind that of 621.7 billion yen in 1991, since 1970 when the GIAJ started the calculations of damage resulting from natural disasters.
Each member company revised downward their earnings forecast when they released their interim results for the fiscal period that ended in September. However, each company prepares for such heavy claims by accumulating catastrophe loss reserves and/or by covering such risks with reinsurance so that each management is not affected excessively and drastically by the claims.
We expect that operation of our member companies will not be affected by this series of natural disasters and will be in good health in terms of annual accounting by drawing down on the catastrophe loss reserves.

2. Large package of tax revisions

It is every general insurer's social responsibility to pay claims reliably even when we have a large scale natural disaster that is really difficult to foresee the time and scale. Therefore, it is really important for general insurance companies to have a catastrophe loss reserve scheme which reserves a certain amount of premiums every year for future losses even though there is no claims payment during the policy term. As I mentioned above, insurers are meant to reserve a certain percentage of the premiums every year in accordance with the present catastrophe loss reserve scheme. With an increased tendency of the amount and scale of natural disasters, the scheme of the present catastrophe loss reserve will be revised from April 2005 to establish a more financially stable one. In particular, each member company will be required to determine their catastrophe disaster exposure based on the risk model of Isewan Typhoon disaster which was the biggest typhoon Japan has ever experience in 1959. Each company will then have to fund the policy reserve according to their determined exposure. If the cumulative funding amount falls below this level, companies have to set up a funding plan and systematically build the reserves.

The GIAJ has been actively lobbying the government to revise the tax code to increase the non-taxable portion of catastrophe loss reserves as one of the primary issues of our tax reform request in fiscal 2005. As a result of heavy claims on several large-scale natural disasters happened in this year, general insurers are going to draw down on their catastrophe loss reserves. Reflecting this fact, the non-taxable portion will be increased to 4% from the previous 3% according to the Basic Tax Policy published by the LDP.
Each member company will strengthen their risk management and maintain sufficient solvency to fulfill social responsibility to pay claims reliably.

3. Specific activities

(1) Enhancement of customer services

The GIAJ has 48 Automobile Insurance Claims Counseling Centers around the country to give a customer consultation service for claim payments of voluntary automobile insurance and compulsory automobile liability insurance. We started a full-scale operation of making a database of the complaints from customers in each Claims Counseling Centers to feed back to member companies from this past October.
The GIAJ has a General Insurance Counseling Office to give customer consultation services in general. We are also preparing to establish a complaints feedback system in the Counseling Office as with the Automobile Insurance Claims Counseling Centers. The GIAJ will reinforce the function of the complaints feedback system so that our member companies can analyze the complaint details and improve customer services.

(2) Implementation of social responsibility

a. Automobile theft prevention measures

The GIAJ has been lobbying local police departments of each prefecture to establish Automobile Theft Prevention Councils. Today, a new Council has just been established in Nagano prefecture. As a result of this establishment, now, all prefectures have the Council. The number of automobile thefts has been decreasing from October 2003 to October 2004 for 13 consecutive months on a month-on-month basis. As a result of this decrease, it is almost certain that the total number of thefts from January to December 2004 will also decrease compared with the number of last year. We believe that it is important for the Council to reinforce its function and take action to implement further effective automobile theft prevention measures so that the number of thefts will steadily decrease in the future.

b. Theft Prevention Day

The GIAJ has set October 7 as Theft Prevention Day. On the day this year, the GIAJ conducted an anti-theft campaign with support from Independent Insurance Agents of Japan Inc., local police, etc. About 1,800 people who work for our member companies, Independent Insurance Agents of Japan Inc. and local police called for crime prevention measures at 81 places in all 47 prefectures. The most important measure to prevent crime is to boost the crime prevention awareness of local residents. We hope that the Theft Prevention Day will be one of the triggers to boost crime prevention awareness and continue to conduct a campaign to establish such awareness among the general public.

c. Enhancement of disaster prevention

From January 18 to 22, 2005 the United Nations World Conference on Disaster Reduction will be held in Kobe. The GIAJ decided to hold the following two events officially during the Conference.

- The Exploration for Disaster Prevention Forum
The Exploration for Disaster Prevention is a hands-on educational program for elementary school children. They explore their town to find emergency facilities and make their own disaster prevention maps. In this Forum, we are going to hold a prize-giving ceremony for the disaster prevention maps (The GIAJ selects some of the best disaster prevention maps in terms of disaster preparation and disaster prevention education and gives prizes for them.) and also to introduce the Exploration for Disaster Prevention activity specifically.

- Radio Forum to educate the public about the importance of disaster prevention.
The GIAJ will invite radio presenters from all over the nation to Kobe. The purpose of this Forum is to make them understand the role of the radio when we have a large-scale earthquake, the importance of daily preparation for disasters, earthquake insurance, etc., by exchanging information and to deliver such information to their listeners.

To hold these two events in the United Nations World Conference on Disaster Reduction, we hope that not only the participants of these two events but also their families and listeners will increase their awareness of disaster prevention.

d. CSR (Corporate Social Responsibility) Report

We are drawing up the CSR report which explains our various corporate social responsibility activities such as disaster & crime prevention activities, environmental protection activities, etc.. The report will be issued this year. It is the first trial in publishing this kind of report among Japanese trading organizations. We hope the report helps our customers to understand our CSR activities and to recognize the general insurance industry as "familiar and trustworthy" for them.

(3) Response to the Personal Information Protection Law

The Association's compliance guidelines will be formally revised after reviewing the Practical Guidelines on Safety Management Measures which is the supplementary volume of the Guideline of the Personal Information Protection in the Financial Industry and Accreditation Criteria concerning Accredited Information Protection Bodies. The GIAJ's member companies are now preparing for the implementation of the Personal Information Protection Law on 1st April 2005.

4. Issues concerning Financial System Council

(1) Review of policyholders protection

The GIAJ established a task force in conjunction with the Foreign Non-Life Insurance Association of Japan in May 2002 to deliberate what system should be taken to protect non-life insurance policyholders. In March 2003, the task force drew up the report named " What a Policyholders Protection System should be" and the GIAJ has delivered its opinion to related bodies. Recently, the 2nd Subcommittee of the Financial System Council resumed discussion on review of the policyholders protection system. The Council held wide-ranging discussions on this matter and drew up the report on December 14. We appreciate that the report reflects the characteristic point of non-life insurer's policyholders protection, which we have mentioned before, namely that to secure claims payment is important for general insurance which aims to cover against damage. We are pleased that a revised policyholder protection system will be finally realized. We will further discuss practical aspects of this matter so that we can establish a stable and sustainable policyholders protection system in accordance with the revision of the Insurance Law.

(2) Regulation on unregulated cooperative insurers (Kyosai)

The 2nd Subcommittee of the Financial System Council drew up the report on unregulated cooperative insurers on December 14. Outlines of the report are as follows. - Unregulated cooperative insurers who sells insurance products to the general public should be strictly regulated by the Insurance Business Law.

- Cooperative insurers who truly limit their beneficiaries, such as cooperative insurers operating in a certain company should not be regulated by Insurance Business Law.
- Cooperatives for specific people, whose premiums are small and policy terms are short, should be regulated by making new provision in the Insurance Business Law.

I think that details such as revisions in the Insurance Business Law will be discussed based on the direction which is shown in the report on unregulated cooperative insurers. The GIAJ will closely watch developments on this matter to secure the effectiveness of regulation on unregulated insurers.

The year 2004 has only a few weeks remaining. This year was a tumultuous year for the general insurance industry as we had repeated natural disasters and a review of some insurance regulation systems which were longstanding pending issues. We, the general insurance industry, will continuously conduct our missions proactively by asking ourselves what the customer's and/or social expectations are towards us. We hope for your continued support of the industry.