Working toward a more secure, safer society
- What we can do to bring smiles and vitality back to the people of Japan -
(June 21, 2012

I would like to report progress on our major initiatives during my one-year tenure of office as Chairman of the GIAJ and offer my views as follows:

1. Introduction

 The business environment was very severe when I assumed office as Chairman, as the whole Japanese economy was faced with serious problems such as decline in production and consumer spending, shredded supply chains and a limited electricity supply, in the wake of the Great East Japan Earthquake. Even since then, large-scale disasters have occurred across the world, including typhoons in Japan, massive floods in Thailand, cyclonic storms, tornadoes, and hailstorms in many areas. Such disasters have made us re-realise our social mission and roles.

 Japan's economy has been flat with its recovery being held back by various factors, such as the worldwide economic slowdown due to the debt crisis in the eurozone, the appreciation of the yen, falling stock prices, and delayed responses to reconstruction-related demand following the Great East Japan Earthquake. Although the economy showed signs of recovery temporarily at the end of 2011 with rising stock prices, it slowed again due to the recurrence of Greece's problems and the prolonged appreciation of the yen. We see that there is little room for optimism.

Mr. Shuzo Sumi, Chairman 
The General Insurance Association of Japan
Mr. Shuzo Sumi, Chairman
 In addition to the economic conditions, there are many issues to solve in order to deal with the increasingly aging population, including integrated reform of social security and taxation systems as well as creating a growth strategy. Over the past year, our anxiety related to the uncertainty of the future has grown.

 As the financial reports of our 26 member companies for fiscal 2011 indicate, the business environment for the industry has been severer than ever, because of the surge in claim payments following the occurrence of large-scale disasters in Japan and overseas, a continuing high loss ratio for automobile insurance, and the worsening investment environment.

2. Unified post-disaster responses of the industry

 We have prioritised measures for proper and prompt payment of Earthquake Insurance claims regarding the Great East Japan Earthquake, so that general insurance could help rebuild the affected people's lives and contribute to the early recovery and reconstruction of the affected areas. While appropriately responding to customers who submitted claims, we also actively reached out to other customers to thoroughly access and confirm their situations and encouraged them to make claims when relevant.

 We have also advanced our industry's unified efforts to improve the market penetration of general insurance including Earthquake Insurance. Our specific measures are as follows:

(1) For proper and prompt payment of Earthquake Insurance claims

 The GIAJ has led the post-disaster responses of the industry and dealt with various issues in supporting our member companies' operations, under the basic policy of the Earthquake Insurance Central Command adopted by the board just after the earthquake. The measures for proper and prompt payment covered responses to customer inquiries, damage assessment, simplified contract procedures, an extension of the grace period regarding the conclusion of continuing insurance contracts and premium payments, and provision of related information.

 In particular, we have made industry-wide efforts to actively encourage policyholders to review if any covered claim has been identified on various occasions, including policy renewal, issuance of tax credit certificates, and visits by agents. Through these measures, the total amount of Earthquake Insurance payouts has reached 1.2346trillion JPY for 780 thousand cases (as of May 31, 2012, for Dwelling Risks).

(2) For improving the market penetration of Earthquake Insurance

 We held an Earthquake Insurance Promotion Campaign through media such as newspapers, radio, and TV, in order to promote public awareness of the Earthquake Insurance system. We also conducted community-based promotional activities, including open lectures on disaster prevention in all six prefectures of the Tohoku region.

 While the total number of Earthquake Insurance policies has increased in all prefectures, they have increased by more than 10% as a national average since the Great East Japan Earthquake (as of March 31, 2012, on a year-on-year basis). We recognise that our promotional activities as well as rising consumer awareness of earthquake risk have helped improve market penetration.

(3) For the stable operation of the Earthquake Insurance system

 The total amount of claims paid for the Great East Japan Earthquake reached more than 1.2 trillion JPY. The Earthquake Insurance system, which was introduced to help stabilise affected people's lives, has broadly been appreciated as being effective. On the other hand, challenges have emerged, such as responses to the increase of Earthquake Insurance policies and decreased monetary reserves of the system.

 We have submitted requests to the Japanese government to deal with the above-mentioned issues toward the sustainable and stable operation of the Earthquake Insurance system. Within the past year, the government decided on the continuance of the Special Account for Earthquake Reinsurance, the increased limit for total payments under the Earthquake Insurance system, and the review of burden sharing between the government and the industry. We recognise that the Earthquake Insurance system is making steady progress in attaining the confidence of policyholders.

 Furthermore, in April this year, a project team for the Earthquake Insurance system was established at the Ministry of Finance, where strength of the system and product-related issues are being discussed. We reported to the second meeting on May 25 on issues for consideration in improving the system and products, based on our customers' voices, the balance between benefits and burdens, and the system's sustainability and stability.

 We will continue to fulfill our social responsibility to build up public trust and confidence in the Earthquake Insurance system.

 Adding to the various measures related to Earthquake Insurance, we have sorted out our challenges and reviewed our action plan in a time of disaster, to enhance our preparedness, including the smooth launch of a system to handle inquiries from policyholders about which insurers their insurance contracts are concluded with. We will continue to fulfill our expected roles in case of emergencies.

3. Specific measures for other key issues

 We have taken the following measures, focusing on the unified post-disaster responses of the industry, our highest priority, as well as other priority issues we identified at the beginning of my tenure:

(1) Addressing environmental issues

 Last August, we established a project team to promote the use of recycled automobile parts and later held a promotional campaign for the use of recycled parts, supported by relevant ministries and co-sponsored by auto industry organisations.

 In June this year, a meeting to examine challenges and specific measures to promote the use of recycled automobile parts in repairing vehicles was held with the participation of relevant ministries and organisations. We reported to the meeting on our declaration of the promotion of the use of recycled parts and the outcome of our activities so far, including the result of user questionnaires.

 We will continue to participate in relevant meetings to examine and implement measures to gain recognition among automobile users.

(2) Improving the quality of insurance business administration

a. Education for insurance solicitors
 We began a new examination system for general insurance solicitors in October last year, targeting more than two million people. We launched an industry-wide rule that passing the examination is required for insurance solicitation. For the smooth operation of the system, we also started operating the Insurance Solicitors Qualification Information System, which consolidates information on all solicitors' qualification status.

 Under the new examination system, we have strengthened education for solicitors by enhancing curriculum on the Earthquake Insurance system based on our responses to the Great East Japan Earthquake.

 We will launch the General Insurance College Course in coming July. The program is designed for those who have passed the examination for general insurance solicitors and seek to further their careers.

b. The General Insurance ADR (Alternative Dispute Resolution) Center
 In addition to the main General Insurance ADR Center in Tokyo, we started ADR services this April in another 10 cities where our branch offices are located, to increase our capacity to resolve complaints and disputes. We also began to implement the new PDCA cycle to improve the quality of business administration in consideration of customers' voices.

c. Advisory Panel to Listen to Consumers' Voices
 During the panel's June 19 session this year, we received valuable comments from the panel members on our measures to deal with the priority issues set in our Sixth Mid-term Business Plan, such as improvement of customer convenience and promotion of the efficiency of business processes by enhanced standardisation. The panel advised us that advancing the measures is also important from consumers' perspective.

 We will try hard to improve the quality of business administration through constant efforts to enhance customer convenience.

(3) Promoting traffic accident reduction, disaster and crime prevention, and traffic safety

a. Theft Prevention Day
 Last October, we engaged ourselves in awareness-raising activities to help prevent auto thefts, car break-ins, and residential burglaries in all 47 prefectures. We also held an automobile theft prevention campaign, as part of the Government-Private Sector Joint Automobile Theft Prevention Project.

 Theft prevention activities, which we have conducted for over 10 years, have more than halved the number of automobile theft cases from peak levels. On the other hand, the number have been on the rise again recently, particularly in theft-prone areas. We will continue our theft prevention measures.

b. Exploration for Disaster Prevention
 The Exploration for Disaster Prevention program is for school children to study crime and disaster prevention as well as road safety through hands-on experience. This year's program attracted a record number of 1,643 map submissions amid the increasing awareness of disaster prevention after the Great East Japan Earthquake.

 Other activities we have conducted include holding explanatory sessions and seminars on supplementary reading materials for hazard maps and publication of traffic safety guides for senior drivers. Through such measures, we have strived to enhance public awareness of disaster prevention and reduction.

(4) Further enhancing the soundness of the industry

a. Solvency II in Europe (Equivalence assessment)
 Last October, the European Insurance and Occupational Pensions Authority (EIOPA) announced that it found Japan's reinsurance regulation largely equivalent with that of Solvency II. We have submitted comments on the issue, including our views on the soundness of the industry. We hope that the European Commission will also recognise the equivalence of Japan's reinsurance regulation.

b. ComFrame and G-SIIs
 It is expected that the International Association of Insurance Supervisors (IAIS) will start a full-scale examination of key regulatory issues such as solvency standards, toward the goal of establishing the Common Framework for the Supervision of Internationally Active Insurance Groups (ComFrame). The GIAJ has been calling on the IAIS to realise through ComFrame supervision and regulations that enhance the soundness of internationally active insurance groups.

 We also recognise that concrete discussions will begin about the assessment methodology and policy measures for G-SIIs (Global Systemically Important Insurers). We will closely monitor the developments and call for the creation of a reasonable framework in consideration of general insurance-specific features.

 In September last year, I had an opportunity to make a presentation on our response to the Great East Japan Earthquake at the IAIS 2011 Annual Conference in Seoul. I reported on the unified industry-wide efforts and the structure and goals of the Earthquake Insurance system supported by government reinsurance. We believe that we gained the wide understanding of the effectiveness of the system and the financial soundness of the Japanese general insurance industry among insurance supervisors and industry representatives from around the world.

 The recent large-scale disasters, including the massive floods in Thailand, highlighted the importance of our member companies' proactive measures, such as Enterprise Risk Management, to prepare for increasingly complex and globalised risks. The GIAJ will support such efforts to enhance the soundness of each member company.

(5) Financial System Council

 The working group on regulations related to insurers' group management, which was established in March last year, concluded that the following four issues should be subject to deregulation. On March 30 this year, a bill to revise the Insurance Contract Law, which will lead to deregulation of the issues, was enacted.

1) A review of the regulation on the scope of the business of subsidiaries regarding an acquisition of a foreign insurance company

2) A review of the regulation on a large credit limit in terms of the relations between a parent insurance company and its subsidiary

3) Re-commissioning of insurance solicitation to an insurer in the same group

4) A review of the regulation on insurance policy transfer including an abolition of the provision on suspension of the sale

 In June this year, a working group on provision of insurance products and services was launched and vigorous discussions are being held. We will actively provide input to the working group, particularly on simplified solicitation documents to improve customer convenience, a topic also featured in our Sixth Mid-term Business Plan.

 We will continue to take part in council discussions to further improve customer convenience and corporate value.

(6) Requests for tax reform in the next fiscal year

 A large package of tax revisions for fiscal 2012 was released in December. Although we had requested as a priority issue the elimination of double taxation on dividend income and related measures, including an increase of the gross revenue reduction for such income, no change was made to the package from the previous one.

 For the 2013 package, the centerpiece of our requests will be enhancement of the catastrophe loss reserves including those for fire insurance. The special measures for the catastrophe loss reserves are to expire at the end of fiscal 2012.

 We recognise that taxation measures, such as allowing a transfer to the catastrophe loss reserves free of taxation, are essential for the general insurance industry of today, as preparation for large-scale disasters such as earthquakes comparable to the Great East Japan Earthquake and typhoons.

 We will continue to call for tax reform for the sound development of the industry so that we can fulfill our roles toward a more secure, safer society.

4. Establishing the basis for promoting the Sixth Mid-term Business Plan

 We have developed the three-year Sixth Mid-term Business Plan, based on issues and our roles that have been reaffirmed since the Great East Japan Earthquake, as well as current environmental changes surrounding the industry. The plan clarifies priority issues to tackle in the medium term.

 On April 1 this year, the GIAJ shifted to a General Incorporated Association, following the government reform of public interest corporations. We have established the basis for strongly and steadily promoting the Sixth Mid-term Business Plan, including a launch of the Claims Services Committee, restructuring of existing committees, and creation of project teams such as one for industry-wide standardisation of business processes.

Priority issues in the Sixth Mid-term Business Plan (the five pillars)

1) Reducing social loss by preventing / reducing damage by accidents, disasters, and crimes

2) Improving customer convenience and promoting the efficiency of business processes by enhanced standardisation where relevant

3) Improving the quality of business administration based on consumers' voices

4) Maintaining and improving the business environment by strengthening our functions to make requests and proposals

5) Improving the market penetration of Earthquake Insurance and enhancing preparation for the probable occurrence of large-scale disasters based on the experience of the Great East Japan Earthquake

5. Conclusion

 I would like to express sincere gratitude for your warm support and cooperation, which I have received during my one-year tenure.

 I feel that the frequent occurrence of disasters during the past year has heightened many people's interest in and expectation of general insurance. As Chairman, I believe that the GIAJ has achieved our most important social mission in times of emergency to a certain degree, by steadily and appropriately promoting measures for proper and prompt payment of Earthquake Insurance claims as well as those for improving the market penetration of general insurance.

 Today, our industry is increasingly expected to fulfill its roles as the interest of consumers and businesses in risk has been growing. We are fully aware that the general insurance industry is being put to the test now. We will continue to make efforts to improve customer convenience and the quality of business administration, and contribute to the sustainable and sound development of the industry, by focusing on the priority issues set out in the Sixth Mid-term Business Plan.

 We will strive to offer better products and services toward a more secure, safer society and continue to carry out our social responsibility. We would highly appreciate your continued support and cooperation.