Tentative translation

November 30, 2005
Financial Services Agency
The Government of Japan

Administrative Actions on Zurich Insurance Company Japan Branch

1. Regarding Zurich Insurance Company Japan Branch (hereinafter referred to as the ''Branch''), according to the results of the on-site inspection (notified on June 17, 2005) conducted by the Financial Services Agency (hereinafter referred to as the ''FSA'') and the reports from the Branch based on Article No. 200 (1) of the Insurance Business Law (hereinafter referred to as the ''IBL''), the following problems are confirmed, in addition to the problems regarding the non-payment of fringe claims that triggered business improvement orders issued on November 25, 2005.

(1)	Business operations impairing the protection and convenience of customers
	- There were many confirmed cases in which the Branch did not sufficiently convey the explanation of important matters such as exemption of liability at the conclusion of an insurance contract by telephone, which violates Article No. 300 (1)-1 of the IBL. - There were also many confirmed cases in which the processing of claim payment took a long time. For instance, around 30% of the all cases regarding bodily injury liability exceeded one year for processing and around 40% of the all cases regarding property damage liability exceeded three months for processing. - The system responding to complaints from clients was improper, such as responding unfaithfully to complaints. - The Branch neglected the inaccurate description of solicitation brochures regarding a special contract of casualty insurance for a long time. The Branch also conducted its business operations in violation of its business plan, as the Branch did not pay claims which it should have paid, because operations at the Branch were in line with the inaccurate description of the above brochures in the case of claim payment.
(2)	Improper reporting system to the FSA
	- The main office of the Branch was not aware of the fact that its service outlet asked a research company for private settlements, which violates Article No. 72 of the Lawyer Law. - As a response to the report requirement from the FSA, which was based on the IBL, the Representative in Japan did not confirm or examine sufficiently the above fact and made a report to the FSA different from the above fact.
(3)	The operational risk management system Concrete rules for operational risk management at each business department and other departments are not stipulated in the internal rules, and the Legal Affairs Team of the Branch cannot provide any clear guidance for securing its accurate processing. Thus, individual staff of each business department handles operational processing at his/her discretion, and it is insufficient and lacking uniformity as a branch.
(4)	The governance system
	- The Representative in Japan did not sufficiently recognize the actual status of the business operation, and he did not play his expected roles as Representative for ensuring compliance and governance throughout the Branch. - Internal auditors did not grasp any of the above problems, and the internal audit was not conducted in the terms of compliance and policyholders' protection.

2. Judging from the problems described above, the FSA issued the following administrative actions (Business Improvement Order) to the Branch, based on Article No. 204 (1) of the IBL, today.

(1)	Examine immediately whether all operations, including claim payment and settlement of complaint, are proper in the terms of the protection and convenience of policyholders, and promptly rectify any problem.
(2)	Establish and improve the governance system including internal audit, internal control system, and compliance system so as to be continuously effective.
(3)	Clarify the responsibilities of officers and employees who caused the problems triggering the business improvement order.
(4)	Regarding (1) to (3) described above, a business improvement plan that describes concrete measures and the timing of the implementation must be submitted by December 14, 2005.
(5)	The progress and implementation of the business improvement plan and the status of the improvement must be reported every three months until the implementation of the plan is completed.