|Readers are advised to refer to the original Japanese text before quoting from this document.|
With substantial changes occurring with regard to the circumstances
surrounding the insurance business, such as the development of liberalization as well as globalization of the economy and the aging of the population, more vital development of products and higher efficiency of management through fair and appropriate competitions under the market mechanism have become necessary in order for the insurers to meet diversified and sophisticated needs of insurance while providing the customers with efficient services. From such a point of view, as an integral part of the financial system reform, it was decided that the review of the insurance business as well as insurance supervision should be undertaken in view of （１）customers' benefit, （２）national economy, and （３）global standard.
A.Reform of the Rating Organization System
a) An obligation for member insurers to use premium rates calculated by the rating organizations is to be abolished. The rating organizations are to calculate reference rates, etc. not accompanied by the obligation, and thus to promote diversification of non-life insurance premium rates, development of various products, and fair and appropriate competition.
The rating organizations after the reform are recommended to function as "data bank" with a view to helping entries into the market by new insurers and providing consumers' choice of insurance products.
This reform is to be implemented by July 1998, in line with the "Supplementary Measures by the Government of Japan and the Government of the United States regarding Insurance" agreed upon in December 1996.
b) For appropriate period of time after the implementation of the reform, certain measures are to be taken, such as applying minimum guidelines as to the prior approval of product and rates, in response to the concerns regarding stable provision of insurance which might be hindered as a result of the reform.
c) From the viewpoint of consumer protection and soundness of insurance companies, it is appropriate to maintain minimum supervision including the prior approval system for products and premium rates. However, with respect to the insurance categories for corporate customers, it is desirable to proceed deregulation including the abolision of the prior approval system in a rapid manner.
B.Promotion of Entry into Other Business Areas
It is appropriate to take institutional measures by year 2001 with which to allow the mutual entries between insurance business and the other financial business areas. Together with the measures, effective preventative measures against harmful effects are to be taken, which will be reviewed as necessary.
Furthermore, with respect to the following cases, it is appropriate to frontload the implementation;
- entry by insurance companies into banking, trust, and securities
- entry by securities companies into insurance business;
- cases where a failed insurance company becomes a subsidiary of a bank, etc. or a trust bank.
C.Introduction of the Holding Company System
a) Taking into consideration that holding companies controlling insurance companies through share holding or their subsidiaries may influence the insurance companies' operations, the framework of supervision over holding companies and sister companies is to be established, such as;
- the qualification check regarding the posession insurance companies'
share at over a certain proportion;
- preventative measures against harmful effects, reporting requirements and on-site inspection (which should be minimum) regarding sister companies, etc.
b) It is appropriate to take institutional measures by year 2001 with
which to allow all types of financial business for sister companies. Furthermore, with respect to the following cases, it is appropriate to frontload the implementation;
- where insurance companies become sisters with each other;
- where an insurance company and a securities company become sisters;
- where a failed insurance company and a bank, etc. or a trust bank become sisters.
Although it is inappropriate to legally restrain sister companies from running commercial businesses, necessary supervision should be extended taking into full account that sister companies may possibly influence soundness of insurance companies.
c) It is appropriate to allow insurance companies to possess holding
companies as a subsidiary with a view to diversifying the choice of organizational form.
D.Sales of Insurance Products by Banks
a) It is appropriate to allow sales of insurance products by banks, etc. by around the target year of 2001, with restricting the type of products allowed to long-term fire insurance and credit life insurance associated with housing loans which are underwritten by subsidiaries or sister companies of banks. However, it could be considered not to restrict the products to those which are underwritten by subsidiaries or sister companies of banks, regarding long-term fire insurance associated with housing loans.
b) With regard to sales of insurance products by financial institutions other than insurance companies, the regulations by the Insurance Business Law are to be applied, and effective preventative measures against harmful effects are to be taken which will be reviewed as necessary. Furthermore it is desirable to allow insurance companies to sell investment trusts.
E.Application of Mark-to-Market Valuation to the Trading Accounts
With a view to maintaining financial soundness, it is appropriate to apply mark-to-market valuation to the trading accounts of the insurance companies, just like banks or securities companies.