Long regarded as one of the world’s most stable insurance markets, Japan’s non-life sector is now experiencing major disruption. Deregulation aimed at unwinding keiretsu-style cross-shareholding agreements between insurers and their clients is freeing up capital and reshaping longstanding business relationships.
Executive Summary
Keiretsu is a Japanese term referring to networks of affiliated companies with close business ties, often reinforced through cross-shareholding. This practice has been common in Japan, particularly between insurers and their corporate clients.Under new regulatory guidance, insurance companies are now expected to unwind these keiretsu-style cross-shareholding arrangements.
Here, INSTANDA's Japan Country Manager Sakura Kawakami reveals what the changes could mean for U.S. insurers eyeing opportunities to expand in Japan as well as the possibly new competition in the U.S. from Japanese insurers looking elsewhere to build their books of business.
As these tight-knit relationships begin to loosen, new openings are emerging for U.S. insurers to compete for Japanese corporate accounts. Simultaneously, Japanese carriers must find ways to reinvest their freed-up capital in accordance with the new Economic Value-Based Solvency Regulation (ESR), which is similar to the EU’s Solvency II framework. This important pivot could create increased competition for U.S. carriers from Japanese insurers.
Before insurers in both nations can fully capitalize on these changes, they will need to make strategic shifts in the way they do business, including accelerating their technological adoption.
Understanding the Market Transition
In the decades following World War II, keiretsu-style policies reinforced business ties within Japan, helping the nation’s insurance market grow into the third largest by volume globally. More recently, however, concerns about inefficiencies, corporate governance and market opacity created a move toward deregulation.
