4.+japan +Toa+Re

Japanese Insurance
Market Report
Hironobu Sakai
Toa Reinsurance Company,Limited
June 2007

COUNTRY PROFILE OF JAPAN
FACTS
Population: 128million (10
th
in the world)

Birth rate: 8.10births/1,000population
(2
nd
worst in the world)

Life expectancy: 82.02 (3
rd
in the world)

Land area: 377,923km
2
(61
st
in the world)

GDP(real): US$4,503B (2
nd
in the world)

GDP per capita: US$35,200 (21
st
in the world)
Source: Government Statistics/CIA the World Fact Book
COUNTRY PROFILE OF JAPAN
YEAR ON YEAR TREND OF JAPAN'S GDP & CPI
-0.8
1.1
2.1
2.0
2.4
1.9(est.)
0.2
-0.1 -0.1
-0.2
-0.6
-1.0
-1.5
-1.0
-0.5
0.0
0.5
1.0
1.5
2.0
2.5
3.0
2001 2002 2003 2004 2005 2006
GDP CPI
Source: Government Statistics
OVERVIEW OF INSURANCE MARKET
OUTLINE OF JAPANESE INSURANCE MARKET
Source: SIGMA No.5/2006
LIFE RANK NON-LIFE RANK TOTAL RANK
MARKET SHARE (%) 19.05 2 6.92 4 13.91 2
INSURANCE DENSITY (US$)*
1
2,956.3 - 790.4 - 3,746.7 7
INSURANCE PENETRATION (%)*
2
8.32 - 2.22 - 10.54 6
*
1
premiums per capita in 2005
*
2
premiums in % of GDP in 2005
LIFE VS. NON-LIFE
Source: Insurance Research Institute Statistics 2005
US$ Million
NON-LIFE
14.4%
LIFE
85.6%
1,748,993
294,715
LIFE
75.9%
NON-LIFE
24.1%
235,986
74,871*
* including the savings portion of maturity-refund type insurance
DIRECT PREMIUM INCOME TOTAL ASSETS
LIFE VS. NON-LIFE
LIFE NON-LIFE
DOMESTIC 22 21
FOREIGN-AFFILIATED*
1
16 22
REINSURANCE 1
5*
2
*
1
domestic insurers with f oreign capital of more than 50% and f oreign insurers licensed on a branch or agent basis
*
2
including 2 companies cov ering both Non-lif e and Lif e
NUMBER OF COMPANIES
MARKET SHARE
RANK LIFE % NON-LIFE %
1 Nissay 17.1 Tokio Marine Nichido 23.4
2 Dai-ichi 12.0 Mitsui Sumitomo 17.9
3 Sumitomo 10.6 Sompo Japan 17.8
4 Meiji Yasuda 9.4 Aioi 10.5
5 Alico* 4.8 Nipponkoa 9.2
TOP 5 TOTAL 54.0 78.7
TOP 10 TOTAL 71.3 94.1
FOREIGN TOTAL 27.6 4.0
*Foreign-affiliated
5 YEAR RESULTS (LIFE PREMIUM)
Source: Insurance Research Institute Statistics
217,950
212,421
216,207
224,918
235,986
-2.8
4.9
1.8
-2.5
4.0
0
50,000
100,000
150,000
200,000
250,000
2001 2002 2003 2004 2005
US$ Million
-4.0
-3.0
-2.0
-1.0
0.0
1.0
2.0
3.0
4.0
5.0
6.0
%
DIRECT PREMIUM INCOME GROWTH RATE
5 YEAR RESULTS (LIFE AMOUNT- NEW BUSINESS)
1,206
738
960
1,124
844
-12.6
-12.0
-14.6
-6.8
6.0
0
200
400
600
800
1,000
1,200
1,400
2001 2002 2003 2004 2005
US$ Billion
-15.0
-10.0
-5.0
0.0
5.0
10.0
%
NEW BUSINESS GROWTH RATE
5 YEAR RESULTS (LIFE AMOUNT- BUSINESS IN FORCE)
13,872
12,455
13,391
12,831
12,093
2.0
-3.5
-4.2
-2.9
-2.9
0
2,000
4,000
6,000
8,000
10,000
12,000
14,000
16,000
2001 2002 2003 2004 2005
US$ Billion
-5.0
0.0
5.0
%
BUSINESS IN FORCE GROWTH RATE
5 YEAR RESULTS (NON-LIFE PREMIUM & L/R)
75,519
77,143
75,861
75,450
74,871
-4.0
2.2
-1.7
-0.5 -0.8
47.0
45.2
46.2
53.6
48.9
0
10,000
20,000
30,000
40,000
50,000
60,000
70,000
80,000
2001 2002 2003 2004 2005
US$ Million
-10.0
0.0
10.0
20.0
30.0
40.0
50.0
60.0
70.0
80.0
90.0
100.0
%
DIRECT PREMIUM INCOME GROWTH RATE L/R
OTHER MARKET (KYOSAI)
KYOSAI (Co-operatives)
Mutual aid system within same professional groups
such as agriculture, fishery, truck fleet operators, workers and
consumers

Regulated KYOSAI is governed by laws other than insurance
business law

Effective from 1
st
April 2006 unregulated (unlicensed) KYOSAI
can no longer exist and must choose whether they get ordinary
insurance license or register themselves as small-amount and
short-term insurers under FSA supervision unless they dissolve

2 small-amount and short-term insurers set up so far (Pet and
EQ on dwelling risks)
SUMMARY OF REGULATED KYOSAI
Source: JCIA 2005 Report
LIFE
48.7%
ANNUITY
13.5%
FIRE
28.4%
OTHERS
0.5%
PA
1.0%
AUTOMOBILE
8.0%
$59,850M
BREAKDOWN OF PREMIUM INCOME
NUMBER OF GROUPS 7,688
NUMBER OF MEMBERS 68Mio
PREMIUM INCOME US$59,850M
TOTAL ASSETS US$411,558M
*The above figures do not include regulated KYOSAI other than JCIA members
KYOSAI VS. INSURANCE
Source: Insurance Research Institute Statistics 2005/JCIA 2005 Report
DIRECT PREMIUM INCOME
KYOSAI
16.1%
LIFE
63.7%
NON-LIFE
20.2%
235,986
74,871*
* including the savings portion of maturity-refund type insurance
59,850
TOTAL ASSETS
KYOSAI
16.8%
NON-LIFE
12.0%
LIFE
71.2%
1,748,993
294,715
411,558
US$ Million
OTHER MARKET (KAMPO)
KAMPO (Postal Life Insurance)
Founded in 1916 as governmental service through
post office
Often criticized by life insurance companies
Postal services including KAMPO is in the process
of privatization
Public corporation (Japan Post) set up in 2003
Japan Post dissolves on October 1
st
2007 and 4 operational
companies (postal mail, savings, insurance and teller
services) under the holding company
All shares of savings company and insurance company to
be sold by the end of September 2017
KAMPO VS. LIFE INSURANCE
Source: Insurance Research Institute Statistics 2005/Japan Post
BUSINESS IN FORCE
KAMPO
10.5%
LIFE
89.5%
$12,093B
$1,420B
DETAILS OF NON-LIFE MARKET
BREAKDOWN OF DIRECT PREMIUM INCOME
FIRE
17.0%
MARINE
3.2%
PA
17.4%
CASUALTY
9.2%
VOLUNTARY
AUTOMOBILE
40.5%
CALI*
12.8%
$74,871M
*Compulsory Automobile Liability Insurance
5 YEAR RESULTS (FIRE)
12,611 12,678
12,522 12,499
12,713
0.5
-1.2
-0.2
1.7
21.3
19.1
20.7
58.5
32.0
29.3
25.9
27.0
75.3
40.3
-8.2
0
2,000
4,000
6,000
8,000
10,000
12,000
14,000
2001 2002 2003 2004 2005
US$ Million
-10.0
0.0
10.0
20.0
30.0
40.0
50.0
60.0
70.0
80.0
90.0
100.0
%
DIRECT PREMIUM INCOME GROWTH RATE L/R*1 L/R*2
L/R*1: including the savings portion of maturity-refund type insurance L/R*2: excluding the maturity-refund type insurance
record number of
typhoon landfall
5 YEAR RESULTS (MARINE)
2,093
2,118
2,167
2,241
2,373
1.2
2.3
3.4
5.9
56.2
47.9
55.5
48.6
46.3
0.2
0
500
1,000
1,500
2,000
2,500
2001 2002 2003 2004 2005
US$ Million
-10.0
0.0
10.0
20.0
30.0
40.0
50.0
60.0
70.0
80.0
90.0
100.0
%
5 YEAR RESULTS (PA)
16,637
14,674 14,566
13,768 13,723
-0.7
-5.5
-0.3
-5.0
16.4 16.2
16.9 16.7
18.9
43.4
41.9 41.5
39.0
39.6
-11.8
0
2,000
4,000
6,000
8,000
10,000
12,000
14,000
16,000
18,000
2001 2002 2003 2004 2005
US$ Million
-10.0
0.0
10.0
20.0
30.0
40.0
50.0
60.0
70.0
80.0
90.0
100.0
%
DIRECT PREMIUM INCOME GROWTH RATE L/R*1 L/R*2
L/R*1: including the savings portion of maturity-refund type insurance L/R*2: excluding the maturity-refund type insurance
5 YEAR RESULTS (CASUALTY)
6,641
6,717
6,668
6,750
6,872
1.1
-0.7
1.2
1.8
54.5
53.2 53.1
57.9
50.7
1.4
0
1,000
2,000
3,000
4,000
5,000
6,000
7,000
8,000
2001 2002 2003 2004 2005
US$ Million
-10.0
0.0
10.0
20.0
30.0
40.0
50.0
60.0
70.0
80.0
90.0
100.0
%
5 YEAR RESULTS (AUTOMOBILE)
31,309
31,068
30,651
30,265 30,287
-0.8
-1.3 -1.3
0.1
57.3
56.6 56.7
59.7 59.3
-0.2
0
5,000
10,000
15,000
20,000
25,000
30,000
35,000
2001 2002 2003 2004 2005
US$ Million
-10.0
0.0
10.0
20.0
30.0
40.0
50.0
60.0
70.0
80.0
90.0
100.0
%
5 YEAR RESULTS (CALI)
8,191
9,997
10,085
9,973
9,596
22.1
0.9
-1.1
-3.8
76.0 76.3
74.0
74.8
-1.4
90.0
0
2,000
4,000
6,000
8,000
10,000
12,000
2001 2002 2003 2004 2005
US$ Million
-10.0
0.0
10.0
20.0
30.0
40.0
50.0
60.0
70.0
80.0
90.0
100.0
%
NATURAL CATASTROPHE IN JAPAN (TYPHOON)
Source: TRMM 'TRMM Tropical Cyclones Database (Ver. 1.2)' was produced and supplied by the Earth Observation Research and application Center,
Japan Aerospace Exploration Agency
2003
2004
2005
2006
NATURAL CATASTROPHE IN JAPAN (TYPHOON)
Source: GIAJ
TOP 10 W/F LOSSES IN JAPAN
0 1,000 2,000 3,000 4,000 5,000
2000 Chiba and Ibaraki Hailstorm
1993 Typhoon Yancy
2000 Tokai Downpour
2004 Typhoon Chaba
2006 Typhoon Shan Shan
2004 Typhoon Tokage
1998 Typhoon Vicki
1999 Typhoon Bart
2004 Typhoon Songda
1991 Typhoon Mireille
US$ Million
FIRE AUTOMOBILE MARINE OTHERS
4,733
3,228
2,623
1,332
1,150
1,100
1,008
859
814
584
NATURAL CATASTROPHE IN JAPAN (EARTHQUAKE)
Source: The Open University
Source: Kobe City, Higasiosaka City, Funabashi City
Source: GIAJ
TOP 10 EQ LOSSES ON DWELLING RISKS IN JAPAN
16
18
21
24
43
50
122
136
141
653
0 100 200 300 400 500 600 700
2003 Miyagiken-oki
2003 Miyagiken Hokubu
2007 Noto Hanto
2000 Tottoriken Seibu
2005 Fukuokaken Seiho-oki
2003 Tokachi-oki
2004 Chuetsu
2005 Fukuokaken Seiho-oki
2001 Geiyo
1995 Great Hanshin-Awaji
US$ Million
Source: NLIRO
DEVELOPMENT OF EARTHQUAKE INSURANCE ON DWELLING
3,075
3,969
5,181
5,975
6,565
6,924
7,326
7,664
7,884
8,079
8,564
9,325
10,247
7.0
9.0
11.6
13.1
14.2
14.8
15.4
16.0
16.4
17.2
18.5
20.1
16.2
0
2,000
4,000
6,000
8,000
10,000
12,000
1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005
Thousand
0.0
5.0
10.0
15.0
20.0
25.0
30.0
%
NUMBER OF POLICIES PENETRARTION RATE FOR HOUSEHOLDS
REINSURANCE BUSINESS IN JAPAN
REINSURANCE COMPANIES OPERATING IN JAPAN
DOMESTIC COMPANIES
LICENSED IN JAPAN
FOREIGN COMPANIES
LICENSED IN JAPAN
SERVICE COMPANIES OR
LIAISON OFFICE OF
FOREIGN COMPANIES
Toa Re, Japan Earthquake Re,
Taisei Re(Run-off)
Swiss Re, Transatlantic Re,
RGA(Life)
Munich Re, Hannover Re,
PartnerRe, Converium etc.
POOLING ARRANGEMENT IN JAPAN
RISK TYPE
REINSURANCE FROM POOL
TO OVERSEAS MARKET
EQ on dwelling risk
100% pool via Japan EQ Re with
governmental backup
NO
CALI including KYOSAI
100% pool on no-loss/no-profit
basis
NO
Atomic Energy 100% pool
YES
(Reciprocity with overseas pools)
Aviation 100% pool YES
Marine Hull
combination of pool and
individual reinsurance contract
YES
FPA risks on Marine Cargo 50% pool (DIC pool) NO
Assigned risk on Bodily Injury
Liability of Voluntary Automobile
80% pool NO
Sizable Indemnity on Bodily Injury
Liability of Voluntary Automobile
Excess of Loss pool NO
Source: Source: Insurance Research Institute Statistics 2005
OUTWARD NON-LUFE REINSURANCE PREMIUM*
*

not including outward reinsurance premium of foreign companies branch and reinsurance companies
excluding CALI and EQ including CALI and EQ
FIRE
12.1%
EQ ON DWELLING
9.1%
MARINE
5.6%
PA
2.6%
CASUALTY
9.4%
CALI
58.9%
VOLUNTARY
AUTOMOBILE
2.3%
$12,499M
FIRE
37.8%
MARINE
17.4%
PA
8.2%
CASUALTY
29.2%
VOLUNTARY
AUTOMOBILE
7.3%
$4,002M
Source: Source: Insurance Research Institute Statistics
*
1
not including outward reinsurance premium of foreign companies branch and reinsurance companies
*
2
not including the saving portion of maturity-refund type insurance
OUTWARD NON-LIFE REINSURANCE PREMIUM*
1
(excluding CALI and EQ on Dwelling risk)
4,402
4,172
4,035
4,002
4,234
3,467
4.0
-5.2
-3.3
-0.8
6.5
8.0
8.4
8.0
7.7 7.5
22.1
1.5
0
1,000
2,000
3,000
4,000
5,000
2000 2001 2002 2003 2004 2005
US$ Million
-10.0
-5.0
0.0
5.0
10.0
15.0
20.0
25.0
%
OUTWARD REINSURANCE PREMIUM GROWTH RATE % TO DIRECT PREMIUM*2
IMPACT OF DEREGULATION ON NON-LIFE MARKET
Deregulation progressed step by step since
revision of the Insurance Business Law in 1996
What happened since then?
Decline in rate and premium volume of industry
Rates of Fire, PA and Automobile used be tariff rates calculated by
NLRI* and now NLRI only calculates advisory pure risk premium
(i.e. loss cost) rates with which member companies do not need to
comply
Rates of Earthquake on dwelling risk and CALI are still tariff rates

Increase in number of products and additional
coverage
* Non-Life Insurance Rating Organization of Japan
IMPACT OF DEREGULATION ON NON-LIFE MARKET
New entrants to the market
Non-life subsidiaries of life insurance companies or other
industries

Diversification
Life subsidiaries
Overseas market
third sector
Distribution system (Broker, Internet, Bankassurance etc.)
Non-insurance products
Establishment of financial holding companies permitted

Mergers and alliances

Efforts to cut expense ratio
CURRENT ISSUE
SCANDAL ON FAILURE TO PAY OR NON-PAYMENT
Failure to pay incidental insurance claims
Due to fierce rate competition in the deregulated
market, non-life insurers competed with each other
to develop products by adding incidental coverage in
order to maintain premium volume
Example: standard automobile insurance (TPL and PD) +
bodily injury compensation + passengers PA +
loaner car expense + personal belongings +
golfers insurance

As a result numbers of products or combinations of
coverage became huge and complicated
CURRENT ISSUE
However, claims handling system did not correspond
with such products and insurers failed to make
payment of incidental claims unless policyholders
claimed

Many policyholders did not fully understand what
was covered in the policy because policy wording
was so complicated, and did not claim compensation
for incidental losses

Almost all insurance companies were involved in this
scandal and hundreds of thousands of improper
non-payment were found out

CURRENT ISSUE
Corporate governance and compliance of insurers
was questioned and FSA ordered them to conduct
thorough investigation and submit business
improvement plan

Typical measurers to solve the problem are
simplification of products by reducing the number of
contractual clauses
improvement of the claim handling system
increasing the number of claim staff
providing easy-to-understand instructions for customers

Restoration of the customers confidence is urgent
issue of industry

INTRODUCTION OF TOA RE
CORPORATE DATA AND CONSOLIDATED FINANCIAL HIGHLIGHTS
Date established: 15
th
October 1940
Number of employees: 280
Lines of business: Non-life Reinsurance
Life Reinsurance
Co-operative Non-Life Reinsurance
Co-operative Life Reinsurance
Net premiums written: $1,567M
Total assets: $5,194M
Credit Ratings: S&P A+
A.M. Best A+(Superior)

As of 31
st
March 2006
INTERNATIONAL OPERATIONS
BRANCHES
Singapore
Kuala Lumpur
Hong Kong

REPRESENTATIVE OFFICES
U.K.
U.S.A.
Taiwan

SUBSIDIARIES
The Toa Reinsurance Company of America (U.S.A.)
The Toa Reinsurance Company of America (Toronto Branch)
The Toa 21
st
Century Reinsurance Company Ltd. (Switzerland)

THANK YOU!

4.+japan +Toa+Re

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