Swiss Re Study Examines Changes in Japanese Market

Swiss Re’s new Sigma 8/2000 report, “Japan’s Insurance Markets—A Sea Change,” examines the industry in depth and discusses the uncertainties and the future outlook. “Financial market deregulation, globalisation and the e-revolution are rapidly reshaping the competitive landscape of Japan’s USD 500 billion insurance market, the world’s second largest, “Swiss Re’s report says.

The study identifies three overriding trends in the Japanese marketplace: “mergers and acquisitions among insurers, the emergence of new competitive parameters and the convergence of financial services.” It also notes the recent company failures, particularly in the life sector, which are increasing the pressure on Japanese insurers to do away with traditional business practices and embrace more cost-efficient alternatives.

It concludes that, “Despite the arduous market conditions, Japanese non-life insurers remain well capitalised and enjoy top-notch credit ratings.” This factor, coupled with their “superior distribution networks” makes them formidable competitors.

The Japanese generally prefer to deal with domestic companies, says the study, and this has led to foreign insurers developing what is called the “third sector,” covering cancer insurance, medical and nursing care, etc. Japanese companies have been restricted from entering this market on a large scale, but further reforms will open it up, and “reinforces the view that foreign companies will remain a minority group in the Japanese non-life market in the foreseeable future.”

The full Sigma 8/200 report may be downloaded from Swiss Re’s website: http://www.swissre.com.