Tokyo Mutual Life became the seventh Japanese insurer to file for bankruptcy since the end of World War II as it sought court protection, listing outstanding liabilities in excess of $7.9 billion. The move was precipitated when Daiwa Bank, TML’s largest creditor, refused to extend its $242.4 million credit line.
The collapse is the latest in a series of financial reverses in the Japanese insurance industry precipitated by falling share prices, and the cancellation of contracts by policyholders fearful of being unable to recover their invested funds.
It follows the bankruptcy of Chiyoda Life and Kyoei Life last October. Prudential Insurance Co. has since taken over Kyoei, and is in the process of restructuring the company. AIG’s plans to take over and restructure Chiyoda are progressing at a slower pace, as it’s negative net worth is now exceeds $6.1 billion, far greater than first estimated.
The general weakness in Japan’s life insurance sector, and the ongoing hope that the long-stalled Japanese economy may eventually recover, have nevertheless attracted the interest of foreign financial service companies, looking for ways to enter the market. Both GE Capital and AIG had been reported to be interested in supporting TML, but neither company has so far indicated whether they will pursue their efforts through the bankruptcy court.