Yamato Life Insurance Co.’s decision to file for bankruptcy protection sent shock waves throughout the industry Friday as it became the first major victim in Japan of the global financial crisis.
But industry sources said policyholders shouldn’t panic because their policies are guaranteed by an industry safety net. It is the industry’s first bankruptcy in seven years.
The Tokyo District Court will appoint a group of administrators to manage the midsize insurer, which has a workforce of 1,011. The administrators will then find a sponsor to rehabilitate Yamato Life and take over its business and contracts.
Lawyers for the insurer and the Financial Services Agency said they had little information about any possible candidates.
The insurer plans to hold meetings in six cities from Saturday to Wednesday to brief creditors about the situation, the insurer said on its Web site.
“We’ll try to ease the concerns of policyholders by providing explanations,” said Hiroshi Kasuya, a lawyer who filed the insurer’s bankruptcy application.
The administrators will also decide how much debt Yamato Life has and evaluate its assets.
Yamato Life said in a news conference earlier in the day that its total debt was estimated at ¥269.5 billion as of the end of September.
The company had 170,000 individual insurance contracts as of March 31, with its assets totaling ¥283.1 billion.
If the administrators cannot find a sponsor, the Life Insurance Policyholders Protection Corp. of Japan, an industry body funded by member insurers, can protect policyholders by either creating a subsidiary to take over its business or by directly taking over all of its policies.
In any case, LIPPC will pay up to 90 percent of the policy reserves of the insurer. As of the end of June, Yamato Life had policy reserves worth ¥255 billion.
The financial authorities said the organization had reserves of around ¥382.2 billion as of the end of September, and there will be no problem with payment.
“It is hard to expect that it will have to pay more than ¥382.2 billion,” said Susumu Yamamoto, a senior FSA official. “We will appropriately cope with the situation to protect policyholders.”
The insurer was originally founded as Nihon Chohei Hoken in 1911, which used to sell conscription insurance policies. The company assumed its current name in 1945.
In 2002 it became a stock company, changing its structure from a mutual company.
INFORMATION FROM KYODO ADDED