The newly appointed administrators of the failed Toho Mutual Life Insurance Co. said Monday they will set up an internal committee to investigate if the firm’s management is liable for its collapse.
The Life Insurance Association of Japan, certified public accountant Mohachi Sugiyama and lawyer Akira Kosugi will run the company as administrators while assessing its assets and liabilities.
They told a news conference that the Financial Supervisory Agency ordered them to investigate whether the firm’s executives are responsible for its collapse.
As of Monday morning, none of the midsize insurer’s executives had resigned, they said.
The investigative committee will include lawyers, but its size and when it will be established have not been decided, they said.
Noboru Yamaguchi, an administrator representing the insurance association, reiterated that Toho’s policyholders will be protected by an industry safety net established in December, even if the probe later finds that the firm was in capital deficit at the time it joined the net.
Before the Life Insurance Policyholders Protection Corp. of Japan was established, some insurers objected to letting firms with questionable financial conditions join the bailout plan. The industry resolved the dispute by requiring each of the 47 participating firms to submit a written oath claiming its finances were sound. Toho turned in its document on Dec. 1.
The FSA suspended Toho’s operations Friday because the firm failed to obtain auditors’ approval of its fiscal 1998 earnings reports.
Toho officials have said the firm would have fallen into a capital deficit of 200 billion yen by the end of March had it complied with the auditors’ request to set aside an additional 230 billion yen to write off its bad loans and settle securities losses.
In 1998, Toho sold its policy-selling license to GE Capital Edison Life Insurance Co., a joint venture between Toho and GE Capital Services Inc. of the United States.
Toho handed over its 9,500 sales agents and its head office to GE Capital Edison, which is owned 90 percent by GE Capital and 10 percent by Toho.
At the time, Toho had set itself up as a company that could manage its existing insurance contracts while it envisioned earning additional revenues from reinsurance transactions with GE Capital Edison.
However, the arrangement failed to put a brake on the growing number of policy cancellations, plunging Toho deeper into insolvency.