• SHARE

A Liberal Democratic Party panel basically endorsed a plan by financial authorities Tuesday to beef up the insurance policyholder protection fund by 500 billion yen, of which 400 billion yen would be covered by public funds. The Finance Ministry and the Financial Supervisory Agency submitted to the LDP panel an insurer bailout plan they compiled that would effectively double the size of the existing protection fund. The plan, which will remain in effect until March 2003, calls for putting up a maximum of 400 billion yen in public money and requiring life insurers to raise an additional 100 billion yen for the safety net. The move came as it became obvious that the bulk of the funds being raised by Life Insurance Policyholders Protection Corp., an industry safety net, will be nearly depleted after it is used to pay out policyholders of Toho Mutual Life Insurance Co., which collapsed in June. In exchange for state support for the fund, the life insurance industry would be required to step up disclosure requirements, and the management of a failed insurer would be held accountable for the collapse. The government plan, however, is expected to stir controversy as it would require insurers to shoulder additional burdens. The life insurance industry has argued that it cannot raise more than the 400 billion yen it pledged when it set up the industry safety net a year ago. An additional burden would worsen the financial condition of each insurer and lead to reduced dividends for policyholders of healthy insurers, it has argued. The industry has also reportedly demanded that it wants the state money through a government grant bond issue; the current plan says the government will subsidize up to 400 billion yen, but the money’s use will require Diet approval whenever it becomes necessary. The safety net has so far collected only 40 billion yen to 50 billion yen, with a goal of raising 400 billion yen by 2008. Industry officials have said more than 300 billion yen will be needed from the fund just to protect Toho policyholders.

In a time of both misinformation and too much information, quality journalism is more crucial than ever.
By subscribing, you can help us get the story right.

SUBSCRIBE NOW