GE Capital Edison Life Insurance Co. has agreed to take over contracts left by the failed Toho Mutual Life Insurance Co. provided that an insurance industry group shoulder 340 billion yen of expected losses, industry sources said Thursday. The Life Insurance Association of Japan and GE Capital Edison have basically agreed on the deal, which will be finalized today, they said. Interest rates for policy holders will be reduced from the current 4 percent level to 1.5 percent, a measure that would substantially reduce the amount of money policyholders receive in the future. To compensate for the losses, the industry body will provide GE Capital Edison with funds through the Life Insurance Policyholders Protection Corp., an insurance industry safety net set up a year ago with funding from the nation's 47 life insurers. The move would use up much of the safety net's financial resources, which total 460 billion yen. The government plans to inject 400 billion yen into the protection fund to help beef up the safety measure. GE Capital Edison has been insisting that the safety net bear financial burden to compensate for the 340 billion yen in losses, which includes more than 100 billion yen expected in the future due to further declines in asset values. The firm, initially a joint venture created by U.S. nonbank financial institution GE Capital Services Inc. and Toho in February 1998, has already taken over Toho's business network and branches. Toho, meanwhile, has been concentrating on the management of its contracts.
