The American Chamber of Commerce in Japan said Monday that foreign life insurance firms operating here should be treated equitably if the government decides to allow local insurers to cut their guaranteed yields.
“Several proposals currently being debated would, if implemented, put foreign companies at a competitive disadvantage,” the ACCJ said in a statement.
ACCJ Insurance Subcommittee Chairman Charles Lake said the American business body recognizes that the Japanese insurance industry and regulators face a difficult and complex dilemma, adding that it takes no position for or against the cut in guaranteed yields. “However, if such an interest rate cut is adopted, the cut should not discriminate against a particular type of legal entity licensed to conduct an insurance business in Japan, or discriminate among companies based on the types of products they underwrite,” Lake said. The government is now discussing whether to permit the mandatory cut in guaranteed yields to assist insurers hit by a combination of low interest rates and weak share prices.
These have bitten into insurers’ investment returns, resulting in a “negative spread.”
“The negative spread has resulted from the obligation to pay benefits calculated at 1980s interest rates while earning current near-zero returns,” the ACCJ said.
But it expressed concern about the possible fallout for foreign insurers from a mandatory cut in yields.
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