The Marine & Fire Insurance Association of Japan is considering offering full protection to individual policyholders for three months after the collapse of a nonlife insurer, association sources said Sunday.
The limited full protection is part of a set of new rules being drafted by the association to deal with failed insurers, the sources said.
At present, 90 percent of insurance policies are protected for an unlimited period of time after a company's bankruptcy, provided they are taken over by other insurance firms.
The association expects policyholders of failed insurers to shift to other insurers during the three-month period. During that time necessary funds would be provided by Non-Life Insurance Policy-Holders Protection Corp. of Japan, an industry safety net, according to the sources.
The new rules are designed to protect automobile insurance policyholders in case of accidents, while reducing each insurer's contribution to the industry safety net.
The association will soon present the new rules to the Financial Services Agency. They hope the agency will make the necessary legal changes to allow the association to introduce the new rules next April, they said.
Under the new rules, insurance payouts would be reduced after the three-month period in proportion to the degree of damages incurred, the sources said.
As with current rules, corporate policyholders of fire insurance will not be eligible for full protection under the new rules, according to the sources.