Tokio Marine & Fire Insurance Co. will take a one-third stake in Nisshin Fire & Marine Insurance Co. by March 2005, the nonlife insurers said Thursday.

The announcement marks the end to the first round of industry consolidation that began in 1999.

Nisshin Fire was the last major nonlife insurer to enter the frenzy to reorganize the sector following the government’s liberalization of insurance premiums four years ago.

Tokio Marine — the nation’s largest nonlife insurer, with 7.8 trillion yen in assets — will hold veto power at shareholders’ meetings. Nisshin Fire meanwhile will retain its retail business model and will not join the Tokio Marine-led Millea Insurance Group, Nisshin President Michio Noda said.

The deal will give Tokio Marine access to smaller corporate customers and regional consumers, one of Nisshin’s strong points. Nisshin Fire’s 14,750 sales agencies are expected to extend Tokio Marine’s reach in a crowded domestic market.

The alliance will meanwhile improve the creditworthiness of Nisshin Fire, help it to access larger corporate clients and expand its life insurance business through Tokio Marine Life Insurance Co., a Tokio Marine subsidiary.

The industry is likely to see more consolidation in the not-so-distant future.

Despite pumping more funds into product development, individual companies have been unable to carve a niche or offer any unique products that are not copied by competitors within months of their release. Many nonlife insurers share the same sales agencies, resulting in small-scale price battles and cost-cutting measures.

Senior Tokio Marine executives will join Nisshin Fire by June to standardize the two companies’ computer systems and help consolidate customers’ insurance policies.

Tokio Marine plans to buy Nisshin Fire stocks from key shareholders, including Meiji Life Insurance Co., Mitsubishi Tokyo Financial Group Inc. and regional banks.

The Millea group has had a bumpy ride since April, already having lost two proposed members, Kyoei Mutual Fire & Marine Insurance Co. and Asahi Mutual Life Insurance Co.

Tokio Marine and Nichido Fire & Marine Insurance Co. integrated operations under Millea Holdings, which has been working to increase its market share.

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