The botched handling of a life insurance company bankruptcy by Japan's Finance Ministry has triggered a 24 trillion yen (about HK$1.53 trillion) rush of policy cancellations.
This has resulted in a five trillion yen drop in policy totals during the past three months, according to insurance industry sources and Japanese media reports yesterday.
Eight out of Japan's 44 life insurers, were 'vulnerable', and four of these are believed to be 'unstable', according to analysts at Standard & Poor's in Tokyo. The lowest ratings were given to Chiyoda Mutual Life Insurance, Kyoei Life Insurance, Nippon Dantai Life Insurance and Toho Mutual Life.
According to confidential industry documents published by the news weekly Shukan Gendai, Kyoei Life's year-on-year policy cancellation rates rose 29 per cent between April and June, creating severe cash-flow problems.
Figures for the others were Chiyoda, 39 per cent, Nippon Dantai, 61 per cent, with Toho Mutual, 71 per cent, the biggest loser.
At the Life Insurance Association of Japan annual gathering yesterday, Finance Minister Hiroshi Mitsuzuka said: 'Nissan Life's bankruptcy has caused the people to lose faith in the insurance industry . . . we urge the industry to work towards starting up a fund to protect policy holders [from future bankruptcies].' At the same event, Prime Minister Ryutaro Hashimoto said the companies must strengthen their situation 'through their own efforts'.
A weak stock market is also believed to be aggravating the situation.