23-D-0528
August 9, 2023

Premium Arrangement by Major Non-life Insurers—Limited
Impact on Ratings, JCR Will Watch for Progress ofInvestigation
The following is Japan Credit Rating Agency, Ltd. (JCR)'s opinion on the acts of arranging premiums forcoinsurance policies by Japan’s major non-life insurance companies (Tokio Marine & Nichido Fire InsuranceCo., Ltd., Sompo Japan Insurance Inc., Mitsui Sumitomo Insurance Company, Limited, and Aioi Nissay Dowa
Insurance Company, Limited).

(1) Late June 2023, Japan’s major non-life insurance companies announced that they had received anorder to submit report from the Financial Services Agency (FSA) under the Insurance Business Actfor the fact that their employees were involved in prearrangement of premiums in the renewal ofcoinsurance policies of fire insurance for some specific corporate customers. Each company has
established an investigation committees consisting of outside attorneys and others to confirm thefacts and to investigate whether or not there are similar cases. The impact is beginning to expand.
On August 4, they received an additional order to report for all their sales branches, based on thepossibility that several premium arrangement cases may have occurred for customers other thansuch specific customers. JCR believes that while coinsurance policies for corporations are ameaningful underwriting method for both corporate customers and non-life insurers in terms ofdiversifying huge insurance underwriting risks, the fact that Japan’s non-life insurance market is anoligopoly with the four major non-life insurers after repeated restructuring may have led to theinappropriate business conduct.
(2) JCR believes at the moment that the impact of the incident on the rating is limited. Although theunderlying causes of the incident and the existence of similar incidents are still under investigation,
JCR believes that it is unlikely that the incident will impair their financial bases, even if premium rates
and other factors are affected, given the small percentage of coinsurance policies for corporations
subject to the premium arrangement act in their overall insurance underwriting portfolios. In addition,
the major non-life insurers have solid and thick business foundations in large corporations, middlescale companies & SMEs, and individual transactions, and all have established a firm position in thedomestic non-life insurance market. It is also unlikely that their business foundations will besignificantly impaired as a result of this incident. On the other hand, this case shows that there wereproblems in their corporate governance structure and awareness of compliance in their sales
departments. This case may violate the "Prohibition of unreasonable restraint of trade (Cartel)" underthe Antimonopoly Act, and JCR believes that if the scope of the case is expanded or the investigation
is prolonged, their reputation will be damaged, which may have a certain impact on their sales andcustomer bases not only in the area of coinsurance for corporations but also in their businesses ingeneral. JCR will closely monitor the progress of the investigation and confirm the measures taken
by each company to prevent recurrence and the impact on its sales and customer base.
Tomohiro Miyao, Seito Achiha<Reference>Issuer: Tokio Marine Holdings, Inc.
Long-term Issuer Rating: AAA

Outlook: Stable

Issuer: Tokio Marine & Nichido Fire Insurance Co., Ltd.
Long-term Issuer Rating: AAA

Outlook: Stable

Issuer: Sompo Holdings, Inc.
Long-term Issuer Rating: AA+Outlook: StableIssuer: Sompo Japan Insurance Inc.
Long-term Issuer Rating: AA+

Outlook: StableIssuer: MS&AD Insurance Group Holdings, Inc.
Long-term Issuer Rating: AA+

Outlook: Stable
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Issuer: Mitsui Sumitomo Insurance Company, Limited
Long-term Issuer Rating: AA+Outlook: Stable

Issuer: Aioi Nissay Dowa Insurance Company, Limited
Long-term Issuer Rating: AA+Outlook: Stable

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