23-D-1179
December 27, 2023

Administrative Action Taken Against Major Non-life Insurers
for Premium Adjustment—No Immediate Impact on Rating
The following is Japan Credit Rating Agency, Ltd. (JCR)'s opinion on the business improvement order issued
by Financial Services Agency to major Japanese non-life insurance companies (Tokio Marine & Nichido Fire
Insurance Co., Ltd., Sompo Japan Insurance Inc., Mitsui Sumitomo Insurance Company, Limited, and Aioi
Nissay Dowa Insurance Company, Limited).

(1) On December 26, 2023, four major Japanese non-life insurance companies received business
improvement orders from Financial Services Agency. The main contents of the order require thecompanies to "examine and implement measures to improve environment for implementation ofproper competition in the corporate insurance sector, including coinsurance" and "establish an
appropriate sales promotion system and underwriting management system." The latest administrative
action was taken in response to employees' involvement in the act of prearrangement of premiumsin the renewal of coinsurance policies for corporate customers. According to the companies' reports,
the total number of policyholders subject to premium adjustment activities has reached well over 500
in the past five to seven years, for which about half were motivated by the intention to maintain theleading underwriter’s position and contract terms and conditions such as premium shares, while 40%(including duplications) are said to have been in response to other companies approaching them toadjust premiums, etc. This case is considered to violate the "Prohibition of unreasonable restraint oftrade (Cartel)" under the Antimonopoly Act, and Fair Trade Commission has conducted on-site
inspections of the companies.
(2) In the news release dated August 9, 2023 (23-D-0528), JCR expressed the view that it is unlikely thatthe 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. JCR believes that the facts thedomestic non-life insurance market is an oligopoly of big four companies after repeated restructuring
and their fire insurance's profits have been constantly in the red due to frequent natural disasters may
have led to the inappropriate business conduct, while coinsurance policies for corporations are ameaningful underwriting method for both corporations and non-life insurers in terms of diversifying
huge underwriting risks. FSA has requested the identification of additional cases and investigations,etc., with regard to the large number of corporations (policyholders) subject to the inappropriate
conduct, and although the impact may further increase, there is no change in JCR's view that theincidents will not immediately affect their ratings.
(3) JCR believes that the incidents indicate that there are problems in the governance systems of thecompanies and in the compliance awareness of their sales departments and that the deterioration of
their reputations may have a certain impact on their sales and customer bases in relation to theiroverall business. The companies will continue their investigations, while at the same time
implementing measures to prevent recurrence, with a business improvement plan in place by the endof February 2024. JCR will continue to confirm the impact on the sales and customer base of eachcompany and follow from a medium-term perspective to see whether each can build a system toprevent similar incidents from recurring.
Tomohiro Miyao, Seito Achiha

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

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