Recession forces Japanese insurers to merge

29 December 2008

Three Japanese non-life insurance companies specialising in car and housing insurance, and with combined revenues of $30.2 billion, are contemplating a merger to cope with falling demand as recession sets in on the Japanese economy.

According to media reports, Mitsui Sumitomo Insurance Group Holdings, Aioi Insurance Co. and Nissay Dowa General Insurance Co, all non-life insurance companies are in the final stages of talks for a three-way merger could take place as early as March next year.

A merger of the country's second, fourth and sixth largest non-life insurers would enable them to boost profits, cut cost and expand to other countries, especially in Asia and make the new company, the leader in non-life insurance in Japan, ahead of industry leader Tokio Marine.

The non-life insurance sector is under strain from its core product sales related to the auto-insurance, which has shrunk due to falling sales in the automobile industry, to its lowest since 1974.

The industry has suffered also due to an ageing population and a birth rate which is declining, as also the surging yen has battered the worth of insurers' foreign-currency denominated assets resulting in a decline in profitability.

Deregulation in the late 1990s helped Japan's non-life insurance sector to consolidate and MSIG, Aioi and Nissay Dowa were created through mergers during that time.