Japanese life insurance market
Transcript of Japanese life insurance market
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Japanese life insurance market and
the role of the Appointed Actuary
Masaaki YoshimuraGeneral Secretary of IAJ
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History of Japanese ActuaryModern life insurance companies formed around 1880First insurance regulation (old Commercial Law) 1898Establishment of the Institute of Actuaries of Japan 1899IAJ started qualifying examination for fellowship 1936Revision of Insurance Business Law 1939
Introduction of the Appointed Actuary* system
IAJ incorporated 19638 Trust Banks joined IAJ as supporting member 1964Non-life Ins. Cos. joined as supporting member 1970
IAJ started ASEA seminar for East Asian Countries
20th ICA held in Tokyo 1976* “Hoken Keirinin” in Japanese
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History of Japanese ActuaryIntroduction of the Certified Pension Actuaries * 198815 Banks joined IAJ as supporting member 19908th EAAC held in Tokyo 1995Drastic Revision of the Insurance Business Law 1996
IAJ became a full member of IFAA (IAA)
Centennial Anniversary of IAJ 1999IAJ Centenary Convention IAA Tokyo meetingASTIN / AFIR Colloquia
IAJ was entitled “designated corporation” by FSA 2000
* “Nenkin Suurinin” in Japanese
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About IAJ (Institute of Actuaries of Japan)More than 3500 individual membersMore than 100 supporting corporate membersOriginal Qualification ExaminationsMany committees and research groupsMany educational activities
Annual MeetingRegular Meetings and SeminarsASEA (Actuarial Seminar of East Asia) Actuarial Seminar for university students to know about “What is an Actuary”Publication of Transactions, research papers Publication of Actuary Journals (basically every 3 months)
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Number of Members
Fiscal Year 1965 1975 1985 1995 2000 2001 2003.July.31
Fellows 200 310 507 773 952 985 1,008
Honorary 3 5 6 9 6 7 8
Associates 347 596 801 899 772 784 801
Students 217 600 664 1,674 1,667 1,637 1,703
Supporting Members 32 58 69 106 131 118 109
Total 799 1,569 2,047 3,461 3,528 3,531 3,629
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Membership by types of industry
2003.July.31
Honorary Fellows Associates Students Subtotal SupportingMembers Total
Life 8 422 327 658 1,415 41 1,456
Non-Life 148 120 254 522 27 549
Trust Bank
160 92 142 394 6 400
Others 278 262 649 1,189 35 1,224
Total 8 1,008 801 1,703 3,520 109 3,629
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ASEA (Actuarial Seminar of East Asia)
Seminar for actuaries of East Asia for 3 weeks in August1st ASEA was held in1970 and it has been held 32 times by 2002 Nearly 500 actuaries from 13 different countries/regions in Asia Participants gain valuable experience, not only from the lectures but also from the stay in Japan and cultural exchanges among participants from various countries/regions.
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Organizational Chart of the IAJ General Meeting
Board of Directors MeetingPresident
Vice Presidents
Board of Councilors
Auditors
Standard Mortality Consultative Committee
Disciplinary Committee
Appeals Board
Secretariat
Committees(E&E function)
Committees(International function)
Committees(Planning function)
Committees(Practice &Research
function)
Committees(General Affairs)
Kansai Branch
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Relationship with Regulatory BodyLong-term relation since the establishment of IAJCoping with various inquiries on actuarial matters from Regulatory AuthoritySend delegates to important councils of Regulatory AuthorityIAJ was entitled “designated corporation” by FSA
Public-service corporation that perform services related to training actuarial specialistsEstablish coefficients to serve as the basis for computing Standard Valuation ReservesUndertaking other activities involving actuarial expertise.
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Japanese Life Insurance Market
EU Other19%
Others7% Asia Other
6%
UK12%
US29%
Japan26%
* Based on life insurance premium in 2000
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Life Ins. Products in Japan (~1980s)
1960s and 1970s “Endowment Insurance”, “Endowment with Term”
1970s“Cancer insurance” was introduced and many riders like
“Sickness” and “Hospitalization” are developed
1980s “Whole life with Term” with various riders
Almost all the products are “With-Profits”.
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Success of Japanese Life Ins.
The national character ?Economic growthManagement efforts
Product DevelopmentDistribution channel
Sound regulationNet level premium reserveConservative dividend policy
Sound Actuarial Practice
Company Regulation
IAJ
Policyholders/Public
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Japanese Equity Market Trend
0
5,000
10,000
15,000
20,000
25,000
30,000
35,000
40,000
Jan-74 Jan-79 Jan-84 Jan-89 Jan-94 Jan-99
NIKKEI 225
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Japanese Interest Rate Trend
0.0%
1.0%
2.0%
3.0%
4.0%
5.0%
6.0%
7.0%
8.0%
Jan-85 Jan-90 Jan-95 Jan-00
10yr - JGB
Assumed Interest Rate
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Life Insurance Company Failures
Company Date Failed Policy Reserve Cut
Revised Guaranteed Interest Rate
Nissan Mutual 04/1997 0% 2.75%Toho Mutual 06/1999 10% 1.5%
Daihyaku Mutual 05/2000 10% 1.0%Taisho Life 08/2000 10% 1.0%
Chiyoda Mutual 10/2000 10% 1.5%Kyoei Life 10/2000 8% 1.75%
Tokyo Mutual 03/2001 0% 2.6%
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Measures takenAsset
Reduction of “Risky Assets”Investment Policy change
LiabilityProduct Design changeDividend cut, Premium Increase for saving products
CapitalInjection of Solvency Capital
Business Restructuring DemutualizationCoalition, Mergers and Acquisitions
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Negative Spread or Positive Spread?
Negative Spread Problem became very famous but …
The truth is ….
Negative spread on interest-rate factor* but Positive spread in terms of total gross premium for major products
* Based on the assumption of the initial premium calculation
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Statutory Role of the Appointed Actuary* Verification (each year)
Adequacy of valuation reserveFairness and equity of dividendsContinuation of the insurance business
The Appointed Actuary* mustsubmit statement of opinion to the board of directorsprepare supplementary report to the statement of opinion submit copy of these documents to the supervisory authority
* “Hoken Keirinin” in Japanese
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Statutory Role of the Appointed Actuary* Involvement
Not only making the aforementioned confirmations each fiscal year, it is necessary for the company to make AA* participate in the following actuarial matters.
Calculation of premiumCalculation of valuation reserveCalculation of dividends to policyholdersCalculation of surrender valueCalculation of claim reserveSales planningMaking rules about agent commission etc.
* “Hoken Keirinin” in Japanese
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Success of Actuarial Profession Good Communication
Both with Regulatory Body and Companies, etc.
Sound RegulationImportant statutory role
Corporate GovernanceActive role in (financial) risk management
ProfessionalismSound Actuarial PracticeEfforts to improve actuarial skillsStrong Actuarial Organization to support member activities
CompaniesRegulatory
Body
Actuarial Organization/Member Actuaries
Policyholders/Public
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Thank you for your kind attention !