U.S.-Japan Trade:

The Japanese Insurance Market

NSIAD-99-108BR: Published: Mar 15, 1999. Publicly Released: Mar 15, 1999.

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Benjamin F. Nelson
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Office of Public Affairs
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Pursuant to a congressional request, GAO provided information on the implementation of Japanese insurance agreements, as well as U.S. government monitoring and enforcement efforts, focusing on the: (1) size of the Japanese insurance market; (2) U.S. insurance company presence in and concerns regarding this market; and (3) business, regulatory, and other events that have affected the Japanese insurance market in the 1990s.

GAO noted that: (1) the Japanese insurance market is the second largest insurance market in the world after the United States, with $334 billion in annual premiums paid to insurance companies operating in Japan in fiscal year (FY) 1997; (2) the Organization for Economic Cooperation and Development reports that foreign market share grew in Japan, from 2.4 percent in 1990 to 3.7 percent in 1996, the most recent year for which such data are available; (3) by comparison, foreign penetration of the U.S. insurance market in 1996 was almost three times greater; (4) 13 U.S. majority-owned insurance companies operate in Japan, with 81 percent of the $10.961 billion in premiums generated by these companies in FY 1997 attributable to two insurance providers--the American Family Life Assurance Company of Columbus (AFLAC) and the American International Group (AIG); (5) AFLAC is the largest U.S. provider of niche insurance products (such as cancer insurance), and AIG is the largest U.S. provider of standard life insurance and non-life insurance products; (6) CIGNA is the next largest U.S. provider in the Japanese insurance market, followed by Prudential Life Insurance Company, Limited; (7) of total U.S. premiums, over 60 percent are attributable to niche products, with AFLAC accounting for $4.582 billion, or 67 percent, of U.S. niche product sales in FY 1997; (8) U.S. insurers in Japan are concerned about the following issues: (a) Japan's degree of deregulation of its market for standard insurance products; (b) Japanese firms' increased activities in the market for niche products; (c) Japan's level of transparency in approving new insurance products and making other regulatory decisions; (d) the sufficiency of staffing of Japan's regulatory offices; (e) Japan's handling of how insurance industry contributions are being determined for a new fund to protect policyholders from company failures; and (f) an impasse between the United States and Japan over the timing of a grace period during which U.S. and other insurers could gain a competitive foothold in important segments of the Japanese insurance market; (9) several business, regulatory, and other events have affected the Japanese insurance market in the 1990s; and (10) in 1997, Japan agreed to include key commitments contained in the 1996 agreement as part of its obligations under a World Trade Organization financial services agreement.

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