A trade group representing Japan's biggest non-life insurers said on Thursday that member firms should set a clear deadline and cut their strategic holdings of listed client shares to zero, following government pressure to abandon the long-standing practice.
The General Insurance Association of Japan also published guidelines for its members on cross-shareholdings (buying their clients' stocks to deepen business times) to ensure a fairer market environment. The guideline bans companies from taking on new cross-shareholdings.
The country’s Financial Services Agency has pushed insurers to cut the stakes to improve competition in the aftermath of a price-fixing scandal last year.
Japan's biggest general insurers are estimated to own more than ¥6 trillion (US$42 billion) in cross-shareholdings as of March. Four of the group's members, Tokio Marine, Sompo, and MS&AD subsidiaries Mitsui Sumitomo Insurance and Aioi Nissay Dowa, have all pledged to remove such stakes in the next couple of years.
The government has also stepped in and urged companies to reduce stakes in one another for improved governance and better allocate capital. Powerhouse manufacturers like Toyota Motor Corp are planning to sell such shares.
