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Life Health > Life Insurance

ACLI Hits Japanese Government-Owned Life Program

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NU Online News Service, Aug. 21, 5:15 p.m. — Washington

The American Council of Life Insurers, Washington, is asking the U.S. Trade Representative to help level the playing field between “Kampo,” Japan?fs government-owned life insurance program, and other foreign and domestic life insurers that do business in Japan.

But ACLI hopes the Japanese government will agree to end preferential treatment for Kampo on its own, so that private life insurers will not have to seek formal remedies, according to Gary Hughes, ACLI?fs general counsel.

ACLI says the Japanese government is violating the “national treatment” standard in the General Agreement on Trade in Services, or GATS, by giving Kampo so many advantages over its competitors.

The Japanese government founded Kampo in 1916 to provide low cost life insurance.

The Kampo system pays no taxes, and it is not subject to marketing regulations, solvency regulations, Japan’s commercial code or supervision by Japan?fs Financial Services Agency, Hughes says.

Moreover, Hughes says, the Japanese government gives Kampo another significant advantage over its competitors by providing a government guarantee on each policy Kampo issues. The government guarantees are available only on Kampo policies.

Since 1916, Japan has set up a social security system that provides universal health insurance and pension coverage, and domestic and foreign life insurers now offer the same broad array of life insurance products as Kampo offers, Hughes says.

But Kampo is still the world?fs largest life insurer, with the equivalent of about $1 trillion in assets and a 41% share of all Japanese life insurance assets under management, Hughes says.

GATS requires Japan and other participating countries to offer foreign competitors “national treatment,” meaning that the foreign competitors must receive treatment that is “no less favorable” than the treatment accorded to domestic competitors.

Japan?fs failure to bring the Kampo system into compliance with GATS has left U.S. insurers with a “very high level of frustration,” Hughes says. “At some point, the integrity of those commitments must be upheld.”

Alan Wolff, an attorney in the Washington office of the law firm of Dewey Ballantine, says resolving the GATS concerns is an urgent matter because Japan is about to convert Kampo into a corporation, and the funding for Japan?fs policyholder protection safety net is running out.

If the Japanese government asks private insurers to bail out the policyholder protection safety net without help from Kampo, there will be a crisis, Wolff warns.


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