Entry into the third sector by subsidiaries

II. Entry into the third sector by subsidiaries

(1)Non-life subsidiaries of life insurance providers

1. Non-life subsidiaries of life insurance providers will be permitted to sell personal accident insurance from January 1, 1997, subject to the following measures to avoid radical change in the third sector for small to medium and foreign insurance providers:
   1. protection of existing sales networks currently utilized by small to medium and foreign insurance providers, i.e., not allowing sales by the subsidiaries of:

      (A) personal accident insurance based on a single policy written for and/or endorsed by non-profit inter-industry associations or foundations for managers of corporations;

      (B) domestic and overseas travel accident insurance through travel agents;

      (C) personal accident insurance for students marketed through or endorsed by schools (including all levels of schools, and including public and private schools), or scholastic, student or parent organizations or associations (i.e., gakusei-dantai, dosokai, and PTA); and

      (D) personal accident insurance through direct response methods (tsushin- hanbai);

   2. (A)in the case of co-insurance, not allow the subsidiaries to sell group personal accident insurance, when they are not acting as lead managers among co- insurers; and

      (B) in the case of sole underwriting or when a subsidiary is a lead manager among co-insurers, not allow the subsidiaries to sell group personal accident insurance to a group, inclusive of companies, associations, or other organizations capable of purchasing group personal accident insurance, that has had in effect in the preceding six months a policy for the same or a substitutable group personal accident insurance product by a small to medium and/or foreign insurance provider.

   3. not allow the subsidiaries to sell maturity refund personal accident insurance.

(2) Life subsidiaries of non-life insurance providers

In order to avoid radical change in the business environment in the third sector, life subsidiaries of non- life insurance providers will not be allowed to sell stand- alone cancer insurance and stand-alone medical insurance, and the Ministry of Finance will maintain the limit regarding the ratio of rider benefits to base policy benefits that was in existence before implementation of the new Insurance Business Law on April 1, 1996.

(3) Criteria for terminating measures to avoid radical change

The Ministry of Finance will terminate the measures to avoid radical change in the third sector in subsections (1) and (2) above two and one-half years after all the following criteria are met. The Ministry of Finance intends for the date of termination of the measures described in subsections (1) and (2) to be no later than 2001. To accomplish this end, the Ministry of Finance intends to implement the measures described in section I by no later than July 1, 1998. The criteria are:

1. whether the Ministry of Finance approved, within the standard processing period of 90 days, applications for differentiated auto insurance as described in section I (4);
2. whether the Ministry of Finance has lowered the minimum insured amount per contract required for application of the advisory rate system for commercial fire insurance as described in section I (2) a.;
3. with respect to the notification system, whether the Ministry of Finance:
   1. has put into effect the notification system as described in section I (2) b.; and
   2. allowed, within the standard period of 90 days, marketing of the products notified to the Ministry of Finance (i.e., did not reject the notifications);
4. whether the Ministry of Finance has implemented the necessary legal changes (including administrative measures) to eliminate obligations for members of a rating organization to use rates calculated by the rating organization, as described in section I (3); and
5. with respect to applications for differentiated products or rates, whether the Ministry of Finance approved, within the standard processing period of 90 days, the applications submitted.