ACLI’s key postal privatisation issues outlined, Japan
The American Council of Life Insurers (ACLI) announced today it has submitted to the government of Japan a ten-point review of issues it sees as critical to the privatization of Japan Post's insurance business.
Under an initiative put forth by Prime Minister Koizumi, the Postal Privatization Preparatory Office (PPPO) is currently drafting legislation for early 2005 Diet consideration to move Kampo, the world's largest life insurer, into the private sector after decades of government ownership. Japan Post's other major businesses — savings bank giant Yucho and the postal delivery business, would also be privatized. Meanwhile, a new corporation for the network of post offices would be established.
All four corporations would be structured under a government-owned holding company and transitioned to private status beginning in 2007. Working from the Basic Policy on Postal Privatization, an outline drafted earlier this year by the Council on Economic and Fiscal Policy (CEFP) and adopted by the Cabinet, the PPPO is expected to shortly release a detailed plan for discussion with the ruling Liberal Democratic Party (LDP).
In its eight-page submission, ACLI clarifies U.S. industry positions on key aspects of achieving "equal footing" in Japan's life insurance market. The paper addresses issues such as the appropriate agency to certify that "equal footing" has been achieved; whether the holding company structure put forth in the Basic Policy can protect against government-to-private entity subsidies; the future impact of Kampo-era policies on the safety net for policyholders; whether the placement of thousands of former Kampo employees in the new Network Corporation will result in services provided to the PIC on an "arms-length" basis, and whether those employees will be subject to Financial Services Agency (FSA)-based supervision and regulation; the prospect of infusions of capital by the government into postal insurance operations; what role a privatization monitoring organization should play; and, the need to comply with the General Agreement on Trade in Services (GATS).
Highlights of the ACLI's top ten issues include: * "Overarching" principle that there should be no expansion of product offerings until a completely level legal and regulatory playing field has been established. * Regulatory oversight of the new Postal Insurance Corporation (PIC) should be identical to that of private insurance suppliers and conducted by the FSA, which regulates private life insurers * Safeguards should be adopted protecting against cross-subsidization within the new structure of former Japan Post businesses. * Pre-existing policies of Kampo should not be allowed to become a potential burden on the Life Insurance Policyholder Protection Corporation (LIPPC). * Profits and losses from the entity created to hold Kampo's pre-existing accounts should be completely isolated from the PIC so as to avoid market distortions and undermining attainment of a "level playing field." * No government capital infusions into either Kampo or its successors should be permitted because private sector insurers get no such support. * To the extent a monitoring entity is created to oversee the PIC's transition to private status, it should operate transparently with clearly defined criteria and rules of deliberation. * The end result of privatization should be full alignment of Japan Post's insurance business with the requirements of the GATS.
ACLI expressed the hope with its submission that as development of privatization legislation proceeds there will be ample opportunity for mutual discussion of these issues.
