A new body is needed to protect policyholders trapped at failed insurers by either taking over all the failed firm's policies itself or providing financial assistance to an insurer that offers to do so, a report released by a Finance Ministry study group suggested Friday.

But in either case, the conditions of the policies, such as the promised rates of interest and amounts insured, would be subject to change upon transfer. The study group's report on a comprehensive framework for payment guarantees to policyholders is to be submitted to the ministry's Insurance Council later this month.

It is expected to help map out the details so legislation can be drafted in time for the next Diet session, which is expected in January.

Both life and nonlife insurance companies would be required to participate in the framework by contributing funds to the new payment-guarantee body. To ensure this burden will not overwhelm insurers, a limit of some form should be placed on their contributions, the report says.

The panel also suggested that compensation for policyholders at the failed insurance firm be offered through the new body. However, since financial resources would be limited and policyholders themselves have to bear some responsibility, compensation for each policy should be a fixed percentage of the amount the failed institution saved as policy reserves for that particular contract.

The panel left the issue of calculating a concrete figure for the Insurance Council to discuss. Debate on whether to utilize public funds to help support the scheme was also left in the council's court.