The Cabinet endorsed a bill Tuesday to rewrite the insurance business law with a view to creating a safety-net system to protect policyholders in the event of a life insurer's collapse.
Under the safety-net system, a new company would be able to assume the operations of a failed life insurer if no suitable insurer to take over the insolvent one can be found in a short period.
The safety-net system, to be run by the Life Insurance Policyholders Protection Corp. of Japan, would invest in the new company and, if necessary, extend it financial assistance.
The bill would allow the government to inject 400 billion yen in public funds and an additional 100 billion yen from life insurers to double the size of the policyholder protection fund of life insurance companies.
The fund now has 460 billion yen in private-sector money. -- contributions from life insurers and borrowings from financial institutions. The legislation also allows banks to sell insurance products for clients applying for housing loans starting April 1, 2001.
The bill also features measures aimed at helping life insurance companies under mutual ownership to adopt a stock ownership system.
By making it easier for life insurers to transform themselves into joint-stock companies, the bill is expected to help the companies raise capital flexibly and promote reorganization in the industry.
The government hopes the bill will clear the Diet by the end of April so it can take effect in the second half of this year, government officials said.