The Liberal Democratic Party was divided Thursday over a government plan to allow troubled life insurers to cut the high yields guaranteed to policyholders during the asset-inflated bubble economy, party lawmakers said.
The LDP held a meeting to discuss the Financial Services Agency's plan to revise the Insurance Business Law, with agency officials briefing participants on the proposal.
Some party members slammed the agency's plan not to include a clause in the amendment that managers at life insurers would be held responsible if they cut the guaranteed yields.
Others voiced support for the agency, however, claiming that the planned amendment would ease policyholders' fears that life insurers could collapse if they were forced to honor their obligations to pay out high yields.
The LDP will probably discuss the issue again Tuesday, the lawmakers said.
Although many insurers promised yields of around 5 percent in an effort to attract customers during the bubble economy of the late 1980s, they have found it hard to generate the promised returns due to flagging stock prices and record-low interest rates.
Many insurers have accordingly suffered for years from negative spreads, in which the returns on their investments have fallen significantly below the yield rates promised.
The FSA plans to allow insurers to reduce the yields on contracts signed during the bubble era to around 3 percent. It claims this will save policyholders from suffering heavier losses in the event of insurance-sector failures.
Most life insurers currently guarantee new policyholders yields in the mid-1 percent range.