TOUGH TIMES AHEAD FOR JAPANESE INSURERS: EXEC

SINGAPORE-Japan's insurance market will see dramatic changes as the market deregulates, suggests a Japanese insurance executive.

Prior to deregulation, the market's stability and order, "unparalleled in other countries. . .made it enjoyable for insurers," but full deregulation will be implemented by 2001, according to Megumi Ugai, associate director and general manager of Yasuda Fire & Marine Insurance Co. Ltd. in Tokyo, at the fourth biennial Singapore International Reinsurance Conference last month.

Mr. Ugai predicted Japanese insurers' days of easy profitability are coming to an end as the Japanese government's deregulation of financial markets is put in place. "The law of the jungle, survival of the fittest, will come into play," he told delegates.

"It is likely to be impossible to produce underwriting profits as insurers always did before," he noted. He said he expects commercial business to "migrate to larger companies, which have the technological superiority and ability to compete on price."

Much of the impetus for change was fueled by the United States-Japan Insurance Talks.

The 1996 Insurance Business Law, which took effect Oct. 1, permits life and non-life insurance companies to compete in each others' sectors; the introduction of brokers; and the licensing of Lloyd's agents.

Since then, 11 non-life insurers have entered the life market, and six life insurers have entered the non-life market. The number of non-life companies has risen to 59, including foreign-owned companies. Lloyd's Japan Inc., a Tokyo-based Lloyd's service company, was set up in April this year.

Mr. Ugai's company, Yasuda, chose to expand by taking a stake in INA Life Insurance Co. of New York-a unit of CIGNA Corp.-a strategy that Mr. Ugai noted would have been "impossible before regulation."

Mr. Ugai said deregulation of premium rates is occurring slowly because if premiums are completely liberalized, "some high-risk consumers would be unable to afford insurance as the premium demanded of them rises or the policy conditions are tightened."

He predicted job losses in the insurance industry as job opportunities are eroded and the industry goes through "a round of cost-cutting of a severity never before experienced." The non-life sector always has been seen as a first-choice career path for university graduates, with high wages and life-time employment, he noted.