Impact of low interest rates on Japanese insurance industry October 30, 2016 Impact of low interest rates on Japanese insurance industry Hiroshi Okada Director of Insurance Business Division, Financial Services Agency, Japanese Government

JFSA is continuing to monitor them closely. There is a growing concern internationally that the solvency of many life insurance companies “is threatened by a prolonged period of low interest rates.” - IMF (Summary) In the case of Japanese life insurance companies, impact of low interest rate is limited in the short-term. However, if the low interest persists in the mid-to-long term, there will be consequences on life insurance companies. JFSA is continuing to monitor them closely. http://www.pionline.com/article/20161005/ONLINE/161009940/imf-urges-regulators-to-strengthen-pension-funds-amid-weak-growth-low-interest-rates

Asset size of Japanese financial institutions Below are the total assets of Japanese financial institutions. Insurance companies rank second to Major banks in Japan. Insurance companies’ main mission is to provide protection to customers; however, they also have the role of helping household asset building. （Trillion JPY）

Introduction of negative interest rates Composition of securities investment of Japanese life insurance companies Shift toward foreign securities continues. This trend has not changed after the introduction of negative interest rates. Interest gain from Yen denominated foreign securities is affected by exchange rates. Introduction of negative interest rates (2016/1/29) ※　JP: General Account, statutory base. US: General Account, regulatory account base. ※　FSA developed this chart with data submitted by all life insurance companies. Data of US life insurance companies is from American council of life insurers (ACLI).

（Hundred million JPY） <Asset and liability that insurance company holds by maturity (A fictional example)> (By maturity)