Japan's Insurers Fill Gap In Lending Left by Banks

TOKYO -- Having been burned by stock and other investments in recent years, Japan's life insurers are hoping to bolster profits by increasing corporate lending at home.

"Banks are not lending, so we're filling the gap," said an official at a major life insurance company.

Life insurers are Japan's largest institutional investors and took some mammoth losses in both domestic stocks and foreign assets in the late 1980s.

Now, insurers see domestic loans as a safe investment free of risk from market fluctuations, and interest rates have been at attractively high levels for the past few years, officials said.

Life insurers allotted some 56% of their $97.6 billion in new assets to corporate lending in the period from April 1990 to February 1991, against 35.4% in the fiscal year ended March 31, 1990, according to the Life Insurance Association of Japan.

"We plan to maintain a steady fund allocation to lending from the standpoint of promoting insurance business," said Yoshihiro Sawada, deputy vice president in charge of loan management at Dai-ichi Mutual Life Insurance Company.

Asahi Mutual Life Insurance Co. increased its corporate lending to 95% of its asset growth in 1990/91, compared with 53.8% in 1989/90, mostly at the expense of bonds and foreign securities investments, its annual report said.

Big Change for Nippon Life

Nippon Life Insurance Co., Japan's biggest insurer, said its ratio grew to 56.2%, from 36.6% a year earlier.

Insurer lending in 1991-92 was off to a slower start, but is still a growing area, officials said.

"There is underlying demand, but expectations of an easing in monetary policy are keeping some potential borrowers on the sidelines," Dai-ichi Life's Sawada said.

Last year's figures could have been the peak because they include special factors, namely subordinated loans to banks, said Jushin Matsubara, Asahi's loan department manager.

"But we are still projecting 40% of fresh funds for loans this year."

Insurers began disclosing hidden profits and losses in the 1990/91 annual reports released Friday, and are getting more reluctant to invest in volatile securities.

A Comfortable Arrangement

Insurers have long been stable shareholders in the Tokyo stock market, in return for business in managing corporate pension funds or selling policies to company employees.

But since the stock market is no longer so bullish, and since insurers' stockholdings have nearly reached the 30% legal maximum, they are reluctant to buy much more.

Corporations are increasingly looking to insurers for loans as banks strapped by capital adequacy requirements restrain lending growth, and equity-linked financing is subdued by the fragility of the stock market, insurance officials said.

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