The Tokio Marine and Fire Insurance Co., Ltd.
The Tokio Marine and Fire Insurance Co., Ltd.
Incorporated: 1879 as Tokio Marine Insurance Company
Assets: ¥7.68 trillion (US$53.43 billion)
Stock Exchanges: Tokyo Osaka Nagoya Sapporo Niigata Kyoto Hiroshima Fukuoka
The Tokio Marine and Fire Insurance Company, the largest and oldest nonlife insurance company in Japan, played an early and important role in the century-long development of Japan’s insurance industry. Its presidents and managers set industry precedents while they prudently guided the company through many economic and social upheavals. From its inception, Tokio Marine sought markets in the West, thus contributing to the process of Japanese westernization. Today, this investor-owned company offers insurance in several areas: hull, cargo and transit, fire, voluntary and compulsory automobile, personal accident, and other lines including general liability and workers’ compensation. With a well-established domestic network of 47 branches and 434 sub-branches, Tokio Marine is committed to expanding its international presence.
Tokio Marine Insurance Company was founded in 1879. Its beginnings were closely tied to the onset of Japanese westernization in the mid-19th century. In 1639 the Tokugawa government came into power and isolated Japan from the rest of the world for more than two centuries. During this period of seclusion, no Japanese was allowed to travel abroad, and trade with foreign nations was strictly regulated. Even in the absence of contact with the West, primitive types of insurance were developed for internal trade. In 1859, however, the Japanese ports were reopened, and Japan was again in touch with the West. Foreign insurance companies immediately established agencies in these ports to protect the risks of foreign shippers. In 1868 the embattled Tokugawa regime collapsed, and the Meiji restoration government took power. Its first acts were to restore full communication with the West and adopt Western economic structures. Many young industries were financed by the Meiji government, including insurance firms, which were modeled after western companies.
In 1878, representatives of the government, financiers who had been feudal lords, and Eiichi Shibusawa agreed on the need for a marine insurance company. Shibusawa was a leader in the development of modern industries in Japan. On Shibusawa’s commission the plan for Tokio Marine was drafted by Katsunori Masuda, one of the few Japanese experts on insurance at that time. Masuda proposed an initial capital investment of ¥500,000 and branch offices or agencies in all the major port cities. On August 1, 1879, the Tokio Marine Insurance Company was born, funded by both the government and private investors.
Tokio Marine received its early impetus from the rapidly expanding insurance needs of the westernizing Japanese economy rather than from a single visionary leader. Mochiaki Hachisuka became the firm’s first president. Almost immediately, however, he was called to serve in the Foreign Ministry and was succeeded by Munenari Date. Date led the new company until 1883, when he too resigned to fill a government post. Mochimasa Ikeda, the third president, served until 1896. All three presidents had been feudal lords before the Meiji government took over; they championed the Western example but knew little themselves about the business of insurance. During these early years, the firm was held together by Masuda, who became general manager.
Originally, Tokio Marine insured only cargo. Even with this limited product line, however, its business grew quickly. Mitsubishi and Mitsui both trading companies, not only patronized the new insurance firm but also acted as agents in Japanese cities where Tokio Marine could not yet establish branch offices. Wholesalers around the country also served as agents, and soon an extensive network was established with minimal solicitation on the part of Tokio Marine. By carefully selecting risks among ships with first-class ratings, the firm’s early leaders assured its secure beginning.
In the early 1880s, however, the young firm was beset by extensive losses. In 1881 four insured cargoes were sunk, capped in 1882 by the loss of the Gulf of Panama, a ship whose cargo was worth ¥86,000. These claims would have exhausted the reserves—funds kept in reserve for the payment of claims and usually not booked as profit—as well as investments of Tokio Marine if the Meiji government had not again offered a grant in 1883. At this time, the government also expanded the firm’s charter to permit the writing of hull insurance.
The years leading up to World War I were punctuated by the Sino-Japanese War of 1894 to 1895 and the Russo-Japanese War of 1904 to 1905. After an economic crisis in 1890, both wars briefly stimulated the newly industrialized but unstable Japanese economy, resulting in the inception and growth of many new businesses. In the insurance industry, many new companies were started and failed. Following the Sino-Japanese War, 19 non-life insurances firms were formed, but only 6 survived beyond 1910. In order to regulate the speculation in this field, the government enacted the Insurance Business Law in 1900. The statute tightened methods of accounting and prohibited companies from concurrently writing life and non-life insurance.
Tokio Marine suffered during the 1890s from the too-rapid expansion of its own business as well as increasing competition from new businesses. Building on its newly solidified capital base, the company looked to foreign markets, establishing agencies in Liverpool, London, and Glasgow in 1891, and in San Francisco, California in 1893. The British operations rapidly raised the level of premium income from hull insurance, a line that was not expanding as quickly as expected in Japan. In 1890 domestic hull insurance generated barely ¥11,000. In the first half of 1891, overseas hull insurance brought in ¥82,000, and by the second half of the same year that amount had more than doubled. In the first half of 1892, foreign agencies generated ¥290,000 in hull insurance, leaving cargo-insurance income far behind.
The rapid increase in premiums, however, was followed by a multitude of claims. In 1892 overseas losses were beginning to climb, amounting to ¥226,000; by the second half of 1893, losses had reached ¥667,000, with overseas premiums only ¥775,000 for the same term. At the same time, Tokio Marine was faced with stiffening competition at home. Two new marine companies were formed in 1893: The Nippon Kairiku Insurance Company, and the Imperial Marine Insurance Company. In the early 1990s, Tokio Marine lost the cargo business of rice, grain, and fertilizer wholesalers to Nippon.
Tokio Marine responded to the overseas crisis by closing the San Francisco agency in 1897 and the London office in 1898, and negotiating with brokerage firms to act as its agents. Domestically, the firm took the opposite approach and countered its competition by assuming responsibility for its own promotion rather than relying on agents from other companies. To weather the two financial crises, Tokio Marine was forced to draw on its capital, effecting a reduction of ¥375,000. Accepting responsibility for the company’s performance, Mochimasa Ikeda resigned in 1896 and was succeeded by Heigoro Shota. Shota resigned almost immediately to become general manager of the Mitsubishi shipyards, and Michinari Suenobu was appointed to succeed him. Despite corporate and financial upheaval, Tokio Marine opened a branch office in Osaka in 1896.
Tokio Marine benefited greatly from the economic revival during the war with Russia. In 1903, the firm’s overall profit was less than ¥100,000; by 1910, it exceeded ¥1 million and reserves were comparable to those of longer-standing British companies. The first decade of the 20th century also saw the consolidation of Japan’s commercial enterprises into large family-run financial blocs called zaibatsu, a structure that characterized the Japanese economy until after World War II. Fiscal retrenchment inevitably followed the prosperous wartime years; in this environment, the zaibatsu were thought to be more secure. Tokio Marine became part of the Mitsubishi zaibatsu. In these years of mergers and reaffiliations, the company formed its first subsidiary. In 1907 it cooperated with the Meiji Fire Insurance Company to form Tomei Fire and Marine Insurance Company, a firm that reinsured the preferred risks of both companies. A reinsurer does not write policies directly, but contracts with the primary insurer to share the risk for large or preferred risks, thus backing the insurer’s ability to settle claims.
In the years leading to World War I, the nonlife insurance industry expanded both in size and in product lines. Marine insurance grew with the expanded marine business during the war with Russia, while competition in fire insurance markets increased. Many new companies were formed to handle the growing needs. In addition, new types of insurance expanded the scope of the industry.
The performance of Tokio Marine during these years reflected the general industry expansion. The directors had learned from the firm’s financial setbacks in the 1890s and, with prudent retrenchment, prospered during the lean years after the war with Russia. In 1912 Tokio Marine reentered the U.S. market, establishing an agency for marine insurance in New York, with sub-agencies soon following in San Francisco and four other U.S. port cities. In 1913 the company applied for permission to add six new lines of insurance: inland transit, fire, personal accident, credit, theft, and automobile. In 1914 approval was granted for transit, fire, and automobile. Tokio Marine thus became the first Japanese firm to offer automobile insurance.
Expansion continued and escalated during World War I. With the outbreak of war, trade and industry grew rapidly. From 1914 to 1918, exports tripled, and industrial production increased fivefold from 1914 to 1919. The need for non-life insurance concomitantly grew as well, and Tokio Marine strengthened its position by acquiring control of several other insurance companies. In 1915 it purchased the Meiji Fire Insurance Company, in 1916 became part-owner of Fukuju Fire, and in 1917 acquired stock in Hokoku Fire. In addition, when Mitsubishi, one of its long-standing customers, moved to create its own insurance company, Tokio Marine became a large shareholder in the new firm. From 1908 to 1918 Tokio Marine’s assets increased 12-fold. In 1918 the firm began to write fire insurance in the United States. At the same time it changed its name to The Tokio Marine and Fire Insurance Company Ltd., to reflect its expanded business.
In 1920 Japan’s postwar economy slid into a depression that lasted most of the decade and prefigured the global Depression of the 1930s. Shipping and trading were particularly affected, and the non-life insurance business suffered accordingly. Tokio Marine and other major companies weathered the crisis, but many smaller companies could not stay afloat on their own. Tokio Marine spearheaded a move toward consolidation of the insurance market. To protect themselves, the smaller, less secure companies became affiliated with those that were larger and more stable. Reinsurance pools and tariff agreements were also used to regulate the market and to establish consistent conditions for determining premium rates. Tokio Marine was instrumental in organizing one of these pools, the Hull Insurers’ Union, in December 1927.
The years of financial crisis were exacerbated in 1923 by the Great Kanto Earthquake, which killed 100,000 people and destroyed property valued at over ¥10 billion. Aggregate net assets of all nonlife firms amounted only to ¥235 million; a serious attempt at payment of all claims would have wiped them out. Prime Minister Gonnohyoe Yamamoto, however, publicly called for settlement of claims, and popular pressure exploded in 1924 in seven mass rallies supporting the prime minister’s appeal. Kenkichi Kagami, then a managing director of Tokio Marine, led a coalition of insurance companies into an agreement with the government, in which the government and the nonlife insurance companies shared the financial burden of the earthquake, even though in some cases the companies were not liable. Because most claims were for settlement on fire policies, an area Tokio Marine had only recently entered, its payments were not debilitating.
Although the 1920s continued to be years of economic decline, Tokio Marine operated with a surplus and was able to expand its presence overseas. In 1921 it established the Standard Insurance Company of New York, its first subsidiary in the United States, to handle the growing fire insurance business. The company also began to expand in other parts of the world. In 1926 it concluded an operating agreement with Cornhill Insurance Company, a British firm. According to the terms of this agreement, the two firms shared liability on all policies, with Tokio Marine managing operations in Japan, China, and Southeast Asia, and Cornhill handling them in Europe, Africa, and Australia.
At home, the 1920s were years of corporate consolidation for Tokio Marine. The firm had lost business when Mitsubishi formed its own insurance company, and to forestall further losses the executives of Mitsubishi Marine and Tokio Marine coordinated their operations in 1925. At that time, Michinari Suenobu, chairman of Tokio Marine’s board but also an executive at Mitsubishi, resigned and was succeeded by Kenkichi Kagami, Tokio Marine’s managing director. Kagami, who had been board chairman at Meiji Fire since 1922, was concurrently made chairman of Mitsubishi’s board. Under Kagami, the three firms cooperated and exchanged personnel. In 1933 they began to exchange capital as well. Tokio Marine also purchased numerous smaller subsidiaries during the 1920s.
In 1929, the collapse of the U.S. stock market initiated a global depression. Japan began to recover in 1932, after it went off the gold standard and adopted an inflationary policy. Nonlife insurance firms profited in this inflationary environment and developed smoothly in the early 1930s. In 1937, however, war broke out with China. Japan’s relations with Britain and the United States declined when Japan’s friendships with Italy and Germany deepened in the turbulent years before World War II.
To prepare for economic withdrawal from much of the Western world and to finance the war with China, the Japanese government instituted strict economic controls of the insurance industry, in 1937. Nonlife insurance firms were required to reinsure domestically, rather than in London, a center for reinsurance. When war broke out in Europe in 1939, the requirement became a need. Two Japanese syndicates were established for domestic reinsurance in 1938 and 1939. To enlarge reinsurance capacity, the Toa Fire & Marine Reinsurance Company was established in 1940, with 42 domestic insurance companies as shareholders. Because Tokio Marine was now required to reinsure with the government-approved companies or syndicates, Tomei Fire’s function became meaningless and it merged with Toyo Marine and Fire, another Tokio Marine subsidiary. Tokio Marine suspended or shut down all operations in England in 1941, when the British government froze all Japanese assets.
In 1939 Kenkichi Kagami died. At his death, the three affiliated companies—Mitsubishi Marine, Meiji Fire, and Tokio Marine—decided to elect separate presidents. Sakae Suzuki became president of Tokio Marine. The three companies, however, increased the exchange of officers to maintain coordination. In 1941 the Japanese government decreed the need for mergers of financial institutions in order to raise funds for the war effort. At the government’s insistence, the three closely affiliated companies were dissolved as separate entities in 1944, and a single firm under Tokio Marine’s name emerged in their place. Suzuki became chairman of the new Tokio Marine, and Shunzo Kameyama, president of the old Mitsubishi Marine, became president.
Although operations abroad ceased during World War II, domestic operations sustained a measure of growth, at least initially. As Japanese occupation of foreign soil expanded, the market for nonlife insurance also grew, particularly in Manchuria. In 1943 attacks on Japan increased, and the need for war-risk insurance climbed. Air raids became more frequent, and underwriters wrote more policies. Payments also escalated. Following the major air raid on Tokyo in March 1945, the numbers of policies and payments reached their peak. Between January 1942 and September 1945, income from war-risk policies issued by Japanese companies reached ¥500 million, and payments amounted to ¥46 billion. In early August 1945 the United States dropped atom bombs on Hiroshima and Nagasaki, and on August 15, Japan surrendered. The Japanese fleet and all major cities had been completely destroyed. With no risks left to insure, Tokio Marine and other nonlife insurance companies simply ceased to function. Chairman Suzuki resigned in 1945, and Kameyama was appointed in his place.
Occupation forces arrived in Japan on August 30, 1945, under General Douglas MacArthur, Supreme Commander for the Allied Power (SCAP). Under the SCAP administration, economic controls were inaugurated that reversed the trend of Japanese business and American-style antitrust legislation was passed. One of SCAP’s first directives dissolved the zaibatsu. Over the next few years, companies had to divest themselves of stock held in other businesses in their respective zaibatsu. Top management personnel who had held their positions during the war were dismissed.
The following years, 1946 and 1947, were the most difficult years in Tokio Marine’s history. First its office building then its replacement were requisitioned by SCAP. The company ended up in a suburb of Tokyo until 1950. Under the Restriction of Securities Decree of November 1946, Tokio Marine was forced to divest itself of stock amounting to ¥96 million that represented more than 76% of its total holdings. At Tokio Marine, Kameyama was forced to resign as chairman, Issaku Yatsui as president, as well as other top managers and directors. Tukujiro Tanaka became the new president, but the post of chairman was not filled. By 1948 Tokio Marine had complied with most of SCAP’s directives.
Marine business, in general, had declined after the war, and the firm concentrated on fire insurance. It introduced fire-prevention techniques to the Japanese insurance market. By 1947, with government support, the shipping industry began to show signs of recovery and the company’s marine business grew substantially between 1949 and 1954. In 1950 the company moved back to central Tokyo. In 1951 it became an early proponent of office automation, and in 1953 purchased IBM automation equipment.
The company gradually reopened communications in foreign markets. In 1950 it signed reinsurance treaties with London companies. In 1953 it resumed overseas training of personnel. In 1956 it renewed direct underwriting operations in England and the United States. These domestic and foreign successes revived Tokio Marine’s profitability. In 1949 the firm resumed dividend payments, and by 1956 had almost recovered its prewar position in the industry. In the period from 1949 to 1954 total assets increased more than fivefold and working assets sevenfold. In 1957 the position of chairman of the board was re-established, and President Tanaka was appointed to fill the post. He was succeeded by Mikio Takagi as president.
The 15 years from 1955 to 1970 were years of spectacular growth for both the Japanese economy and for Tokio Marine. From a nation devastated by World War II, Japan rose to become second in gross national product only to the United States by 1968. The 1960s were especially profitable for Tokio Marine. In 1964 its direct premiums totaled ¥39.3 billion, with total assets of ¥86.5 billion. By 1973 direct premiums had climbed to ¥238.5 billion with total assets of ¥491 billion. Although both marine and fire insurance coverage did well, much of the new business came from auto insurance. In 1956 Japan adopted compulsory auto insurance. Although premium income from compulsory insurance could not be counted as profit, supplemental voluntary auto insurance also increased. By 1967 Tokio Marine’s combined auto insurance exceeded 50% of the company’s total business. In 1966 Tanaka was succeeded by Kenzo Mizusawa as chairman. Genzaemon Yamamoto became president.
Tokio Marine introduced several other lines of insurance during the 1960s. Compulsory auto insurance had given the Japanese public a new awareness of the advantages of personal insurance, and Tokio Marine added new lines of personal coverage to its largely corporate business. Several types of personal accident insurance were offered: householders’ and storekeepers’ comprehensive, traffic personal accident, long-term comprehensive, and earthquake insurance for individual citizens. Its corporate lines continued to develop as well. The firm added aviation insurance, nuclear-energy liability, movables comprehensive, and employees’ housing-loan credit insurance.
Between 1964 and 1975 Tokio Marine increased to 19 the number of foreign countries in which it did business. In the United States, Tokio Marine affiliated with the Continental Insurance Company and directed more of its efforts toward non-marine business. In both European and U.S. markets the company did an increasing amount of reinsurance. Yamamoto became chairman in 1972, and Minori Kikuchi followed him as president.
In the early 1970s, the rapid growth of the previous decade slowed dramatically. The growth in premium income of non-life insurance companies in Japan dropped from 40% in 1970 to 12.8% in 1971. The economic slump was exacerbated by the oil crisis of 1973. To counteract the domestic downturn, Tokio Marine focused even more intently on overseas expansion and plotted a strategy of internationalization in the mid-1970s. Net overseas premium income increased from ¥14 billion in 1969 to ¥49.7 billion in 1978. In 1978 Kikuchi advanced to the chairmanship, and Fumio Watanabe followed him as president.
The 1980s were years of stable financial growth for Tokio Marine, especially from investment income. In 1980 it purchased three subsidiaries from the Equitable Life Insurance Society of the United States. One year later it became the first Japanese nonlife insurance company to begin operations in Italy. Investment income soared as the firm invested extensively in high-yield foreign securities. Auto-premium income also continued to climb, bolstered by a premium ratehike in 1983. In 1984 President Watanabe became chairman, and Haruo Takeda succeeded him as president. In 1985 Tokio Marine reported a record ¥25 billion net profit. In 1989 the firm purchased a 10% stake in Delaware Management Holdings, the fifth-largest independent money-management firm in the United States, in order to train itself in the management of pension funds. By 1989 Tokio Marine was the world’s largest property and casualty insurance company. In 1990 Takeda advanced to the chairmanship, and Shunzi Kono became president.
Arab International Co. (Egypt); Tokio Marine Management (Australiasia) Pty. Ltd. (Australia); America Latina Companhia de Seguros (Brazil); P. T. Asuransi Jayasraya (Indonesia); The Koryo Fire & Marine Insurance Co., Ltd. (Korea); United Prime Insurance (Malaysia) Sdn. Bhd.; Jerneh Insurance Corp. Sdn. Bhd. (Malaysia); Tokio Marine Internacional S.A. (Mexico); La Rural del Paraguay S.A.; Pan-Malayan Insurance Corp. (Philippines); The Arab-Eastern Insurance Company Limited EC. (Saudi Arabia); The Tokio Marine & Fire Insurance Co. (Singapore) Pte. Ltd.; Tokio Reinsurance Co. Ltd. (Switzerland); The Sri Muang Insurance Co., Ltd. (Thailand); Tokio Marine South-East Servicing Co., Ltd. (Thailand); Tokio Marine International Fund (Bahama) Co. Ltd.; Tokio Marine International Fund (Luxembourg) S.A.; The Wuphoon Insurance Co. Ltd. (Hong Kong); Tokio Marine Realty Co., Ltd. (U.S.A.); The Tokio (New York) Corp. (U.S.A.); Houston General Insurance Co. (U.S.A.); Trans Pacific Insurance Co. (U.S.A.); TM Claims Service, Inc. (U.S.A.); First Insurance Co. of Hawaii, Ltd. (U.S.A., 40%); Tokio Marine Management, Inc. (U.S.A.); Tokio Marine de Venezuela, C.A.
The Tokio Marine & Fire Insurance: The First Century, 1879-1979, Tokyo, The Tokio Marine & Fire Insurance Co., Ltd., 1980.
—Lynn M. Voskuil