Millea, JP Morgan to form reinsurance firm: Nikkei

Tokyo, March 11: Japanese insurer Millea Holdings Inc. will set up a reinsurance company jointly with JP Morgan, financial daily Nikkei said on Sunday.

The new firm, which will have start-up capital of about 10 billion yen (.56 million), with Millea owning a majority, will offer reinsurance services to cover the risk faced by life insurers offering variable annuity policies.

The Nikkei said Millea is likely to be the first Japanese insurer to reinsure against the risk in variable annuity contracts.

A formal announcement on the venture is expected on Monday.

Variable annuity policyholders receive different amounts of money at maturity depending on the performance of their investment trusts.

But the majority of products sold recently guarantee the policyholders' full premium payments even if returns fall short of the investment amount, with the insurers covering the shortfall.

About 20 domestic and foreign-owned life insurance companies currently offer variable annuities in Japan, with the value of contracts in force amounting to 12.45 trillion yen at the end of September 2006, rising nearly 10 trillion yen in the last three and a half years.

Reuters