Moody's Investors Service in Tokyo said despite regulatory actions taken against Mitsui Sumitomo Insurance Co., Japan's second largest property insurer, it has improved its outlook for the carrier.
The rating firm also said it is considering an upgrade for two other large Japanese insurers.
Moody's said the outlook for Mitsui Sumitomo has improved from stable to positive and affirmed the company's financial strength rating of "Aa3."
The action came after last week's order by Japan's financial regulator, Financial Services Agency (FSA), suspending the company from writing property-casualty insurance for two weeks, and the indefinite suspension of writing new sales for health insurance products.
The action was taken after it was discovered that the company failed to pay claims over a three-to-four-year period that amounted to 2.66 billion Yen (U.S. $22.9 million at the current exchange rate) on auto insurance claims, and 166 million Yen ($1.4 million) on illness insurance products, Moody's said.
According to press reports, the FSA discovered a number of companies in Japan have failed to pay policy claims over a number of years because of poor management.
Moody's said that in Mitsui's case, while there are short-term financial implications, it has extensive financial resources and the losses from the action should not prove to be material.
However, Moody's added, it would continue to monitor the company and warned it could switch the rating back to stable if there is additional regulatory action.
Moody's said the "Aa2″ financial strength rating of Japan's largest p-c insurer, Tokio Marine & Nichido Fire Insurance Co., is under review for possible upgrade.
The company, Moody's said, has "maintained an exceptional level of capitalization in spite of some volatility due to stock market fluctuations." It has continued to pay dividends and post profitability in recent years, the rating service added, partly due to disciplined underwriting despite intense competition and slow growth in the p-c market.
Aioi Insurance Co., Ltd.'s "A3″ financial strength rating was also placed under review for possible upgrade by the rating service. Moody's said the company has made progress strengthening its domestic retail p-c business while controlling costs. It has made additional moves to stabilize its profitability, Moody's said.
All three companies are based in Tokyo.
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