Japanese e-commerce group Rakuten Inc.'s planned acquisition of Asahi Fire & Marine Insurance Co. Ltd. from Nomura Holdings Inc. is credit negative for Japan's existing property and casualty insurers, Moody's said.
The rating agency said Feb. 5 that the move would enable Rakuten to take market share away from existing P&C insurers as the company can use its "big data" expertise with advanced technology to offer cheaper insurance products to its members and Asahi Fire & Marine Insurance's existing customers.
Rakuten and Nomura said Jan. 29 that they reached an agreement for the latter's 4,369,100 ordinary shares and 2,084,000 preferred shares in the insurer. The e-commerce group is offering ¥2,664 per share of common stock and ¥10,656 per series A class stock under the tender offer for up to 16,891,288 Asahi Fire & Marine Insurance shares.
The rating agency said that advanced technology, such as telematics, could potentially disrupt P&C product pricing. It added that Rakuten could potentially develop and use telematics technology to offer so-called pay-how-you-drive policies with lower premium rates for drivers with good driving records.
Moody's noted that Japanese P&C insurers have been slow to adopt advanced technology to develop new products, adding that the three largest P&C insurance groups — Tokio Marine Holdings Inc., MS&AD Insurance Group Holdings Inc. and Sompo Holdings Inc. — have had little incentive to innovate.
Pricing for some insurance products, including auto insurance, is mostly based on advisory pure premium rates set by the General Insurance Rating Organization of Japan, or GIROJ, Moody's said. While insurers can set their own premium rates for auto insurance, they typically follow the GIROJ's advisory rates with small adjustments.
As of Feb. 2, US$1 was equivalent to ¥110.39.
