International Trade

The Japanese insurance market, with $334 billion in annual premiums in 1997, is second in size only to that of the United States. Yet the foreign share of the Japanese market is only 3.7 percent; the foreign share of the U.S. market is 10.7 percent. To improve foreign access to the Japanese insurance market, the United States and Japan have signed two bilateral insurance agreements. A GAO survey of the 13 U.S. insurance companies and three brokers in Japan found that all but two think that Japan has made moderate or better progress in implementing the insurance agreements. GAO found that Japan has met most of its openness, procedural protection, and deregulation commitments. Most U.S. companies said that the agreements have had a positive effect on their ability to compete in Japan. Nevertheless, nearly half of the companies expressed concern about Japan's implementation of key commitments, such as speeding approval of insurance products and rates and limiting the activities of large Japanese companies in the specialized third sector. The Office of the U.S. Trade Representative is the principal agency responsible for monitoring and enforcing the insurance agreements, with assistance primarily from the U.S. embassy in Tokyo. U.S. officials have noted Japanese progress in implementing the agreements, but they have also identified several issues for which they believe Japan has not fully met its commitments. Japan, on the other hand, believes that it has fully implemented both agreements. More U.S. insurance companies expressed favorable views of U.S. government efforts to monitor the insurance agreements than reported favorable views of enforcement efforts.

GAO noted that: (1) GAO's 1999 survey of the 13 U.S. insurance companies and 3 brokers in Japan revealed that all but 2 think that Japan has made moderate or better progress overall in implementing the 1994 and 1996 insurance agreements; (2) GAO's analysis of survey results shows that Japan has met most of its transparency (openness), procedural protection, and deregulation commitments; (3) overall, most U.S. companies reported that the agreements have had a positive effect on their ability to compete in Japan; (4) nevertheless, almost half the companies expressed concerns over Japan's implementation of key commitments such as expediting approval of insurance products and rates and limiting the activities of large Japanese companies in the specialized third sector; (5) USTR is the principal agency responsible for monitoring and enforcing the insurance agreements, with assistance primarily from the U.S. embassy in Tokyo; (6) USTR also receives assistance from Commerce and State, with a lesser level of assistance by the Departments of the Treasury and Justice; (7) USTR and U.S. embassy monitoring efforts include obtaining information on the agreements' implementation from industry groups and individual U.S. insurance companies, as well as consulting with the Japanese government; (8) in conducting their monitoring and enforcement work, U.S. government officials have noted Japanese progress in implementing the agreements; (9) however, they have also identified a few issues, which are similar to those cited by some U.S. companies, where they believe Japan has not fully met its commitments; (10) Japan, on the other hand, believes that it has fully implemented both agreements; (11) more U.S. insurance companies expressed favorable views of U.S. government actions to monitor the insurance agreements than reported favorable views of enforcement efforts; (12) about half (7 of 13) of all U.S. insurers and 2 of the 3 brokers GAO surveyed reported that U.S. government efforts to monitor agreements have been effective; (13) with regard to enforcement, about one-third of the companies and no brokers reported that U.S. government efforts have been effective; (14) around one-third of the companies reported that U.S. government monitoring and enforcement efforts have been as effective as ineffective; and (15) three major U.S. insurers expressed concerns over U.S. government monitoring and enforcement efforts concerning the protection of various U.S. company interests in the third sector.