What Is the Driving Force behind Consolidations in the Insurance Market?

Journal of Risk Finance, Vol.14(2): 108-119

12 Pages Posted: 25 Feb 2010 Last revised: 3 Sep 2017

See all articles by Mahito Okura

Mahito Okura

Doshisha Women's College of Liberal Arts

Noriyoshi Yanase

Keio University - Faculty of Business and Commerce

Abstract

Purpose – The purpose of this paper is to discuss whether insurers could have a strong motivation for M&A in the future because they need to survive within the industry under oversaturated market conditions. Recently, Japanese non-life insurance markets, mainly the automobile insurance market, have reached the point of saturation due to the oversaturated domestic automobile market. At that time, the industry has also experienced successive large-scale M&A transactions.

Design/methodology/approach – Using a theoretical model developed by Salent et al., the authors discuss whether an insurer's motivation for M&A could be affected by a saturation of the market. The authors also clarify whether insurance premium deregulation is a necessary condition for merger incentives.

Findings – The authors conclude that, first, necessary requirement for insurers' motivation of consolidations is to loosen the rate regulation; and second, the sufficient condition is saturation of market.

Research limitations/implications – This result is intuitive to understand recent circumstances surrounding the Japanese non-life insurance industry.

Originality/value – This study is believed to be the first to discuss the relationship between a potential market size and M&A transactions.

Keywords: Acquisitions and mergers / Consolidations / Deregulation / Insurance companies / Insurance market / Japan

JEL Classification: D43, G22

Suggested Citation

Okura, Mahito and Yanase, Noriyoshi, What Is the Driving Force behind Consolidations in the Insurance Market?. Journal of Risk Finance, Vol.14(2): 108-119, Available at SSRN: https://ssrn.com/abstract=1541633 or http://dx.doi.org/10.2139/ssrn.1541633

Mahito Okura (Contact Author)

Doshisha Women's College of Liberal Arts ( email )

Kodo
Kyotanabe
Kyoto, 610-0395
Japan

Noriyoshi Yanase

Keio University - Faculty of Business and Commerce ( email )

2-15-45 Mita
Minato-ku
Tokyo 108-8345
Japan
1088345 (Fax)

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