(Bloomberg) -- Japan’s industry body for non-life insurers told its member companies to cut their cross-shareholdings, following government pressure to abandon the long-standing practice.
In guidelines released Thursday, the General Insurance Association of Japan also told members not to acquire new stakes in companies.
Cross-shareholdings are widely used in Japan to cement business ties. The country’s Financial Services Agency has pushed insurers to cut the stakes to improve competition in the aftermath of a price-fixing scandal last year.
Japan’s biggest general insurers are estimated to own more than ¥6 trillion ($42 billion) in cross-shareholdings as of March. Industry heavyweights including MS&AD Insurance Group Holdings Inc. and Sompo Holdings Inc. have already pledged to eliminate such stakes over the next few years.
In the guidelines, the association also urged its members to avoid reclassifying cross-shareholdings as for “pure investment” as a way to maintain stakes.
The government has been urging companies to reduce their stakes in one another to improve governance and better allocate capital. Manufacturers including Toyota Motor Corp. are among those with plans to sell such shares.
--With assistance from Kazu Hirano.
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