THE SUMITOMO MARINE AND FIRE INSURANCE COMPANY, LIMITED History

Company History:

The Sumitomo Marine and Fire Insurance Company has existed in its present form only since 1954, but its roots stretch far into the history of Japanese insurance. Ranking fourth among Japanese non-life insurance firms in 1990, with a 7% share of the Japanese market, Sumitomo specializes in fire and automobile insurance. It is a conservative company but is a pioneer in women's long-term accident insurance.

Sumitomo traces its origins to two insurance companies--the Osaka Marine and Fire Insurance Company, founded in 1893, and The Sumitomo Marine and Fire Insurance Company, founded in 1917 as Fuso Marine Insurance Company. The Osaka was among the Japanese insurance industry's pioneers.

Japanese insurance companies initially operated unfettered by regulations, but the lack of regulation resulted in fierce competition, questionable business practices, and several bankruptcies. In 1900 the Japanese government laid down a set of principles to govern the industry: non-life issuers had to be licensed by the government and had to be either stock or mutual companies. The law further prohibited companies from selling both life and non-life insurance policies, and from conducting other businesses.

It was in this regulatory environment that Fuso Marine Insurance Company was founded in 1917. One of Fuso's financial backers was Kichizaemon Sumitomo, a member of the powerful Sumitomo family. One of the chief interests of the Sumitomo zaibatsu, or conglomerate, was shipping. Japanese shipping and shipbuilding had expanded greatly during World War I, creating a greater demand for maritime insurance.

A year after its founding, Fuso began writing fire and transit insurance, and later added personal accident, automobile, and aviation insurance. In 1920 a branch office was opened in New York City. During the Depression, the Sumitomo group increased its holdings in Fuso. Sumitomo eventually held over 40% of the firm's 200,000 shares, and in 1940, Fuso became a Sumitomo subsidiary and changed its name to The Sumitomo Marine and Fire Insurance Company.

In the meantime The Osaka grew extensively, spreading its operations throughout the world. In 1942 it merged with the Settsu Marine and Fire Insurance Company. Two years later it merged with Sumitomo, to become The Osaka Sumitomo Marine and Fire Insurance Company, based in Osaka.

The Osaka Sumitomo merger was part of a larger consolidation of the industry during the 1940s. World War II was a lean time for the Japanese insurance industry. All policies written in foreign countries were lost, and after the outbreak of war, the industry was placed under strict wartime control. To meet wartime emergencies many companies were forced to merge. In 1940 there were 43 Japanese insurance companies; in August 1945 there were only 16. During the war, Osaka Sumitomo was forced to withdraw from Europe and the United States and concentrate its business in Asia.

With Japan's defeat, Osaka Sumitomo faced huge losses. Its overseas assets and connections were obliterated and, with the cessation of trade and the destruction of ships, marine underwriting ground to a halt. The end of the war brought other serious problems. High inflation was rampant, and the insurance industry was near collapse because the destruction of houses, stores, factories, and ships created losses insurers could not cover.

Osaka Sumitomo shifted its attention to fire insurance, re-organized its management structure, and started the arduous process of rebuilding. As Japan's economic rehabilitation proceeded, so did the company's. When overseas trade began to grow, marine insurance picked up as well.

At war's end, the Sumitomo honsha, or holding company, held about 17% of Osaka Sumitomo's shares. When the Allied occupation government forced the break-up of the zaibatsu, the Sumitomo group had to divest itself of some of its shares. Thousands of shares in Osaka Sumitomo were put up for sale.

Since World War II the company has grown with little uninterruption. In 1950 Osaka Sumitomo reappointed the two London brokers who acted as its agents before the war. The same year Osaka Sumitomo resumed transactions with underwriters in France, West Germany, Canada, and Italy. During the boom decade of the 1950s the firm also reopened relations with firms in the United States, Switzerland, and India, and acted as the Japanese agent for the Insurance Company of North America. In 1954 its recovery well under way, the company changed its name to The Sumitomo Marine and Fire Insurance Company and moved its head office to Tokyo. That year, paid-in capital stood at ¥600 million. The company had 1,661 employees in its head office and 14 Japanese branches.

As the Japanese economy grew throughout the 1950s and 1960s, so did Sumitomo. The company continued to write fire, shipping, personal accident, and automobile policies, but the new conditions created by increased trade required Japanese insurance companies to take on new risks. Sumitomo and other insurers began to insure supertankers, airplanes, and industrial complexes. In 1957 Sumitomo established offices in New York and Hong Kong. Growth continued, and by 1964 paid-in capital stood at ¥5.4 billion. By 1969 that total had reached ¥6 billion.

In 1971 Sumitomo made a new foray into the U.S. market, signing a reciprocal agreement with Chubb & Son, and receiving a license to write marine insurance in New York State. That year, assets reached ¥100 billion and paid-in capital stood at ¥9.3 billion. Sumitomo continued to grow during the 1970s. By 1974 assets had doubled to ¥200 billion. Two years later, a subsidiary, The Sumitomo Marine and Fire Insurance Company (Europe) Ltd., was established in London. By 1979 total assets had doubled again, to ¥400 billion.

The 1980s saw a period of continued growth, expansion into foreign markets, and the development of new technologies, products, and services. In 1980 Sumitomo began participating in the New York Insurance Exchange, and a Singapore branch was established to serve Southeast Asia. In 1981 Sumitomo established its second major overseas subsidiary--The Sumitomo Property & Casualty Insurance Company--in Hong Kong.

In 1982 Sumitomo established an office in Beijing, furthering its work with the People's Insurance Company of China, begun in 1972. During the recession of the early 1980s, Sumitomo's expansion slowed but did not stop. Although insurance in force, premiums written, and assets continued to rise, Sumitomo experienced a 5% decline in profits in 1982. In 1983 Sumitomo claimed ¥586.5 billion in assets, 40% of which consisted of bonds and stocks. Loans accounted for about 20% of corporate assets.

While other insurance companies diversified their asset holdings during the turbulent 1980s, Sumitomo maintained a conservative portfolio. In 1989, for example, loans constituted 23% of assets, while stocks and bonds rose to make up nearly half of the company's holdings.

In 1984 Sumitomo installed an on-line computer system to deal with rising numbers of auto claims. It also brought out new products. In 1983 Sumitomo began to offer family personal accident insurance, a special automobile policy, and an insurance gift certificate--a Japanese first. In 1985 Sumitomo offered a new long-term family traffic personal accident assurance, and women's long-term accident insurance which incorporated a savings plan into the insurance.

Overseas expansion continued unabated. In 1985 Sumitomo received a license to conduct non-life insurance business in France. Sumitomo opened an office in Madrid in 1988, giving it representation in 20 countries.

Sumitomo outgrew its old building and, in 1985, started construction of a new 21-story headquarters building in central Tokyo. This physical growth corresponded to immense growth in assets. Between 1985 and 1989 assets doubled--from ¥742 billion to ¥1.59 trillion.

In 1988, under the leadership of President Sumao Tokumasu, Sumitomo inaugurated a five-year plan, to coincide with the corporation's 100th anniversary in 1993. Under the plan, Sumitomo hoped to upgrade products, improve profitability, and increase efficiency. In 1988 Sumitomo introduced the New Age Intelligent System, a computer-assisted driver evaluation system. In 1989 it integrated data processing for all branches of insurance. By 1990, Sumitomo was a licensed insurer in 16 countries, represented by 27 overseas offices and 59 branch offices in Japan.

Principal Subsidiaries: The Sumitomo Marine & Fire Insurance Company (Europe) Ltd. (U.K.); The Sumitomo Property & Casualty Insurance Company (H.K.) Ltd. (Hong Kong); Sumitomo Marine Staff Services Co., Ltd.; Sumikai Computer Center, Ltd.; Sumitomo Marine Automobile Claims Survey Co., Ltd.; Sumikai Buildings' Services Co., Ltd.; Sumikai Marine Services Co., Ltd.; Sumitomo Marine Agencies Services Co., Ltd.; Sumitomo Marine Claims Services Co., Ltd.; Sumikai Head Office Maintenance Services Co., Ltd.; Nishiki Shoji Co., Ltd.; Sumikai Loan Management Services Co., Ltd.; Sumitomo Marine Investment Management Co., Ltd.

Further Reading:

• "The Sumitomo Marine and Fire Insurance Company, Limited," Tokyo, The Sumitomo Marine and Fire Insurance Company, Limited, [1954].
• Uemura, Mitsuo, "Spiritual Guideline and Strategy for Management," Sumitomo Quarterly, September 1982.

Source: International Directory of Company Histories, Vol. 3. St. James Press, 1991.

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