Requirements:
For many years, Japanese financial companies, including insurance companies banded assets together as a method of displaying strength with limited, if any, change in capital ownership. This was and is called Keiretsu- in South Korea called Chalbol.
This performed as reinsurance for the insurance companies and permitted them to operate without reinsurance for risks of earthquakes and hurricanes.
With the Kobe earthquake, the result to Japanese insurance companies was that EQ losses were absorbed solely into the Japanese market as more or little was a part of the whole market and totaled in excess of $30,000,000,000.
This practice was then stopped due to the financial consequences in the Japanese only market and Japanese companies resorted to the reinsurance in the traditional world market.
This change then provides protection of the Japanese property insurance companies as secured in the world marked in the traditional way and changed forever this practice.
Keiretsu applies to other financial intermediaries,
A. Discuss this practice from as insurance standpoint what are alternative.
B. Assess other financial intermediaries and their capital needs.
C. What is the impact from an investor position?