4. Insurance premiums
(1) Payment of insurance premiums
Cooperatives covered by savings insurance are obliged to pay insurance premiums to the Corporation by June 30th every year. Insurance premiums form the base fund for the Corporation’s operations in providing financial assistance and insurance payouts.
The Corporation outsources the administrative work of accepting insurance premiums to credit federations of agricultural cooperatives, credit federations of fishery cooperatives, and the Norinchukin Bank.
(2)Insurance premium amounts
Insurance premiums are calculated by multiplying the previous fiscal year’s balance of savings and others covered by savings insurance (from FY2002 onwards, this has changed from the balance on the final day of the previous fiscal year to the average balance on working days in the previous fiscal year) by the insurance premium rate.
(3) Deciding the insurance premium rate
The insurance premium rate is decided with the approval of the competent ministers (i.e. the Minister of Agriculture, Forestry and Fisheries, the Minister of Finance and the Commissioner of the Financial Services Agency (legally mandated by the Prime Minister)) following a resolution by the Policy Board, and is then publicly announced.
○ Trends in the insurance premium rate
Insurance premiums |
|||
Ordinary insurance premiums |
Special insurance premiums (Note 1) |
||
FY1973 (system launch) – |
0.006% |
- |
|
FY1986 |
0.010% |
- |
|
FY1987 |
0.011% |
- |
|
FY1988- |
0.012% |
- |
|
FY1996- |
0.018% |
0.012% |
|
FY2001 |
Designated savings (Note 2) |
Other savings, etc. |
0.012% |
0.018% |
0.018% |
||
FY2002 |
0.034% |
0.017% |
- |
FY2003 |
Savings for payment & settlement |
General savings, etc. |
- |
0.034% |
0.017% |
||
FY2004- |
0.017% |
0.014% |
- |
FY2010- present |
0.018% |
0.014% |
- |
(Note 1) Only available between FY1996 and FY2001 (Savings Insurance Act, Supplementary Provisions Article 10 paragraph 1).
(Note 2) I.e. current savings, ordinary savings and separate savings.
(4)Trends affecting the insurance premium rate in recent years
There were two types of insurance premium (ordinary insurance premiums and special insurance premiums) between FY1996 and FY2001, but special insurance premiums were abolished at the end of FY2001.
(Note 1) Special insurance premiums formed the base fund for an account especially created with the aim, among others, of providing financial assistance (special financial assistance) exceeding the pay-off cost (the cost expected to be borne by the Corporation when insurance payouts are made to depositors; the same applies below), in response to special measures for full protection of savings, etc. (FY1996-FY2001). Cooperatives covered by savings insurance were obliged to pay special insurance premiums (the premium rate was set by Cabinet Order at 0.012% of the balance of insured savings).
As the insurance premium rate for FY2002, while full protection continued for “designated savings”, a different system applied to “other savings, etc.” as part of the shift to fixed sum protection (protection for principal up to 10 million yen plus interest thereon, etc.). Considering the gist of the Savings Insurance Act and a report by the Financial System Council in December 1999, the rate was set at 0.034% for “designated savings” and 0.017% for “other savings, etc.”.
(Note 2) Therefore, total income from insurance premiums comprised the balance of “designated savings” multiplied by 0.034%, plus the balance of “other savings, etc.” multiplied by 0.017%.
In FY2003, insurance premium rates were to be set anew under the provisions of the December 2002 amendment to the Savings Insurance Act. However, in FY2003 and FY2004, “designated savings” (which had been covered by full protection up to FY2002) were regarded as “savings for payment and settlement” and continued to be fully protected, while “other savings, etc.” were renamed “general savings, etc.” and subject to fixed sum protection. As a result, the framework of savings protection remained essentially the same as in FY2002.
Therefore, different premium rates were set for “savings for payment and settlement” and “general savings, etc.” Partly out of consideration for continuity and taking into account the gist of the Savings Insurance Act, etc., the rate for “savings for payment and settlement” was set at 0.034% and that for “general savings, etc.” at 0.017%.
The insurance premium rates were again changed in FY2004, taking into account the situation of cooperative failures until then and the state of the Corporation’s finances, etc. Now, the rate for “savings for payment and settlement” was set at 0.017% and that for “general savings, etc.” at 0.014%, these two being pegged until FY2009.
Since FY2010, the rate for “savings for payment and settlement” has been 0.018% while the rate for “general savings, etc.” has remained unchanged at 0.014%. Though maintaining the previous rationale on setting insurance premium rates, this was based on changes in the compositional proportions of savings, in that the ratio of “savings for payment and settlement” was decreasing and that of “general savings, etc.” was increasing.