JA Kyosai, the Japanese National Mutual Insurance Federation of Agricultural Cooperatives often better known as Zenkyoren, has established a reinsurance company in Guernsey with a strategic goal to underwrite international risks to diversify its exposure, with investments into catastrophe bonds also in scope for the structure.
Zenkyoren Re is 100% owned by JA Kyosai, but its reinsurance operations are being outsourced to Aon Insurance Managers.
The new reinsurer has initially been capitalised with the equivalent of JPY 40 billion, which is approximately US $250 million.
Interestingly, this Zenkyoren Re strategy sees the parent looking to broaden its horizons by underwriting international risks, as a way to diversify its portfolio exposures.
Currently Zenkyoren, which is a large writer in Japan and also the buyer of one of the world’s largest reinsurance towers, is predominantly exposed to Japanese perils, with earthquake risk the largest contributor.
Initially, Zenkyoren Re Limited will start by underwriting overseas natural catastrophe risks from ICMIF (International Cooperative and Mutual Insurance Federation) member organisations and other sources on a small scale.
The goal is to gradually expand the size of its portfolio, achieving stable, medium- to long-term reinsurance underwriting performance.
Zenkyoren is open to multiple forms of catastrophe risk instrument it seems, from traditional reinsurance, to even investing into catastrophe bonds.
That’s an interesting twist for an organisation that has a long-history in the insurance-linked securities market as a sponsor of cat bonds itself.
We currently have sixteen catastrophe bonds directly sponsored by Zenkyoren listed in our extensive Deal Directory.
Explaining the strategy further, JA Kyosai explained, “In recent years, risks associated primarily with natural disasters have become increasingly complex due to factors such as climate change and globalization. Many cooperatives and mutual insurance organizations around the world that provide services to specific regions or industries face a structural challenge in that risks tend to be concentrated in particular segments. JA Kyosai is no exception, as its natural disaster risk is heavily concentrated in earthquake risk within Japan.
“In order to help address this challenge, and taking the opportunity of 2025 being designated the “International Year of Cooperatives,” JA Kyosai has established Zenkyoren Re Limited.”
Zenkyoren Re is expected to support the transfer of risks by ICMIF organisations, while promoting more diversified risk retention at the JA Kyosai Group level and at the new reinsurer.
The cooperative angle is important to Zenkyoren, who explains, “By positioning ICMIF member organizations and other cooperative entities around the world as its main ceding companies (reinsurance clients), the subsidiary will also work to further strengthen collaboration with the global cooperative network.”
While on the prospect of investing into insurance-linked securities, Zenkyoren added that, “From the perspective of ensuring stable asset management for the subsidiary, investments will also be made in instruments such as catastrophe bonds (cat bonds).”
We’re told that collateralized reinsurance arrangements will also be in scope for Zenkyoren Re, as the reinsurer begins its operations and looks to build out a diversifying portfolio of international natural catastrophe risks for its owner.
It’s a strategy that makes sense for a cooperative insurer. As unlike other large Japanese re/insurance groups, international acquisitions are not a strategic fit we suspect.
Given Zenkyoren’s familiarity with the catastrophe bond instrument and ILS structures, it also makes sense that the cooperative use cat bonds and ILS as instruments to help build-out and maintain diversification within the risk portfolio that Zenkyoren Re constructs.
In fact, the secondary liquidity of catastrophe bonds may also be beneficial, in allowing the portfolio to be more actively managed between the main reinsurance cycles.
Given how diversifying international perils will be for Zenkyoren, its new reinsurer may be able to operate with a relatively low cost-of-capital, while the scale of the cooperative also means there will be scope for expansion of this diversification strategy if it delivers the targeted benefits.
As we reported recently, Zenkyoren secured a targeted $100 million of multi-year collateralized Japanese earthquake reinsurance protection from a new Nakama Re Pte. Ltd. (Series 2026-1) catastrophe bond issuance just this month.
