Corporate Governance Dialogue

July 2025

TMNF’s “Re-New” and Strengthening Group Governance

Tadashi Kunihiro (Left)
Tokio Marine & Nichido Fire Outside Director Chairman of the Business Quality Innovation Committee

Haruka Matsuyama (Center)
Outside Director Chairman of the Group Audit Committee

Satoru Komiya (Right)
Chairman of the Board

“Theory of Employee Excellence” and Guardrails

Secretariat: It has been just over a year since TMNF launched the “Re-New” initiative, prompted by a series of governance issues. What specific discussions were held during the implementation of this initiative?
Kunihiro: I have served as an outside director of TMNF for many years. Reflecting on the fact that this series of governance issues had been occurring continuously, I feel a profound personal regret that we were unable to recognize the problem for so long. With this in mind, when identifying root causes and developing measures to prevent recurrence, we thoroughly examined the question of why these issues went unnoticed until now and discussed it at the Board of Directors and the Business Quality Innovation Committee. The discussions spanned a wide range of topics, but today I would like to introduce one particular perspective: the “Theory of Employee Excellence.”
Secretariat: At first glance, it sounds as if this simply means that employees should be talented, but what does it specifically entail?
Kunihiro: For example, our corporate culture of “Freedom and Open-mindedness” is cultivated by the Company’s trust in employees and its encouragement of autonomous work. This culture is supported by the presence of excellent employees who respond to that trust. Such a culture is invaluable—it cannot simply be created from scratch, and it must be carefully nurtured. On the other hand, the “excellence of employees” that underpins this culture was developed within the Company’s familiar “sandbox” of insurance business law—but had not kept pace with changes in the broader marketplace, such as antitrust and data privacy regulations. While we excelled within this controlled environment, the external world had evolved, and remaining focused solely on our sandbox might have created a gap between our internal practices and societal expectations.
Matsuyama: In other words, our focus had been almost entirely within the sandbox—that is, the non-life insurance industry. While cartel issues were occurring in other sectors, we did not consider the possibility of such issues arising within our own company, which reflects a rather narrow perspective. Even if some employees had raised concerns, the prevailing culture that prioritized industry practices and adherence to precedent might have made it difficult to act on them. I believe this was partly due to the high degree of homogeneity and conformity among our employees.
Komiya: Indeed, our employees exhibit a high degree of homogeneity. In my experience in sales, I often received feedback from customers noting that the consistency and quality of our service remained strong even when their contact changed due to transfer or relocation. The ability to provide uniform, high-quality service without detailed rules has long been one of our strengths, demonstrating the positive side of this homogeneity. However, relying on past successes meant we were slow to adapt to changes outside our sandbox. In a changing environment, it is important to preserve what works well and change what needs to evolve. Because we did not fully embrace this latter perspective, aspects that had been strengths might have inadvertently become weaknesses.
Kunihiro: In addition, by assuming that “employees are excellent,” we might have fostered the mistaken belief that employees would not stray from the right path even without detailed rules. Certainly, principle-based controls—ensuring that what is right is done correctly—are important in governance. However, placing too much trust in employees based solely on a presumption of goodwill is insufficient for effective governance. In certain areas, we should have clearly defined specific boundaries regarding what is correct and what is not, and I reflect on the need to have done so.
Matsuyama: That’s exactly right. What makes this particularly challenging is that the line between what is right and what is wrong changes over time and with the environment, and even individuals might perceive the distance to that line differently.
Assuming that “employees are excellent,” we cannot leave the setting of that line entirely to the field. The Company must clearly establish guardrails. In addition, it is essential to explain why these guardrails are in place and the reasoning behind them. As a lawyer, when applying a law, I always interpret its provisions based on an understanding of the background, purpose, and legislative discussions at the time of enactment—that is, the legislative intent. Conversely, ignoring legislative intent when interpreting a law can lead to incorrect conclusions, which is extremely risky. Similarly, by understanding the purpose behind established guardrails, employees can naturally recognize inconsistencies or raise questions and act in ways aligned with their intent. As a result, this enables them to ensure that the right actions are carried out correctly.
Kunihiro: Our business improvement plan places the lack of specific rules and codes of conduct at the beginning of the root cause analysis. Some feedback suggested that this was obvious for a business improvement plan or that the true root causes lay deeper. While it is true that some causes are embedded in industry structures and other systemic factors, we nonetheless prioritized establishing clear rules and codes of conduct and ensuring they are embedded among employees. This decision emerged from thorough discussions on why these issues had gone unrecognized for so long and whether we had overestimated our own capabilities. From this perspective, clarifying rules—or guardrails—is fundamental to risk-based governance and underpins all other initiatives.

Thorough Execution Capability

Secretariat: Through the “Re-New” initiative, we strengthened our self-correcting mechanisms and proactively uncovered the information leakage issue, which ultimately led to two consecutive years of business improvement orders. Looking ahead, is there a dilemma in the fact that continuing to do the right things correctly could result in the discovery of new issues?
Komiya: Following last year’s insurance premium adjustment issue, the discovery of the information leakage problem led to two consecutive years of business improvement orders, causing considerable concern and inconvenience for our stakeholders. In our supervisory role over TMNF, we take this matter very seriously. At the same time, as the Board of Directors of Tokio Marine Holdings (TMHD), we resolved from the outset that this crisis must not be wasted. Immediately after these governance issues came to light, we strongly directed that not only individual cases but also any inappropriate conduct identified through root cause analysis be thoroughly examined and addressed. I continue to believe this judgment was appropriate.
Kunihiro: From TMNF’s perspective, it was very reassuring to see Mr. Komiya take the lead and, from TMHD’s standpoint, direct that all issues be thoroughly examined. Since the initial insurance premium adjustment issue was reported to the Financial Services Agency, the company has proactively uncovered incidents, engaged the industry in investigations, and implemented measures to prevent recurrence. TMNF has never taken the approach of simply covering up issues; once a matter is brought to light, it is investigated thoroughly.
Executives and employees alike have worked together to address these challenges decisively and without hesitation.
Matsuyama: Of course, incidents are best avoided altogether. That said, from the perspective of thoroughly addressing underlying issues, the fact that incidents were uncovered in two consecutive years can actually be seen as a sign of healthy governance. The root causes of the information leakage case mirror those of the insurance premium adjustment issue, such as an organizational culture prioritizing sales figures. In this context, the company’s ability to step outside the conventional thinking within the non-life insurance industry sandbox and identify issues from a fresh perspective represents significant progress. At the recent shareholders’ meeting, even shareholders representing agencies raised questions about structural reforms in the non-life insurance industry and agency business, which I take as evidence of the company’s serious commitment to addressing these issues.
Matsuyama: Earlier, we discussed corporate culture, and I see Tokio Marine’s commitment to thoroughly seeing initiatives through as one of the company’s key strengths. While it is important to reflect on the fact that these issues went unrecognized for many years, management has consistently demonstrated strong determination since the occurrence of these incidents. This includes deeply investigating root causes, developing and implementing measures to prevent recurrence, and continuously reviewing these measures in each committee and at the Board of Directors to enhance their effectiveness. Combined with the dedication and execution capability of employees implementing these initiatives on the ground, the results of the “Re-New” efforts are steadily becoming evident. I believe this capacity to fully execute initiatives has been a major factor supporting Tokio Marine’s success.
Kunihiro: I share that view. At the same time, while the strong execution capability that stems from the company’s commitment to thoroughly seeing initiatives through is highly reassuring, it also means that if environmental awareness or goal-setting is incorrect, the company could pursue the wrong direction. It is therefore essential to set clear objectives and continuously review them through repeated discussion to ensure alignment and unity across the organization.
Komiya: That’s correct. This aligns with the earlier point about the importance of understanding the purpose of guardrails and the reasoning behind them. The current business improvement plan has been developed based on thorough root cause analysis, but it would be counterproductive if the process itself became an end in itself or led to mechanical thinking. It is essential to continually discuss, from a fresh perspective, what we are aiming for and why we are pursuing it, and to work together as one toward the right direction. Achieving unity through robust discussion is something we intend to maintain going forward.

Achieving a High-Level Balance Between Growth and Governance

Secretariat: Looking ahead, what initiatives are necessary to further advance the “Re-New” initiative at TMNF and to strengthen and enhance Group governance?
Matsuyama: I believe that the “Re-New” initiative at TMNF has been making steady progress, thanks to the unified efforts of management and employees. The series of incidents also highlights the structural challenges within the non-life insurance industry, and addressing these will inevitably take time. That is why it is essential to maintain a lasting awareness of risk.
Management must sustain a healthy sense of crisis and ensure that it reaches all employees to cultivate a strong risk culture across the company. Achieving this requires not only repeated messages from top management but also communication from supervisors who are closely connected with their teams. In addition, initiatives currently being implemented—such as comprehensive walk-throughs of daily operations involving third parties—should not be treated as one-off efforts; they must be continuously refined and integrated into daily work.
Kunihiro: It is true that major transformations take time. While this is unavoidable, up until now, the efforts following the incidents have largely focused on bringing negative outcomes back to zero.
Prolonged initiatives of this kind can risk employee fatigue, so moving forward, the company needs to shift gears toward efforts that energize employees and aim for positive outcomes.
For example, in a world without conventional industry practices such as excessive cooperation in customer’s businesses or business-related equities, what concrete tools do frontline employees have to succeed? Management must provide practical, real-world tools beyond the ideal of simply doing the right thing correctly, and one such tool is the solutions business. As societal challenges and risks expand and become more complex, the insurance industry remains a growth sector. However, non-life insurance products are easily replicated by competitors, as they carry no patents. In contrast, the solutions business the company is pursuing reduces risks and potential losses themselves, and the technologies, know-how, and data required to deliver these solutions are unique to Tokio Marine and not easily replicated.
This represents a distinctive strength and a significant growth opportunity. By providing solutions that create a world with fewer accidents, or minimize damage when accidents occur, claim payments are reduced and customers’ insurance premiums can be lower. This, in turn, naturally increases demand for insurance plus solutions services and contributes to the company’s profit growth. This business model is unique globally and provides Tokio Marine with a clear competitive advantage.
Komiya: I agree. For employees to feel excited and energized in their work, it is essential that they recognize the nobility of contributing to society, find the work itself engaging, and feel that it leads to their own growth. In this regard, for example, disaster prevention and mitigation initiatives directly embody efforts to serve customers and society by building a disaster-resilient society, known as Build Back Better. Moreover, as these initiatives represent new challenges for the company, tackling them with determination will not only drive corporate growth but also undoubtedly foster employees’ own growth.
Furthermore, societal issues are expanding not only in disaster prevention and mitigation but also in areas such as cybersecurity and healthcare. This broadens the fields in which we can contribute to customers and society through the solutions business. Under conventional industry practices, employees’ capabilities and time were often diverted to activities outside of insurance, such as excessive cooperation in customers’ business or support for agents. Going forward, by directing these resources fully toward delivering value through insurance plus solutions, we can further realize our purpose of supporting customers and society not only in times of need but at all times.
Matsuyama: From a Group governance perspective, I intend to proactively share both the initiatives taken in response to incidents and the lessons learned with other Group companies through the Group Audit Committee. For example, the recent series of incidents at TMNF stemmed in part from structural factors unique to Japan’s non-life insurance industry, such as the agent-based business model. As other Group companies operating agency businesses in Japan might face similar risks, we have recommended concrete measures such as comprehensive walk-throughs of daily operations, which are now being put into practice across the Group.
Komiya: The sharing of lessons learned is an effective mechanism for strengthening and enhancing Group governance. By sharing insights, it is possible to identify potential issues at other Group companies before they arise, highlight problems that might otherwise go unnoticed, and clarify differences among Group companies.
Matsuyama: In terms of differences among Group companies, for example, large overseas acquisitions, which were previously listed companies, tend to have relatively high governance levels and can operate independently. In contrast, governance at smaller or minor sites in emerging markets is still developing, and TMHD provides necessary support for local governance and operations. As such, governance levels vary across Group companies—domestic versus overseas, large versus small or minor sites. It is important to understand these differences and characteristics in order to appropriately maintain and enhance governance at the Group level. Based on my experience serving as an outside director at various companies, I believe Tokio Marine is implementing governance practices of a particularly high level of complexity.
Kunihiro: That’s correct. From a business perspective, it is also true that Group companies can leverage their strengths and achieve strong performance by operating independently.
Governance should not be about imposing restrictions on everything; rather, it is important to maintain a balance and respond to each company’s individual circumstances.
Komiya: Exactly. By clearly defining the responsibilities between the holding company and its subsidiaries according to governance levels, it is important to maintain an optimal balance between respecting autonomy and taking a more hands-on approach. Striking this balance is crucial for achieving a high-level equilibrium between growth and governance, which in turn enhances corporate value. TMHD manages this across the Group by leveraging the functions of the Group Audit Committee and the Board of Directors. I believe that diversity and an external perspective are key to achieving this.
In an era of rapidly changing business environments, it is essential to integrate diversity even more deeply into execution and governance, so that we can continually refresh our understanding of the sandbox in which our business operates and the direction we are heading. By incorporating new and diverse perspectives and fostering the kind of lively debate we just discussed, we can ensure that the Group keeps evolving in the right direction.
Ms. Matsuyama, since joining the TMNF Business Quality Innovation Committee in August 2025, you, together with Mr. Kunihiro, have contributed significantly to strengthening governance by bringing external perspectives. I appreciate how you both apply these insights to the “Re-New” initiatives, which TMHD continues to monitor closely to ensure their successful completion.
With the new TMHD’s Board structure as of June 2025, seven of the 13 members are outside directors, forming a majority. This enables robust discussions that fully incorporate external viewpoints. This setup is not just about structure—it reflects our shared focus on ensuring that Board discussions and decisions effectively support the realization of our Purpose and the enhancement of corporate value.
Going forward, I look forward to continuing long-term, rigorous discussions with diverse perspectives, including yours, to support high-quality decision-making and strong execution, thereby advancing our Purpose and corporate value.