Outside Officers Interview

August 2020

A global Good Company that contributes to society

Effectiveness of the Board of Directors

Enhancing communication to boost effectiveness

QHow effective is Tokio Marine Holdings’ Board?

Egawa

One of the Board’s strongest points is the diversity of opinions and knowledge among its members, which ensures that each agenda item receives multifaceted attention. Meetings are characterized by an open and dynamic atmosphere that leads to deep and productive discussions, with proactive contributions from both outside directors and outside Audit and Supervisory Board members.

Wani

None of the Board members are shy about sharing their opinions. This year will mark my seventh as an Audit and Supervisory Board member, and in all that time discussions have never stalled. The Chair does a very effective job of ensuring meetings are well organized and fruitful by managing the discussions at crucial points.

Egawa

The secretariat does a good job of putting together necessary and easy-to-understand documents for meetings, ensuring discussions remain focused on the key issues. The fact that priority items, such as M&A proposals, are brought to the table at an early stage and go through multiple rounds of discussion increases the efficacy of deliberations.

Endo

A crucial prerequisite in ensuring effective Board meetings is the creation of appropriate agendas. A second crucial element is deliberating upon agenda items at the right time. Moreover, preparation such as material creation and briefing is another essential element. As Ms. Egawa pointed out, Tokio Marine Holdings’ attention to ensure the Board meeting effectiveness is superb.

Egawa

At the start of the fiscal year, the Group CEO explains yearly policies and targets to the Compensation Committee, and then at the end of that fiscal year, delivers a thorough summary of results and activities. I believe this engagement from Tokio Marine Holdings management ensures effective governance.

Wani

I quite agree. The members of the Board are extremely dedicated to the company, and there are no rifts between inside and outside officers, or between directors and Audit and Supervisory Board members. We are all members of a single crew, who share in a common corporate culture. However, each member honors an appropriate distance and tries to play each role in a quite professional manner.

QWhat challenges do you face in further improving effectiveness?

Egawa

To ensure the Board engages in deep discussions, we need to fully understand the conditions of the Company. Since my appointment as an outside director, I have been able to deepen my understanding of Tokio Marine Group by attending sales strategy meetings and engaging in discussions with top management of overseas Group companies at international executive committees.

Endo

As part of Board meetings, we engage in strategic discussions, which focus on management strategies for sustainable Group growth and for improving medium- to long-term corporate value. For instance, in fiscal 2019 we held discussions on themes such as "Tokio Marine Group’s CSR/Sustainability Initiatives and the SDGs," "Communicating with Overseas Subsidiary Management," and "Tokio Marine Group’s Digital Strategy." In some themes, executive officers in charge join the discussion and explain details of their initiatives. While these discussions have been immensely helpful in improving our understanding of the Company, I do think increased opportunities to communicate with executive officers directly involved in the various issues at hand would help to further deepen our understanding of the company’s operations.

Appropriate Managerial Decision-Making

Strengthening responsiveness to a changing environment by promoting organizational and HR diversity

QHow do you rate the Group’s ability to make managerial decisions that reflect changes in the business environment?

Endo

Our operating environment is transforming rapidly. In this environment, pursuing an optimal portfolio, both in terms of risk analysis and capturing growth opportunities, is a prerequisite for a global insurance group. While this is no easy task, Tokio Marine Holdings is successful in this respect.

Egawa

I’ve witnessed many M&A among Japanese companies, including my time working at investment banks. While many companies are eager to acquire companies, when it comes to selling, the Japanese are often slow in making decisions and miss out on the timing. In contrast, Tokio Marine Holdings has made the appropriate decisions based on the changes in the business environment or future growth strategies.
Examples include our divestment of reinsurance subsidiaries that served as the vanguard of our overseas development, and our partial divestment of shares in the Egyptian Life Takaful subsidiary.

Wani

Tokio Marine has a keen grasp of opportunity that differentiates it from others. Without being trapped by the past history, boldly reappraising businesses with low profitability or fields with poor growth, and not hesitating to sell them off when necessary, allows limited resources to be invested into more promising the fields. Tokio Marine’s acquisition of American the PURE Group is one such example of this. A detailed explanation of the PURE Group’s businesses to the Board of Directors made it clear that it’s a company with a very unique business model.

Egawa

Tokio Marine Holdings’ approach to risk is also one of the strong points. For instance, when COVID-19 began to spread in Japan, many companies were trying to formulate responses, while Tokio Marine was already discussing contingency plans, such as if a large earthquake or other natural disaster should occur in tandem with the pandemic. Our ability to constantly propose a range of countermeasures against worst-case scenarios is very impressive.

QAre there any specific challenges you would like to mention?

Egawa

In order to further strengthen integrated Group management, which is a priority under the mid-term plan, it is important to select high potential personnel from the various Group companies, and provide opportunities to contribute in more essential positions beyond their current assignments. Currently, two senior managing executive officers and one managing executive officer at Tokio Marine have been appointed from the management of overseas subsidiaries, and many other non-Japanese members of staff have also been appointed to positions of responsibility. I would like to see such global talent management accelerate even further.

Wani

So long as Tokio Marine Holding Group strives to be a global Good Company, diversity and inclusion, both for Japanese and overseas staff, is indispensable. The Group has done extremely well so far in this respect.

Egawa

The workforce at Japanese companies can easily be homogenous, so it is vital to promote more diverse staff and make full use of their capabilities, including in management positions. Regarding the digital realm, the Group already has initiatives in place to employ highly specialized external talents and train internal staff. To accelerate digital transformation amidst a rapidly changing world, it is essential to proactively identify staff who are knowledgeable in technology and develop them as candidates for future management.

Endo

In terms of training internal staff, it can be effective to increase their level of outside exposure. This is particularly true in digital fields, but it’s no exaggeration to say that challenges cannot be solely solved in-house or in-department. Tokio Marine Group staff should actively seek to absorb outside knowledge, including through outside officers such as ourselves.

Toward Long-Term Growth

Reconsidering our products and stance in response to future changes

QWhat sort of strategy is needed for long-term growth?

Endo

With the recent spread of COVID-19, the future world outlook has become a hot topic. There are also many other macro-level changes occurring, such as climate change and other environmental issues, or shifting demographics. Digital and other technological revolutions are also bringing great changes to society. When discussing Tokio Marine’s medium- to long-term business strategy, we should first consider what risks these changes will pose to customers and society.

Egawa

In some areas, risks will decrease, while risks will increase in other areas. Completely new risks may also arise. For instance, as assisted and automated driving technologies become more advanced, the risk of traffic accidents may decline, but over-reliance on complicated systems will only grow, magnifying the impact of any breakdowns. For networked systems, this also includes increased cybersecurity risks.

Endo

In addition to developments such as automated driving and MaaS^*1, in the next five or ten years, I believe household robots will become more common. Cleaning robots have already become fairly commonplace, but there are many other electronic goods that are now networked and controlled by AI. If they become part of everyday life, then cybersecurity will unquestionably become a major risk.

Egawa

Tokio Marine Group was one of the first in the industry to offer cyber risk insurance products. The changing nature and risk of cybersecurity requires close monitoring of technological and social trends, in order to continuously improve products and services, and to develop completely new insurance products.

Endo

Looking ahead, I believe the function and role of insurance companies and products could also begin to change. For instance, medical insurance is a product meant to insure against unexpected illness and injury, but if people could improve their health and avoid injury, that would be a major benefit to both customers and insurance companies. That was the thinking behind Tokio Marine’s development of Aruku Hoken, which not only insures against unexpected circumstances, but also supports customers in their efforts to improve their health. In terms of auto insurance, Tokio Marine offers services that utilize driving recorders that can either help prevent accidents or diagnose driving habits. Moving forward, customers may prefer products that not only prepare for risks but also help to reduce risks through risk survey and loss prevention^*2.

Wani

Tokio Marine Group has a proud and talented workforce, and it’s paramount that the Group comes together to consider its stance as a corporate entity, for today and tomorrow. What sort of social issues will we be facing in 50 or 100-years time? How can Tokio Marine contribute to solving them? Should the Company strictly remain as an insurance company? These questions don’t necessarily require clear answers right now, but they can serve as the basis for further discussions.

Thank you for taking the time to speak with us today.

• *1MaaS=Mobility as a Service. A one-stop service for search, reservation, payment, and other procedures of transportation, including public transportation such as trains and buses as well as taxis, carsharing, rental cars, and bike sharing.
• *2 Loss prevention=A service that provides what the customer should do to avoid losses through analyzing big data with statistical and other methods.