1

School of Commerce, Meiji University, Tokyo, Japan

DISCUSSION PAPER SERIES NO.

Risk Management and Insurance of SME

Financing —Evidence from the Manufacturing

Industry in Japan—*

Yoshihiro Asai**

School of Commerce, Meiji University, Tokyo, Japan

JEL Classification: G21, G22

Key words: Insurance Demand, Risk Management, Small and Medium-sized Enterprises (SMEs)

Abstract

Insurance demand and risk management is common even among small and medium enterprises (SMEs).

However, few articles have sought to analyze SME insurance demand and risk management. In this study,

we try to provide evidence of SME insurance demand and risk management by utilizing a questionnaire

survey to SMEs in the manufacturing industry in Japan. For example, SMEs purchase property liability

insurance worth about $25,000, and they purchase at a median of about $30,000 per year. Also, this survey

indicates that 7.5% of SMEs conducted a seismic retrofit before the Great East Japan Earthquake. Overall,

the results of the survey suggest that risk management and insurance play an important role in SMEs and

their financing.

* The author thanks the Grant-in-Aid for Scientific Research (No. 23730303 and 17K03817) for

financial support. The author also thanks the participants at the Japan Society of Household

Economics for their many helpful comments. ** Yoshihiro Asai is an associate professor at Meiji University and a visiting scholar at California

State University at Northridge.

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1. Introduction

Why do companies manage risk? Shareholders invest diversely in many listed companies. In

other words, many shareholders can hedge a company's inherent risk by diversifying and investing

in companies around the world. Under these circumstances, it is even possible that they will not

ask for risk management, such as purchasing insurance, because risk management will be costly

and not contribute to increasing the corporate value.

However, in reality, various types of insurance are purchased by listed companies. Therefore,

from the 1980s to the 1990s, attempts were made to explain corporate risk management activities

economically. For example, Mayers and Smith (1987) said that purchasing insurance would

alleviate underinvestment problems in a company and increase the corporate value. Likewise,

Mayers and Smith (1982) explained that hedging increases the corporate value by lowering the

probability of bankruptcy, decreasing the cost of funds, and decreasing tax payments. In textbooks

on insurance risk management, such as one by Doherty (2000), which summarizes the results of

the preceding research described above, insurance risk management is explained using specific

numerical examples en route to raising corporate value. In other words, the preceding theoretical

research agrees with the explanation that “corporate risk management activities may increase

corporate value.”

Empirical tests have been carried out from the latter half of the 1990s as to whether such a

theoretical explanation can account for the actual insurance demand of listed companies well. For

example, Yamori (1999) was the first study to attempt to clarify factors that determine the

insurance demands of listed companies, using Japanese data. Subsequently, Hoyt and Khang

(2000) tried to estimate the insurance demand function of listed companies using premium data

from the U.S. Likewise, Zou, Adams, and Buckle (2003) and Zou and Adams (2006) showed data

on listed companies in China. Regan and Hur (2007) used data from large Korean companies to

determine insurance demand.

Aunon-Nerin and Ehling (2008) found that companies with high payout ratios (companies that

have easy access to capital markets) tend not to buy insurance. Also, it was discovered that

insurance coverage (upper limit and deductible) tends to be wider as the cost of failure increases.

Jia, Adams, and Buckle (2012), using Indian data, found that companies with many shares owned

by managers, high leverage, high growth opportunities, and a high percentage of tangible assets

tended to have an increased demand for insurance.

However, the preceding research mainly deals with the insurance demands of listed companies

that can raise funds in various ways, such as capital increase and the issuance of corporate bonds.

For small and medium-sized enterprises (Hereafter, SMEs), the means of financing is limited, and

the role of insurance is considered to be large.

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It is difficult to obtain SME data, and research and surveys are hardly carried out, even on a

global scale. On the other hand, according to the White Paper on SMEs (2014 edition) in Japan,

small and medium enterprises account for 99.7% of companies and 69.7% of employees among

all companies. In other words, the proportion of small and medium-sized enterprises in Japan's

overall economic activity is considerably high, and despite the fact that many such companies are

exposed to risks, research on insurance demand and risk management concentrates on listed

companies and large companies. Also, the actual conditions associated with purchasing insurance

and risk management for small and medium-sized enterprises have been hardly clear, even on a

global scale.

Therefore, this paper attempts to clarify the actual conditions regarding risk management and

insurance demand by using data of Japan's small businesses (manufacturing industry). That is, the

main purpose of this paper is to report the findings of the corporate questionnaire, “Survey of

Corporate Insurance Risk Management” (hereinafter, “this survey”), conducted from January to

February 2014. In this paper, I present descriptive statistics on data obtained from the same survey

and try to clarify the actual situation of Japanese SME finance, especially insurance risk

management, by adding very simple analysis. It also has the purpose of providing basic

information for conducting detailed analysis in the future using data from the same survey.

The structure of this paper is as follows. In the next section, I will introduce the outline of the

questionnaire and the industry types of the surveyed companies. Section 3 introduces the growth

prospects and job titles of respondents. Section 4 introduces questionnaire results on purchasing

property insurance, risk management of major production facilities, purchasing life insurance,

implementing earthquake-resistant reinforcement, and transactions with financial institutions

such as banks. Finally, it summarizes the findings of this paper and the prospect of future research.

2. Outline of the questionnaire and basic attributes of the company

I will introduce the results of this survey in the next section, but first I will explain the survey’s

outline. This survey was conducted as part of Analysis of Insurance Demand Structure—

Empirical Tests of Corporate Finance Theory. The representative designed the survey

(questionnaire), which was then entrusted to Teikoku Databank Co., Ltd., and was carried out by

mail.

The target enterprises were selected as follows. First, I decided to sample a specific industry,

specifically, small and medium enterprises of the manufacturing industry (TDB industry type

code: 19 to 39). The reason for targeting only the manufacturing industry is not a lack of concern

for nonmanufacturing industries but to avoid distortion by business type when analyzing the

company size by the number of employees etc. In the manufacturing industry, production

equipment that is subject to property insurance may be easy to imagine.

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Furthermore, it was targeted only to small and medium-sized enterprises, as mentioned above,

even considering the traditional theory of the finance and insurance fields, that access to the

securities market is limited for such companies as compared to larger enterprises. Also, SMEs

cannot use risk management tools enough; fund procurement, such as the use of captives, is also

restricted. Therefore, the role of insurance is considered to be large in SMEs.

This survey focused on medium-sized manufacturing industry with a target size of 20 to 299

employees. In addition, it focused on companies submitting previous financial results settlements

and latest financial results settlements to Teikoku Databank. As a result of narrowing the survey

field as described above, there were 6,308 companies in the database of Teikoku Databank. Again,

because the budget was exceeded, I sent a letter of response to questionnaire responses by mailing

to 3,500 companies Teikoku Databank randomly extracted on January 27, 2014. After that, there

was a reply, and as a result of dunning by telephone, 909 companies (response rate 26.0%) had

responded by February 21. Below, I will explain the answer results from this 909-company sample.

In addition, the total number of responses will fluctuate, as there were no answers to some

questions, multiple responses were sometimes possible, some companies did not sign their name,

and some responses were “not applicable.”

The industrial classification is shown in Table 1. Although 907 companies were subject to

survey, the most numerous—148 companies (14.7%)—were in the general machinery and

equipment manufacturing industry. Next, 116 responding companies (12.8%) were in the metal

product manufacturing industry; 102 (11.2%) were in the food, feed, and beverage manufacturing

industry; 95 were other manufacturing companies (10.5%); and 89 were electrical machinery and

equipment manufacturing companies (9.8%). The companies that responded were mainly in

machinery and metal-related manufacturing industries. In the tables below, the upper rows of the

number of responses represent the number of companies, and the lower rows represent the

percentage.

Table 1 Industries of Companies Subject to Survey (Manufacturing Industry)

Food, feed,

beverage Textiles Clothing and other textiles

Wood and wood

products

Furniture and

accessories

102

11.2％

16

1.8％

19

2.1％

25

2.8％

19

2.1％

Pulp, paper, and

paper processing

Publishing/printing/related

industries Chemical industry

Petroleum

products/coal

products

Rubber products

5

28

3.1％

39

4.3％

37

4.1％

6

0.7％

8

0.9％

Leather · Copper

products · Fur

Ceramics

Sandstone products

Iron and steel industry,

nonferrous metal Metal products

General machinery and

equipment

2

0.2％

63

6.9％

54

6.0％

116

12.8％

148

16.3％

Electrical

machinery and

equipment

Transportation equipment Precision machinery ·

Medical machinery Others

89

9.8％

28

3.1％

13

1.4％

95

10.5％

Table 2 shows the response status by number of employees and industry type. Companies with

20 to 49 employees answered most frequently. According to the White Paper on Small and

Medium Enterprises (2014 edition) in Japan, 112,463 companies—the largest number—employ

4–9 people in the small and medium-sized manufacturing industry, with 51,608 companies

employing 10–19 people, 56,361 companies employing 20–99, and 9,931 companies employing

100–299 people. A large majority of companies have fewer than 100 employees. Our sample does

not differ from the SMEs distribution.

Table 2 Number of Employees of Respondent Companies

Number of

responses

20–50 50–100 100–200 200–300

All 907 413 299 160 35

45.5％ 33.0％ 17.6％ 3.9％

Table 3 shows the company location of respondent companies by prefecture. Further breaking

down respondents, according to region, 35 companies in the Hokkaido region, 58 in the Tohoku

region, 243 in the Kanto region, 57 in the Koshinetsu region, 57 in the Hokuriku region, 35 in the

Tokai region, 124 in the Kinki district, 188 in the Kinki region, 68 companies in the Chugoku

region, 68 in the Shikoku region 30 companies, and 69 in the Kyushu and Okinawa region

responded. This confirms that respondents were also distributed similarly to the population and

economic scale without being biased toward a specific region.

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Table 3 Locations of Respondent Companies

3. Outline of Respondent Companies and Respondents

From the following, I will introduce results from the questionnaire, “Survey of Corporate

Insurance Risk Management.” In question 1, I asked about the attributes of respondents. At the

beginning of the questionnaire, I stated “Please indicate who is largely involved in making

insurance purchase decisions (such as the president).” Table 4 shows the results corresponding to

the president (29.1%), the person in charge of the finance department (27.2%), and the person in

charge of the general affairs department (34.8%). Together, these positions were identified by

90% or respondents. Even among “others,” many answered, “responsible persons in charge of the

insurance department,” and then almost all responses were obtained from the president or other

managers.

Table 4 Attributes of questionnaire respondents

Number of

responses

The president Head of the financing

department

Head of the general

affairs department

Others

All 870 253 237 303 77

29.1％ 27.2％ 34.8％ 8.9％

Table 5 shows results for Question 2, which asked about the attributes of the responding

company. It is often pointed out that the degree of freedom of affiliated companies becomes small

because the intention of the parent company is strongly reflected in corporate finance. Therefore,

respondents were asked whether they belong to a corporate group (22.8%) or are an independent

company without a parent company (58.3%). More than half have become independent

companies without parent companies. On the other hand, it is interesting that 18.8% of companies

answered that they have a subsidiary, despite targeting SMEs with 20 to 300 employees.

１． Hokkaido 35 ２． Aomori 2 ３． Iwate 8 ４． Miyagi 13 ５． Akita 4

６． Yamagata 17 ７． Fukushima 14 ８． Ibaraki 11 ９． Tochigi 6 １０．Gunma 13

１１．Saitama 36 １２．Chiba 20 １３．Tokyo 118 １４．Kanagawa 39 １５．Niigata 31

１６．Toyama 11 １７．Ishikawa 15 １８．Fukui 9 １９．Yamanashi 5 ２０．Nagano 21

２１．Gifu 22 ２２．Shizuoka 23 ２３．Aichi 68 ２４．Mie 11 ２５．Shiga 8

２６．Kyoto 25 ２７．Osaka 95 ２８．Hyogo 43 ２９．Nara 12 ３０．Wakayama 5

３１．Tottori 5 ３２．Shimane 10 ３３．Okayama 16 ３４．Hiroshima 26 ３５．Yamaguchi 11

３６．Tokushima 7 ３７．Kagawa 9 ３８．Ehime 10 ３９．Kochi 4 ４０．Fukuoka 24

４１．Saga 11 ４２．Nagasaki 8 ４３．Kumamoto 6 ４４．Oita 9 ４５．Miyazaki 5

４６．Kagoshima 5 ４７．Okinawa 1 Overall 907

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Table 5 Attributes of respondent companies

Number of

responses

We belong to a corporate

group.

We have an independent

company without a parent

company.

We have a subsidiary

company.

All 902 206 526 170

22.8％ 58.3％ 18.8％

Table 6 shows the responses to Question 3, which asked whether managers’ and employees'

homes are used as factories or offices. Earthquake insurance for households is subsidized by the

government, and earthquake insurance for enterprises is operated purely by the private sector. In

particular, SMEs may use houses as factories and offices, and it is pointed out that earthquake

insurance cited by respondents may refer to earthquake insurance for households. When I inquired

about the use situation of the home, respondents reported using their homes as an office (2.5%),

as a store (0.2%), as a factory (1.0%), and as other facilities (0.8%). This confirms that there are

not so many SMEs using their homes in this manner.

Table 6 Home utilization situation (multiple answers acceptable)

Previous studies, such as that by Hoyt and Khang (2000), have found that some growth

opportunities are in a positive relationship with insurance demand. Therefore, in Question 4,

respondents were asked about their expected growth. Looking at the whole, 14.3% expect growth,

36.5% somewhat expect growth, 36.6% expect to maintain the status quo, 4.3% face the prospect

of shrinking, and 8.2% are uncertain about their future. Table 7 shows that more than 50% of

companies expect growth.

Table 7 Growth prospects of responding companies

Number of

responses

We use it as an

office.

We use it as a

store.

We use it as a

factory.

We use it as other

facilities.

We do not use it at all.

All 904 23 2 9 7 869

2.5％ 0.2％ 1.0％ 0.8％ 96.1％

Number of

responses

Growth can

be expected.

Growth can be

somewhat expected.

The current situation is

expected to be maintained.

It is expected

to shrink.

We do not know.

All 898 128 328 329 39 74

14.3％ 36.5％ 36.6％ 4.3％ 8.2％

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Question 5 asks about the dividend schedule of the responding company. A small percentage

(7.7%) plan to increase it in the future, while 64.7% plan to maintain the status quo. Only 1.7%

plan to reduce it in the future, while 26.0% responded that “we do not know.” Compared with

listed companies, it can be imagined that the pressure on dividends is not large in SMEs.

Table 8 Scheduled dividend for responding companies

Number of

responses

We plan to increase it

in the future.

We plan to maintain the

status quo.

We plan to reduce it in

the future.

We do not

know.

All 900 69 582 15 234

7.7% 64.7% 1.7% 26.0%

In Question 6, I asked answering companies their reasons for retaining internal reserves, and

the results are shown in Table 9. The largest percentage (60.9%) keep internal reserves for new

investment, followed by “for (short-term) working capital” (42.1%), “for factory and machine

repair” (28.9%), “to prepare for accidents/disasters” (25.5%), and “to pay dividends” (7.3%), as

well as other uses (5.6%). However, 4.4% responded that they had no internal reserves, and 9.7%

indicated that the reason for their reserves was not understood.

Since SMEs have limited access to capital markets, such as the issuance of stocks and corporate

bonds, it is considered that the proportion of responses answering “for new investment” is higher

for the objective with retained earnings. In addition, the response “to prepare for

accidents/disasters” (25.5%), which is the main concern of this paper, is the fourth reason for

having significant internal reserves.

Table 9 Reasons for retaining internal reserves (multiple answers allowed)

Number of

responses

For working

capital

For new

investment

For repair To prepare for

accidents/disast

ers

To pay

dividends

We do not

know.

There are

no retained

earnings

Other

All 895 377 545 259 228 65 87 39 50

42.1% 60.9% 28.9% 25.5% 7.3% 9.7% 4.4% 5.6%

Table 10 shows the results of Question 7, which asked respondents about the status of their

overseas expansion. Although the highest percentage of responding SMEs reported having no

business with overseas enterprises or companies (46.6%), 33.4% reported that they export and

import products despite not owning offices, shops, or factories overseas. Overseas offices are

reported by 6.2% of the respondents, and 10.8% reported owning stores or factories overseas,

while 4.6% gave other answers, and 1.3% responded “We do not know.” This confirms that

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overseas expansion has penetrated widely; approximately 50% of manufacturing SMEs transact

abroad in various ways. In addition, from the perspective of insurance and risk management,

which is the main concern of this paper, I can confirm that the risks faced by companies are

becoming more complicated.

Table 10 Status of overseas expansion by respondent companies (multiple answers allowed)

Number of

responses

We have an

office

overseas.

We own stores

and factories

overseas.

We do not own offices,

shops, or factories

overseas, but we export

and import products.

We haves no business

with overseas enterprises

and companies.

We do

not know.

Other

All 900 56 97 301 419 13 41

6.2% 10.8% 33.4% 46.6% 1.4% 4.6%

4. Results of the questionnaire on risk management and insurance

Section 4 introduces the results of questionnaire on insurance risk and insurance purchases, risk

management of major production facilities, the purchase of life insurance, the implementation of

earthquake resistance reinforcement and insurance risk management, and transactions with

financial institutions.

4.1 Purchase of property insurance

Question 8 seeks to clarify the degree of respondents’ risk aversion. Respondents are asked to

assume that there is a risk of a loss of 10 million yen with a probability of 50% within one year.

If a company pays the insurance premium, then the loss amount will be recovered. Table 11 shows

how much respondents would be willing to pay with the risks assumed in Question 8. Of particular

interest in this paper is whether the degree of risk aversion of those who are influential in

purchasing insurance, such as the president, is related to the risk management of small and

medium enterprises. This will be analyzed empirically in the future. For the risk assumed in

Question 8, it is understood that many executives think that it is acceptable to pay the premium

up to 1 million yen.

Table 11 Risk Aversion of Respondents

Insurance premium

(yen)

Would pay the insurance

fee and purchase

insurance

Even if we can afford the

insurance premiums, we

would not purchase

insurance

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１． ¥ 10,000 A 731 B 94

２． ¥ 100,000 A 735 B 96

３． ¥ 500,000 A 645 B 185

４． ¥ 1,000,000 A 457 B 366

５． ¥ 2,000,000 A 248 B 569

６． ¥ 3,000,000 A 139 B 678

７． ¥ 4,000,000 A 81 B 736

８． ¥ 4,500,000 A 83 B 739

９． ¥ 5,000,000 A 74 B 729

Table 12 shows the results of Question 9-1, which asked about the person with the most

influence over purchasing property/casualty insurance in the responding company. As seen in

Table 12, the company’s president (66.6%) was overwhelmingly responsible for decisions

regarding insurance, followed by the manager of the general affairs department (14.0%), the head

of the finance department (13.4%), other directors (3.5%), other (2.1%), and “We do not know”

(0.4%). Fully two thirds of companies confirm that the president is a substantial decision maker

on purchasing property insurance.

Table 12 Major decision maker of insurance purchase (property insurance)

Number of

responses

The president Head of the

finance

department

Head of the general

affairs department

Other directors We do not

know.

Others

All 891 593 119 125 31 4 19

66.6% 13.4% 14.0% 3.5% 0.4% 2.1%

Table 13 shows the results of Question 9-2, which asked responding companies who was the

person with the most influence regarding purchasing life insurance. From Table 13, we can see

that the responses are similar to those in the case of property insurance. The company’s president

is a substantial decision maker on life insurance (71.9%), followed by the head of the general

affairs department (10.7%), the head of the finance department (10.2%), other directors (3.1%),

other (2.9%), and “We do not know” (0.9%). It is thought that the president’s involvement is

related to the tax saving effect and business succession issues as reasons for purchasing life

insurance.

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Table 13 Major decision maker of insurance purchase (life insurance)

Number of

responses

The president Head of the finance

department

Head of the general

affairs department

Other directors We do not

know.

Others

All 889 641 91 95 28 8 26

71.9% 10.2% 10.7% 3.1% 0.9% 2.9%

Table 14 summarizes the answers to Question 10, which asks which department is in charge of

purchasing insurance. The largest percentage of insurance (48.6%) is arranged by the general

affairs department, followed by the financial and accounting department (40.7%). The legal

department arranges for insurance in 0.1% of responding SMEs, while insurance is arranged by

each department in 3.1%, and other responses were given by 7.6% of respondents.

The results suggest two things. First, it turns out that most companies give responsibility for

insurance to the general affairs department or the finance/accounting department. Second, the

result that insurance is arranged by each department (3.1%) shows that insurance is purchased

through one department rather than each department in most SMEs.

Table 14 Department in charge of purchasing insurance

Number of

responses

Insurance is

arranged by each

department.

Insurance is arranged

only by the general

affairs department.

Insurance is arranged

only by the financial

and accounting

department.

Insurance is

arranged only by the

legal department.

Other

All 885 27 430 360 1 67

3.1% 48.6% 40.7% 0.1% 7.6%

Table 15 gives the results of Question 11, which asked respondents how much insurance covers

the risks that exist in their enterprise, or their “subjective insurance demand.” As seen in Table 15,

many companies think that most risks are covered with respect to the risk of damage or loss of

corporate property due to fire and the risk of traffic accidents due to company vehicles.

Also, regarding risks concerning the damage or loss of corporate property due to wind and

flood damage, risks relating to external liability arising from business activities, and risks related

to the occurrence of unforeseen circumstances to the president and officers, most companies think

that they are covering most risks or covered to some extent.

At the same time, about one third companies hardly covers the risks related to damage or loss

of corporate property due to the earthquake and risks of officer liability1. In addition, nearly half

1 Insurance on workers' injury accidents is offered as social insurance program in Japan. The source

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of companies (except for those with no corresponding risk) are subject to risks related to bad debts of

accounts receivable, risks related to business interruption (due to natural disasters, etc.), risks

associated with overseas expansion, and risks related to business succession, responding that they do

not cover such risks. Based on the above results, it is believed that risks related to property are covered

by insurance in many SMEs, while insurance does not cover risks that are not property, such as liability

and business succession.

Table 15 Status of risk coverage by purchasing insurance

Types of insurance

Status of compliance with risks by purchasing insurance

It mostly covers Covers to some

extent

Does not cover

much Hardly covered

The risk is not

relevant

１．Insurance on damage or loss of

corporate property (due to fire) 566 299 16 10 3

２．Insurance on damage or

disappearance of corporate property (due

to wind and flood damage)

390 346 86 58 8

３．Insurance on damage or loss of

corporate property (due to earthquake) 148 236 151 323 18

４．Insurance on traffic accidents

involving company cars 760 121 3 3 10

５．Insurance for external liability arising

from business activities 321 290 107 144 23

６．Insurance on directors’ liability 162 144 159 331 76

７．Insurance on workers' injury

accidents (added part to government

workers' accident)

399 276 79 130 8

８．Insurance on accidents during the

process of distributing products/goods 276 252 109 205 42

９．Insurance on construction accidents 204 157 109 165 232

１０．Insurance on accounts receivable 75 200 154 408 44

of benefits is insurance premiums, and the employer is responsible for all of them. The insurance

premium rate is divided into 30 grades, and it depends on the industry. Thus, insurance purchase on

workers’ injury accidents which is added to government workers’ accident means that the companies purchase workers compensation insurance from private insurance companies, in addition to

mandatory workers compensation insurance offered by the government.

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１１．Insurance on business interruption

(due to natural disasters, etc.) 78 131 193 437 36

１２．Insurance on risk associated with

overseas expansion 24 56 85 223 475

１３．Insurance concerning the occurrence

of unexpected events to the president and

officers

319 317 91 131 29

１４．Insurance on risks such as business

succession 67 128 176 379 128

Table 16 summarizes responses to Question 12, which asked respondents through what channel

each type of insurance was purchased. Overall, the following two trends can be confirmed. First,

the majority of insurance types are either purchased from agents of the company or a business

partner or purchased from a distributor who is an acquaintance. For example, 299 companies

purchased insurance on damage or loss of corporate property (due to fire) from an agent of the

company or a business partner, while 276 companies purchased it from a distributor who was an

acquaintance. As for other types of insurance, in many cases, it is purchased from an agent of the

company or that of a business partner or from the agency of an acquaintance.

Second, it is thought that companies change suppliers depending on types of insurance.

Interestingly, 126 firms mostly purchase from a banking agency only insurance on accounts

receivable. Banks deal with credit risk, and it is possible that some companies purchase insurance

from banking agents in response to requests from banks.

Table 16 Route of insurance purchase

Types of insurance

Channel of insurance purchase

Purchased

from a bank

agency

Purchased from an

agent of our own

company/business

partner system

Purchased

from an

acquaintance

agent

Purchased by

introduction

from parent

company

Purchased from

others

Not

purchase

d

１．Insurance on damage or loss of

corporate property (due to fire) 156 299 276 64 74 79

２．Insurance on damage or

disappearance of corporate property

(due to wind and flood damage)

131 269 264 59 70 79

14

３．Insurance on damage or loss of

corporate property (due to

earthquake)

72 178 186 37 49 326

４．Insurance on traffic accidents

involving company cars 60 340 345 49 84 13

５．Insurance for external liability

arising from business activities 61 259 214 51 91 189

６．Insurance on directors’ liability 24 156 140 42 52 421

７．Insurance on workers' injury

accidents (added part to government

workers' accident)

46 277 229 49 119 154

８．Insurance on accidents during

the process of distributing

products/goods

42 229 181 43 87 271

９．Insurance on construction

accidents 25 159 137 31 57 423

１０．Insurance on accounts

receivable 126 82 72 19 85 460

１１．Insurance on business

interruption (due to natural

disasters, etc.)

31 123 115 27 40 501

１２．Insurance on risk associated

with overseas expansion 15 59 45 8 18 674

１３．Insurance concerning the

occurrence of unexpected events to

the president and officers

70 224 255 42 111 160

１４．Insurance on risks such as

business succession 24 99 124 15 39 529

In Question 13, respondents were asked about the amount of property liability insurance

premiums paid by responding companies during the year2. The results are summarized in Table

17. The average value of insurance premiums paid by responding companies is about 4.9 million

yen, and the median value is about 2.6 million yen. In prior empirical research, listed companies’

2 We do not include funded accident insurance. Funded accident insurance is insurance that

insurance premium is funded and it will be refunded when the contract reaches maturity.

15

insurance premiums were divided by insurable assets.

Table 17 suggests that the following two possibilities are considered. First, SMEs have a

concentrated ownership structure, and because the means of risk management, such as captive,

are limited, it is possible that the insurance demand for small and medium-sized enterprises is

greater than that of large enterprises. Second, small-scale companies are also trying to reduce their

risk by purchasing insurance, as the number of projects they are engaged in is small, and risks

cannot be diversified. Meanwhile, empirical tests using insurance demand will be necessary in

the future.

Table 17 Property and casualty insurance premiums (average and median)

Number of

responses

Property insurance

premium (average)

Property insurance

premium (median)

All 769 4,898,842 yen 2,550,860 yen

Many previous studies point out that Japanese small and medium enterprises are dealing with

multiple financial institutions (such as banks and credit unions). Likewise, it is possible that

Japanese SMEs are dealing with multiple insurance companies. Therefore, in Question 14, I asked

the number of insurance companies from which the company purchased insurance. The results

are summarized in Table 18. As seen in the table, the percentage of SMEs purchasing insurance

from just one company was 19.7%; while those buying insurance from two, three, four, and five

or more companies were 32.5%, 27.1%, 10.6%, and 8.9%, respectively. Only 1.1% of responding

SMEs reported no insurance transactions. Table 17 shows that many companies purchase

insurance from multiple insurance company.

Table 18 Number of insurance companies transacted by responding companies

Number of

responses

1 2 3 4 5 or more No transaction

All 883 174 287 239 94 79 10

19.7% 32.5% 27.1% 10.6% 8.9% 1.1%

In Question 15, I asked why respondents purchased property insurance. Table 19 summarizes

the results. The table shows that 75.9% do so to reduce the impact on profit and loss, 56.4% to

secure asset recovery funds, 47.6% to secure working capital in the event of a disaster, 20.2% to

gain knowledge and support for accident response, 11.8% in response to requests from financial

institutions or business partners, 2.0% from a sense of accountability to shareholders, 1.8% from

16

a sense of accountability to other departments within the company, 12.2 % for the tax effect, and

47.6% out of a sense of social responsibility. Experiences with a past major accident motivated

6.1% to buy insurance, while 0.1% and 0.6% were motivated by the example of other companies

in the same industry or for other reasons, respectively. Three-quarters of the total or more

responded that their reason for purchasing insurance was to reduce the impact on profit and loss.

Textbooks on insurance and finance fields (such as one by Doherty, 2000) make the case that

enterprises can reduce fluctuations in profits by using insurance. However, Table 19 shows that

SMEs purchase insurance mainly to reduce the impact of profit and loss on companies. On the

other hand, it can be confirmed that companies are not as strongly aware of the tax saving effect

as much as the preceding research pointed out.

Table 19 Reasons for purchasing property insurance (multiple answers allowed)

Number of

responses

To reduce the

impact on profit

and loss

To secure an

asset recovery

fund

To secure working

capital in the event

of a disaster

To obtain

knowledge and

support for

accident response

Requests from

financial

institutions/business

partners

Accountability

to shareholders

All 901 684 508 429 182 106 18

100 75.9% 56.4% 47.6% 20.2% 11.8% 2.0%

Number of

responses

Accountability

within the

company

Tax saving

effect

Social

responsibility

Experience of a

past major

accident

Because other

companies have

purchased it

Other

All 901

16

1.8%

110

12.2%

429

47.6%

55

6.1%

1

0.1%

5

0.6%

Table 20 summarizes the results of Question 16, which asked companies their reasons for

purchasing insurance. The largest percentage of respondents (62.0%) cited opinions from within

the company itself as a reason for purchasing insurance. Additionally, advice from an insurance

agent influenced 44.4% of respondents. Smaller numbers of respondents said that purchasing

insurance was an essential condition for receiving loans from banks (9.8%), the parent company

requested it (10.8%), shareholders requested it (1.0%), a tax accountant/certified public

accountant recommended it (9.7%), and acquaintances such as other companies in the same

industry recommended it (4.5%). Finally, 6.4% purchased insurance for other reasons, and 3.5%

responded, “I do not know.”

Prior research in the insurance and finance field indicates that creditors such as banks are more

likely to compel companies to purchase insurance at the time of loans in order to alleviate agency

17

problems. Therefore, the result that insurance was purchased as essential condition for financing

from banks by only 9.8% of respondents is not consistent with the prediction of the theoretical

research.

Also, the degree of freedom is low reflecting the intention of the parent company; however, it

can be inferred that companies purchase property insurance at the request of the parent company

(97 of 206 companies). In other words, it can be inferred that nearly half of the remaining

subsidiaries are making in-house decisions regarding arrangements for property insurance.

Table 20 History of purchasing property insurance (multiple answers allowed)

Number of

responses

It was a prerequisite

for loans from banks.

The parent company

requested it.

Shareholders

requested it.

An insurance

agent advised

us.

A tax accountant/certified

public accountant advised

us.

All 901 88 97 9 397 87

9.8% 10.8% 1.0% 44.4% 9.7%

Number of

responses

We were advised by

acquaintances such as

peers in the same

industry.

The opinion within

our company was

that insurance is

necessary.

Other We do not

know.

All 901

40

4.5%

555

62.0%

57

6.4%

31

3.5%

Table 21 summarizes the results of Question 17, which asked responding companies to order

the sources from which firms would consider raising funds. A basic textbook in the financial field

stated that corporate financing is typically done in order of asymmetric information and in order

of the low cost of funds. Therefore, when creating a questionnaire, we considered financing in the

order of internal reserve, borrowing from management, borrowing from relatives of management

and others, borrowing funds from group companies, and then financing from financial institutions,

such as banks.

However, in fact, while 43.7% of companies think first of borrowing from their internal reserve,

51.8% of companies think first of borrowing from banks/financial institutions. Only a few

companies considered first or second borrowing from management, borrowing from relatives of

management and others, or borrowing funds from group companies 3 . The target of the

questionnaire is medium-sized companies in the manufacturing industry, and the amount of

3 Group companies are companies that have parent or affiliated companies.

18

capital investment is large. Therefore, in some circumstances, they are not able to borrow a

sufficient amount from management, relatives, and group companies.

Table 21 Financing order (In a normal case)

Number of

responses

In the case of new investment, such as establishing a factory or a new development opportunity, where

would you seek funds first, second, third, etc.?

Internal

reserve

Borrow from

management

Borrow from

relatives of

management

Borrow funds from

group companies

Borrow from

banks/financial

institutions

1 870 380 3 2 34 451

100 43.7% 0.3% 0.2% 3.9% 51.8%

2

826

100

360

43.7%

54

6.5％

4

0.5％

91

11.0％

317

38.4％

3

635

100

48

7.6％

319

50.2％

25

3.9％

174

27.4％

69

10.9％

4

529

100

14

2.6％

210

39.7％

248

46.9％

53

10.0％

4

0.8％

5 470

100

17

3.6％

11

2.3％

252

53.6％

184

39.1％

6

1.2％

Question 18 is similar to question 17, but asked about the order of fund procurement when

recovering from disaster, in particular. Table 22 summarizes these results. The first finding of note

is that companies see purchasing insurance in advance (58.6%) as a means of raising funds in

case of disaster. It turns out that many companies consider purchasing insurance first. Meanwhile,

it confirms that more than a few enterprises would first turn to their internal reserve (19.7%) and

borrow from banks or financial institutions (18.7%) in the case of a disaster.

Table 22 Financing order (When fire, earthquake, and flood damage recovery funds are needed)

Number of

responses

When recovery funds are needed due to fire, earthquake, flood damage, etc., where would you seek funds first,

second, third, etc.?

Internal

reserve

Borrow from

management

Borrow from

relatives of

management

Borrow funds

from group

companies

Borrow from

banks/financial

institutions

Purchase

insurance in

advance

19

1 872

172

19.7％

3

0.3％

1

0.1％

22

2.5％

163

18.7％

511

58.6％

2 850

346

40.7％

26

3.1％

3

0.4％

53

6.2％

332

39.1％

90

10.6％

3

782

237

30.3％

96

12.3％

12

1.5％

76

9.7％

288

36.8％

73

9.3％

4 618

37

6.0％

281

45.5％

60

9.7％

161

26.1％

52

8.4％

27

4.4％

5 533

13

2.4％

191

35.8％

242

45.4％

68

12.8％

6

1.1％

13

2.4％

6 448

15

3.3％

10

2.2％

221

49.3％

164

36.6％

5

1.1％

33

7.4％

Question 18 asks about the use of enterprise derivatives (derivatives, currency and interest

options, swaps, futures/forward transactions, CAT bonds, etc.). The results are shown in Table 23.

Companies most commonly reported that they had never used derivatives and were not interested

(64.6%); approximately two thirds of companies that responded are not related to derivatives.

On the other hand, 12.8% said that they had used derivatives as a means of risk management,

and more than 10% of companies expect to use derivatives like insurance and are using derivatives.

In addition, 10.4% answered “We have used derivatives as a means of fund management,” which

shows that about 10% of enterprises use derivatives as a means of asset management. It will also

be necessary to clarify the characteristics of companies that tend to use derivatives.

Table 23 Derivative usage status

Number of

responses

We have used

derivatives as a means of

risk management.

We have used

derivatives as a

means of fund

management.

We have never used

derivatives, but we

are interested.

We never used

derivatives, and we

are not interested.

We do not

know what

derivatives

are.

All 885 113 92 48 569 59

12.8% 10.4% 5.4% 64.6% 6.7%

4.2 Risk management of major production facilities

Many of the previous studies have analyzed the insurance demand of whole companies, but the

status of individual factories has not been clarified. Therefore, Question 19 asks about the state

20

of insurance and risk management as related to the most important buildings among enterprises'

production facilities, such as factories. Inquiries are made in Question 19 based on the assumption

that buildings constructed after the new earthquake resistance standards were introduced in 1982

have some degree of earthquake resistance. Table 24 summarizes respondents’ answers. Table 24

makes it clear that many enterprises set either a deductible, an upper limit, or both for any

insurance.

Regarding the status of seismic retrofitting of main production facilities, most companies

answered “We are not carrying out seismic retrofitting because the buildings’ strength is sufficient”

(325 companies). Another 277 companies responded, “There is insufficient strength, but seismic

reinforcement has not been implemented.” Thus, it can be confirmed that factories and other

production facilities are earthquake-proof properties of manufacturing companies, while others

do not satisfy the standards.

Table 24 Risk management status of major factories

We have set both a

deductible and an

upper limit, and have

purchased.

We have set only a

deductible and have

purchased.

We have set only the

upper limit and have

purchased.

We have set

neither a

deductible nor

an upper limit,

and have

purchased.

We have not

purchased.

1. Fire insurance 460 77 219 78 25

2. Wind and flood

damage insurance 374 77 172 61 151

3.Earthquake insurance 213 49 91 44 431

Seismic

reinforcement was

implemented.

Strength is insufficient,

but earthquake-resistant

reinforcement has not

been implemented.

Since the strength is

sufficient, earthquake-

resistant reinforcement

has not been carried out.

We do not know.

Implementation of

seismic reinforcement 74 277 325 178

Table 25 shows the results from Question 20, which asks responding companies about the

source of funding for and repayment status of their main production facilities. The most common

answers are, “We have received a loan from a bank and are currently paying it back” (40.8%),

21

followed by “We received a loan from a bank, and now we have paid it off” (38.3%). The impact

of such repayment status on insurance and risk management is also interesting, so empirical tests

will be necessary in the future.

Table 25 Repayment status of funds at major factories

Number of

responses

We received a

loan from a

bank and are

currently paying

it back.

We received a

loan from a

bank, and now

we have paid it

off.

We received loans

from management

and are currently

paying them back.

We received

financing from the

manager, and now

it has been paid

off.

We have

received loans

from others and

are currently

paying back.

We received

loans from

others, and now

they have been

paid off.

All 880 359 337 5 6 8 13

40.8% 38.3% 0.6% 0.7% 0.9% 1.5%

Number of

responses

We got

shareholders to

contribute.

We used internal

reserves.

We received

financing in other

ways.

Other We do not

know.

All 880

16

1.8%

59

6.7%

18

2.0%

39

4.4%

20

2.3%

Table 26 summarizes the responses to Question 21, which asked responding companies about

the collateral and personal guarantee status of their main production facilities. The largest number

of responders said that they had set up collateral (41.6%), and when combined with those who

had set up both collateral and a personal guarantee (23.4%), this means that two-thirds of

companies had set up collateral. Meanwhile, just 4.4% had only set up a personal guarantee. This

means that it is generally necessary to set up collateral first and to set up a personal guarantee, if

it is needed. This also exceeds the scope of this paper, but the impact of collateral and personal

guarantee on insurance and risk management is also interesting.

Table 26 Collateral and personal guarantee status of major factories

Number of

responses

We have set up

collateral.

We have set up

a personal

guarantee.

We have set up both

collateral and a

personal guarantee.

We have set up

neither collateral nor

a personal guarantee.

We do not

know.

Other

All 870 362 38 204 211 33 22

41.6% 4.4% 23.4% 24.3% 3.8% 2.5%

22

Table 27 summarizes the results of Question 22, which asked about fund procurement at the

main factory in the event of a disaster. The largest number respondents reported that they would

be likely to obtain loans from the main bank (81.2%), followed by those likely to obtain loans

from banks other than the main bank (37.5%), and those likely to obtained loan from the Japan

Finance Corporation (32.9%). Moreover, 12.0% of companies said that they were likely to obtain

loans from the parent company. It is especially important that one-third of companies answered

that they would be likely to obtain loans from the Japan Finance Corporation. The tables illustrates

the important role the public sector has played in SME financing in Japan, particularly in the case

of natural disasters.

Table 27 Procurement of major factories in the event of a disaster (multiple answers allowed)

Number of

responses

Loans are likely

to be obtained

from the main

bank.

Loans are likely to be

obtained from banks

other than the main

bank.

Loans are likely to

be obtained from

the Japan Finance

Corporation.

Loans are likely

to be obtained

from local

governments.

Loans are likely

to be obtained

from the parent

company.

Loans are likely

to be obtained

from business

partners.

All 893 725 335 294 23 107 11

81.2% 37.5% 32.9% 2.6% 12.0% 1.2%

Number of

responses

Loans are likely

to be obtained

from others.

We will not get a loan

from anywhere.

We are likely to

receive outside

investment.

There is no need

for financing or

investment.

We do not know. Other

All 893

6

0.7%

20

2.2%

2

0.2%

36

4.0%

50

5.6%

16

1.8%

4.3 SMEs and life insurance

Question 23 asked about the life insurance premiums paid for specific life insurance regarding

the president and the management (long-term level regular term insurance, increasing periodic

life insurance, officer severance payment) in the most recent fiscal year. Table 28 summarizes the

results. It can be confirmed that the average value of the payment of life insurance premiums in

small business is about 8.8 million yen, and the median value is 3 million yen. To the best of our

knowledge, research and analysis regarding purchasing life insurance for small and medium-sized

enterprises have been limited.

23

Table 28 Life insurance premiums paid by respondent companies (long-term standard level

insurance of managers, increasing periodic life insurance, officer retirement fees)

Number of

responses

Life insurance premium

(average value)

Life insurance premium

(median value)

All 740 8,813,970 yen 3,000,000 yen

Next, Question 24 asked why companies purchase life insurance. Table 29 summarizes the

results. The most common reason was “to reduce the impact on management (at the time of the

manager’s death)” (73.3%), followed by “to form assets, such as management retirement funds”

(67.3%). The most interesting thing is that only 12.2% of companies listed tax savings as a reason

for purchasing property insurance (Table 19), which was more than tripled by 38.2% buying life

insurance for this reason in this article. In other words, the tax saving effect of purchasing

insurance pointed out by Main (1983) seems to be true in small and medium enterprises,

especially as it relates to life insurance.

Table 29 Reasons for purchasing life insurance (multiple answers acceptable)

Number of

responses

To reduce the impact on

management at the time of a

manager’s death

To receive tax

benefits

To form assets,

such as

management

retirement funds

As an employee

benefit

All 880 601 313 552 102

73.3% 38.2% 67.3% 12.4%

Number of

responses

At the request of a financial

institution

At the request

of a business

partner

To offer

accountability to

shareholders

Other

All 880

5

0.6%

4

0.5%

6

0.7%

36

4.4%

Table 30 summarizes the results of Question 25, which asked respondents about the history of

purchasing life insurance. The most common reason for purchasing life insurance “There was an

opinion from within our company that it” (51.4%) was followed by “We were advised by an

insurance agent” (36.0%), “We were advised by insurance sales staff” (24.0%), and “We were

advised by a tax accountant/certified public accountant” (18.7%).

Compare that to the responses to Question 16 (Table 20) regarding reasons for purchasing

property insurance. “There was an opinion that it is necessary from within your company

24

(management team and employees)” (62.0%) was more than 10% higher than as a reason for

purchasing life insurance; “We were advised by an insurance agent” (44.4%) is also about 8%

higher for property insurance than for life insurance. In the case of property insurance, 9.7%

answered that it was “recommended by a certified tax accountant/certified public accountant,”

while nearly twice as many (18.7%) followed this type of advice from tax accountants and

certified public accountants when purchasing life insurance.

Table 30 Background on which responding companies purchased life insurance (multiple

answers allowed)

Number of

responses

It was a loan

condition from the

bank.

We were advised by an

insurance agent.

We were advised by

insurance sales staff.

We were advised by a

tax

accountant/certified

public accountant.

All 811 22 292 195 152

2.7% 36.0% 24.0% 18.7%

Number of

responses

We were advised by

a financial planner.

We were advised by

acquaintances such as peers

in the same industry.

There was an opinion from

within our company that it

was necessary.

We do not know.

All 811

100

46

5.7%

21

2.6%

417

51.4%

47

5.8%

Question 26 asked about the respondent company’s experience canceling insurance during the

past five years, and Table 31 summarizes the results. The most frequent answered was, “we have

never canceled insurance” (51.3%). On the other hand, about 10% each reported, “we canceled

life insurance for financial reasons” and “we canceled property insurance for other reasons.” In

addition, 26.1% of companies have canceled life insurance for other reasons. “Other reasons”

includes the retirement of officers.

Companies in this paper have submitted “previous financial results settlements” and “latest

financial results financial statements” with the number of employees of more than 20 and less

than 300, and are thought to be medium-sized companies. It is thought that about 10% of these

companies experienced deficits that require surrender of life insurance. Also, since 2009 and

beyond, the fact that it was the time of the impact of the Lehman shock may have an effect. It is

interesting to see what kinds of factors affect cancellation of life insurance, and empirical tests

will be necessary in the future.

25

Table 31 Companies’ experiences with canceling insurance (2009–2013)

Number of

responses

We have never

canceled insurance.

We canceled life

insurance for financial

reasons.

We canceled

property/casualty

insurance for financial

reasons.

We canceled life

insurance for other

reasons.

All 873 448 88 13 228

51.3% 10.1% 1.5% 26.1%

Number of

responses

We canceled

property/casualty

insurance for other

reasons.

Other We do not know.

All 873

84

9.6%

20

2.3%

41

4.7%

Question 27 asked about company’s experiences (0-5 years) with receiving insurance money.

Table 32 summarizes the results. The most frequent response (33.4%) was, “we received

insurance money with property insurance,” followed by, “we received insurance money with life

insurance” (16.4%), and “we received insurance money with both property insurance and life

insurance” (13.6%). Approximately two-thirds of companies have received insurance money for

property/casualty or life insurance claims over the past five years. This demonstrates that paying

insurance premiums and receiving insurance money are familiar economic activities for

companies.

Table 32 Respondent companies’ experiences receiving insurance payments (FY2009–FY2013)

Number of

responses

We received

insurance money

with property

insurance.

We received

insurance money

with life

insurance.

We received insurance money

with both property insurance

and life insurance.

We have never

received

insurance

money.

We do not know.

All 860 287 141 117 291 24

33.4% 16.4% 13.6% 33.8% 2.8%

4.4 The Great East Japan Earthquake and small business risk insurance and

management

Next, companies were asked about the damage caused by the Great East Japan Earthquake, and

26

the safeguards, such as purchasing insurance and reinforcing earthquake resistance, that had been

carried out before and after the earthquake. Question 28 asked about the damage suffered by the

responding companies after the Great East Japan Earthquake, and Table 33 summarizes their

responses. No damages were reported by 52.5% of respondents, while other companies reported

direct or indirect losses.

Table 33 Damage suffered by responding companies after the Great East Japan Earthquake

Number of

responses

Direct damage to

company's assets

Indirect

damage

Damage due to

sufferers and stops

by external suppliers

Damage due to

customers’

disaster/leave

Damage from

slowing economic

activity

There was no

damage.

All 895 117 27 87 83 111 470

13.1% 3.0% 9.7% 9.3% 12.4% 52.5%

Question 29 asked about the impact of the Great East Japan Earthquake on the company’s profit

and loss, and the results are summarized in Table 34. Most companies reported little direct effect

from the earthquake (79.6%). That is, their corporate performance does not change to deficit or

surplus. Of the companies that responded, a total of 15.3% either expanded their deficits or first

experienced deficits as a result of the earthquake.

Table 34 Impact on profit and loss of the Great East Japan Earthquake

Number of

responses

The deficit

expanded.

From black surplus to a

deficit

Little influence From red deficit to black

surplus

The surplus

expanded.

All 860 57 77 694 10 34

6.5% 8.8% 79.6% 1.1% 3.9%

Question 30 asked about risk management against earthquakes the company had done before

the Great East Japan Earthquake, and Table 35 summarizes the results. Although none of the

steps had been implemented by a majority of companies (68.8%), 15.3% had purchased

earthquake insurance for offices, shops, or factories, while 7.5% had seismically retrofit their

offices, shops, or factories. In addition, 9.3% and 5.2% had formulated or enhanced their Business

Continuity Plan (BCP) or strengthened their supply chain, respectively, as ways of implementing

risk management for the earthquake.

27

Table 35 Risk management before the Great East Japan Earthquake (multiple answers allowed)

Number

of

responses

Seismic retrofit Purchase earthquake

insurance

Formulation of a

Business

Continuity Plan

Strengthening of

the supply chain

Other Nothing

particular

All 884 66 135 82 46 8 608

7.5% 15.3% 9.3% 5.2% 0.9% 68.8%

Question 31 asked about the risk management steps companies took after the Great East Japan

Earthquake. Table 36 shows that the cost required for implementation is low. The formulation or

enhancement of a Business Continuity Plan (BCP) was reported by 18.5% of respondents, while

9.6% strengthened the supply chain, double that before the earthquake. Also, as seen in Table 36,

some companies reported making more costly changes: 7.4% reported making seismic

reinforcements of offices, shops, or factories, and 8.9% purchased earthquake insurance for their

offices, shops, or factories. Such changes were implemented in many companies despite the short

period—less than three years—since the disaster. Earthquake-resistant reinforcement has been

implemented in the same number of companies as before the Great East Japan Earthquake.

Meanwhile, even after the Great East Japan Earthquake, we can confirm that about two-thirds

(64.5%) of firms that have not implemented risk management.

Table 36 Risk management newly conducted after the Great East Japan Earthquake

Number of

responses

Seismic retrofit Purchase earthquake

insurance

Formulation of a

Business Continuity Plan

Strengthening of

the supply chain

Other Nothing

particular

All 887 66 79 164 85 572 16

7.4% 8.9% 18.5% 9.6% 1.8% 64.5%

Question 32 asked about the focus and order of risk management review, and Table 37

summarizes the results. Especially in the manufacturing industry, it is considered desirable to

implement loss financing (earthquake insurance) on risks that cannot be covered after the

implementation of loss control (seismic reinforcement); however, 13.7% of companies answered,

“We will consider earthquake resistance reinforcement after considering purchasing earthquake

insurance.”

Also interestingly, 4.1% (35 companies) tried to purchase earthquake insurance, but they did

not accept underwriting by the insurance company. Although the number is small, from Table 36,

considering that 8.9% (79 companies) have purchased earthquake insurance since the Great East

Japan Earthquake, more than 30% of companies declined purchasing earthquake insurance.

28

Table 37 Status of risk management review

Number

of

responses

After considering

seismic

reinforcement, we

will consider

purchasing

earthquake

insurance.

After considering

purchasing earthquake

insurance, we will

consider earthquake

resistance

reinforcement.

We will consider

seismic

reinforcement and

earthquake insurance

at the same time.

We considered

purchasing earthquake

insurance, but we did not

accept it from insurance

companies.

We have never

considered risk

management for

earthquakes.

All 860 139 116 176 35 383

16.4% 13.7% 20.7% 4.1% 45.1%

Question 33 asked about the support situation at the time of the Great East Japan Earthquake,

and the results are summarized in Table 38. A majority of companies (85.4%) reported not needing

any support. Among the companies that received assistance, most received new loans from a bank

(7.5%), demonstrating the importance of banks to SMEs in the event of a disaster.

Table 38 Assistance obtained during the Great East Japan Earthquake

Number of

responses

Group companies

dispatched people.

Group companies lent

money.

The bank provided us

with a new loan.

We got support from

others.

All 873 6 4 64 32

0.7% 0.5% 7.5% 3.7%

Number of

responses

We needed support,

but we did not

receive any.

We needed no

assistance.

Other

All 873

12

1.4%

731

85.4%

25

2.9%

Question 34 asked about responding companies’ seismic retrofitting of production facilities,

such as offices and factories, and the results are summarized in Table 39.

The table shows that 32.2% reported they had no need for seismic retrofitting since the

earthquake resistance of their offices, shops, and factories was sufficient, while 14.7% had carried

out some earthquake-resistant reinforcement for some of the offices, shops, and factories that

were considered not to be earthquake resistant. However, 35.8% of responding companies had

made no effort to reinforce buildings considered insufficiently earthquake resistant. Earthquake-

29

proofing efforts differ depending on the company, but it will be necessary in the future to clarify

the factors that are causing such differences.

Table 39 Status of responding companies’ seismic retrofits

Number of

responses

Since the earthquake resistance of our

offices, shops, factories, etc., is

sufficient, there is no need for seismic

reinforcement.

Earthquake-resistant reinforcement has

been carried out for all offices, shops,

factories, etc. that are considered not to

have sufficient earthquake resistance.

Some earthquake-proof reinforcement

has been carried out for our offices,

shops, factories, etc. that seem not to

have sufficient earthquake resistance.

All 873 283 23 129

32.2% 2.6% 14.7%

Number of

responses

No earthquake-resistant reinforcement

has been implemented for our offices,

shops, factories, etc. that seem not to

have sufficient earthquake resistance.

We do not know.

All 873

315

35.8%

129

14.7%

4.5. Transactions with financial institutions

Previous research has clarified the importance of banking relationships to SME finance.

However, little research has been done from the viewpoint of the role of insurance in SME finance.

Therefore, in this section, while keeping in mind the relationship with insurance, we will mainly

look at the relationship between companies and banks.

Question 35 asked respondents about their relationship with their main bank, and the results

are summarized in Table 40. As the table shows, more than two-thirds of companies report

depending on their main bank; 23.6% rely heavily on it, while 44.6 depend on it to some extent.

On the other hand, 22.0% and 8.2% of companies said that they did not depend much or were not

at all dependent on their main bank, respectively.

Table 40 Respondent companies’ relationships with their main bank

Number of

responses

We depend on it

greatly.

We depend on it

to some extent.

We do not depend

so much on the

bank.

We do not

depend at all

on the bank.

We do not have

a main bank.

We do not

know.

All 901 213 402 198 74 12 2

23.6% 44.6% 22.0% 8.2% 1.3% 0.2%

30

Next, Question 36 asks companies about their usage of insurance purchased from banks. The

results are summarized in Table 41. As the table shows, while 16.9% reported having received an

explanation, solicitation, introduction, and proposal and actually purchasing insurance, 21.1%

reported not having purchased insurance in spite of receiving an explanation, invitation,

introduction, and suggestion. In addition, more than half (55.9%) of firms said that they knew that

banks sold insurance but did not purchase any.

For companies with 50 or fewer employees who already have loan relationships, employees

are not allowed to sell insurance at the bank counter; however, the data used in this paper

encompasses businesses with at least 20 but not more than 300 employees. It is believed that the

characteristics of such data can bring about the result described above.

Table 41 Insurance purchased from banks

Number of

responses

We received an

explanation, invitation,

introduction, and proposal,

and we actually purchased

insurance.

We received explanations,

solicitation, introductions,

and suggestions, but we did

not purchase insurance.

We know what the

bank has to offer, but

we did not purchase

insurance.

We do not

know what the

bank has to

offer.

All 896 151 189 501 55

16.9% 21.1% 55.9% 6.1%

The regulation regarding bank window sales that varies according to the size of the company

exists because there is concern that selling insurance will be linked to a company’s ability to get

loans. Therefore, Question 37 asked about how refusing to purchase insurance impacts their

ability to receive loans, and Table 42 summarizes the results. The numbers of companies that are

very worried or a little worried (0.8% and 7.0%, respectively) are small, although not zero.

On the other hand, 36.4% and 50.0% of companies reported worrying not much or not at all,

respectively. The pressure produced by selling insurance at the bank is a big social problem at

present; however, it is thought that the issue of bank selling can be more serious for companies

with smaller scales than those surveyed in this paper. Thus, further empirical tests will be needed

using data from companies with fewer than 20 employees.

31

Table 42 Influence on loans when refusing insurance purchase

Number of

responses

Very worried A little worried Not much Not at all We do not know.

All 892 7 62 325 446 52

0.8% 7.0% 36.4% 50.0% 5.8%

In the context of relationship banking research, we often think that the number of banks that

firms transact with shows the strength of their relationship with the main bank. Therefore,

Question 38 asked companies’ reasons for dealing with multiple financial institutions. The results

are summarized in Table 43.

The most frequent answers are “each financial institution/loan has merit” (49.4%), and

“borrowing conditions become advantageous when multiple financial institutions compete for our

business” (48.0%). The table also shows that 38.7% borrow from multiple institutions to avoid

difficulty when something unexpected happens, such as losing financing through another bank.

In addition, 13.7% reported not borrowing from multiple financial institutions, while 9.3% did so

because they wanted to borrow more money than the first bank would allow.

Table 43 Reasons to transact with multiple financial institutions

Number of

responses

The financing limit of

individual financial

institutions is less than

the desired amount.

We are in trouble when

an unexpected situation

(such as losing our

ability to borrow)

happens.

Each financial

institution/loan

has merit.

Borrowing conditions become

advantageous when multiple

financial institutions compete for

our business.

All 889 83 344 439 427

9.3% 38.7% 49.4% 48.0%

Number of

responses

We do not borrow from

multiple financial

institutions.

Other（ ） We do not

know.

All 889

122

13.7%

38

4.3%

21

2.4%

In relationship banking research, such as that of Uchida, Udell, and Yamori (2012), it is often

believed that the company’s relationship with the loan representative shows the strength of its

relationship with the main bank. Therefore, Question 39 asked about the lending officer and the

32

branch manager's term of transaction and the number of meetings in a year. Table 44 summarizes

the results. The average length of association with current lending personnel is about 2 years

(median is also 2 years), and the length of association with the branch manager is about 1.6 years

(median is 1 year). In addition, it can be seen that companies meet, on average, about 24 times a

year (median is 20 days) and about 9 days (median is 6 days) with the branch manager and the

loan officer, respectively.

In the context of relationship banking research, loan officers and branch managers gather soft

information through such visits, alleviating problems that can arise from the asymmetry of

information existing between a company and a bank. Additionally, frequent visits are good

opportunities for banks to sell insurance to companies.

Table 44 Period of relationship with the lending officer and number of times meeting the person

in charge

①Current loan officer ②Current branch manager

1. Length of relationship （Average）2.014 years

（Median）2 years

（Average）1.581 years

（Median）1 year

2. Visiting frequency

(How many days in a year do

you meet the bankers?)

（Average）24.433 days

（Median）20 days

（Average）9.438 days

（Median）6 days

In the previous research, the distance between the company and the bank is also used as a

representation of the strength of the relationship. Therefore, Question 40 asked about the time it

takes to travel to the responding company from the branch office of the financial institution with

the first borrowed balance. Table 45 summarizes the results.

The table shows that the trip takes 0–10 minutes for 25.1%, 10–20 minutes for 32.3%, and 20–

30 minutes for 19.7% of responding companies. That means that 77.1% of responding SMEs

transact with financial institutions that can be reached in less than 30 minutes. Of the remaining

companies, 10.2% answered 30–40 minutes, 4.8% answered 40–50 minutes, 3.7% answered 50–

60 minutes, and 4.3% answered more than 60 minutes.

In the framework of relationship banking research, when the physical distance between the

branch of the bank and the enterprise is close, it is thought that soft information is easy to

accumulate, and the asymmetry of the information existing between the bank and the company is

relaxed.

33

Table 45 Time taken from the branch office of the financial institution with the highest

borrowing balance to the answering company

Number of

responses

0–10 minutes 10–20 minutes 20–30 minutes 30–40 minutes

All 821 206 265 162 84

25.1% 32.3% 19.7% 10.2%

Number of

responses

40–50 minutes 50–60 minutes More than 60

minutes

All 821

39

4.8%

30

3.7%

35

4.3%

Finally, Question 41 asked about companies’ credit guarantee ratio to the total borrowing

amount. The results are summarized in Table 46. The table shows that 35.4% of companies

responded “0%,” 33.6% said “more than 0% and less than 25%,” 13.6% said “25% to 50%,” 7.7%

said “more than 50% and less than 75%,” 2.1% said “more than 75% and less than 100%,” and

1.1% said “100%.”

Table 46 Credit guarantee ratio to total borrowing

Number of

responses

0% More than 0% and

less than 25%

More than 25% and

less than 50%

More than 50% and

less than 75%

All 833 291 276 112 63

35.4% 33.6% 13.6% 7.7%

Number of

responses

More than 75% and

less than 100%

100% We do not know.

All 833

17

2.1%

9

1.1%

65

7.9%

5. Summary and future prospects

This paper introduces the survey results of the “Survey of Corporate Insurance Risk

Management” administered in Japan to manufacturing SMEs from January to February 2014. It

clarifies facts that had not been well known about SME’s insurance risk management.

This survey has been designed and collected so that it can be linked with corporate financial

data, and some empirical analysis will be developed in the future. First, we will be able to

34

empirically clarify the relationship between banks and insurance risk management. Second, the

role of risk management tools other than insurance will be empirically tested. Third, the data will

enable us to analyze the effects of seismic reinforcement on SME management after the Great

East Japan Earthquake. Fourth, it is possible that the cancellation of life insurance is used as a

means of corporate finance, a theme to which traditional financial theory and insurance theory

did not pay attention.

References

Adams, Mike, Chen Lin and Hong Zou (2011) “Chief Executive Officer Incentives, Monitoring,

and Corporate Risk Management: Evidence from Insurance Use,” Journal of Risk and

Insurance 78(3), pp.551-582.

Aunon-Nerin, Daniel and Paul Ehling (2008) “Why Firms Purchase Property Insurance,”

Journal of Financial Economics 90(3), pp.298–312.

Doherty, Neil A. (2000) “Integrated Risk Management,” McGraw Hill.

Hoyt, Robert E. and Ho Khang (2000) “On the Demand for Corporate Property Insurance,”

Journal of Risk and Insurance 67(1), pp.91–107.

Jia, Joy, Mike Adams and Mike Buckle (2012) “Insurance and Ownership Structure in India's

Corporate Sector,” Asia Pacific Journal of Management 29(1), pp.129–149.

Main, Brian G.M. (1983) “Corporate Insurance Purchases and Taxes,” Journal of Risk and

Insurance 50(2), pp.197–223.

Mayers, David and Clifford W. Smith (1982) “On the Corporate Demand for Insurance,” Journal

of Business 55(2), pp.281–296.

Mayers, David and Clifford W. Smith (1987) “Corporate Insurance and the Underinvestment

Problem,” Journal of Risk and Insurance 54(1), pp.45–54.

Regan, Laureen and Yeon Hur (2007) “On the Corporate Demand for Insurance: The Case of

Korean Nonfinancial Firms,” Journal of Risk and Insurance 74(4), pp.829–850.

Uchida, Hirofumi, Gregory F. Udell and Nobuyoshi Yamori (2012) “Loan Officers and

Relationship Lending to SMEs,” Journal of Financial Intermediation 21(1), pp.97–122.

Yamori, Nobuyoshi (1999) “An Empirical Investigation of the Japanese Corporate Demand for

Insurance,” Journal of Risk and Insurance 66(2), pp.239–252.

35

(Appendix)

Ⅰ．About the Outline of Your Company and Respondents

Q1. Which of the following positions is held by the person who answered this questionnaire? Please

select one applicable item and enclose it with a circle.

1. President 2. Head of finance department 3. Head of the general affairs department

4. Other （ ）

Q2. For the relationship between your company and the parent company/subsidiary, please choose one

number from the following and enclose it with a circle.

1．We belong to a corporate group. 2．We have an independent company without a parent company.

3. We have a subsidiary company.

Q3. Do you use the manager’s or an employee's home as your main office, shop, factory, etc.? Circle

the number of the appropriate response from the following choices (multiple selections allowed).

1．We use it as an office. 2．We use it as a store. 3．We use it as a factory. 4．We use it as other

facilities. 5．We do not use it at all.

Q4. Which is the most likely prospect for your company's future management? Please choose one

corresponding number from the following and enclose it with a circle.

1．Growth can be expected. 2．Growth can be somewhat expected. 3．The current situation

is expected to be maintained. 4．It is expected to shrink. 5. We do not know.

Q5. Which is the most likely dividend policy for your company (to shareholders) in the future?

Please circle the number of the statement that best reflects your plans.

1．We plan to increase it in the future. 2．We plan to maintain the status quo.

3．We plan to reduce it in the future. 4. We do not know.

Q6. Circle the applicable numbers (multiple answers allowed) of reason your company is retaining

earnings.

36

1. Short-term working capital 2. For new investment (new factory and introduction of machinery)

3． For repair (for factory and machine) 4. To prepare for accidents/disasters (such as office/factory

fire or earthquake) 5. To pay dividends 6. We do not know. 7. There are no retained earnings

8. Other（ ）

Q7. Which is the most appropriate one for your company's overseas relationship? Please choose the

number of the corresponding item from the following responses (multiple selections allowed) and

circle it.

1．We have an office overseas. 2. We own stores and factories overseas.

3．We do not own offices, shops, or factories overseas, but we export and import products.

4．We have no business with overseas enterprises and companies.

5. We do not know. 6. Other

Ⅱ．About Risk Management

Q8. Within one year, there is a risk of a loss of 10 million yen with a 50% probability. However, if you

pay insurance premiums, you can collect the loss amount. If you could purchase insurance with the

insurance premiums in each row in the table below, would you purchase the insurance? For each of

the nine rows, please circle “A” when you would purchase insurance by paying insurance premiums

and circle “B” if you would not purchase insurance.

Insurance premium

(yen)

Would pay the insurance

fee and purchase

insurance

Even if we can afford the

insurance premiums, we

would not purchase

insurance.

１． ¥ 10,000

２． ¥ 100,000

３． ¥ 500,000

４． ¥ 1,000,000

５． ¥ 2,000,000

６． ¥ 3,000,000

37

７． ¥ 4,000,000

８． ¥ 4,500,000

９． ¥ 5,000,000

Q9. Who has the strongest influence on deciding to purchase insurance or making your insurance

arrangements? Please circle the number of the answer that best reflects your situation.

Q9-1 Property Insurance

1. The president 2. Head of the finance department 3. Head of the general affairs department

4. Other directors 5. We do not know. 6. Others （ ）

Q9-2 Life Insurance

1. The president 2. Head of the finance department 3. Head of the general affairs department

4. Other directors 5. We do not know. 6. Others （ ）

Q10. Please circle the number of the choice that best reflects how you arrange your insurance.

1．Insurance is arranged by each department. 2．Insurance is arranged only by the general affairs

department. 3. Insurance is arranged only by the financial and accounting department. 4.

Insurance is arranged only by the legal department. 5. Other （ ）

Q11. How much of the risks that are present in your company are covered by insurance you have

purchased? For each item, mark the box that best matches your response.

Types of insurance

Status of compliance with risks from purchasing insurance

It almost

covers

Covers to

some extent

Does not

cover much

Hardly

covered

The risk is not

relevant

１．Insurance on damage or loss of

corporate property (due to fire)

２．Insurance on damage or

disappearance of corporate

property (due to wind and flood

damage)

38

３．Insurance on damage or loss of

corporate property (due to

earthquake)

４．Insurance on traffic accidents

involving company cars

５．Insurance for external liability

arising from business activities

６．Insurance on directors’ liability

７．Insurance on workers' injury

accidents (added part to

government workers' accident)

[Note: Here and in the following table,

please clarify what is meant by this

parenthetical statement.]

８．Insurance on accidents during

the process of distributing

products/goods

９．Insurance on construction

accidents

１０．Insurance on accounts

receivable

１１．Insurance on business

interruption (due to natural

disasters, etc.)

１２．Insurance on risk associated

with overseas expansion

１３．Insurance concerning the

occurrence of unexpected events to

the president and officers

１４．Insurance on risks such as

business succession

Q12. For each type of insurance listed on the left, please mark the box that best reflects your company’s

route of purchasing insurance.

Types of insurance Route of insurance purchase

39

Purchased

from a

bank

agency

Purchased from

an agent of our

own

company/business

partner system

Purchased

from an

acquaintance

agent

Purchased

by

introduction

from parent

company

Purchased

from

others

Not

purchased

１．Insurance on damage

or loss of corporate

property (due to fire)

２．Insurance on damage

or disappearance of

corporate property (due

to wind and flood

damage)

３．Insurance on damage

or loss of corporate

property (due to

earthquake)

４．Insurance on traffic

accidents involving

company cars

５．Insurance for

external liability arising

from business activities

６．Insurance on

directors’ liability

７．Insurance on

workers' injury

accidents (added part to

government workers'

accident)

８．Insurance on

accidents during the

process of distributing

products/goods

40

９．Insurance on

construction accidents

１０．Insurance on

accounts receivable

１１．Insurance on

business interruption

(due to natural disasters,

etc.)

１２．Insurance on risk

associated with overseas

expansion

１３．Insurance

concerning the

occurrence of

unexpected events to the

president and officers

１４．Insurance on risks

such as business

succession

Q13. Please provide the insurance premiums your company paid for the last fiscal year for damage

insurance (fire insurance, earthquake insurance, car insurance, credit insurance, liability insurance).

Total annual payment of property insurance premiums (fire

insurance, car insurance, etc.) yen

Q14. Please circle the number that best reflects the number of insurance companies with which your

company does business (including mutual aid associations).

1．1 company 2．2 companies 3．3 companies 4．4 companies 5．5 or more

companies 6．We have not purchased property insurance.

Q15. Please circle the numbers of all reasons your company chooses to purchase property insurance

(multiple answers allowed).

1. To reduce the impact on profit and loss 2. To secure an asset recovery fund 3. To secure

working capital in the event of a disaster 4. To obtain knowledge and support for accident response

41

5. Requests from financial institutions/business partners 6. Accountability to shareholders 7.

Accountability to other departments within the company 8. Tax saving effect 9. Social

responsibility 10. Experience of a past major accident (reflection) 11. Because other companies in

the same industry have purchased it 12. Other（ ）

Q16. Please circle the number of each reason (multiple answers allowed) you purchased

property/casualty insurance.

1. It was a prerequisite for loans from banks. 2. The parent company requested it. 3.

Shareholders requested it. 4. An insurance agent advised us. 5. A tax accountant/certified public

accountant advised us. 6. We were advised by acquaintances such as peers in the same industry.

7. The opinion within our company was that insurance is necessary. (management team and

employees) 8. Other（ ） 9. We do not know.

Q17. ① In the case of new investment, due to the construction of factories and the introduction of

facilities, where would you seek funds? Rank each source as first, second, third, fourth, or fifth in the

order you would access funds. ② In order to consider financing for rebuilding when damaged due to

earthquake, fire, etc., where would you seek funds? Rank each source first, second, third, fourth, fifth,

or sixth in the order you would access funds.

In the case of new investment

such as establishing a factory or

a new development opportunity

When recovery funds are

needed due to fire, earthquake,

flood damage, etc.

Internal reserve （ ） place （ ） place

Borrow from management （ ） place （ ） place

Borrow from relatives of

management （ ） place （ ） place

Borrow funds from group

companies （ ） place （ ） place

Borrow from banks/financial

institutions （ ） place （ ） place

42

Purchase insurance in advance （ ） place

Q18. Please circle the number of the statement that best describes your use of derivatives (derivatives,

derivatives related to currency and interest rates, swaps, futures/forward transactions, CAT bonds, etc.).

1．We have used derivatives as a means of risk management.

2．We have used derivatives as a means of fund management.

3．We have never used derivatives, but we are interested.

4．We have never used derivatives, and we are not interested.

5. We do not know what derivatives are.

Q19. For each type of insurance listed, please mark the box that best describes the status of your

insurance and risk management of the most important building in your production facility, such as

factories. Those built after new earthquake resistance standards introduced in 1982 are considered to

have some degree of earthquake resistance.

We have set both a

deductible and an

upper limit, and have

purchased.

We have set only a

deductible and have

purchased.

We have set only the

upper limit and have

purchased.

We have set

neither a

deductible nor

an upper limit,

and have

purchased.

We have not

purchased.

1. Fire insurance 460 77 219 78 25

2. Wind and flood

damage insurance 374 77 172 61 151

3.Earthquake insurance 213 49 91 44 431

Seismic

reinforcement was

implemented.

Strength is insufficient,

but earthquake-resistant

reinforcement has not

been implemented.

Since the strength is

sufficient, earthquake-

resistant reinforcement

has not been carried out.

We do not know.

Implementation of

seismic reinforcement 74 277 325 178

43

Q20. How did you procure funds for building the most important buildings of your production

facilities, such as factories? Please circle the number of the statement that best reflects your answer.

1．We received a loan from a bank and are currently paying it back. 2．We received a loan from a bank, and now

we have paid it off. 3．We received loans from management and are currently paying them back. 4．We received

financing from the manager, and now it has been paid off. 5．We have received loans from others and are currently

paying them back. 6．We received loans from others, and now they have been paid off. 7．We got shareholders

to contribute. 8．We used internal reserves. 9．We received financing in other ways 10. Other

（ ） 11. We do not know.

Q21. What kind of collateral or personal guarantee did you use to finance your most important

buildings of your production facilities such as factories? Please circle the number of the statement that

best reflects your answer.

1．We have set up collateral. 2．We have set up a personal guarantee. 3．We have set up both

collateral and a personal guarantee. 4．We have set up neither collateral nor a personal guarantee.

5．We do not know. 6. Other（ ）

Q22. How will you be able to raise funds when your most important production facilities, such as

factories, are seriously damaged? Please circle the number of the statements that reflect your answer

(multiple answers allowed).

1．Loans are likely to be obtained from the main bank. 2. Loans are likely to be obtained from

banks other than the main bank. 3. Loans are likely to be obtained from the Japan Finance

Corporation. 4. Loans are likely to be obtained from local governments. 5. Loans are likely to be

obtained from the parent company. 6. Loans are likely to be obtained from business partners. 7.

Loans are likely to be obtained from others. 8. We will not get a loan from anywhere. 9. We are

likely to receive outside investment. 10. There is no need for financing or investment. 11. We do

not know. 12. Other（ ）

44

Q23. Please provide the life insurance fee you paid for the latest fiscal year for the specific life

insurance (president, management) that you purchased.

Annual payment amount of insurance premiums of long-

term level regular term insurance, increasing periodic life

insurance, and officer retirement payment (excluding

pension)

yen

Q24. Why does your company purchase the life insurance for the managers? Please circle the number

of the statements that reflect your answer (multiple answers allowed).

1. To reduce the impact on management at the time of a manager’s death 2. To receive tax benefits

3. To form assets, such as management retirement funds 4. As an employee benefit 5. At the

request of a financial institution 6. At the request of a business partner 7．To offer accountability

to shareholders 8. Other（ ）

Q25. Why did you purchase life insurance? Please circle the numbers (multiple answers allowed) that

reflect reasons you purchased your life insurance.

1. It was a loan condition from the bank. 2. We were advised by an insurance agent.

3. We were advised by insurance sales staff. 4. We were advised by a tax accountant/certified public

accountant. 5. We were advised by a financial planner 6. We were advised by acquaintances such

as peers in the same industry. 7. There was an opinion from within our company that it is necessary.

8. We do not know.

Q26. Please circle the numbers (multiple answers allowed) that reflect any insurance you have

canceled in the past 5 years (2009 to 2013).

1．We have never canceled insurance. 2. We canceled life insurance for financial reasons.

3．We canceled property/casualty insurance for financial reasons. 4．We canceled life insurance

for other reasons. 5. We canceled property/casualty insurance for other reasons.

6. Other （ ） 7. We do not know.

Q27. Please circle the number of the statement that best reflects your experience of receiving insurance

money in the past 5 years (2009 to 2013).

45

1. We received insurance money with property insurance. 2. We received insurance money with

life insurance. 3. We received insurance money with both property insurance and life insurance.

4. We have never received insurance money. 5. We do not know.

Ⅲ．About the Great East Japan Earthquake

Q28. Please circle the numbers (multiple answers allowed) of descriptions that reflect the damage

suffered by your company from the Great East Japan Earthquake.

1. Direct damage to your company's assets (offices, shops, factories) 2. Indirect damage due

to the company's disaster/leave 3．Damage due to sufferers and stops by external suppliers 4.

Damage due to customers’ disaster/leave 5. Damage from slowing economic activity 6.

There was no damage.

Q29. How was your company affected financially by the Great East Japan Earthquake? Please circle

the number of the most suitable response.

1. The deficit expanded. 2. We went from black surplus to a deficit.

3. The earthquake had little impact on us. 4. We changed from a deficit to black surplus. 5.

Our surplus expanded.

Q30. Please circle the number corresponding to the risk management steps you took before the Great

East Japan Earthquake (multiple selections possible).

1. Seismic retrofit (of offices, shops, factories, etc.)

2. Purchase of earthquake insurance (as a special contract for company fire insurance for the

office, shop, or factory)

3. Formulation and enhancement of a Business Continuity Plan (BCP)

4. Strengthening of the supply chain

5. Other（ ） 6. Nothing particular

Q31. Please circle the number corresponding to the risk management steps you took after the Great

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East Japan Earthquake (multiple selections are possible).

1. Seismic retrofit (of offices, shops, factories, etc.)

2. Purchase of earthquake insurance (as a special contract for company fire insurance for the

office, shop, or factory)

3. Formulation and enhancement of a Business Continuity Plan (BCP)

4. Strengthening of the supply chain

5. Other（ ） 6. Nothing particular

Q32. Please circle one that corresponds to the order in which your company reviews risk management

against earthquake risk.

1. After considering seismic reinforcement, we will consider purchasing earthquake insurance.

2. After considering purchasing earthquake insurance, we will consider earthquake resistance

reinforcement.

3. We will consider seismic reinforcement and earthquake insurance at the same time.

4. We considered purchasing earthquake insurance, but we did not accept it from insurance companies.

5. We have never considered risk management for earthquakes.

Q33. Please circle the number of the statements (multiple selections possible) that reflect the support

obtained by your company in connection with the Great East Japan Earthquake.

1. Group companies dispatched people. 2. Group companies lent money.

3. The bank provided us with a new loan. 4. We received support from others.

5. We needed support, but we did not receive any. 6. We needed no assistance.

7. Other（ ）

Q34. Regarding your implementation of earthquake-resistant reinforcement of your main office, shop,

factory, etc., which of the following conditions apply to your company? Circle the number of the

statement that best reflects your situation. Buildings constructed after new earthquake resistance

standards were introduced in 1982 are considered to have some earthquake resistance.

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1. Since the earthquake resistance of our offices, shops, factories, etc., is sufficient, there is no need for seismic

reinforcement.

2. Earthquake-resistant reinforcement has been carried out for all offices, shops, factories, etc. that are considered

not to have sufficient earthquake resistance.

3. Some earthquake-proof reinforcement has been carried out for our offices, shops, factories, etc. that seem not to

have sufficient earthquake resistance.

4. No earthquake-resistant reinforcement has been implemented for our offices, shops, factories, etc. that seem not

to have sufficient earthquake resistance.

5. We do not know.

Ⅳ．Transactions with Financial Institutions

Q35. How much do you feel your business depends on your main bank? Please circle the number of

the answer that best reflects your company’s position.

1. We depend on it greatly. 2. We depend on it to some extent.

3. We do not depend so much on the bank. 4. We do not depend at all on the bank.

5. We do not have a main bank. 6. We do not know.

Q36. Are you aware that banks sell insurance at the window counter or through related agents? Also,

have you purchased insurance through bank window sales? Please choose the most appropriate

response, and circle it.

1. We received an explanation, invitation, introduction, and proposal, and we actually purchased

insurance.

2. We received explanations, solicitation, introductions, and suggestions, but we did not purchase

insurance.

3. We know what the bank has to offer, but we did not purchase insurance.

4. We do not know what the bank has to offer.

Q37. Does your company worry about future disadvantageous treatment in financing if you decline

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the insurance offered by your bank? Please circle the number of the answer that best reflects your

feelings.

1．Very worried 2. A little worried 3. Not much 4. Not at all 5. We do not know.

Q38. What are your reasons for currently borrowing from multiple financial institutions? Please circle

the numbers of the answers that best reflect your situation. Multiple answers are possible.

1．The financing limit of individual financial institutions is less than the desired amount.

2．We are in trouble when an unexpected situation (such as losing our ability to borrow) happens.

3．Each financial institution/loan has merit.

4．Borrowing conditions become advantageous when multiple financial institutions compete for our

business.

5. We do not borrow from multiple financial institutions.

6. Other（ ）

7．We do not know.

Q39. This question is about the staff of the financial institution from whom your company is presently

receiving the most loans. The following table shows officials who are actually engaged in transactions

with your company at that financial institution. Please indicate the length of time you have been

involved with each individual and your average number of visits in a year.

①Current loan officer ②Current branch manager

1. Length of the relationship years years

2. Visiting frequency (How

many days in a year do you

meet the bankers?)

days days

Q40. How long does it take to travel from your company to the branch of the financial institution with

the highest borrowing balance (in the way the person in charge comes, by car or train, or by your

company)? Circle the number that best reflects your answer.

1. 0–10 minutes 2. 10–20 minutes 3. 20–30 minutes 4. 30–40 minutes 5. 40–50

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minutes 6. 50–60 minutes 7. More than 60 minutes

Q41. Of your company’s total borrowings from all financial institutions, what is the ratio of guaranteed

borrowings by the credit guarantee system? Please circle the number of the answer that best matches

your answer.

1. 0% 2. More than 0% and less than 25% 3. More than 25% and less than 50% 4. More than

50% and less than 75% 5. More than 75% and less than 100% 6. 100% 7. We do not know.