Japan Post Insurance and Société Commerciale de Réassurance have signed a memorandum of understanding for a new reinsurance arrangement that could expand the use of sophisticated risk-transfer structures by one of Japan's largest life insurers.

The agreement, announced Friday, outlines plans for Japan Post Insurance to cede underwriting risk from its Postal Life Insurance policies to a reinsurance vehicle that the French-based global reinsurer will establish and operate.

The vehicle would assume risks from both Japan Post Insurance and Scor, with the companies saying the structure will provide more risk diversification.

Japan Post Insurance also plans to invest in the vehicle as part of its strategy for financial soundness, although the transaction is subject to final agreements and regulatory approvals.

While the announcement did not identify where the reinsurance vehicle would be domiciled, Bermuda is a leading global centre for life and annuity reinsurance and has become a major destination for Japanese insurers looking for capital management and risk-transfer solutions.

Japan Post Insurance has already established ties with the Bermuda market. Earlier this year, it entered reinsurance arrangements with Aflac Re Bermuda and Talcott Life Re.

Thomas Fossard, head of investor relations for Scor, told The Royal Gazette that the company was not yet in a position to provide more information about any potential domicile.

“The timing for commencement of operations is currently being finalised and remains subject to completion of the parties’ discussions, execution of definitive agreements and receipt of the relevant regulatory approvals and licences. Should any matters requiring disclosure arise, they will be disclosed promptly,” he said.

The memorandum of understanding also covers discussions on the structure, operation and investment arrangements for the vehicle. The companies said they will move forward once definitive agreements have been reached and regulatory approvals have been obtained.