Japan's Next Battleground: The Insurance Sector Under Activist Pressure

Farallon’s push at T&D Holdings marks a shift in focus for activist capital targeting Japan’s untapped insurance sector.

For nearly a decade, global activist investors have circled Japan’s corporate sector with growing assertiveness. Empowered by Tokyo’s post-Abenomics governance reforms, foreign funds have increasingly pushed sleepy boards and overcapitalized balance sheets to unlock value. But until recently, one part of the market remained largely untouched: insurance. That’s beginning to change.

San Francisco-based Farallon Capital’s recent stakebuilding in T&D Holdings, a mid-sized Japanese life insurer, marks a significant shift in the activist playbook. With much of Japan’s industrial base now restructured or in transition, the insurance sector represents what some investors see as the ‘final frontier’ for capital efficiency reform.

Activist Capital Finds Its Footing in Japan

The broader environment has become more accommodating for shareholder engagement. Japan’s Corporate Governance Code (first introduced in 2015 and revised in subsequent years) alongside the Stewardship Code has fostered a climate more open to reform. Initiatives led by the Tokyo Stock Exchange have increasingly pressured listed firms to improve return on equity (ROE), unwind cross-shareholdings, and justify valuations.

This regulatory encouragement, combined with rising domestic and foreign institutional interest in governance, has driven a sharp uptick in activist campaigns. Traditionally, such campaigns have targeted conglomerates, electronics manufacturers, and legacy industrials with sprawling and inefficient structures. Firms such as Toshiba, Hitachi, and Panasonic have all been engaged, in some cases successfully, by activist capital.

But financials—and insurers in particular—have so far remained relatively insulated.

Why Activists Are Targeting Insurers Now

That insulation is beginning to crack. Japanese insurers present several features that attract activist attention:

• Chronic undervaluation: Many trade at deep discounts to book value despite stable profits and asset-rich balance sheets.

• Inefficient capital use: Conservative capital management often leads to large retained earnings and excessive equity buffers.

• Low ROE: Returns remain far below international peers, partly due to sluggish investment strategies and legacy asset holdings.

• Governance inertia: Boards are often insular, with limited independent oversight and a low sense of urgency around change.

Unlike banks, Japanese insurers face less regulatory scrutiny on capital returns and balance sheet structure, making them more open to shareholder demands for optimisation.

The T&D Holdings Campaign

Farallon’s move on T&D Holdings is emblematic of this new wave. With assets under management of over $40 billion, the US-based fund has quietly acquired a material stake and begun pressing the insurer’s board to take more decisive strategic action. Publicly disclosed demands have focused on:

• Accelerating shareholder returns, especially buybacks and dividends.

• Optimising capital allocation across its domestic and international operations.

• Introducing more robust board independence and aligning governance with global best practices.

T&D, which operates primarily in Japan’s domestic life insurance market, has long been seen as underperforming relative to potential. Its limited overseas exposure, conservative growth strategy, and underwhelming returns make it a symbol of the broader inefficiencies in Japan’s insurance industry.

While the company has resisted some external overtures in the past, the growing pressure from Farallon could force movement, particularly if other shareholders begin to align.

Ripple Effects: A Sector in Play

The implications go well beyond one firm. Japan’s other major insurers—including Dai-ichi Life, MS&AD Insurance, and Sompo Holdings—face many of the same structural issues as T&D. They maintain significant domestic equity holdings, operate with excess capital buffers, and have boards still shaped by legacy relationships.

As Farallon’s campaign gains attention, peer firms may face growing pressure to preemptively improve shareholder engagement and demonstrate strategic clarity. We may also see:

• Voluntary restructuring or divestments to enhance focus.

• Revisions to capital return policies, including share repurchases.

• Improvements in investor communications to reduce vulnerability to activist challenge.

The broader financial sector, often viewed as too complex or too opaque for activism, is now being reevaluated as a potentially rich field for returns-oriented engagement.

Cultural Resistance and Systemic Limits

Despite these openings, activists still face meaningful headwinds in Japan—particularly in insurance, where ties to broader keiretsu networks and long-standing customer relationships foster a conservative culture.

Cross-shareholding practices remain stubbornly present in some quarters, creating conflicting incentives for management teams. Boards often lack true independence, and reforms have so far fallen short of overhauling internal governance cultures.

There is also a continued ambivalence toward foreign activist investors, especially those perceived as short-term or opportunistic. Legal frameworks in Japan remain less conducive to hostile action, and shareholder resolutions face higher hurdles than in US or UK jurisdictions.

Conclusion: Activism Enters a New Phase

Still, the direction of travel is clear. Japan’s insurance sector is no longer immune from scrutiny. The Farallon–T&D engagement illustrates a new phase of activist strategy: one that targets entrenched capital inefficiencies in sectors once thought too protected to challenge.

For insurers, the message is clear. Improve performance and governance—or risk having the conversation forced upon you.

Far from being the final frontier, Japan’s financial institutions may now be the next major arena for international capital to test the limits of reform.

Author: Gerardine Lucero