The aftermath of the World Trade Center attacks have started to reverberate around Japan's already troubled insurance industry.

Medium-sized non-life insurance firm Taisei Fire and Marine filed for bankruptcy protection, after saying that claims from the US attacks raised its liabilities to 40bn yen (�229m; $325m) more than its assets.

And Nissan Fire and Marine Insurance said it expected to pay reinsurance of 74.4bn yen as a result of the attacks.

The two firms, which are due to merge, insisted that Taisei's bankruptcy had not derailed their plans.

But the collapse - Asia's first major financial-sector casualty since 11 September - came as a shock to Japanese investors, sending shares in insurance firms spiralling lower.

Storing up trouble

Many Japanese insurers were in trouble even before the attacks.

Their fortunes are closely bound up with the ailing financial sector, which is labouring under the burden of bad debts and heavy costs.

Taisei's bankruptcy is seen as only the first step in a new wave of consolidation in the industry.

In a sign of further rationalisation, conglomerate Sumitomo Mitsui Group said that four of its finance companies - Sumitomo Mitsui Banking Corp, Mitsui Mutual Life Insurance, Mitsui Sumitomo Insurance and Sumitomo Life Insurance - were considering forming stronger ties.

Newspaper Yomiuri Shimbun reported that the four have reached agreement on a broad tie-up, including joint development of insurance products and a reorganisation of group firms to improve efficiency.

'Unforeseen' events

Taisei ascribed its failure - only the second bankruptcy in Japanese non-life insurance since World War II - to the freak events of 11 September.

"The expected loss from reinsurance was caused purely by the terrorist attacks and we could not foresee that such a huge loss would be generated because the four airplanes simultaneously crashed," Taisei president Ichiro Ozawa said.

"That was unpredictable. We have not posted any loss on reinsurance for 30 years since we started the business."

A survey by Japan's non-life insurance association showed claims related to the attacks would reach 30.4bn yen.

Taisei's policy holders should be fully protected, as Yasuda Fire - another firm due to join the Taisei-Nissan merger - is to take over its existing business.