(Bloomberg) -- Japan’s largest property-and-casualty insurers said they will sell cross-shareholdings after the government pressured them to abandon the decades-old practice. 

Tokio Marine Holdings Inc., MS&AD Insurance Group Holdings Inc., and Sompo Holdings Inc. have more than 6 trillion yen ($40 billion) combined in such holdings according to Bloomberg calculations, based on company filings. 

Cross-shareholdings, often called strategic holdings by companies, are widely used in Japan to cement business ties. The country’s Financial Services Agency has pushed insurers to cut the stakes to improve competition in the aftermath of a price-fixing scandal. 

“This is an important milestone in Japan’s corporate governance reform,” Chisa Kobayashi, a Japan equity strategist at UBS SuMi TRUST Wealth Management, wrote in a note earlier this month. “The P&C insurance industry holds the second-largest number of policy-holding shares after banks and trading companies.” 

The government ordered the companies to draw up plans to improve their businesses last year after they were found to be colluding to fix prices in contracts with corporate clients. 

The holdings have long been criticized by investors as an inefficient use of capital because they can cloud companies’ financial positions and shareholder structures. MS&AD plans to eliminate cross-shareholding by March 2030 and Sompo has set a deadline of March 2031. Tokio Marine has not yet set a date. 

The insurers’ shares have surged this year after reports that they would cut the cross-shareholdings. Sompo has gained 27%, MS&AD has risen 34% and Tokio Marine has gained 24%. The Topix index has risen 13% year-to-date. 

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