TOKYO (Kyodo) -- Mitsui Sumitomo Insurance Co. and Aioi Nissay Dowa Insurance Co. are set to begin merger talks to create Japan's largest standalone non-life insurance firm, their parent company said Friday.

The two firms, which have coexisted under MS&AD Insurance Group Holdings Inc., are aiming to complete the merger in April 2027. If realized, the new company would surpass Tokio Marine & Nichido Fire Insurance Co. in net premium income, equivalent to sales.

The board of MS&AD Insurance Group approved the plan at a meeting on Friday. A preparatory committee is expected to be established to finalize details such as the name of the new firm and the method of the merger, sources familiar with the matter said.

The merger plan comes as the insurance group struggles with increasing insurance claim payouts due to a rise in natural disasters. Its mainstay auto insurance operations have also suffered from higher repair fees, which erode its profit.

Through the merger, the group plans to streamline the two firms' operations and improve its earnings structure, the parent firm said.

MS&AD Insurance Group was formed in 2010, but some analysts have said the competition between the two firms in insurance sales has hindered them from pursuing growth.