Hiscox is believed to have become the first insurer to offer cover to investors in the Japanese financial services market.

The ground-breaking deal could unlock a completely new area of business for Lloyd's insurers with a potential premium volume of up to £6 million per year.

Until recently, the government of Japan has been the monopoly provider of this cover. But it has agreed to privatise the market fully during the next two years.

The Hiscox deal involves Matsui Securities and protects investors in its financial products should the securities house fall into bankruptcy.

If that were to happen, the policy guarantees to pay each Matsui investor up to £6m (Yen 1 billion) but only if insolvency is triggered by a criminal act such as misappropriation of funds.

Robert Read, banks and financial institutions underwriter at Hiscox, said the product has been developed to meet the complex needs of the Japanese financial market.

He said: "The cover gives carefully selected security houses a valuable tool to help in attracting new investors and will allow individual clients additional peace of mind."

Hiscox already underwrites internationally through its Syndicate 33 and it has a number of existing policies in force with Japanese financial institutions. These include cover for safety deposit boxes and cash in transit.