Nippon Life Insurance Co. said Tuesday that it will invest about EUR500 million, or about Y60 billion to buy a 1% to 2% stake in German insurer Allianz, as part of its efforts to accelerate its global reach.

Japan's largest life insurer by revenue said it will spend that amount to buy convertible subordinated bonds to be issued by a financial unit of Allianz.

The transaction will be completed by July 7 and by exercising the conversion right, Nippon Life will be able to obtain Allianz common shares at any time within next 10 years.

A Nippon Life spokesman said that while the eventual holding depended on various factors, the company would end up with a stake between 1% and 2% of Allianz shares based on current share prices.

The move underscores how the nation's life insurance sector feels it is in dire need of joining hands with global partners at a time when Japan's population is shrinking and its life-insurance industry is seen as saturated.

With this concern in mind, Nippon Life has already formed several business tie-ups with foreign financial institutions including U.S. Prudential Financial Inc. in 2009 and Northwestern Mutual Life Insurance in 2010.

-By Hiroyuki Kachi, Dow Jones Newswires; 813-6269-2789; Hiroyuki.Kachi@dowjones.com