Under the Insurance Business Act (IBA) the Prime Minister of
Japan has overarching authority as insurance regulator. Except for
certain important powers such as granting and cancelling insurance
business licences, most have been delegated to the Commissioner of
the Financial Services Agency of the Japanese Government (FSA) and
to the directors of the Local Finance Bureau and the Local Finance
Branch Bureau of the Ministry of Finance (collectively LFB).
Insurers and reinsurers must be licensed by the Prime Minister.
There is a separate category of registration for entities that only
carry on small amount and short-term insurance business
Insurance brokers (Nakadachi-nin) must be registered.
Insurances agents must be registered and, for life insurance,
every officer and employee of a corporate agent who individually
acts as an agent must also be registered.
Japanese incorporated entities with a licence are Licensed
Branches of foreign insurers and reinsurers may also be licensed
and are known as Licensed Foreign Insurers. Every Licensed Foreign
Insurer must deposit ¥200 million with the government
Except in limited circumstances only Licensed Insurance
Companies or Licensed Foreign Insurers may underwrite policies
covering Japanese risks.
Prior authorisation (ninka) from the FSA is required to:
become an 'insurance holding company' (a company (i) of
which more than 50 per cent of the total assets consists of
subsidiaries' shares and (ii) which holds majority of voting
rights in a Licensed Insurance Company).
acquire 20 per cent or more (or 15 per cent or more together
with substantial influence on financial and business policy
decisions) of the voting rights of a Licensed Insurance Company
(Major Shareholder Threshold) – the ultimate controller as
well as the direct controllers must apply.
The acquisition of five per cent or more of the voting rights in
an insurer must be notified.
Licensed Insurance Companies
¥1 billion* capital
¥10 million* capital plus ¥10 million* (or more)
Licensed Foreign Insurers
¥200 million* deposit
¥40 million* (or more) deposited guarantee
* ¥105.25 = US$1 at 1 January 2014
Risk based capital
The IBA provides for calculation of a solvency margin ratio:
Solvency margin ratio (%) = Total amount of solvency margin /
(Total amounts of risks x 1/2) x 100
Total amount of risks is calculated using different formulas for
life and non-life, taking into account potential volatility or
deviations in claims, interest rates, asset valuations, credit
risk, business risks, minimum guarantee risk and catastrophe
A solvency margin of:
200% or more
=sound condition, no intervention by FSA
Less than 200% and no less than 100%
FSA will issue "business improvement order"
Less than 100% and no less than 0%
FSA will order measures to improve capability of paying claims, eg
suspension of dividends to shareholders and/or policyholders,
change of terms for new business, prohibition on directors'
Less than 0%
FSA will order partial or total suspension of business
From the fiscal year ending March 2012 a group solvency margin
requirement applies to the group (the holding company and its
subsidiaries or the insurance company and its subsidiaries).
There are two policyholder protection corporations: Life
Insurance Policyholders Protection Corporation of Japan and the
Non-Life Insurance Policyholders Protection Corporation of
They will protect up to 90 per cent of the policy reserves and
provide financial assistance for the transfer or payment of
insurance contracts of a Bankrupt insurer
assume insurance contacts of a Bankrupt insurer
purchase rights to insurance claims of a Bankrupt insurer.
The corporations are funded by industry levies.
Yes as a comprehensive transfer. Insurance contracts can be
transferred en bloc subject to certain conditions and procedures
including public notice, the absence of more than one-tenth (or
one-fifth in the case of transfer of all insurance contracts) of
the policyholders objecting and prior authorisation from the
Insurers may only in very limited circumstances (usually limited
to insolvency) delegate discretionary powers with respect to their
substantial business or administration of its assets with the
FSA's prior approval. Insurers may outsource "clerical
works" to a service provider without restriction. If the
service provider is another insurer, the service provider must
obtain the FSA's prior approval.
The content of this article is intended to provide a general
guide to the subject matter. Specialist advice should be sought
about your specific circumstances.
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The failure of a party to call a witness does not necessarily give rise to an adverse inference being drawn in accordance with Jones v Dunkel (1959) 101 CLR 298. An unfavourable inference is drawn only if evidence otherwise provides a basis on which that unfavourable inference can be drawn.
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