Japan Insurance Industry – Governance, Risk and Compliance

Japan Insurance Industry Regulation Overview

The Financial Services Agency (FSA) and the Local Finance Bureau (LFB) of the Ministry of Finance act as the regulator of the Japan insurance industry. The other regulatory bodies overseeing the industry are the International Association of Insurance Supervisors (IAIS), the General Insurance Association of Japan (GIAJ), and the Life Insurance Association of Japan (LIAJ).

The Japan Insurance Industry governance regulation report provides a detailed analysis of the insurance regulations for life, property, motor, liability, personal accident and health, and marine, aviation, and transit insurance. The report specifies various requirements for establishing and operating insurance and reinsurance companies and intermediaries. The report also gives insurers access to information on prevailing insurance regulations and recent and upcoming changes in the country’s regulatory framework, taxation, and legal system. It includes the scope of non-admitted insurance in the country as well.

Japan Insurance Industry – Key Regulators and Legislation

Financial Services Agency (FSA): The Prime Minister of Japan assigns most of the insurance regulatory responsibilities to the FSA. The FSA was established by the Financial Reconstruction Commission of Japan (FRC) in July 2000, to maintain stability in the industry and provide protection to policyholders. The FSA is responsible for the supervision of any kind of insurance operation, but not the issuance of licenses. The Prime Minister of Japan is accountable for issuing or revoking licenses of insurance or reinsurance companies. The FSA functions under the guidelines stipulated in the Insurance Business Act 1995.

Local Finance Bureau(LFB) of the Ministry of Finance: The FSA transferred some important regulatory responsibilities to directors of the LFB to regulate insurance and reinsurance companies in Japan. It also functions under the guidelines stipulated in the Insurance Business Act 1995, under the supervision of the Ministry of Finance. The LFB is responsible for providing licenses to SASTI (small amount and small term insurance) providers to operate insurance businesses locally. It is also in charge of issuing insurance licenses to brokers.

The key laws governing the insurance industry are:

• The Insurance Business Act 1995
• The Insurance Act 2008

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Japan Insurance Industry - Compulsory Insurance

A few of the key compulsory insurance required within the Japan insurance industry are motor third-party liability insurance, aviation liability insurance, marine liability insurance, professional indemnity insurance, and social security insurance.

Japan Insurance Industry Analysis by Compulsory Insurances

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Japan Insurance Industry - Company Registration and Operation

According to Article 3 of the Act, any individual or entity intending to provide insurance policies may only conduct business after obtaining a license from the Prime Minister of Japan. Reinsurers are required to obtain a license to carry out onshore reinsurance business, however, there is no separate licensing requirement to underwrite exclusive reinsurance business. The Insurance Business Act permits direct life and non-life insurers to underwrite respective reinsurance businesses. Reinsurers intending to underwrite exclusive reinsurance business for life and non-life insurance are required to obtain a non-life insurance business license.

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Japan Insurance Industry – Taxation

Tax is imposed upon insurance premium premiums within the insurance industry in Japan. The taxes imposed in the Japan insurance industry are corporate income tax, corporate capital gains tax, and value-added tax.

Corporate income tax rate: Taxation in Japan is administered and supervised by the National Tax Agency (NTA). Any company which has its principal or main office in Japan is considered a resident company. Resident companies are subject to tax on their global income, whereas non-resident companies are taxed only on income sourced in Japan. A foreign company with a permanent establishment is taxed only on income derived from that establishment in Japan. Distributions of profits within domestic companies are not considered taxable income.

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Scope

The report provides:

• Details of the insurance regulatory framework in Japan.
• Details of the rules and regulations governing insurance products and insurance entities.
• Lists and analysis of key trends and developments in the country’s insurance regulatory framework.
• Analysis of the rules and regulations about the establishment and operation of insurance businesses in the country.
• Details of the taxation imposed on insurance products and insurance companies.

Key Highlights

• The Financial Services Agency and the Local Finance Bureau of the Ministry of Finance regulate the Japanese insurance industry.
• Composite insurance is not permitted in Japan, however, both life and non-life insurers are permitted to operate accident and health insurance business.
• Non-admitted insurance is not permitted in the Japanese insurance industry, with a few exceptions.
• Automobile liability, workers’ accident compensation, and nuclear risk liability are compulsory classes of insurance.

Reasons to Buy

• Provides FAQ-style analytical insights comprising 129 knowledge elements on insurance compliance applicable to the country.
• Gain insights into the insurance regulatory framework in Japan.
• Track the latest regulatory changes, and expected changes impacting the Japan insurance industry.
• Gain detailed information about the key regulations governing the establishment and operation of insurance entities in the country.
• Understand key regulations and market practices about various types of insurance products.