All the questions
Year in Review
On May 19, 2021, due to the effects of the covid-19 pandemic, an amendment to the banking law was adopted, and the law on insurance companies was also amended. Here are some of the main points of the amendments:
- contributions to regional revitalization will be added to the activities that insurance companies and subsidiaries of insurance companies can carry out;
- investments by insurance companies will be more deregulated;
- insurance companies will be able to continue to hold foreign subsidiaries, which would otherwise have to be divested because they carry out certain types of activities which are not authorized to be carried out by subsidiaries of insurance companies, for 10 years, and with the authorization from the Prime Minister has been obtained for more than 10 years.
In addition, following an amendment to the law on sales, etc. of financial instruments effective November 1, 2021, a new financial brokerage system is established to enable single brokerage of financial services provided in multiple business formats, such as banking, securities and insurance.
Perspectives and Conclusions
On 26 June 2020, the FSA appointed Economic Value Based Solvency Framework Advisory Board published a report recommending the introduction of economic value based solvency regulations in 2025 to improve policyholder protection, as well as insurance company risk management and discipline.
This report describes the prudential policy of insurance companies based on the following pillars:
- establish a common standard for the solvency margin ratio and a framework allowing the regulatory authority to intervene with insurance companies as a backstop;
- determine the risks that cannot be covered by the first pillar by verifying and promoting the development of internal control in insurance companies; and
- ensure the necessary discipline for insurance companies through relevant communication between insurance companies and external stakeholders.
This report recommends that the timeline for finalizing the standard ends around the spring of 2024 and that the standard be implemented as a regulation in 2025. This timeline takes into account the period needed for communication regarding the establishment of the standard. , taking into account relevant factors such as the Insurance Capital Standard, any issues raised in other countries and by the International Association of Insurance Supervisors or any other factors specific to Japan and relevant to the preparation of regulation by the country insurance companies. Insurance companies doing business in Japan should therefore monitor this debate.