Table of Contents
CHAPTER 1

FRAMEWORK OF REGULATION .............................................................. 1

1-1. Relevant Laws .............................................................................................................. 11-1-1. Insurance Business Act ............................................................................................. 1
1-1-2. Act on Non-Life Insurance Rating Organization of Japan ....................................... 4
1-1-3. History of Insurance Regulation ............................................................................... 4
1-2. Types of Insurers .......................................................................................................... 91-2-1. Exempt Businesses ...................................................................................................101-2-2. Businesses Regulated by Other Laws ......................................................................101-2-3. Insurance Companies ...............................................................................................121-2-4. Foreign Insurers .......................................................................................................161-2-5. Unlicensed Foreign Insurers ....................................................................................16
1-2-6. Small Amount and Short Term Insurance Providers ...............................................171-2-7. Authorized Specified Insurers ..................................................................................191-3. Regulations on Shareholders ...................................................................................... 20
1-3-1. Insurance Holding Companies .................................................................................201-3-2. Other Shareholders ..................................................................................................23
1-4. Supervision ................................................................................................................. 23
1-4-1. Financial Services Agency ........................................................................................23
1-4-2. Monitoring ................................................................................................................24
1-4-3. Administrative Action ...............................................................................................27

CHAPTER 2

INSURANCE OPERATIONS ..................................................................... 31

2-1. Restrictions on Business Scope ................................................................................... 31
2-1-1. Three Types of Business ...........................................................................................312-1-2. Scope of Subsidiaries ................................................................................................342-1-3. Restrictions on the Acquisition of Voting Rights .....................................................37i2-2. Insurance Products and Rating ................................................................................... 382-2-1. Filing Requirements .................................................................................................382-2-2. Rating Organization .................................................................................................422-3. Other Operation Regulations ...................................................................................... 472-3-1. Proper Operations ....................................................................................................472-3-2. Conflict-of Interest Transactions .............................................................................492-4. Restrictions on Asset Investment ................................................................................ 492-4-1. Asset Investment Methods .......................................................................................492-4-2. Investment Allocation for Each Investment Destination ........................................512-4-3. Small Amount and Short Term Insurance Providers ...............................................52CHAPTER 3SALES REGULATIONS ........................................................................... 53

3-1. Sellers ......................................................................................................................... 53
3-1-1. Scope of Sellers .........................................................................................................53
3-1-2. Insurance Solicitors ..................................................................................................55
3-1-3. Insurance Brokers ....................................................................................................57
3-1-4. Financial Service Intermediary ...............................................................................59
3-2. Regulations on Sales Activities ................................................................................... 60
3-2-1. Prohibited Acts .........................................................................................................60
3-2-2. General Rules on Sales Processes and Governance System s ..................................653-2-3. Other Duties and Restrictions .................................................................................673-2-4. Restriction on Banks ................................................................................................693-3. Supervision ................................................................................................................. 71
3-4. Cooling-off .................................................................................................................. 71

CHAPTER 4SOLVENCY REGULATIONS .................................................................... 75

4-1. Reserve Requirements ................................................................................................ 754-1-1. Underwriting Reserves .............................................................................................754-1-2. Outstanding Loss Reserves ......................................................................................804-1-3. Price Fluctuation Reserves.......................................................................................814-2. Solvency Margin Standard .......................................................................................... 814-2-1. Concept and Formula ...............................................................................................82ii

4-2-2. Solvency Margin .......................................................................................................83
4-2-3. Risks .........................................................................................................................84
4-2-4. Early Remedial Action ..............................................................................................894-2-5. Revisions of the Standard ........................................................................................904-2-6. ORSA Report .............................................................................................................924-3. Policyholder Protection ............................................................................................... 92
4-3-1. Policyholder Protection Organization ......................................................................934-3-2. Eligible Contracts and Compensation Ratios ..........................................................944-3-3. Policyholder Protection Mechanism and Insolvency Cases .....................................95

CHAPTER 5

ALTERNATIVE DISPUTE RESOLUTION ................................................. 99

5-1. Introduction ................................................................................................................ 99
5-2. Legal Framework ...................................................................................................... 100
5-2-1. Designated ADR Organizations .............................................................................. 100
5-2-2. Operating Rules and Agreement Form .................................................................. 101
5-2-3. Insurers’ Obligations .............................................................................................. 101
5-3. GIAJ's ADR System .................................................................................................. 102iii