Insurance Business
As the insurance business is a business which has a public interest aspect, theinsurance business is subject to supervisorial control by the state. In the Insurance
Business Act, the insurance business is made a licensed business and domestic
insurance business operators are restricted to mutual companies and stock companiesof a certain scale.
The principal laws and regulations relating to supervisorial control of the insurance
business and insurance companies are the Insurance Business Act, the Insurance
Business Act Enforcement Regulations, the Insurance Business Enforcement Order, etc.
With respect to the concrete application of laws and regulations, the “Comprehensive
Supervisorial Guidelines for Insurance Companies” prepared by the Financial Services
Agency, which is the supervisory agency, plays an important function.
The insurance business means (1) the life insurance business where insurance
premiums are received under contracts to pay a fixed amount of insurance claims inconnection with the life or death of individuals, (2) the non-life insurance businesswhere insurance premiums are received under contracts to compensate for damage
caused by a certain fortuitous accident and (3) other classes of insurance listed in theitems of Article 3, Paragraph 4 or items of Article 3, Paragraph 5 (Insurance Business
Act, Article 2, Paragraph 1). (3) is the underwriting of so-called third sector insurance.
Insurance companies are not authorized to engage concurrently in the life insurance
business and the non-life insurance business and companies that have life insurance
business licenses and companies that have non-life insurance business licenses arerespectively and independently permitted to undertake the underwriting of (3) thirdsector insurance. Insurance companies can establish a subsidiary and have thesubsidiary obtain a life insurance business or non-life insurance business license notundertaken by the parent company and, via the subsidiary, the parent company can beauthorized to engage in the insurance business not undertaken by the parent company.
The Insurance Business Act creates not only supervisorial control relating to theorganization itself, such as the establishment and management, etc. of insurance1companies but also puts in place provisions on supervisorial control relating toinsurance solicitation. The sale of insurance by financial institutions, such as banks,
will be subject to regulation pursuant to the Insurance Business Act.
The Insurance Business Act was revised accompanying the enactment of the Financial
Instruments and Exchange Act. Namely, Article 300-2 of the Insurance Business Act
defines “…an insurance contract specified by a Cabinet Office Ordinance as entailingthe risk of loss due to any change in interest rates, currency values, financial
instruments market prices or any other indicator as mentioned in Article 2, Paragraph
14 the Financial Instruments and Exchange Act…” as “specified insurance contract.”
Specified insurance includes variable life insurance, variable annuity insurance, andinsurance in foreign currency. The specified insurance contract has market risks
because there is the potential for surrender value, maturity benefits and pension funds
to vary significantly due to the state of management and exchange rate fluctuations and,considering the strong investment nature, customers are protected through the mutatis
mutandis application of the sales and solicitations regulations of the FinancialInstruments and Exchange Act pursuant to Article 300-2 of the Insurance Business Act.

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