JAPAN Law and Practice Contributed by: Hironori Nishikino and Koji Kanazawa, Chuo Sogo LPC
2.3 Taxation of Premium This is not applicable in Japan.
writing insurance) and any business incidental thereto (restriction on engaging in other business). Further- more, insurance companies are not allowed to own, as subsidiaries, companies other than those engaging in businesses prescribed by the Insurance Business Act (ie, “a company eligible as a subsidiary”) nor to obtain more than 10% of voting rights in domestic companies (excluding said companies eligible as a subsidiary). However, if approved by the regulatory authorities, subsidiaries of insurance holding com- panies may engage in businesses other than those prescribed by applicable laws and regulations. With respect to specifically prescribed matters (which are quite extensive), such as customer explanations or information control, insurance companies are obli- gated to have a system in place to secure the sound- ness of operations and appropriate management. The minimum amount of capital of an insurance company is JPY1 billion. Policy Reserves Insurance companies are required to set aside policy reserves and appoint an insurance administrator hold- ing a designated actuary’s licence to engage in actu- arial practice. In 1996, regulations on solvency margin ratios were introduced. The solvency margin index has become an assessment standard for the supervisory authorities to execute early corrective actions with broad supervisory reach against targeted companies, including orders to submit an improvement plan. At present, the solvency margin ratio on a consoli- dated basis has been introduced. In March 2016, the EU announced the adoption and enforcement of the equivalence recognition between Solvency II with temporary equivalence and the Japanese reinsurance supervision and group solvency. The FSA is scheduled to introduce the Economic Val- ue-Based Solvency Regulatory Framework at the end of March 2026, having published the relevant laws and regulations in July 2025. 2.2 Writing of Insurance and Reinsurance See 2.1 Insurance and Reinsurance Regulatory Bod- ies and Legislative Guidance .
3. Overseas Firms Doing Business in the Jurisdiction 3.1 Overseas-Based Insurers or Reinsurers Under the Insurance Business Act, the regulations that apply to Japanese insurance companies also apply to domestic subsidiaries of overseas-based insurers. Nonetheless, this Act allows foreign insurance com- panies to conduct insurance business without estab- lishing such domestic subsidiaries. Foreign insurance companies may conduct insur- ance business in Japan only if they have opened a branch in Japan and obtained the applicable licence from the FSA, the body overseeing insurance com- panies (Article 185-1 of the Insurance Business Act). This requirement allows the FSA to effectively execute its administrative powers over such foreign insurers. With some exceptions, Article 185-6 of the Insurance Business Act requires such licensed foreign insurers to conclude insurance contracts with persons having an address or residence in Japan, property located in Japan, or vessels or aircrafts with Japanese nationali- ty inside Japan. The procedure to apply for the licence is mostly the same as that for Japanese insurance companies. Since foreign insurance companies do not have capital inside Japan, they are required to deposit a minimum of JPY200 million to the deposit office to protect policyholders. Restrictions on Unlicensed Foreign Insurance Companies Unlicensed foreign insurance companies may not conclude insurance contracts with persons having an address or residence in Japan, property located in Japan or vessels or aircrafts with Japanese nationality (Restriction on Foreign Direct Insurance; Article 186-1 of the Insurance Business Act), other than the insur- ance contracts listed below: • reinsurance contracts; • marine insurance contracts pertaining to objects such as vessels with Japanese nationality used for international maritime transportation;
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