JAPAN Law and Practice Contributed by: Hironori Nishikino and Koji Kanazawa, Chuo Sogo LPC
3.2 Fronting Fronting is not expressly prohibited or permitted in Japan and there are no explicit expectations with regard to the cedent’s retention. 4. Transaction Activity 4.1 M&A Activities Relating to Insurance Companies Existing insurance businesses may be acquired in several ways, such as through obtaining shares of Japanese insurance companies, a merger of insur- ance companies, or sale and purchase of insurance business. The Insurance Business Act provides a reg- ulatory framework for these M&A activities of insur- Under the Japanese regulatory framework, sharehold- ers who own a certain percentage of voting rights in insurance companies are subject to oversight of the regulator. • A shareholder with more than 50% voting rights in an insurance company is required to obtain an approval from the FSA in advance of acquisition of such voting rights (Insurance Holding Company; Article 271-18-1 of the Insurance Business Act). Insurance holding companies are subject to strict regulations including those regulating the scope of business and imposing subsidiary restrictions, and, in certain instances, reporting obligations. As of 1 August 2022, 15 insurance holding companies had been approved by the FSA. • Except for insurance holding companies, a share- holder with 20% or more voting rights in an insur- ance company needs approval from the FSA in advance of acquisition of such voting rights (Major ance businesses. Obtaining Shares Shareholder of Insurance Companies; Article 271-10-1). Such approval is required even if the investor resides overseas. The FSA oversees major shareholders of insurance companies by impos- ing reporting obligations and taking administrative dispositions. • A shareholder with more than 5% voting rights in an insurance company is required to report such acquisition of voting rights within five days (in case
• aviation insurance contracts pertaining to aircrafts with Japanese nationality used for commercial aviation; • insurance contracts pertaining to launching into outer space; • certain insurance contracts covering cargo located within Japan which is in the process of being shipped overseas; and The restriction does not apply when an applicant wish- ing to purchase insurance from unlicensed insurance companies has obtained a permission from the FSA in advance of their applications for insurance as set forth in Article 186-2 of the Insurance Business Act. This exception is provided to enable policyholders to purchase insurance products that are most beneficial to them. That permission may not be provided in the following cases: • the insurance product in question violates laws or is unfair; • it is easy to conclude insurance contracts with licensed Japanese or foreign insurers for compara- ble insurance products on equal or more advanta- geous conditions; • overseas travel insurance. Exceptions and Permissions • the terms and conditions of the insurance product in question are significantly unbalanced compared to the typical terms and conditions of the same type of insurance products with licensed Japanese or foreign insurers; • concluding such insurance contracts would unjust- ly deprive the insured and other related persons of their benefits; and • concluding such insurance contracts would likely negatively impact the development of the Japa- nese insurance business or be harmful to the pub- lic interest. In a recent trend, the government of Tokyo is pursuing a policy to attract overseas financial business provid- ers to the Japanese market by providing assistance to manage Japan’s complicated financial regulations, such as opening a one-stop service centre for finan- cial start-ups. It is expected that such a move will attract more overseas insurance companies and revi- talise the Tokyo financial markets.
275 CHAMBERS.COM
Powered by FlippingBook