JAPAN Trends and Developments Contributed by: Kazuo Yoshida and Tomonori Ogawa, Mori Hamada
actions concluded by licensed reinsurers in Japan. Foreign reinsurers without a licence in Japan may also invoke this exemption, but only to the extent that the reinsurance would not impair the financial soundness of the cedants, taking into consideration the foreign reinsurer’s businesses and financial conditions. There is no bright-line test based on specific monetary thresholds or limits under the IBA. That said, if, for example, the maximum reinsurance payment is less than 1% of the total assets of the cedant and there is no concern that the foreign reinsurer would fail to make the reinsurance payments due to insolvency or other reasons, then this exemption may be invoked according to the Supervisory Guidelines for Insurers published by the JFSA. Japanese insurance compa- nies (cedants) may ask a foreign reinsurer for infor- mation, materials and other evidence regarding the foreign reinsurer’s businesses and financial conditions for the foregoing purpose. Insurance brokers Along with the increase in reinsurance transactions, an increasing number of companies have registered, or are preparing to register, as insurance brokers under the IBA. The IBA provides for two types of insurance intermediary (insurance solicitation) licences: (i) insur- ance broker ( hoken nakadachi-nin ) registration and (ii) insurance agent ( hoken dairi-ten ) registration. While insurance brokers act as intermediaries for the con- clusion of insurance contracts on behalf of insurance policyholders (cedants in reinsurance transactions), insurance agents act on behalf of insurers (reinsurers in reinsurance transactions). In respect of these two intermediary licences, there are no overseas or rein- surance exemptions under the IBA, unlike the licens- ing requirement discussed above. In other words, those who act as intermediaries for the conclusion of (re) insurance contracts must obtain either licence, even if they act as intermediaries from abroad or for reinsurance. In addition, the insurance agent registra- tion is available only for insurance agents who act as intermediaries on behalf of Japanese licensed insur- ers and is not available to those who act on behalf of unlicensed reinsurers. Therefore, the only option for those who act as intermediaries for the conclusion of insurance contracts with unlicensed reinsurers is to obtain the insurance broker registration and to act on
behalf of insurance policyholders (cedants in reinsur- ance transactions). In light of the requirement that insurance brokers are independent from insurers and insurance agents, the JFSA’s Comprehensive Guidelines for the Supervision of Insurance Companies (the “Guidelines”) provide the following focus points to ensure appropriate business operations by insurance brokers. • Shared shops: generally, the office for insurance solicitation should not be in the same building as the office of an insurance company. However, if sufficient measures are taken to prevent confu- sion among customers, such as using separate entrances and exclusive areas for each office, this is not considered to be a problem. • Investments: insurance brokers should not, in prin- ciple, receive capital investments from insurance companies. • Benefits provision: insurance brokers should not accept loans from insurance companies on terms that are significantly more favourable than standard terms, nor request or accept favours, such as the provision of money, goods or services, regardless of the name under which such favours are made. • Personnel exchanges: insurance brokers should not accept officers or employees seconded from insurance companies as their own officers or employees engaged in solicitation. Insurance companies should not second their officers and employees to insurance brokers to carry out solici- tation activities on behalf of the broker. Moreover, insurance brokers must act in good faith as intermediaries to conclude insurance contracts on behalf of their insurance policyholder custom- ers (cedants in reinsurance transactions). One of the most notable obligations under the Guidelines is: “in the performance of its duties and in the selection of an insurance company, an insurance broker should take into consideration the customer’s purpose and assets, and should advise the customer of the insur- ance products that the insurance broker knows are most appropriate for the customer, clearly indicating the reasons for such recommendations.”
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