JAPAN Law and Practice Contributed by: Shinichiro Yamashita and Naruku Okamoto, Hiratsuka & Co
7. Geopolitical Factors 7.1 Geopolitical Drivers of Insurance Disputes No objective evidence has been found to suggest that recent geopolitical developments have had an impact on the volume and nature of insurance and reinsur- ance disputes in Japan. 7.2 Sanctions and Payment Challenges Japanese insurance companies may agree to special clauses or endorsement relating to economic sanc- tions. In such cases, the insurer will not underwrite insurance or make insurance payments that contra- vene the economic sanctions measures imposed by major countries. It is reasonable to assume that the settlement of insurance claims or claims handling is carried out in accordance with these special clauses or endorsement. On the other hand, no insurance claim disputes in which this point has been contested appear to have been documented in publicly available sources. 7.3 War, Political Risk and Exclusions Published court precedents indicate no cases in which the war risk exclusions clause, the terrorism risk exclusions clause or the political risk exclusions clause have been directly interpreted. It is therefore extremely difficult to demonstrate, on the basis of objective evidence, how these clauses are being contested or interpreted; it is also difficult to demon- strate whether they have led to notable disputes or uncertainty. 7.4 Supply Chain and Systemic Loss Events No new categories of loss eligible for insurance cover have arisen in connection with supply chain instability or energy market volatility, nor have any issues relating to aggregation arisen. 7.5 Forward Outlook and Market Response The underwriting and payment of claims by Japa- nese insurers is expected to be influenced by trends in reinsurance cover provided by reinsurers. Provided there is a basis in the policy terms and conditions, it is unlikely that an insurer’s refusal to pay a claim would immediately lead to litigation and a ruling by the Japanese courts. Whilst Japanese insurers may amend the wording of their policy terms and condi-
tions as necessary, they do not tend to make frequent changes over a short period.
8. Emerging Risks 8.1 Market Overview of Emerging Risks Japan is regularly hit by major earthquakes and tor- rential rain, and fire insurance cover for the resulting damage remains crucial. Whilst it is expected that insurance claims will be assessed and processed in the traditional, established manner, it cannot be ruled out that new issues may arise given the specific char- acteristics of earthquakes and torrential rain. The FSA is calling on insurance companies to strengthen their response to cyber-risks, which are also becoming a reality for corporate clients, leading to situations where various types of information are leaked or the smooth running of business operations is impeded. Consequently, insurance claims based on cyber insurance and similar policies are likely to be made, giving rise to various issues regarding insur- ance coverage. Although no published court prece- dents regarding insurance claims for cyber-risks have been found, academics have written on the applica- tion of war exclusion clauses in cyber insurance poli- cies, which represents a new development. Another emerging risk concerns the application of war-related business interruption insurance to ves- sels stranded in the Persian Gulf, but this is not an issue that affects the Japanese insurance market as a whole. 8.2 Impact of ESG on Underwriting and Insurance Litigation The FSA requires insurance companies to address climate change risks, and places great importance on insurance companies conducting their business operations in a customer-centric manner. It also con- tinues to require insurance companies to maintain compliance. The insurance industry is taking action to respond appropriately to these requirements from the FSA; for example, one insurance company has adopt- ed an internal system to make more careful decisions on underwriting. However, it is unlikely that these fac- tors are influencing the interpretation and application
171 I NSURANCE L I T IGATI O N 2026
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