During and after the COVID19, the risks faced in the society are becoming more complicated and unpredictable., Because of this, the value of insurance products and the role of insurers are rapidly becoming more important.
In recent years, the Japanese authorities have been gradually harmonising laws and regulations relating to the domestic insurance market with global standards. However, foreign insurance company affiliates in Japan still encounter obstacles that limit efficient development of their businesses. Examples include reserving and solvency regulations that are inconsistent with international norms; the improving, but still lengthy product approval process, and restrictions of insurance selling through banks. Future growth of the insurance market in Japan will come from the ageing of the population, which will drive a need for products dealing with extended retirement, changes to family structure and rising demand for healthcare. The EBC urges the FSA (Financial Services Agency) to facilitate a truly open and competitive insurance market capable of meeting consumers’ needs.
The Insurance Capital Standard (ICS) is an international solvency regulation framework to supervise Internationally Active Insurance Groups (IAIGs). The IAIS (International Association of Insurance Supervisors) provides the criteria for an insurance group to be identified as an IAIG. Currently, 48 IAIGs have been identified by the Group Wide Supervisors (GWS) from 16 jurisdictions. The identities of 47 IAIGs have been publicly disclosed by GWSs. The IAIS has mentioned that: “Accelerating global risks demonstrate the importance of a common language for supervisory discussions of group solvency of IAIGs”. Furthermore, “The IAIS is committed to delivering an ICS that is fit for implementation by supervisors by 2024”. The EBC appreciates that the FSA continues to take a leadership role in implementing the legitimate framework of the international capital standard by 2025.
The EBC appreciates that the FSA supports and directs that insurers promote their products and services under the fiduciary duties among which customers’ understanding on the products and services are fully secured and the costs incurred by customers are explained clearly.
While the FSA has made efforts to speed up the approval process through both a more efficient procedure and increased staffing, the EBC still believes that a “file-and-use” system should be introduced for quicker approval of standard products. This would free up resources for the FSA to focus its attention on more advanced products.
Under the FSA’s promotion of principle-based regulation scheme, the EBC appreciates the more flexible approach by the authorities which puts emphasis on the needs of consumers and progress of technologies like digitalisation. The EBC recognises that the FSA is positive in promoting digitisation and at the same time paying attention to the transformation progress in the insurance industry with the substantial impact COVID19. The EBC is looking forward to working in close collaboration with the FSA on this topic.
In parallel, the EBC believes that the FSA should accelerate de-regulation of distribution practices based on a risk-based approach, to cater to the growing demand from consumers for better access to more convenient distribution channels targeting their individual needs. This would also benefit the domestic financial services industry, Japanese consumers and Japan’s ability to retain foreign investment.
Key issues and recommendations
Harmonisation with global solvency and other regulatory standards
Distribution practices under fiduciary duties
Expansion of Japan’s role as an international financial centre
Fair competition in providing group insurance program to banks
Liberalisation of sales through bank channel
Mr. Kazutaka Matsuda
Executive Officer, General Counsel,
Legal & Compliance, AXA Life Insurance Co., Ltd.
NBF Platinum Tower
Minato-ku, Tokyo 108-8020
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