Harmonisation with global solvency and other regulatory standards
The EBC appreciates the FSA’s willingness to take a leadership role among international regulators. The FSA is steadily working toward the introduction of economic value-based solvency framework in 2025, including the release of "The provisional policy for economic value-based solvency regulations" on June 30, 2022. Further alignment of local regulatory requirements with the approach of international capital standard such as Solvency II or ICS is crucial for international insurers in Japan. This would enable them to use the same methodologies in all territories and better develop group-wide risk management strategies. Such a move would, furthermore, both encourage and reward improved risk management within insurance companies – a goal shared by the FSA and insurers – and hopefully reduce the overall regulatory reporting burden on insurers conducting business in multiple jurisdictions. The EBC is in a position to provide the information regarding the economic value based advanced regulation framework to the FSA on these issues.
- Japan should accelerate reforms to achieve convergence between Japanese and global solvency standards such as Solvency II and ICS.
- Japan should consider the approval process of an internal model for risk calculation on a new solvency regulation to evaluate the risk characteristics of each insurer correctly.
- In adopting FSB/IAIS-proposed policy measures for the Japanese market, the Government should consider the burden that risk management reporting and capital adequacy requirements could impose on businesses and minimise any conflicting cross-border jurisdictional requirements.
- The scopes of the Policyholder Protection Corporation should be reformed to align with introducing a new solvency regulation.
- The results of five-year monitoring process by IAIS should be well embedded in the implementation of a new solvency regulation.
- The pace of progress should be carefully monitored considering the risk of COVID19.