Business Law

INSURANCE BUSINESS LAW (effective 1 April 1996)

The following is an English summary of some of the main points of the new Insurance Business Law which became effective on 1 April 1996. The previous law of 1940 was revised as part of the comprehensive reform of the Japanese insurance system.

The revisions was based on three principles,i.e.

promoting competition and enhancing efficiency through deregulation and liberalization

preserving soundness of business, and

ensuring fairness and equity in business operations.

The following are provided for in the new Insurance Business Law:

mutual entry between the life and the non-life insurance businesses,

introduction ofa notification system for certain products and premium rates,

introduction of an insurance brokerage system,

introduction of solvency margin standards, and

establishment of a Policyholders' Protection Fund.

The following summary is made by Mizuho Securities Co., Ltd. based on information provided by the Marine and Fire Insurance Association of Japan, Inc. and the Life Insurance Association of Japan and does not attempt to provide a complete translation. Reference to the relevant articles of the Japanese original are provided in brackets.

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Objectives (Article 1)

Definition (Article 2)

License (Article 3)

Application Procedures for a License

Examination Criteria for a License (Article 5)

Amount of Capital or Foundation Fund (Article 6)

Stock or Mutual Company carrying on Insurance Business (Articles 9 to 96)

Insurance Business (Articles 97 to 100)

Subsidiaries (Articles 106 & 107)

Accounting (Articles 109 to 122)

Supervision (Articles 123 to 134)

Portfolio Transfer, Dissolution, Liquidation, etc. (Articles 135 to 184)

Foreign Insurers (Articles 185 to 240)

Special Measures to Protect Policyholders (Articles 241 to 270)

Insurance Distribution (Articles 275 to 300)

Miscellaneous (Articles 309 to 314)

Supplemental Provisions (Supplemental Articles)

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I. Objectives (Article 1)

The objective of this Law, with due consideration of the public responsibilities of the insurance business, is to protect policyholders'interests by ensuring the sound management of insurance companies and the fairness of insurance soliciting activities, thereby contributing to the stability of people's lives and the sound development of the national economy.

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II. Definition (Article 2)

In order to make insurance-related terminology more precise, such words as insurance business, insurance company, foreign insurer, life insurance solicitor, non-life insurance agent, and insurance broker are defined individually.

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III. License (Article 3)

No person shall carry on insurance business without obtaining a license from the Minister of Finance.

There shall be two types of licenses available - one for life insurance business and another for non-life insurance business.

No person shall hold both licenses for both life and non-life insurance concurrently.

The license for life insurance business is granted for underwriting the following classes of insurance:

Insurance providing a certain fixed amount of benefits concerning the survival or death of individuals;

Insurance relating to personal accident, sickness, and nursing care fields;

Under the classes of insurance stated in 5-1 below, reinsurance related and limited to the above 4-1 and 4-2

The license for non-life insurance business is granted for underwriting the following classes of insurance:

Insurance covering loss or damage caused by a specified type of accident, which includes surety bonds.

Insurance relating to personal accident, sickness, and nursing care fields.

Under the classes of insurance stated in 4-1 above, insurance related and limited to death occurring during the course of overseas travel and death directly caused by sickness during the course of overseas travel.

Note. Reinsurance, conducted by non-life insurance companies, is deemed to be part of their insurance business.

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IV. Application Procedures for a License

Any person wishing to obtain a license must submit to the Minister of Finance an application together with the so-called "Fundamental Documents". The Fundamental Documents consist of (i) the articles of association, (ii) a statement showing the method of operations, (iii) general policy conditions, and (iv) a statement showing the basis of working out premiums and underwriting reserves.

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