Japan’s new insurance solvency regime
Provisional decisions on technical specifications (October 2022)
The Financial Services Agency of Japan (FSA) has been working on a new solvency regulation framework for insurers that has certain characteristics in common with the Insurance Capital Standard (ICS) that is under development by the International Association of Insurance Supervisors (IAIS).
The FSA published a report in June 2022 that presents (i) provisional decisions on key technical specifications and (ii) basic directions for the finalisation of the new solvency framework. Provisional decisions are intended to remain unchanged for the finalisation of the new regulations, other than in exceptional circumstances. On the other hand, basic directions are intended to provide a basis for further development of the regulations. See Table 1 for the structure of the 2022 FSA Report.
This paper first recapitulates recent developments with respect to insurance solvency regulations both at global and jurisdictional levels in Section 2. Section 3 consists of a summary of the 2022 FSA Report, which focuses on key provisional decisions and basic directions presented in the report. Section 4 is a discussion of certain critical issues.
It is obvious that insurers need to further strengthen their governance and internal control systems towards the implementation of the new regulation. To that end, the management’s strong leadership and full commitment will be required.
Table 1. Structure and content of the FSA report