Japanese Regulator Proposes Strengthened Supervision of Japanese Reinsurance

The volume of reinsurance ceded by Japanese insurance companies rose markedly in recent years ahead of the introduction of economic value-based solvency regulations (J-ICS / ESR), which went into effect on March 31, 2026.¹ In 2024, asset-intensive block life reinsurance transactions with Japanese cedants totaled an estimated US$20 billion to $30 billion, with market analysis predicting that as much as 30% of Japan’s life insurance liability pool could be addressable by asset-intensive reinsurance in the coming years, subject to market conditions. ²

In response to this trend, on April 8, 2026, the Japan Financial Services Agency (JFSA) published a proposed amendment (Proposed Amendment) to the Comprehensive Supervisory Guideline for Insurance Companies (Hokengaisha mukeno sougoutekina kantokushishin).³ This is meant to serve as a guide for JFSA officials responsible for the inspection and supervision of insurance companies and insurance brokers conducting insurance business in Japan. It systematically sets out a set of principles of supervision, operational considerations, and supervisory evaluation criteria. The Proposed Amendment seeks to enhance the JFSA’s supervisory expectations around reinsurance, with a particular focus on substantive risk transfer and asset-intensive reinsurance.

Under the Proposed Amendment, the permissibility of a ceding insurer not to hold policy reserves for ceded insurance contracts should be determined comprehensively. The Proposed Amendment would, as a result, shift the focus for reducing reserves from merely the presence of formal contractual terms to whether risk has been effectively transferred, taking into account the contractual structure, economic substance, and which party genuinely bears risk. In doing so, factors that should be considered include, among other things, (i) whether the transferred risk could revert to the ceding insurer through recapture at the discretion of the reinsurer and (ii) whether the primary purpose of the transaction is financing, such as the financing of new business costs, without involving a substantive risk transfer for the policy liabilities.

In addition, the Proposed Amendment introduces expectations for risk management, including, specifically for asset-intensive reinsurance, (i) enhanced scrutiny of reinsurer counterparty risk, asset management practices, risk management framework, collateral risk, and concentration risk; (ii) stronger requirements for stress testing, including scenarios involving reinsurer solvency failure or recapture; and (iii) more robust corporate governance and internal controls around reinsurance decision-making, including heightened analysis of reinsurer financial soundness.

Public comments to the Proposed Amendment are being accepted until May 11, 2026, and several ceding insurers are expected to comment. The Proposed Amendment is expected to be finalized in the third quarter of 2026 and implemented following completion of the necessary procedures.

We will be reviewing any public comments and tracking the development of this proposed legislation.

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¹ Bloomberg, “Japan’s Financial Services Agency monitors deposit declines and reinsurance risks — behavioral changes emerging among financial institutions as interest rates rise” (February 13, 2026), available at https://www.bloomberg.com/jp/news/articles/2026-02-12/TA6K5OKJH6V900#gsc.tab=0.

² Society of Actuaries, “Asset Intensive Reinsurance in Japan: Current Trends and Future Outlook” (December 2024), available at https://www.soa.org/sections/reinsurance/reinsurance-newsletter/2024/december/rsn-2024-12-chang/.

³ Financial Services Agency of Japan, “Publication of Draft Amendments to the Comprehensive Supervisory Guidelines for Insurance Companies” (April 8, 2026), available at https://www.fsa.go.jp/news/r7/hoken/20260408/20260408.html.