RESTRICTED
GENERAL AGREEMENT S/IGFS/W/1
24October 1994
ONTRADE INSERVICES
(94-2162)
Interim Group onFinancial Services
COMMUNICATION FROM JAPAN AND THE UNITED STATES
Measures bytheGovernment oftheUnited States andthe
Government ofJapan regarding Insurance
Inresponse totherequest made during themeeting oftheInterim Group onFinancial Services
on12October 1994, theattached communication1iscirculated bythedelegations ofJapan andthe
United States fortheinformation ofparticipants.
Groupe intérimaire desservices financiers
COMMUNICATION DUJAPON ETDESETATS-UNIS
Mesures prises parlegouvernement desEtats-Unis etle
gouvernement duJapon enmatière d'assurance
Donnant suiteàlademande formulée aucours delaréunion du12octobre 1994 duGroupe
intérimaire desservices financiers, lesdélégations duJapon etdesEtats-Unis ontfaitdistribuer aux
participants, àtitred'information, lacommunication ci-jointe.1
Grupo Provisional sobre Servicios Financieros
COMUNICACI ÓNDEL JAPÓNYDELOSESTADOS UNIDOS
Medidas adoptadas porelGobierno delosEstados Unidos y
elGobierno delJapón conrespecto alosseguros
Enrespuesta alasolicitud formulada durante lareunión delGrupo Provisional sobre Servicios
Financieros del12deoctubre, lasdelegaciones delJapón ydelosEstados Unidos distribuyen alos
participantes lacomunicación1adjunta, parasuinformación.
1English only/Anglais seulement/Inglés solamente.S/IGFS/W/1
Page2
MEASURES BYTHE GOVERNMENT OFJAPAN AND
THE GOVERNMENT OFTHE UNITED STATES
REGARDING INSURANCE
11October 1994
Washington, D.C.
Asaresult ofconsultations under theJointStatement ontheJapan-United States Framework
foraNewEconomic Partnership regarding measures intheinsurance sector, theGovernment ofJapan
andtheGovernment oftheUnited States eachhasdecided toimplement themeasures oninsurance
described herein.
__________________ _________________
Takakazu Kuriyama Michael Kantor
Ambassador ofJapan United States Trade
RepresentativeS/IGFS/W/1
Page3
CONTENTS
Page
I. PURPOSE AND GENERAL POLICIES 4
II. RECOGNITION OFJAPANESE INSURANCE SECTOR REFORM 4
III. TRANSPARENCY AND PROCEDURAL PROTECTIONS 5
(1) Passage ofAdministrative Procedures Law 5
(2) Compilation, Publication andStandardization ofMeasures of
General Application 5
(3) Harmonization ofState Regulation 5
(4) Developer 'sbenefit 6
(5) Administrative Appeals 6
(6) Advisory groups 7
(7) Participation inindustry groups 7
(8) Access toinsurance regulatory informations 7
(9) Procedural protection fornotifications andapplications 8
(10) Self-regulatory organizations 8
IV. DEREGULATION MEASURES 9
(1) Product andrateapproval 9
(2) Licensing ofinsurance providers andintermediaries 12
(3) Insurance brokers 13
(4) Postal insurance 14
(5) Cross-border transactions 14
V. GOVERNMENT CORPORATIONS 14
VI. COMPETITION 15
(1) Private analysis ofmarket conditions 15
(2) JFTC Study 15
(3) Enforcement measures 15
(4) Article 28oftheAMA 16
VII. CONSULTATIONS 16
VIII. ASSESSING IMPLEMENTATION OFTHE MEASURES 16
(1) Datacollection 16
(2) Assessment 17
APPENDIX 1:OUTLINE OFTHE ADMINISTRATIVE APPEALS INQUIRIES
LAW AND THE ADMINISTRATIVE CASE LITIGATION LAW 19
APPENDIX 2:GOVERNMENT CORPORATIONS 20S/IGFS/W/1
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I. PURPOSE AND GENERAL POLICIES
(1) Thegoals oftheFramework aretodealwithstructural andsectoral issues inorder substantially
toincrease access andsales ofcompetitive foreign goods andservices through market-opening and
macroeconomic measures; toincrease investment; topromote international competitiveness; andto
enhance bilateral economic cooperation between theUnited States andJapan. Toaccomplish these
goals withrespect totheinsurance sector, thisdocument, "Measures bytheGovernment ofJapan and
theGovernment oftheUnited States Regarding Insurance" (the"Measures"), hasbeenadopted. It
addresses reform ofrelevant government laws, regulations, andguidance which havetheeffect of
substantially impeding market access forcompetitive foreign goods andservices, andsignificant
improvement inmarket access forcompetitive foreign insurance providers*andintermediaries.
(2) EachGovernment reaffirms itscommitments related toinsurance intheCode ofLiberalization
ofCapital Movements andtheCode ofCurrent Invisible Operations, adopted bytheOrganization for
Economic Cooperation andDevelopment.
(3) Each Government reaffirms itscommitment totheprinciples ofnational treatment and
most-favoured-nation treatment, anditscommitments related toinsurance intheFinal ActEmbodying
theResults oftheUruguay Round ofMultilateral Trade Negotiations.
II. RECOGNITION OFJAPANESE INSURANCE SECTOR REFORM
(1) BothGovernmentsrecognizethattheGovernmentofJapancurrentlyisintheprocessofpreparing
forthereform ofinsurance sector lawsandregulations based onrecommendations contained inaJune
1992 Report bytheInsurance Council, established under Article 8oftheNational Government
Organizations Law(Kokka gyosei soshiki ho).TheLegislative Study Group under thisCouncil
deliberated onthelegalaspects ofthereform, and,based ontheLegislative Study Group Report, the
Council submitted itsreport totheMinister ofFinance inJune, 1994. TheGovernment ofJapan intends
tosubmit suchlegislation totheDietin1995.
(2) TheGovernment ofJapan hasinformed theGovernment oftheUnited States thatthereform
isbeing conducted based onthefollowing three principles contained intheInsurance Council 's
recommendations:
(i) Promotingcompetitionandenhancingefficiencythroughderegulationandliberalization;
(ii) Preserving soundness ofbusiness; and
(iii) Ensuring fairness andequity inbusiness operations.
(3) Unless otherwise specified intheMeasures, measures inSection IVbelow which areclosely
related tomatters under consideration inconnection withtheGovernment ofJapan'sinsurance sector
reform efforts aretobeimplemented uponimplementation ofinsurance reform legislation. Allmeasures
intheMeasurespertainingtodomesticlegislativeactionaresubjectto,anddonotprejudge,deliberations
bytheJapanese Diet.
*IntheMeasures, "insurance provider" means onewhoislicensed toengage ininsurance business.S/IGFS/W/1
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(4) Notwithstandingtheabove,theGovernmentofJapanispreparedtoimplementtheothermeasures
intheMeasures byadministrative means, independently ofinsurance reform legislation.
(i) Measures referencing theAdministrative Procedures Law("APL") (Gyosei tetsuzuki
ho)willbeimplementedaccordingtotheGovernment-widescheduleforimplementation
ofthatlaw.TheGovernment ofJapan hasexplained totheGovernment oftheUnited
States thatimplementation ofthislawwithrespect totheinsurance sector currently
isexpected byNovember 1994.
(ii) Allother measures willbeimplemented expeditiously, inadvance ofinsurance sector
reform legislation where possible.
III. TRANSPARENCY AND PROCEDURAL PROTECTIONS
(1) BothGovernmentswelcomepassageoftheAPLinthe128thDietsession,whichhasthepurpose
ofensuring fairness andenhancing transparency ofadministrative operations, andthereby contributing
totheprotectionoftherightsandwelfareofcitizens,byestablishingcommonproceduresfordispositions,
administrative guidance, andtheprocessing offilings.
(2) Compilation, Publication andStandardization ofMeasures ofGeneral Application
(a) TheGovernment ofJapan confirms thefollowing, pursuant totheAPL, withregard
totheprovision ofinsurance inJapan:
(i) Standards relating tolicensing toprovide insurance andapproval ofnew
products andrateswillbecompiled, published andmade available tothepublic,
unless itcauses undue hindrance toadministration;
(ii) Administrative guidance thatisdelivered orally, uponrequest, willbedelivered
inwriting, unless itcauses undue hindrance toadministration;
(iii) Whenconductingthesametypeofadministrativeguidanceonamultiplenumber
ofpersons with thesame setofconditions andtoachieve thesame
administrative purpose, anadministrative agency should stipulate inadvance,
according toeachcase, theitems which arecommon tothose administrative
guidances, andshould make itpublic unless suchpublication causes undue
hindrance toadministration.
(b) Under (i),(ii),and(iii)of2(a)above, "undue hindrance toadministration" isintended
tobeusedonlyinexceptional circumstances.
(3) Harmonization ofState Regulation
(a) Taking notofprinciples offederalism under theUnited States Constitution, recognizing
thatinsurance hasbeenregulated atthestategovernment levelsince thebeginning of
insurance regulation intheUnited States, andfurther recognizing theprovision ofthe
McCarran-Ferguson Actthat"thebusiness ofinsurance... shallbesubject tothelaws
oftheseveral States," theGovernment oftheUnited States welcomes efforts bythe
National Association ofInsurance Commissioners ("NAIC") topromote the
harmonization ofstateinsurance regulation, through suchsteps asitsAccreditation
Programme andthepreparation ofmodel insurance laws.S/IGFS/W/1
Page6
(b) TheGovernment oftheUnited States notes thatunder theAccreditation Programme,
theNAIC selects anindependent teamofauditors toreview thecompliance ofstates
withthelaws, regulations, andregulatory andorganizational practices contained in
theNAIC accreditation standards. Theteamreports totheNAIC, which determines
whether astatequalifies foraccreditation under thestandards. Currently, 37states
areaccredited bytheNAIC through thisprogramme.
(c) TheGovernment oftheUnited States notes thatNAIC Model Laws aredesigned to
facilitate legislative andregulatory action oncommon problems among thestates and
areintended tosaveduplication ofeffort onthepartofthestates. Some models are
adopted byallormostofthestates, sothere isaharmonizing effect. Some models
serve asguidelines which thestates mayadopt, utilize oramend tofittheirindividual
needs. Certain models havebeenidentified asbeing ofsuchimport thattheiradoption
isnecessary forstates tobeaccredited pursuant toNAIC financial regulation standards.
(d) TheGovernment oftheUnited States encourages theNAIC tocontinue itsefforts to
work withstategovernments onthese programmes.
(4) Developer 'sbenefit
(a) "Developer 'sbenefit" means abenefit granted, foracertain period, toadeveloper
ofanoriginal product, under which approval isnotgiven tocertain products proposed
bycompetitors.
(b) TheGovernment ofJapan confirms thatadeveloper 'sbenefit currently doesnotexist
inthenon-life insurance sector inJapan.
(c) TheGovernment ofJapan willspecify thescope andperiod ofexclusivity under the
developer 'sbenefit, intheevent thatsuchbenefit isintroduced inthefuture. "Scope"
includes thestandards fordetermining when aproposed product issufficiently different
from anexisting product soasnottoaffect thedeveloper 'sbenefit applicable tothe
existing product.
(5) Administrative Appeals
(a) TheGovernment ofJapan confirms theapplicability oftheAdministrative Appeals
InquiriesLaw("AAIL")(Gyoseifufukushinsaho)andtheAdministrativeCaseLitigation
Law("ACLL") (Gyosei jikensosho ho)toall"dispositions" (including approvals for
alicense toprovide insurance andapprovals ofnewproducts andrates) ofgeneral
application relating totheprovision ofinsurance inJapan. Ageneral description of
AAIL andACLL procedures issetforth inAppendix I.
(b) On30June1994, theJapan FairTrade Commission ("JFTC") issued Guidelines
RegardingAdministrativeGuidance.Theseguidelinesstatethatanadministrativeagency
should notissueadministrative guidance thatinduces conduct thatisinconsistent with
theAnti-MonopolyAct("AMA").Anypersonthathasreceivedadministrativeguidance
mayseektheviews oftheJFTC astowhether theperson 'sconduct proposed tobe
taken inresponse totheadministrative guidance isinconsistent withtheAMA.S/IGFS/W/1
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(6) Advisory groups
When theGovernment ofJapan establishes, orregularly seeks recommendations from, ina
manner indicative ofaformal advisory rolefor,anycouncil, association, committee, group
orsimilar organization withapurpose orfunction relating totheprovision ofinsurance, which
includes theparticipation ofmembers oftheprivate sector, theGovernment ofJapan will
strongly request theentity toallow interested foreign insurance providers andintermediaries
established inJapan, andassociations orother organizations representing suchcompanies, to
attend itsmeetings andsubmit statements toittotheextent possible.
(7) Participation inindustry groups
(a) InJapan, foreign insurance providers canjoinalltrade associations suchastheLife
InsuranceAssociation,andthenon-liferatingassociations.BothGovernmentswelcome
thefactthattheMarine andFireInsurance Association ofJapan amended itsarticles
ofincorporation inJanuary 1994, soastoenable foreign insurance providers tojoin
theAssociation.
(b) TheGovernment ofJapan confirms thattheLifeInsurance Association, theMarine
andFireInsurance Association, thenon-life rating associations andother similar
organizations accord foreign insurance providers andintermediaries rights, privileges,
andopportunities equal tothose accorded todomestic firms subject tosimilar feesand
other obligations, inaccordance withtherulessetbytheorganizations. Suchrights,
privileges andopportunities include rights, privileges andopportunities regarding
representation andgovernance oftheassociations.
(8) Access toinsurance regulatory information
(a) With respect totheinsurance system reform nowinprocess, theInsurance Council
hasbeenhearing opinions offoreign insurance providers, andtheInsurance Department
oftheMinistry ofFinance ("MOF") hasbeenexchanging views from timetotime
withforeign insurance providers.
(b) TheGovernment ofJapan willensure thatforeign aswellasdomestic insurance
providers andintermediaries areaccorded meaningful andfairopportunities tobe
informedof,commenton,andexchangeviewswithofficialsregardingmeasuresrelating
tooraffecting theprovision ofinsurance inJapan.
(c) Withrespect toregulatory changes intheinsurance sector thattheGovernment ofJapan
mayundertake from timetotimefollowing thecompletion oftheregulatory reform
nowinprocess, foreign insurance providers willbeaccorded access toinformation
bytheGovernment ofJapan onanational treatment basisthataffords faircompetitive
opportunities. Thefollowing steps willfurther thisobjective:
(i) Theestablishment bytheMOF ofalistofforeign insurance providers, aswell
asorganizations representing suchproviders, thathaveexpressed aninterest
inregular communication;
(ii) Regular meetings with, andtheprovision ofadvance information toproviders
ororganizations onthelist,totheextent thatsimilar exchanges takeplace with
domestic insurance providers andorganizations;S/IGFS/W/1
Page8
TheGovernment oftheUnited States willencourage foreign insurance providers and
their representative organizations totake advantage oftheopportunities for
communication provided bytheMOF.
(9) Procedural protection fornotifications andapplications
(a) Recognizing thattheJapanese courts ultimately maydetermine whether specific
information is"secret" within themeaning oftheNational Public Service Law(Kokka
komuin ho),theGovernment ofJapan confirms thatitconsiders "secret" information
toinclude information inconnection withapplications ornotifications forinsurance
licenses, products, orrates thatisgenerally available tothepublic, andthatsuch
information isprotected bythedutyofGovernment officials under thatlawnotto
disclose secret information, except when theyarelegally required todisclose it.
(b) TheGovernment ofJapan confirms thatnolimit, inlaworinpractice, exists onthe
number ofnewlicence orproduct approval applications (including rate,form, and
other types ofproduct approval applications) thataninsurance provider maysubmit
atonetime, andthatnorequirement orregulatory practice restricts aninsurance
provider fromsubmitting additional applications based uponwhether theGovernment
ofJapan hascompleted itsreview ofthatprovider 'sprevious applications.
(c) TheGovernment ofJapan confirms thataninsurance provider isnotrequired to
coordinate itsnotifications orapplications forlicences orproduct orrateapprovals,
ortoconsult regarding suchnotifications orapplications, withanyother insurance
providers, industry associations, orother thirdparties thathave, orwhose members
have, acompetitive interest orpotential competitive interest insuchnotifications or
applications.TheGovernmentofJapannotesthat,undercurrentlaw,whenaninsurance
provider submits anapplication forarateforatypeofproduct forwhich anon-life
rating association calculates rates(i.e.,notincluding a"special" rate), theGovernment
ofJapan mayadvise theinsurance provider toinquire with thenon-life rating
association.
(d) TheGovernment ofJapan confirms thattheacceptance, processing, orapproval of
anotification orapplication foralicence, product orratemaynotbeconditioned or
delayed based onwhether theinsurance provider consults, orcoordinates itsnotification
orapplication withanyother insurance provider, industry association, orother third
partiesthathave,orwhosemembershave,acompetitiveinterestorpotentialcompetitive
interest insuchnotification orapplication. TheGovernment ofJapan notes that,under
current law,when aninsurance provider submits anapplication forarateforatype
ofproduct forwhich anon-life rating association calculates rates(i.e., notincluding
a"special" rate), theGovernment ofJapan mayadvise theinsurance provider toinquire
withthenon-life rating association.
(10) Self-regulatory organizations
(a) TheGovernment ofJapan confirms thefollowing withregard to"self-regulatory
organizations"intheinsurancesector,includingthosedescribedintheLegislativeStudy
GroupReport(suchastheLifeInsuranceAssociation,theMarineandFireAssociation):
(i) Membership insuch organizations isvoluntary, andtheir operations are
conducted inaccordance withtheirrespective association rules andby-laws,S/IGFS/W/1
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andtheGovernment ofJapan willnotdelegate anyauthority tosuch
organizations.
(ii) Thepurpose ofstipulating intheproposed lawprovisions regarding
self-regulatory organizations istoclarify andmake transparent thescope of
theiroperations andtheirsupervision bytheMOF under theproposed law.
(iii) TheReport doesnotrecommend that:
- thelegislationdirectself-regulatoryorganizationstoconductoperations
thatareinconflict withtheAMA; or
- thelegislation exempt orimmunize those self-regulatory organizations
from theAMA.
TheGovernment ofJapan isrespecting theabove informulating thebillto
besubmitted totheDiet.
(iv) Theguidance, recommendations, "investigation orresearch surveys" (chosa ),
andsolution ofcomplaints bysuchorganizations described intheReport are
advisory and/or voluntary. Insurance providers maycomply withorparticipate
insuch actions asamatter ofchoice, butmaynotbesanctioned bythe
organizations, directly orindirectly, fornotcomplying ornotparticipating.
However, itisnoted thatsuchorganizations 'rules orby-laws maymaintain
therighttodenyorrevoke membership, ortakeother lessstringent measures,
against members thatdonotmeettheorganizations 'ethical standards indicated
intheirrules orby-laws.
(v) TheGovernment ofJapan, through theMOF astheresponsible supervisory
agency fortheinsurance sector, willstrongly recommend thatsuch
organizations 'activities beconducted inanopen, non-discriminatory, and
transparent manner, andnotunreasonably impede freebusiness activities. In
addition, theMOF willtreatapplications andother requests bynon-members
nolessfavourably thanapplications orrequests from members.
(b) TheJFTC willcontinue tovigorously dealwithviolations oftheAMA bytrade
associations, including self-regulatory organizations, inallindustries including those
intheinsurance sector, andwillcontinue tomonitor theiractivities.
IV. DEREGULATION MEASURES
(1) Product andrateapproval
(a) Asregards theregulation ofinsurance products andrates, although itisdesirable from
theusers'standpoint thatlessexpensive andbetter products beprovided through
promoting competition andenhancing efficiency, itisalsonecessary tomaintain
appropriate prudential measures suchastoensure astable supply ofproducts, ensure
fairness byaninsurance provider among similarly-situated policyholders, preserve the
solvency oftheindustry, andprotect consumers andother claimants against default,
fraud, anddeception.S/IGFS/W/1
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(b) TheGovernment ofJapan hasinformed theGovernment oftheUnited States thatit
intends toderegulate theJapanese insurance system, including liberalization ofthe
approval process forinsurance products andrates, inastep-by-step manner, with
appropriatephase-inmeasureswherenecessary,whileclarifyingthedirectionofreform.
Within thebroader context ofthereform, thespecific purpose ofproduct andrage
liberalization istopromote competition andenhance efficiency among insurance
providers forthebenefit ofJapanese consumers, allowing product differentiation and
distribution based ontheneeds anddemands ofthepolicyholders.
Specifically, thefollowing measures aretobetaken withtheschedule described in(c).
(i) TheGovernment ofJapan willexpedite andsimplify theapplication review
process fortheapproval ofinsurance products andrates, through suchsteps
asreducing examination requirements andtimeperiods, introducing expedited
approval review systems suchas"fileanduse"systems, andother possible
steps.Undertheexpeditedapprovalsystem,whenaninsuranceproviderapplies
fortheapproval ofaproduct thatisessentially thesame asaproduct already
approved foranother insurance provider, theMOF willreview theapplication
onanexpedited basis. Under thefileandusesystem, theMOF willapprove
certain products aseligible forfileanduse.Subsequently, anycompany which
theMOF hasapproved towrite thatproduct mayintroduce changes tothe
product onafile-and-use basis, i.e.,thecompany mayfiletheproduct changes
withtheMOF andthenbegin using thechanged product afteracertain short
timeperiod unless disapproved.
(ii) Withregard toratesfornon-life insurance products, thecurrent system includes
fixed rates, banded rates, benchmark rates, andfreerates. TheGovernment
ofJapan willexpand thetypes ofproducts orcategories ofriskforwhich
benchmark orfreerates areused, totheextent possible consistent with
appropriate policyholder protection andthefairapplication ofotherappropriate
andreasonable prudential measures.
(iii) Aforeign insurance provider willbepermitted tousestatistical andother data
collected outside ofJapan tosupport itsapplication fortheapproval ofaproduct
inJapan, ifdeemed relevant bytheregulatory authority onacase-by-case basis.
(iv) ThetwoGovernments recognize thattheInsurance Council hasrecommended
theintroduction ofa"notification system" forthereview andapproval or
disapproval ofinsurance ratesandproducts, forproduct linesorcategories
ofriskforwhich problems arelesslikely toarise from theviewpoint of
policyholder protection. TheGovernment ofJapan intends tosubmit tothe
Dietaproposal thatimplements, orallows foradministrative implementation
of,anotification system forspecific product linesorcategories ofrisk. If
theDietallows foradministrative implementation ofanotification system, the
Government ofJapan willimplement thenotification system forspecific
categories ofrisk.
(c) Theimplementation oftheabove measures willbeasfollows:S/IGFS/W/1
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FirstStage: Measures relating to(b)(i), (ii),and(iii)willbeimplemented before
theimplementation oftheinsurance system reform legislation, and
where possible, within 1994. Forexample:
- afileandusesystem willbeapplied tocredit cardtheftand
burglaryinsurance,boilerinsurance,andmachineryinsurance;
- datacollected outside ofJapan willbeallowed tosupport an
application forapproval oflong-term disability insurance
products;
- theexpedited approval system willbeapplied totheapproval
ofproducts essentially thesameasproducts already approved;
- benchmark rateswillbeapplied toearthquake rider written
onindustrial fireinsurance andfreerateswillbeapplied to
windstorm andflood riderwritten onindustrial fireinsurance;
and
- withrespect tothespecial discount rateapplicable tothelarge
commercial risks offireinsurance, theminimum threshold
amount willbedecreased andthediscount ratewillbe
significantly expanded.
Second Stage: Thenotification system willbeintroduced upon implementation of
theinsurance system reform legislation. Atthisstage, notification
willbeapplied tocertain large commercial risks, including risks
regarding hull,cargo, andaviation. Asforlinesthatremain under
thepriorapproval system, therewillbefurther expansion ofthescope
ofthefileandusesystem, further expansion ofbenchmark ratesand
freerates, andconsideration oftheexpanded useofcomprehensive
policies andexpedient approval ofspecific requests. Forexample:
- thefileandusesystem will beapplied tocomputer
comprehensive insurance, movable comprehensive insurance,
anddirectors andofficers liability insurance;
- benchmark rateswillbeapplied tobankers blanket insurance;
- freerateswillbeapplied totravellers check comprehensive
insurance;
- theMOF intends tointroduce the"advisory rate"system for
large commercial fireinsurance;
- theMOF intends todecrease theminimum insured amount
ofthelarge commercial firinsurance policies towhich the
deductibles rider canbeattached andadjust therelevant
schedule accordingly.S/IGFS/W/1
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Third and:Application ofthenotification system willbeexpanded toother
Subsequent categories ofriskasdeemed appropriate bytheGovernment ofJapan
Stages including rentcredit andother credit insurance, within areasonable
timeafterimplementation oftheinsurance system reform legislation.
Following this,therewillbefurther deregulation ofproducts andrates
withrespect tomeasures notcovered above, asdeemed appropriate
bytheGovernment ofJapan, withnocategory ofrisknecessarily
excluded from possible deregulation.
(d) With regard tomutual entry**oflifeandnon-life insurance companies intothe"third
sector," theMOF intends nottoallow suchliberalization tobeimplemented aslong
asasubstantial portion ofthelifeandnon-life areas isnotderegulated, taking into
account thefactthatdependency ofsome medium tosmall andforeign insurance
providers onthethird sector ishigh, andthatthese medium tosmall andforeign
insurance providers havemade theefforts toserve thespecific needs ofconsumers
inthethird sector. Furthermore, withrespect toneworexpanded introduction of
products inthethirdsector, itisappropriate toavoid anyradical change inthebusiness
environment, recognizing thatsuchchange should depend onmedium tosmall and
foreign insurance providers firsthaving sufficient opportunities (i.e., areasonable
period) tocompete onequal terms inmajor product categories inthelifeandnon-life
sectors though theflexibility todifferentiate, onthebasisoftheriskinsured, therates,
forms, anddistribution ofproducts.
(2) Licensing ofinsurance providers andintermediaries
(a) TheGovernment ofJapan confirms thatapplications forlicences toprovide insurance
willbeprocessed pursuant tolawspertaining toadministrative procedures, including
theAPL.
(b) TheGovernment ofJapan willmake utmost efforts tostipulate thestandard review
period concerning application forstart-up licences andmake itavailable tothepublic.
(c) Upon thearrival ofanapplication, theGovernment ofJapan willbegin review without
delay.
(d) Inthecaseofadisapproval, theGovernment ofJapan willmake utmost efforts to
provide thereasons fordisapproval.
(e) TheGovernment ofJapan intends to,asapartoftheinsurance system reform, provide
inlaws orregulations thestandards regarding start-up licences, including the
requirements regarding theapplicant 'sfinancial baseandthequalifications ofits
management, taking intoaccount similar requirements applicable toother financial
sectors.
**"Mutual entry" means theability oflifeinsurance companies tointroduce existing, newormodified rates,
products, orriders inthethirdsector currently allowed tonon-life insurance companies, andtheability ofnon-life
insurance companies tointroduce existing, newormodified rates, products, orriders inthethirdsector currently
allowed tolifeinsurance companies.S/IGFS/W/1
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(f) TheGovernment ofJapan notes thataforeign insurance provider isnotrequired to
introduce aninsurance product notyetoffered inJapan asacondition fortheapproval
ofanapplication toprovide insurance inJapan.
(g) Recognizing principles offederalism, thelonghistory ofstateregulation ofinsurance
intheUnited States, andtheMcCarran-Ferguson Act,andnoting theconcerns of
regulators whoseektofurther increase internationalization oftheirinsurance markets
while addressing prudential concerns, theGovernment oftheUnited States:
(i) Welcomes thattheNAIC inOctober 1993 adopted amodel lawontheinitial
entryofnon-UnitedStatesinsuranceproviderswithouttheirpriorestablishment
inanother state, andtheGovernment oftheUnited States encourages theNAIC
tocontinue andasappropriate intensify itsefforts withrelevant stateauthorities
withregard tothisissue;
(ii) Would welcome consideration bytheNAIC, ifappropriate, oftheissue of
thetimeperiod forreview oflicensing applications ofinsurance providers,
from theperspective thatregulatory authorities should make administrative
decisions oncompleted applications ofinsurance providers within areasonable
time; and
(iii) Welcomes efforts bytheNAIC toreview withthestates thequestion of
citizenship requirements fortheboards ofdirectors offoreign insurance
providers, andtheGovernment oftheUnited States encourages theNAIC to
continue andasappropriate intensify itsefforts withrelevant stateauthorities
withregard tothisissue.
(h) TheGovernment ofJapan hasraised withtheGovernment oftheUnited States its
concern thatdifferent stateregulations forforeign insurance providers onlines of
productspermitted,trusteedassetsrequirements,depositrequirements,remittanceceiling
andreinsurance trustfunds affect foreign insurance providers 'ability toenter the
insurance market oftheUnited States.
(3) Insurance brokers
(a) Itistheroleofinsurance brokers totrytohelpusers toselect insurance products which
bestfittheusers'needs, serving asintermediaries between theusers andinsurance
providers.
(b) TheGovernment ofJapan expects thattheintroduction ofabrokerage system will
provideinsuranceconsumerswithobjectiveadviceoninsuranceproducts.Theobjective
ofbrokers differs from thatoflifeandnon-life insurance agents. TheGovernment
ofJapan expects theintroduction ofabrokerage system toresult inadiversification
ofdistributionchannelsandthepromotionofsalescompetitionintheJapaneseinsurance
market.
Accordingly uponthepassage ofnecessary legislation aspartoftheinsurance system
reform, itwillbepossible forinsurance brokers toestablish andtoprovide insurance
inJapan, subject tothefairapplication ofappropriate andreasonable prudential
measures, including those concerning thefinancial capability ofindemnification and
theprohibition ofconcurrent broker andagent operation.S/IGFS/W/1
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(4) Postal insurance
(a) Withregard tothecurrent legalstructure concerning theprovision ofinsurance inJapan
bytheMinistry ofPosts andTelecommunications ("MPT"), theGovernment ofJapan
confirms that:
(i) Such insurance isprovided pursuant tolaw,independent oflawsgoverning
theprovision ofinsurance byprivate insurance providers inJapan;
(ii) Currently, thelawauthorizes theMPT tooffer11basic insurance products,
andtheMPT offers atotalof25variations ofthese 11basic products. The
lawalsoauthorizes theMPT tooffer riders attached tosuchproducts;
(iii) Approval fromtheDietisrequired toexpand orchange theinsurance products
orriders offered bytheMPT except forlimited alterations within thescope
oftheproducts orriders authorized inthelaw;and
(iv) Theinsurancesystemreformnowinprocess,whichaddressestheprivatesector,
isseparate from, anddoesnotitselfinvolve, amendment ofthelawregarding
provision ofinsurance bytheMPT. Therefore, completion ofthereform
process itselfwillnotleadtotheexpansion oftheinsurance products orriders
which theMPT isauthorized bytheDiettooffer.
(b) TheMPT willensure thatforeign insurance providers inJapan areaccorded, upon
request,meaningfulandfairopportunitiestobeinformedof,commenton,andexchange
views withMPT officials regarding theformulation ofproposals toseekfromtheDiet
anamendment tothelawtoexpand, orchange, theinsurance products primarily
regarding sickness, injury ornursing coverage.
(5) Cross-border transactions
(a) TheGovernment ofJapan intends to,aspartoftheinsurance system reform, liberalize
cross-border insurance transactions concerning aircraft ofJapanese registration and
ships ofJapanese registration forinternational transport.
(b) Withrespect tospace launching andfreight (including satellites), necessary measures
willbetaken independent oftheinsurance systems reform.
(c) TheGovernment ofJapan hasscheduled reservations withrespect toitscommitments
related toinsurance intheFinal ActEmbodying theResults oftheUruguay Round
ofMultilateral Trade Negotiations, suchasareservation oninsurance contracts on
goods being transported within Japanese territory.
V. GOVERNMENT CORPORATIONS
(1) TheGovernment ofJapan willencourage public corporations listed inAppendix 2topermit
foreign insurance providers access totheirinsurance programmes andtoensure allocation ofpremium
shares among participating insurance providers according tofair,transparent, non-discriminatory, and
competitive criteria.S/IGFS/W/1
Page15
(2) TheGovernmentoftheUnitedStateshasscheduledareservationwithrespecttoitscommitments
related toinsurance intheFinalActEmbodying theResults oftheUruguay Round ofMultilateral Trade
Negotiations regarding thefactthatbranches arenotpermitted toprovide surety bonds forUnited States
federal government contracts.
VI. COMPETITION
(1) Private analysis ofmarket conditions
(a) TheGovernment ofJapan reaffirms thattherearecertain aspects ofeconomic rationality
ofkeiretsu relationships. However, noting theconcern offoreign insurance providers,
first,thatcertain aspects ofbusiness relationships referred toas"keiretsu "relationships
maygiverisetoanti-competitive business practices, negatively affect foreign direct
investment, andpromote preferential group trade, andsecond, that"case agents" may
substantially impede access totheJapanese insurance market forcompetitive foreign
insurance providers, thetwoGovernments willrequest domestic andforeign insurance
providers to:
(i) Discuss theissueof"keiretsu "relationships andjointly select anindependent
research organization toconduct astudy oftheextent andeffects ofintra-
keiretsu transactions intheJapanese insurance market; and
(ii) Discuss theissue ofcaseagents and,ifdeemed necessary, include thisissue
inthestudy tobeconducted bytheindependent research organization.
(b) ThetwoGovernments willrequest foreign anddomestic insurance providers toinstruct
andallow theindependent research organization toanalyse "keiretsu" relationships
asappropriate totheJapanese insurance market andasappropriate toensure a
comprehensive, useful, andrigorous study ofthatmarket.
(c) ThetwoGovernments willrequest foreign anddomestic insurance providers toreport
tothetwoGovernments by15December 1994, thename oftheindependent research
organization thatwillconduct thestudy. ThetwoGovernments expect thestudy to
becompleted by1April 1995, andtheywillrequest foreign anddomestic insurance
providers tomake every possible effort torealize thisexpectation.
(2) JFTC study
Upon implementation oftheinsurance reform legislation, theJFTC isprepared toconduct
astudy oftheJapanese insurance market within areasonable period oftimefromthecompetition policy
viewpoint, taking intoaccount suchfactors asthedevelopments observed since theimplementation
oftheinsurance reform legislation, theprivate sector study mentioned above andother relevant issues,
asappropriate.
(3) Enforcement measures
(a) TheGovernment ofJapan confirms itscommitment tostrictly enforce theAMA, in
allindustries including theinsurance sector, against practices that,inlightofmarket
structure andother factors asappropriate, constitute violations oftheAMA, suchas
private monopolization, unreasonable restraints oftrade, orunfair trade practices.S/IGFS/W/1
Page16
(b) TheGovernment ofJapan, while noting theReport bytheInsurance Council, will
review, byFiscal Year1995, AMA exemptions stipulated intheInsurance Business
Law.
(4) Article 28oftheAMA
BothGovernments understand that,under Article 28oftheAMA, theJFTC istoperform its
duties independently.
VII. CONSULTATIONS
TheGovernment ofJapan andtheGovernment oftheUnited States willmeetannually, orat
anytimeuponrequest ofeither Government, toreview implementation oftheMeasures, andtodiscuss
asnecessary other issues regarding insurance.
VIII. ASSESSING IMPLEMENTATION OFTHE MEASURES
(1) Datacollection
Thefollowing information onJapan willbeprovided onanannual basis:
(a) Thenumber ofapprovals ofnewproducts, newrates, andlicenses toprovide insurance,
inthelifeandnon-life sectors, aswellasthenumber ofapprovals ofnewthirdsector
products which primarily dealwithsickness, injury ornursing coverage, for:
(i) Foreign insurance providers; and
(ii) Japanese insurance providers.
(b) Theration ofapprovals (thenumber approved compared tothenumber ofapplications
ornotifications) fornewproducts, newrates, andlicences toprovide insurance, in
thelifeandnon-life sectors, aswellastheratioofapprovals fornewthird sector
products which primarily dealwithsickness, injury ornursing coverage, for:
(i) Foreign insurance providers;
(ii) Japanese insurance providers; and
(ii) Allinsurance providers.
(c) Total insurance premiums, inthelifeandnon-life sectors, for:
(i) Foreign insurance providers; and
(ii) Allinsurance providers.
Thefollowing information ontheUnited States willbeprovided onanannual basis:
(a) Thenumber ofstates accredited intheNAIC accreditation programme;
(b) Description andaccount ofNAIC harmonization proposals including model laws; andS/IGFS/W/1
Page17
(c) Total insurance premiums, inthelifeandnon-life sectors, for:
(i) Foreign insurance providers; and
(ii) Allinsurance providers.
Forthepurpose ofdatacollection, "foreign insurance provider" means aninsurance provider
50percentormore owned byforeign shareholders, including those inbranch form.
(2) Assessment
AssessmentoftheimplementationoftheMeasures,aswellastheevaluationofprogressachieved,
willbebased ontheoverall consideration ofthefollowing qualitative andquantitative criteria. These
qualitative andquantitative criteria willbeconsidered asaset,andnoonecriterion willbedeterminative
oftheassessment oftheMeasures, ortheevaluation ofprogress achieved. These criteria donot
constitute numerical targets, butrather aretobeusedforthepurpose ofevaluating progress achieved
toward thegoals oftheFramework andthegoals ofthissector, assetforth inSection I.
(a) Qualitative criteria
(i) Transparency andavailability ofstandards andmeasures inJapan, and
meaningful andfairopportunities forforeign insurance providers inJapan to
beinformed of,comment on,andexchange views withofficials regarding
matters related totheprovision ofinsurance andtoattend meetings andsubmit
statements toadvisory groups;
(ii) Prompt andfairreview ofapplications andnotifications inJapan, including
without being required oradvised tocoordinate withordisclose information
toother insurance providers orintermediaries;
(iii) Efforts bytheGovernment oftheUnited States toencourage theNAIC
regarding United States market issues addressed intheMeasures, including
issues regarding thereview ofapplications forlicenses;
(iv) Changes thataddress impediments tomarket access inJapan, ifany,arising
from certain aspects ofmarket conditions andbusiness practices;
(v) Efforts byforeign insurance providers andintermediaries toutilize new
opportunities created bytheMeasures; and
(vi) Theimplementation ofother measures intheMeasures.
(b) Quantitative criteria
From theviewpoint ofaddressing significant improvement inmarket access for
competitive foreign insurance providers:
(i) Change andrateofchange, fromonereporting period tothenext,inthenumber
andratioofapprovals fornewormodified products andratesinthelifeand
non-life sectors inJapan, forforeign andJapanese insurance providers;S/IGFS/W/1
Page18
(ii) Change andrateofchange, fromonereporting period tothenext, inthevalue
ofpremiums byforeign insurance providers inJapan, intheaggregate and
inmarket subsectors asappropriate; and
(iii) Change andrateofchange, fromonereporting period tothenext,intheshare
oftotalinsurance premiums forforeign insurance providers tothose forall
insurance providers inJapan, intheaggregate andinmarket subsectors as
appropriate.S/IGFS/W/1
Page19
APPENDIX 1
Outline oftheAdministrative Appeals Inquiries Law(Law No.160of1962) and
theAdministrative Case Litigation Law(Law No.139of1962, asamended).
(1) Under theAdministrative Appeals Inquiries Law("AAIL"), anyperson aggrieved byanorder,
omission orruling ofanyadministrative agency mayfileacomplaint against theagency, andmayobtain
review andremedy ofanyillegality orabuse ofdiscretion. Thetypes ofsuchcomplaints arecomplaints
forobjection, examination, andre-examination.
(2) Anadministrative agency isobligated togivenotice asfollows:
(a) When anadministrative agency issues anorder inwriting, itmustgivenotice tothe
person orpersons addressed intheorder thattheymayfileacomplaint, anditmust
givenotice oftheadministrative agency withwhich, andtheperiod during which, such
acomplaint maybefiled.
(b) Upon request byaperson notdirectly addressed inanorder buthaving aninterest
intheorder, theadministrative agency must givenotice tosuch person ofthe
information specified inparagraph (a).
(c) Intheevent thatanadministrative agency failstogivethenotice required under
paragraph (a)or(b)andtheperson entitled tofileacomplaint filesitwithanagency
otherthantheagencyresponsibleforexaminingthecomplaint(the"examiningagency"),
theagency thatissued thechallenged order musttransfer thecomplaint totheexamining
agency.
(3) When acomplaint isfiled, theexamining agency isrequired to:
(a) Examine whether thecomplaint meets therequirements forexamination and,ifitdoes,
commence examining thematter;
(b) Allow theperson whohasfiledthecomplaint andanyintervenor, among other things,
toproduce documentary evidence andmake oralarguments; and
(c) Render inwriting itsdecision andthereasons forit,andaffix itsname andseal
impression thereto.
(4) Further, under theAdministrative Case Litigation Law("ACLL"), ifanyperson 'sspecific
rightorinterest isinfringed byanyillegal order orabuse ofdiscretion byanyadministrative agency,
thatperson mayfileaclaim withacourt andseekjudicial review.
(5) With respect totheinsurance sector inJapan, thecomplaint forobjection mustbefiledwith
theMinistry ofFinance inaccordance withtheAAIL. Following adecision bytheMinistry ofFinance
ontheobjection, theperson whofiledthecomplaint forobjection mayfileanappeal ofthedecision
toacourt forjudicial review, without following anyfurther administrative procedures such as
"examination" or"re-examination" pursuant totheAAIL andACLL.S/IGFS/W/1
Page20
APPENDIX 2
Government Corporations
(1) TheGovernment Housing Loan Corporation
(2) ThePension Welfare Service Public Corporation
(3) TheHousing andUrban Development Corporation
(4) TheOkinawa Development Corporation
(5) TheEmployment Promotion Corporation