The Japan Financial Services Agency

Transcription

1 The Japan Financial Services Agency at 18 th INDONESIA RENDEZVOUS 2012 (Oct 5 th 2012, Bali) Akie OBA Deputy Director for International Affairs Financial Services Agency, Japan 1

2 Japan FSA as an integrated supervisor Japan FSA was established in July 2000 Its supervisory mandates cover all financial sectors, banking, securities and insurance Given the three-pillar mandates as follows, FSA deploys a single and holistic power over financial sectors Planning and policy making for financial system Inspection as on-site monitoring Supervision as off-site monitoring and prompt corrective action 2

3 Financial Supervisory Regime in Major Countries G 2 0 3

4 Transition of Supervisory and regulatory authorities 4

5 Organization of the FSA FSA Planning & Coordination Bureau Inspection Bureau Supervisory Bureau Planning the regulation On-site inspection Off-site monitoring Supervisory Coordination Division Banks Division 1 Banks Division 2 Insurance Business Division Securities Business Division 5

6 Flow of work at the FSA Diet Submission of bills Planning and Coordination Bureau Inspection Bureau Supervisory Bureau Inspection of private sector financial institutions Financial institutions Monitoring, prompt corrective action and other administrative action 6

7 Legal Framework for Supervision Article 1 (Purpose) in Insurance Business Act The purpose of this Act is, in view of the public nature of the insurance business for the purpose of protecting policyholders, etc. by ensuring sound and appropriate management of person carrying on insurance business and fairness of insurance solicitation, and thereby contributing to the stability of the life of the citizens and to the sound development of the national economy. Insurance Business Act (IBA) Stipulates power and responsibilities by FSA supervision (licensing, supervisory measures etc.) Insurance Business Order Insurance Business Ordinance etc. Supervisory Guideline for Insurance Companies 7

8 Outline of Supervision Feedback Inspection Plan Off-site Monitoring Feedback On-site Inspection Follow-up Follow-up If problems found Administrative Action 8

9 Off-site Monitoring ~ Annual Supervisory Routine and Tasks (Program Year Basis) Routine Supervisory Policy -Annually- (in summer) Significant Tasks (Example) Monitoring Financial Results (End of June) Monitoring Financial Results (End of Sep) Interviews with Insurers** (May-June) Interviews with Insurers** (Nov-Dec) ** Interviews with Board of Directors and officers Monitoring Financial Results (End of March) Monitoring Financial Results (End of Dec) Interaction with Inspection Bureau Examination of Insurance Product Application (License, Merger, Transfer etc.) Insurance Solicitation (Market Conducts) Supervisory Action (Interventions etc.) Compliance Check (Governance and Primary Shareholders) Reviews of auditors, actuaries etc. Political and Social Issues 9

10 On-site inspection Financial Inspection Basic Guidelines Five Basic Principles 1. Users Perspective 2. Complementation 3. Efficiency 4. Effectiveness 5. Process Checking 10

11 On-site inspection Insurance Inspection Manual Guidebook for inspectors (FSA s expectation) Insurers are expected to ensure the sound & appropriate businesses based on the principle of selfresponsibility. Contents i. Governance ii. Legal Compliance iii. Insurance Sales Management iv. Customer Protection Management v. Comprehensive Risk Management vi. Underwriting Risk Management vii. Asset Investment Risk Management viii. Operational Risk Management. 11

12 On-site inspection Procedure Off-site Monitoring Supervisory Bureau Information sharing Advance notice of inspection Preparation Checking the effectiveness of Internal audits On-site inspection Conducted by Front Office of Inspection Bureau Opinion Submission Report of inspection results Evaluation of the report Notice of inspection results Conducted by Back Office of Inspection Bureau 12

13 Procedures after Notice of Inspection Results [Inspection Bureau] Notification of Inspection results [Supervisory Bureau] Require an insurer to report based on Insurance Business Act Join the discussions between Supervisory Bureau and an insurer Examine whether issues/problems identified in the inspection are rectified [if needed] Administrative order 13

14 Transition of the insurance market in Japan Pre-deregulation Maintenance of the industry order by limiting insurers overcompetition Deregulation and liberalization (1996~) The Japan-US Insurance Talks Beginning of Financial Big Bang 14

15 Change of the insurance market in Japan Pre-deregulation Interests of policyholders are ensured by limiting overcompetition among insurers The Rating Organization Act Unified premiums and conditions that all insurers must apply were set by the Rating Organization. Fire, Voluntary Automobile, Personal Accident Anti-trust exemption. Preliminary, supervisory approach was detailed and strict. 15

16 Change of the insurance market in Japan I. Abolition of the tariffs of the Rating Organization. Non-Life Insurance Rating Organization of Japan Insurers are not obliged to use the reference rate which is set by the Rating Organization. Instead of that, they can use the rate as a basis for calculating their own premium rates. "Reference Loss Cost Rates" : Fire, Voluntary Automobile, Personal Accident and Nursing Care (cf. "Standard Full Rates : Residential Earthquake and Compulsory Automobile) Ins. Report data in uniformed formats Calculate, File to JFSA 39 member 16

17 Change of the insurance market in Japan II. Distribution channels and sales methods Distribution of certain types of insurance products by banks, etc. III. Change in market structure M&A Foreign Capital IV. Broadened business areas Mutual entry into general and life insurance businesses. V. Change in supervisory structure 17

18 Better Regulation J-FSA promotes Better Regulation to efficiently achieve the objectives of financial regulation. Four Pillars of Better Regulation 1. Optimal combination of rule-based and principle-based approaches. 2. Prompt and effective responses to high-priority issues. 3. Encouraging voluntary efforts by companies and emphasis on incentives 4. Improving transparency and predictability of regulatory actions Five Areas to Focus on 1. Enhanced dialogue with financial institutions. 2. Effective disclosure of information. 3. Further cooperation with foreign authorities. 4. Enhanced research functions for prompt recognition of market developments. 5. Human resource development. 18

19 Initiatives by Japan FSA Clear and transparent regulatory actions FSA s perspective and focuses are clearly presented in advance Inspection Manual Supervisory Guideline Annual plan of on-site inspection Annual off-site supervisory plan FSA s view on administrative action Q&A on interpretation of the regulation No action letter Public consultation process 19

20 Initiative by Japan FSA Credibility and integrity Ethical code We shall not treat citizens in an unfair or discriminatory manner and shall perform out duties fairly We shall not abuse our status for our own or our organization's benefits We shall not act in a manner which may invite the mistrust of public by, for example, receiving donation from a relevant entity We are prohibited from investing in financial institutions in which we directly have stake to gain short-term profit Close communication with the industry Monthly meeting among senior people of authority and the insurance industry 20

21 Annex: Earthquake insurance system in Japan Insurable property Limited to buildings for residential (included condos) use and/or movables for living Losses covered Covers losses from fire, destruction, burial and flood directly and indirectly caused by earthquake, volcanic eruption and tsunami. Payment method of insurance claims Insured properties damaged by earthquakes are investigated and classed into following 3 categories. Total loss (100% of amount insured will be paid.) Half loss (50%) Partial loss (5%) 21

22 Annex: Earthquake insurance system in Japan After the Great East Japan Earthquake, Japanese government revised the liability sharing to reduce the insurers responsibility, according to the decline of EQ reserve. At the time of the Great East Japan Earthquake of March 11, 2011 \ 115billion \ 1trillion 925billion \ 5.5trillion 50% Government: 4 trillion 301 billion Private Sectors:\1 trillion 199 billion 5% After the Great East Japan Earthquake (From May, 2011) \ 115 billion \ 871billion From April, 2012 \ 5.5trillion Government: 4 trillion 776 billion Private Sectors:724 billion 5% \ 104 billion \ 691billion \6.2 trillion Government: 5 trillion 712 billion 22 Private Sectors:488 billion 1.6%

23 Thank you! 23