Insurance-related Laws

1. Insurance Contract Law (2008)

The Insurance Contract Law stipulates basic matters of rights and obligations, etc. between policyholders and insurance companies regarding insurance contracts.
Specifically, it classifies insurance contracts into general insurance, life insurance, and accident and sickness fixed amount insurance, and sets the following rules as to the time when an insurance contract is materialized, insurance benefits are paid, and an insurance contract terminates:

(1) Materialization of an insurance contract (Objective of an insurance contract, duty of disclosure, delivery of documents when an insurance contract is concluded)

(2) Validity of an insurance contract (An insurance contract for the benefit of a third party, over-insurance, a reduction in the insured value, a reduction in risk)

(3) Insurance benefits (Prevention of occurrence and expansion of damages, notification of occurrence of damages, exemption from an insurer's liability, assessment of the amount of damage, under-insurance, double-insurance, beneficiary payment period)

(4) Termination of an insurance contract (Cancellation by policyholder, cancellation due to nondisclusure, cancellation due to an increase in risk, cancellation due to serious reasons, effectiveness of cancellation), etc.


The Insurance Contract Law has come into force on April 1, 2010.
The Commercial Code which had included insurance-related provisions before has been abolished accordingly.

2. Insurance Business Law (1995)

The objective of this law, which gives due consideration to 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.

This law is a main pillar of the Japanese insurance supervisory laws, stipulating the supervision of both insurance companies and insurance soliciting activities.

As for the supervision of insurance companies, various provisions are stipulated on the following matters: licensing requirement, legal status of insurance companies, scope of business, accounting matters, examination criteria for insurance products, measures to maintain the sound management of insurance companies, measures to protect policyholders in case of an insurance company going bankrupt, etc. The provisions of the same effect apply to foreign insurance companies operating business in Japan from the viewpoint of ensuring equal footing with domestic companies.

With respect to the supervision of insurance soliciting activities, the law stipulates the following provisions: registration and notification of those who engage in insurance distribution, prohibition of misconducts in insurance distribution, inspection of general insurance agents, a cooling-off clause, etc.

3. Law concerning Non-Life Insurance Rating Organizations (1948)

The objective of this law is to promote the sound development of the general insurance business and to protect policyholders' interests by ensuring the appropriate business operations of non-life insurance rating organizations when calculating "reference risk premium rates" and "standard premium rates for Compulsory Automobile Liability Insurance and Earthquake Insurance on Dwelling Risks". The Non-Life Insurance Rating Organization of Japan was established based on this law.

4. Automobile Liability Security Law (1955)

This law was enacted to provide financial security to traffic accident victims. As specified in the law, no one is allowed to drive an automobile without owning a Compulsory Automobile Liability Insurance (CALI) policy. This policy only covers liability for bodily injury for traffic accident victims and not liability for property damage.

5. Law concerning Earthquake Insurance (1966)

This law was established with the objective of contributing to the stability of the life of those who have suffered as a result of earthquakes. Under this law, earthquake risks on dwelling houses and contents are covered with reinsurance support provided by the government. Since the likelihood of catastrophic losses on dwelling risks following an earthquake is high, the aggregate limit of indemnity is shared among all private insurers and the government, who are liable under the excess of loss reinsurance cover arranged through the Japan Earthquake Reinsurance Company.

Liability Sharing Scheme between the Government and Private Insurers (as of Apr.1, 2019)

Liability Sharing Scheme between the Government and Private Insurers

1. Up to 87.1 billion yen: Private Insurers are liable for 100% of the claim
2. Over 87.1 billion yen up to 153.7 billion yen: The Government is liable for 50% (33.3 billion yen)
Private Insurers are liable for 50% (33.3 billion yen)
3. Over 153.7 billion yen up to 11,700 billion yen: The Government is liable for 99.88% (11,532.9 billion yen)
Private Insurers are liable for 0.12% (13.4 billion yen)

Transition in Revisions of Earthquake Insurance on Dwelling Risks System

Effective Date The Extent of Loss to be Indemnified Insurable Proportion Limit of Cover Aggregate Limit of Indemnity per One Event
Jun.1, 1966
Total loss only 30% of the insured
amount of fire
insurance policy
Building: 0.9 million yen
Contents: 0.6 million yen
300 billion yen
May.1, 1972 Building: 1.5 million yen
Contents: 1.2 million yen
400 billion yen
Apr.1, 1975 Building: 2.4 million yen
Contents: 1.5 million yen
800 billion yen
Apr.1, 1978 1,200 billion yen
Jul.1, 1980 Total loss Half loss From 30% to 50%
of the insured amount of fire insurance policy
Building: 10.0 million yen
Contents: 5.0 million yen
Apr.1, 1982 1,500 billion yen
Apr.1, 1991 Total loss
Half loss
Partial loss
Jun.24, 1994 1,800 billion yen
Oct.19, 1995 3,100 billion yen
Jan.1, 1996 Building: 50.0 million yen
Contents: 10.0 million yen
Apr.1, 1997 3,700 billion yen
Apr.14, 1999 4,100 billion yen
Apr.1, 2002 4,500 billion yen
Apr.1, 2005 5,000 billion yen
Apr.1, 2008 5,500 billion yen
Apr.6, 2012 6,200 billion yen
Apr.1, 2014 7,000 billion yen
Apr.1, 2016 11,300 billion yen
Apr.1, 2019 11,700 billion yen


The revisions of April 1, 2009, May 2, 2011, May 16, 2013, Oct. 19, 2016, April 1, 2017 and Feb. 14, 2019 refer only to changes of liability of private insurers and the government.

6. Consumer Contract Law (2000)

Under the law, a consumer is able to cancel a contract with a business entity when misrepresentation of the business entity misleads the consumer, or where the consumer is distressed by an importunate behavior of the entity at the time of contract. This law also stipulates that such provisions in the contract shall be void where the liability of a business entity is restricted or the amount of liabilities or damages claimed by the business entity against the consumer exceeds a certain level. Following the enforcement of the revised Consumer Contract Law on June 7, 2007, a class action system for consumers has been introduced, allowing a specific consumer organization the right to file an injunction against misconducts of a business entity.

7. Law on Sales of Financial Products (2000)

Under the law, financial service providers are obliged to provide customers with information on the important matters including risk of losses caused to their products by price fluctuations and credit risk (default), etc. They are also liable for any damage or loss caused to customers by their failure to provide their customers with information on the above important matters. In addition, financial service providers are obliged to draw up and publicize a solicitation policy, and shall be subject to administrative fines in the event of a violation of this obligation.

8. Personal Information Protection Law (2003)

The purpose of this law is to protect the rights and interests of individuals while taking consideration of the usefulness of personal information, in view of a remarkable increase in the use of personal information due to development of the advanced information and communications society. The law prescribes the duties to be observed by entities handling personal information such as: specification of the purpose of use, proper acquisition, notice of the purpose of use at the time of acquisition, security control measures, supervision of the third party vendors, restriction of provision to third parties, disclosure, correction, stoppage of the use of personal information, etc.

9. Financial Instruments and Exchange Law (2006)

This law aims at establishing comprehensive and cross-sectional rules for user protection and to develop an environment where users can invest with confidence, thus responding to changes surrounding the financial and capital markets. Under the law, firms dealing with financial instruments are required to comply with the following rules of conduct (rules for sales and solicitation), which also apply to some insurance products: regulation on advertisements, obligation to deliver documents in a written format before/at the time of making a contract, various examples of prohibited conduct such as delivery of false information, prohibition of loss compensation, etc.