About Unregulated Kyosai

A bill was submitted to the Diet to amend the Insurance Business Law.

Recently, FSA has received inquiries on unregulated Kyosai, however, they are not under supervision of FSA, and there is no regulation nor system for protection of policyholders since they are not insurers licensed to conduct insurance business in Japan. Thus, their business is different from that of the licensed insurers

Therefore, it is important to note their differences and check the soundness of their operation and financial position when you consider entering into contract with such unregulated Kyosai.

What is unregulated Kyosai?

Kyosai is considered to be a scheme, formed by residents in the same region or persons engaged in the same occupation, which provides a certain amount of benefits from the pooled financial contributions of the membership for disaster, death or accident. Kyosai are categorized as regulated Kyosai (established by specific laws) and unregulated Kyosai (without specific law for establishment).

Regulated Kyosai(Note 1) are exempted from Insurance Business Law in accordance with the 1st clause of Article 2 of Insurance Business Law. They are regulated by laws other than Insurance Business Law, and their business operations are under the special laws and supervision of each responsible authority.

On the other hand, unregulated Kyosai are not considered to conduct insurance business as long as Kyosai target specific groups of persons. Therefore, conducting such business without a license is not regarded as a violation of Insurance Business Law. (Note 2) However, unlike regulated Kyosai, they are not subject to any special laws, and there is no authority to supervise them.

(Note 1)   Followings are major regulated Kyosai: Agricultural Cooperative Society (JA) by Agricultural Cooperative Society Law), National Federation of Workers and Consumers Insurance Cooperatives (Zenrosai) by Consumers' Livelihood Cooperative Society Law), and National Federation of Fire Insurance Co-operatives for Small Business (Nikkaren) by Law on Co-operatives of Small and Medium Enterprises).
  For more information, please see the website of Japan Cooperative Insurance Association Inc. open new window, association of regulated Kyosai.
(Note 2)   If an unregulated Kyosai conducts their business for unspecified group of persons and provides more than negligible payment, such a conduct constitutes a violation of Insurance Business Law and criminal sanctions can be imposed for it.

The major difference between unregulated Kyosai and Insurers

  Unregulated Kyosai Insurers
Supervisory authority FSA Japan
Business License system
Product approval and filing
Standard Technical Provision
Limitation on investment
Disclosure requirement
Public safety net
Registration of sales staff

Undertaking by the FSA

The Second Subcommittee of the Financial System Council had deliberated how and to what extent currently unregulated Kyosai should be regulated and it published a report on this issue on 14 December 2004.

The report analysed that it has become rather difficult to distinguish between insurers who underwrite insurance for the general public and unregulated Kyosai which also underwrite insurance for a specified group of persons, since the scale and business models of unregulated Kyosai have increasingly become diversified in recent years. It concluded that unregulated Kyosai, conducting quasi-insurance business for a specified group of persons, should be regulated from the viewpoint of policyholder protection.

In response to the report, the Cabinet submitted a bill to the Diet on 11 March 2005, amending the Insurance Business Law in order to enlarge the scope of the policyholder protection rules provided by the Law to cover, in principle, Kyosai which undertake quasi-insurance business for a specified group of persons.


PDFThe Outline of the Proposed Bill to Amend the Insurance Business Law (PDF:46KB)


Site Map

top of page