Japanese life insurers’ growing use of reinsurance, including cross-border deals with Bermuda-based reinsurers, has prompted Japan’s Financial Services Agency (FSA) to propose revisions to its Comprehensive Supervisory Guidelines for insurers.
In a draft published on 8 April, the FSA said decisions on whether a cedant can avoid booking policy reserves for reinsured portions should not rest on contract wording alone, but on a holistic assessment of the deal’s contract structure, economic substance and where risk ultimately sits.
It highlighted areas that supervisors should examine, including reinsurer discretion that could impair the cedant’s economic interest, whether risks could effectively return to the cedant under stress, and whether terms could allow partial or full termination or recapture.
The proposal also set expectations around the effectiveness of collateral and segregation arrangements such as trusts, particularly where asset-side risk transfer is central. It flagged the risk that recoveries become less timely where settlement frequency falls or payment periods lengthen, including the possibility of delays of more than 90 days, and singled out reinsurance designed mainly to finance new business costs as an area where genuine risk transfer should be checked.
For asset-intensive reinsurance (AIR), the FSA also proposed stronger stress testing and governance, including scenarios that consider recapture events and multiple reinsurer failures, and analysis of potential impacts on solvency and financials, including asset rebalancing and reserves.
The consultation runs until 11 May 2026, with the revisions slated to be finalised and to take effect after thereafter.
Amid the introduction of a new economic solvency regime in Japan from 31 March, AIR has been gaining ground in Japan’s life sector as insurers look to transfer long-duration liabilities alongside related assets. Three deals have been disclosed so far in 2026: Dai-ichi Life’s transaction with Prismic and two Japan Post Insurance transactions announced in late March involving Aflac Re and Talcott Life Re, continuing a trend in 2025 and 2024.
The FSA said that this expansion of reinsurance use, for purposes including risk transfer and tapping reinsurers’ investment capabilities, prompted the regulator to encourage more advanced risk management while clarifying how existing supervisory thinking should be applied.
The FSA move follows growing global focus on asset-intensive reinsurance and related systemic risk. In November 2025, the International Association of Insurance Supervisors (IAIS) said structural shifts in the life sector, including AIR, call for closer oversight because of concerns around recapture risk, concentration risk and cross-border differences in solvency rules.
That theme also ran through the IAIS’s March 2026 review of its Holistic Framework, which said supervisors have made progress overall but still need to strengthen recovery and resolution planning, liquidity risk disclosure and cross-border crisis response.
