This content is from: Local Insights

Japan: Trade and investment insurance

Takeshi Orihara

On July 17 2015, the Act partially revising the Trade and Investment Insurance Act was promulgated. It will enter into force on April 1 2017. The Act sets out the organisation of Nippon Export and Investment Insurance (NEXI), the Japanese export credit agency, and the rules of trade and investment insurance.

The main contents of the Act's revisions are:

  • the organisational change in NEXI which is set to become a special company wholly-owned by the government;
  • the unification of the accounting of trade and investment insurance; and
  • setting out NEXI's close relationship with the government.

NEXI's governance will be enhanced following its change to stock company status. This means that NEXI's management structure must comply with standards set out in the Companies Act so that factors such as its audit system must be made more robust.

On the other hand, based on the fact that trade and investment insurance takes on risk that is not taken on by the private insurance sector, the government will own all of NEXI's issued shares. Therefore, although NEXI will cease to exist as an independent administrative institution, it will be incorporated as a stock company that will, on the same day, succeed to all of the rights and obligations that NEXI had as an independent administrative institution.

The Act also revises the accounting procedures. The accounting concerns a trade and investment insurance unified by NEXI through abolishing a special account of the government pertaining to trade and investment reinsurance. In this way, the government intends to streamline NEXI's administration and finance functions. However, when NEXI faces difficulties in financing (for example, by issuing bonds or borrowing of funds), the government will take financial measures necessary to discharge the insurance liabilities within the scope of the amount specified in the budget.

Additionally, in order for insurance underwriting to reflect the government's policy, the government will set out the criteria for insurance underwriting. In this way, the government will be able to state its opinion on important issues.

The new legislation is expected to enhance NEXI's creditworthiness as trade and investment insurance agencies. It is hoped that this will lead many Japanese companies to promote international expansion.

Takeshi Orihara

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