Non-Admitted Insurance in Japan: Can a Foreign Policy Cover Japanese Risks?

Decision flow for non-admitted insurance in Japan: is the risk inside Article 186, is the contract excluded by Cabinet Order, is permission available, or is a Japanese local policy required

"Non-admitted insurance" is a term from the United States, where an insurer without a licence in a given state may still write certain risks there through the surplus lines market. Risk managers bring the term to Japan and ask the natural question: can our head-office insurer, which has no licence in Japan, cover our Japanese subsidiary? The honest answer is that Japan does not have a surplus lines market, that the Insurance Business Act restricts such contracts in principle, that the restriction has specific exclusions and a case-by-case permission, and that the person exposed to the statutory fine is not the foreign insurer but the party in Japan that applied for the contract. None of that amounts to "foreign insurance is banned in Japan", and none of it means the head-office program is irrelevant. It means the question has to be asked precisely.

This article sets out the legal framework for non-admitted insurance in Japan as it stood on 28 October 2026: what Articles 185 and 186 of the Insurance Business Act say, which risks are inside the rule, which contracts the Cabinet Order and the Cabinet Office Ordinance take outside it, how the permission under Article 186(2) works and when it is refused, and what the fine under Article 337 attaches to. It then separates three questions that are routinely run together, explains when a Japanese local policy is required as a matter of practice rather than statute, and ends with a checklist to work through before any contract touching Japan is signed. For the overall picture of business insurance for a foreign company in Japan, see our guide to business insurance in Japan for foreign companies; for how a global program is designed around the rule, see global insurance programs in Japan.

This article is a general explanation of Japanese insurance regulation for business readers. It is not legal advice, and it does not describe any particular insurer, product or policy. The application of the Insurance Business Act to a specific contract should be confirmed with the Financial Services Agency or a qualified Japanese lawyer. Statutory references are to the Japanese text on the e-Gov statute database; an English translation of the Act exists on the Japanese Law Translation site but reflects an earlier amendment date.

SummaryKey points

Article 186(1) of the Insurance Business Act prohibits a foreign insurer that has no branch in Japan from concluding insurance contracts relating to persons resident in Japan, property located in Japan, or Japanese-flag ships and aircraft, other than contracts excluded by Cabinet Order. Japan has no surplus lines mechanism that would let an unlicensed insurer write such risks once the licensed market declines.
The rule is defined by the location of the risk, not by who the policyholder is. A Japanese subsidiary's office contents, a branch's leased premises and employees resident in Japan are inside it whoever the ultimate parent may be.
Reinsurance, Japanese-flag ocean-going vessels and commercial aircraft with their cargo and liabilities, space risks, cargo in international transit and overseas travel cover are excluded. Reinsurance being excluded is what makes fronting a lawful structure.
The prospective policyholder may apply to the Prime Minister, via the FSA, for permission before applying for the contract (Article 186(2)). Permission must be refused where an equivalent or better contract could easily be concluded with a Japanese-licensed insurer, among other grounds. The standard processing period is sixty days, English documents need no translation, and a registered insurance broker's opinion may be attached.
Applying without permission exposes the applicant to a non-criminal fine of up to 500,000 yen (Article 337). Whether a foreign policy would respond, be enforceable or be accepted by a Japanese landlord, customer or court are separate questions, and the practical consequence of the rule is that property and liability exposures in Japan are insured on Japanese local policies.

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What "non-admitted" means in Japan, and why the US framing misleads

In the United States an "admitted" insurer holds a licence in the state concerned and its policies carry the protection of the state guaranty fund; a "non-admitted" or surplus lines insurer does not, but may write risks the admitted market will not take, through a licensed surplus lines broker and under the federal Nonadmitted and Reinsurance Reform Act of 2010. The NAIC puts surplus lines premium at about 12% of the US property and casualty market in 2024. The structure assumes that non-admitted writing is a normal, regulated part of the market.

Japan's structure is different in kind. The Insurance Business Act (Act No. 105 of 1995) defines a "foreign insurer" as a person that conducts insurance business abroad under foreign law (Article 2(6)) and a "foreign insurance company" as a foreign insurer that has obtained the Prime Minister's licence under Article 185(1) by establishing a branch in Japan (Article 2(7)). Only the second category is part of the Japanese market. For the first category, Article 186 sets a prohibition with exclusions and a permission; there is no intermediate category of regulated non-admitted writing. The word "non-admitted" is therefore useful only as a label for "an insurer that has not established a branch in Japan and holds no Japanese licence". Everything that follows turns on what such an insurer, and the Japanese party dealing with it, may and may not do.

The legal framework: Articles 185, 186 and 337

Article 185: licensing of foreign insurers

Article 185(1) allows a foreign insurer to conduct insurance business in Japan only by establishing a branch or other office in Japan and obtaining the Prime Minister's licence, and only at that branch. The licence is either a foreign life insurance licence or a foreign non-life insurance licence (Article 185(2)). A licensed foreign insurance company must conclude insurance contracts relating to persons resident in Japan, property located in Japan or Japanese-flag ships and aircraft within Japan, except in cases specified by Cabinet Office Ordinance (Article 185(6)). As of 19 October 2026 the FSA lists 21 foreign non-life insurers operating through Japanese branches under this licence, alongside 35 Japanese non-life insurance companies (a figure that includes Japanese-incorporated subsidiaries of foreign groups) and the Society of Lloyd's under a specific licence.

Article 186: insurers without a branch in Japan

Article 186(1) provides that a foreign insurer that has not established a branch or other office in Japan shall not conclude insurance contracts relating to persons who have an address or residence in Japan, property located in Japan, or ships or aircraft of Japanese nationality, excluding contracts specified by Cabinet Order; the prohibition does not apply to a contract for which the permission in paragraph (2) has been obtained. Article 186(2) provides that a person who intends to apply for such a contract must, before making the application, obtain the Prime Minister's permission in the manner prescribed by Cabinet Office Ordinance. Article 186(3) lists the grounds on which the Prime Minister must refuse permission (set out below). The FSA described the rule in its public alert of 17 October 2024 as a prohibition on "direct overseas insurance" in principle, with permission as the exception; the alert was prompted by solicitation of residents of Japan by unlicensed foreign insurers and is available in Japanese, with an English summary in the FSA's weekly newsletter.

Article 337: the fine, and who it attaches to

Article 337 provides that a person who, in breach of Article 186(2), applied for a contract within that paragraph without obtaining permission is liable to a non-criminal fine of up to 500,000 yen. The point to notice is the direction of the sanction. The foreign insurer is the addressee of the prohibition in paragraph (1), but the fine in Article 337 is on the applicant in Japan: the Japanese subsidiary, branch or individual that applied for the contract. A parent company that arranges cover for its Japanese entity from abroad should understand that it is the Japanese entity, if it is the applicant, that carries the statutory exposure.

What is inside the rule: persons, property, ships and aircraft

The scope is defined by three connecting factors, and it is worth working through the situations a market-entry project actually produces.

Table 1: Common situations and whether they fall within Article 186 (general reading of the statute; confirm for your case)
Situation	Connecting factor	Inside the rule?	Note
Contents, fittings and stock of a Japanese subsidiary's office or warehouse	Property located in Japan	Yes	The nationality of the parent is irrelevant.
Leased premises occupied by the Japanese branch of a foreign company	Property located in Japan	Yes	The branch is not a separate legal person, but the property is in Japan.
Employees of the Japanese entity, including staff seconded from the parent and resident in Japan	Persons with an address or residence in Japan	Yes	This is the case the FSA's 2021 simplification of the permission procedure was designed for (see below).
Liability of the Japanese entity for injury or damage in Japan	Persons and property in Japan	Generally yes	Liability contracts are treated by reference to the persons and property they relate to; take advice on the specific wording.
Goods in international transit, including while located in Japan	Property located in Japan	Excluded	Cabinet Office Ordinance, Article 116 (international transit cargo).
Staff of the parent travelling to Japan on a home-country travel policy	Persons in Japan temporarily	Excluded in respect of overseas travel cover	Ordinance, Article 116 (injury, sickness and baggage of overseas travellers during overseas travel).
Reinsurance of a Japanese insurer by a foreign reinsurer	—	Excluded	Cabinet Order, Article 19. This is the basis of fronting.
The parent's own financial interest in its Japanese subsidiary, insured by the parent abroad	The parent's interest abroad	A legal question for each wording	See the third of the three questions below.

What is outside the rule: the exclusions

The exclusions are specific, and they are the reason some parts of a global program continue to operate from abroad without difficulty while others do not.

Table 2: Contracts excluded from Article 186 (Order for Enforcement, Article 19; Ordinance for Enforcement, Article 116; as of 28 October 2026)
Excluded contract	Source	Practical significance
Reinsurance	Cabinet Order, Article 19	A Japanese-licensed insurer may issue the local policy and reinsure it abroad. Fronting is built on this exclusion.
Japanese-flag ocean-going vessels and commercial aircraft, their cargo and the liabilities arising from them	Cabinet Order, Article 19	Marine hull and aviation programs placed abroad.
Space risks	Cabinet Office Ordinance, Article 116	Satellite and launch cover.
Cargo in international transit, while located in Japan	Ordinance, Article 116	Group marine cargo programs commonly continue to cover shipments to and from Japan; domestic transit is a separate question.
Injury, sickness and baggage of overseas travellers during overseas travel	Ordinance, Article 116	Home-country travel cover for staff visiting Japan. It does not extend to staff who become resident in Japan.

Two cautions. First, the exclusions are read by reference to the contract, so a single policy that bundles an excluded cargo risk with non-excluded property in a Japanese warehouse is not thereby excluded as a whole. Second, where a group program's structure might fall within one of the exclusions (for example because the Japanese layer is written as reinsurance of a Japanese insurer), that is a point to establish with the insurer's legal team and a Japanese adviser, not to assume.

Permission under Article 186(2): who applies, when, on what grounds, and how

Who and when. The applicant is the person who intends to apply for the contract, and the permission must be obtained before the application is made. Permission is granted contract by contract. The FSA noted in its 2021 consultation that a renewal may itself require permission, so a contract permitted once is not permitted indefinitely.

Grounds for refusal. Article 186(3) requires the Prime Minister to refuse permission where (1) the content of the contract is contrary to law or unfair; (2) it would be easy to conclude, in place of the contract, a contract on equivalent or better terms with a Japanese insurance company or a licensed foreign insurance company; (3) the terms are markedly out of balance with those that would ordinarily attach to such a contract; (4) the interests of the insured or other interested parties would be unduly prejudiced; or (5) the contract would adversely affect the sound development of the insurance business in Japan or harm the public interest. The second ground is the one that matters for a multinational program: if the Japanese market can supply the cover, permission is not the route.

Procedure. Under Article 117 of the Ordinance for Enforcement, the application for a non-life contract is made on the prescribed form to the Commissioner of the FSA, with the policy terms (including endorsements), the application form, drawings, photographs or other documents describing the subject matter, other reference material, and, where the Commissioner requires it, a translation of an outline. Documents in English need no translation. An opinion letter from a registered insurance broker may be attached. Article 246 sets a standard processing period of sixty days. In February 2021 the FSA consulted on, and in April 2021 adopted, amendments simplifying the procedure for employers that wish to extend home-country group cover to staff transferred to Japan, limiting the translation requirement and the particulars of insureds that must be stated; both notices are available in English on the FSA's site.

The design of the permission is worth reading for what it implies. It is a procedure for the case where the Japanese market genuinely cannot supply an equivalent contract, with a broker's opinion as a way of evidencing that, and with a sixty-day clock. It is not a routine mechanism by which a parent's program is approved for use in Japan.

Three questions that are usually confused

Most difficulty with Article 186 comes from treating three different questions as one. They have different answers because they engage different parts of the law and different parts of the contract.

1. May a foreign insurer directly insure a risk located in Japan?

This is the Article 186 question proper. For persons resident in Japan and property located in Japan, the answer in principle is no, unless the contract is within an exclusion or the applicant has obtained permission. The identity of the policyholder does not change the answer: a contract concluded by the parent abroad that insures the subsidiary's warehouse in Japan still "relates to property located in Japan".

2. May the Japanese entity be an insured under the parent's foreign policy?

Naming is a matter of contract, and a foreign policy may list the Japanese subsidiary among its insureds. But naming does not answer the first question: if the subject matter is Japanese property or persons, the contract is within Article 186 regardless of how the schedule of insureds is drafted. Nor does naming answer the practical questions that follow a loss: whether the foreign insurer will adjust a claim in Japan, whether payment to the Japanese entity is contemplated, and whether a Japanese landlord, customer or lender will accept the foreign policy as satisfying a contractual insurance requirement. Japanese counterparties to leases and supply contracts generally expect a certificate from a Japanese-licensed insurer. "Named on the master" is a necessary condition for the master to respond at all, not a sufficient one for the Japanese entity to be properly insured.

3. How is cover for the parent's own economic loss treated?

A financial interest clause insures the parent, abroad, against the reduction in value of its interest in the subsidiary caused by a loss in Japan. The insured is the parent, the subject matter is the parent's interest, and the payment is made to the parent at home. International insurers describe this device as the standard response to countries that restrict non-admitted insurance. Whether a particular wording respects the line drawn by Article 186, and how the parent then funds the subsidiary and treats that funding for Japanese tax purposes, are legal and tax questions for the wording concerned; the FSA has not published guidance on the point, and this article does not offer a view. What can be said is that financial interest cover does not give the Japanese entity a policy of its own, does not produce a certificate a Japanese counterparty will accept, and does not pay a claim in Japan. It is cover for the parent's balance sheet, not a substitute for a local policy.

When a Japanese local policy is required in practice

Statute aside, there are four reasons a Japanese-licensed policy is the normal form for property and liability exposures in Japan, and understanding them helps a risk manager explain the local placement to head office.

The Article 186 analysis itself. For property and persons in Japan, a local policy is the structure that requires no permission and no legal argument.
Contracts. Commercial leases, customer agreements, construction contracts and loan agreements in Japan routinely require evidence of insurance. Certificates are issued by the insurer, usually through the agent, and counterparties expect a Japanese insurer's document.
Claims. A loss in Japan is investigated in Japanese, settled with Japanese claimants and, for liability, often negotiated by the insurer under the policy. A foreign insurer with no presence in Japan cannot perform that function.
Global program design. International programs treat Japan as a "local policy required" country. Lloyd's, which holds a specific licence in Japan, states on its Japan page that multinational risks located in Japan but controlled from outside Japan require a local policy, issued through its Japan Multinational Model via Lloyd's Japan Inc., and that the model applies only where the policyholder is not registered or domiciled in Japan and the purchase decision is taken outside Japan; the classes it lists as exempt from local requirements are aircraft, ocean-going vessels, marine and aviation cargo and overseas travel, which track the statutory exclusions above.

Statutory schemes sit outside this discussion altogether. Workers' accident compensation insurance and employment insurance apply to any business employing a worker in Japan, and compulsory automobile liability insurance applies to every vehicle; these are public schemes that no foreign policy can replace. The pillar guide sets them out.

Violation risk and practical safeguards

The statutory sanction is the fine in Article 337 on the applicant. Beyond that, the risks are practical rather than penal: a contract that should not have been concluded may be contested at the point of claim; the foreign insurer's position in Japan is uncertain; and a counterparty that discovers the Japanese entity is relying on a foreign policy may treat its contractual insurance requirement as unmet. The FSA's 2024 alert also reminds the public that it cannot confirm the consumer-protection arrangements of an unlicensed insurer, and directs readers to the lists of licensed and registered businesses on its website.

Practical safeguards are simple. Check whether any insurer proposed for a Japanese risk appears on the FSA's licence list. Ask the group's insurer, in writing, which parts of the program are intended to respond to Japanese property, persons and liabilities and on what legal basis. Keep the permission file where permission has been sought. And record, at each renewal, which Japanese exposures sit on local policies, which sit on excluded contracts, and which the parent insures as its own interest.

Pre-contract checklist

List every Japanese exposure by connecting factor: persons resident in Japan, property located in Japan, Japanese-flag ships or aircraft, liabilities in Japan.
For each proposed contract, identify the insurer and whether it holds a Japanese licence (FSA list) or is a foreign insurer without a branch in Japan.
For contracts with a foreign insurer, test each exposure against the exclusions in Table 2 by reference to the contract, not the program.
Where an exposure is inside the rule and not excluded, decide between a Japanese local policy and an application for permission; note that permission must be refused if the Japanese market can supply an equivalent contract.
Separate the three questions: direct insurance of the Japanese risk; naming of the Japanese entity; cover for the parent's own interest. Record the answer to each.
Confirm who the applicant for each contract is, because the Article 337 exposure sits with the applicant.
Check every Japanese lease, customer, construction and loan agreement for insurance requirements and certificate language, and confirm which insurer's certificate the counterparty will accept.
Confirm the claims route in Japan for each contract: who adjusts, who negotiates, who is paid, in what currency.
Diarise renewals of any permitted contract, since permission is contract-specific.
Keep the documentation (licence check, exclusion analysis, permission file, counterparty confirmations) with the policy register.

How these rules play out for groups headquartered in particular countries, with their home-market vocabulary and habits, is covered in our articles on business insurance in Japan for US companies, Chinese companies and European companies.

How Nayuta Insurance Technologies can help

Nayuta Insurance Technologies is a Tokyo-based insurance agency whose corporate practice, Risk & Benefits, works with foreign-owned companies on the Japanese side of their insurance. We cannot give legal advice on the Insurance Business Act, and we do not arrange the parent's global program. What we do is the part that this article shows is usually required anyway: we take the parent's program documentation and the Japanese entity's leases and contracts, identify the exposures in Japan that need a Japanese policy, specify the cover in the terms a Japanese insurer needs, arrange the Japanese policies we are able to place, and keep the local schedule reconciled with the parent's program at each renewal. Our policy review service (Japanese) is the formal version of the first step. Communication with head office in English is supported on an email basis.

For transparency: in non-life insurance, Nayuta Insurance Technologies acts as an agent for a specific insurer. We do not operate a model of comparing and recommending products across multiple insurers, and we do not act as an insurance broker; where a broker's opinion is wanted for a permission application, that is a registered broker's function, not ours. Our policy on comparative recommendation (Japanese) sets out our position.

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Frequently asked questions

Is non-admitted insurance illegal in Japan?

Not in those terms. Article 186 of the Insurance Business Act prohibits, in principle, a foreign insurer with no branch in Japan from concluding contracts relating to persons resident in Japan, property in Japan or Japanese-flag ships and aircraft. Reinsurance, international transit cargo, overseas travel cover and certain marine and aviation risks are excluded, and the prospective policyholder may apply for permission before concluding a contract that is inside the rule. What Japan lacks is a surplus lines mechanism of the US kind.

Who is penalised if a Japanese subsidiary is insured abroad without permission?

Article 337 imposes a non-criminal fine of up to 500,000 yen on the person who applied for the contract without obtaining the permission required by Article 186(2). That is the applicant in Japan, not the foreign insurer. Beyond the fine, the practical risks are an uncertain claims position and counterparties refusing to accept the foreign policy as evidence of insurance.

Our global policy names our Japanese subsidiary as an insured. Does that solve the problem?

No. Naming is a matter of the contract's schedule; whether the contract relates to property or persons in Japan is a matter of the subject matter. If it does, the contract is within Article 186 regardless of the schedule. Naming also does not provide a Japanese certificate, a Japanese claims route or payment to the Japanese entity. A Japanese local policy is the usual answer, with the global policy checked for overlap and gaps.

Can we obtain permission for our head-office insurer to cover the Japanese entity?

Permission under Article 186(2) exists, is applied for by the prospective policyholder before the contract is concluded, carries a sixty-day standard processing period, accepts English documents without translation and allows a registered broker's opinion to be attached. It must be refused where an equivalent or better contract could easily be obtained from a Japanese-licensed insurer, so it is designed for contracts the Japanese market cannot supply, and it is granted contract by contract, including on renewal.

Does financial interest cover get around Article 186?

Financial interest cover insures the parent's own interest in the subsidiary and pays the parent abroad. Whether a given wording respects the line Japanese law draws, and how the parent's receipt and onward funding of the subsidiary are treated for tax, are questions for the insurer's legal team and a Japanese adviser. It does not give the Japanese entity a policy, a certificate or a claim paid in Japan, so it is not a substitute for a local policy.

Which parts of a global program can continue to cover Japan from abroad?

Those within the exclusions: reinsurance of a Japanese insurer (fronting), Japanese-flag ocean-going vessels and commercial aircraft with their cargo and liabilities, space risks, cargo in international transit while in Japan, and overseas travel cover for travellers. Property in Japan, persons resident in Japan and liabilities in Japan are inside the rule.

Primary sources

This article is a general explanation of Japanese insurance regulation for business readers and is not legal, tax or regulatory advice. It does not describe or promote any particular insurer, product, policy or endorsement. The application of the Insurance Business Act, its Cabinet Order and Ordinance to a specific contract should be confirmed with the Financial Services Agency or a qualified Japanese lawyer. In non-life insurance, Nayuta Insurance Technologies acts as an agent for a specific insurer; see our policy on comparative recommendation.