There are no specific limitations focusing on insurtech start-ups. However, general limitations are applicable depending on shareholding ratio and business category of the target company.

An insurance company can invest in an insurtech start-up either as equity instruments or granting of loan.

An insurance company can only have subsidiaries or affiliated companies, which engage in specific businesses, listed under the Insurance Business Act ("Act No. 105 of 7 June 1995") (IBA).

Amendments to the Banking Act, which relax restrictions on the scope of business and will facilitate banks’ investment in fintech companies subject to the approval of the Financial Services Agency (FSA), became effective in April 2017. A similar relaxation of the IBA is expected.

An insurance company needs to obtain approval from the FSA when it acquires a subsidiary engaging in any specific businesses listed under the IBA.

In principle, an insurance company and its subsidiaries in aggregate cannot acquire more than 10% of shares in onshore companies engaging in businesses not listed under the IBA.

The aggregate amount of investment of shares and other form of investments or activities which provide credit listed under the Ordinance for Enforcement of the Insurance Business Act to be made to a specific person by an insurance company and its subsidiaries and affiliated companies in aggregate must not exceed 10% of the total assets of the insurance company and its subsidiaries and affiliated companies unless the FSA approves. This restriction does not apply in the case where an insurance company invests in shares in its subsidiary, which is an insurance company or holding company of which main subsidiaries are insurance companies.

An insurance company needs to obtain approval from the FSA when it acquires a subsidiary engaging in any specific businesses listed under the IBA.

If an insurance company is to acquire a holding company or a foreign financial institution, which has a foreign subsidiary or affiliated company engaging in businesses not listed under the IBA, the FSA's approval can be granted on such acquisition despite the aforementioned restriction. However, it needs to take necessary measures for making such out-of-scope subsidiary or affiliated company ceases to be a subsidiary or affiliated within five years from the acquisition date.

The aggregate amount of loan, guarantee and leased assets to be extended to a specific person by an insurance company and its subsidiaries and affiliated companies in aggregate shall not exceed 3% of the total assets of the insurance company and its subsidiaries and affiliated companies unless the FSA approves.

The investment in insurtech start-ups must be approved by the board of directors if such investment constitutes an execution of important operations, the applicability of which depends on the sizes of the insurance company and the target company.

There are various minority shareholders’ rights such as right to request convocation of shareholders' meeting, make a proposal for shareholders' resolution, bring a derivative suit and bring an injunction suit for illegal actions by directors and so on, with varying shareholding ratio requirements.

Also, if a person holds more than one-third of the shares in a company, the person will have blocking power on important shareholders' resolutions such as resolutions to amend the articles of incorporation, reduce the stated capital and implement entity conversions, mergers, company splits and share exchanges, as well as minority squeeze-outs.

Directors of insurance companies (in the case of companies with a committee governance structure under the Companies Act, executive officers) who work on a regular basis cannot work for other companies on a regular basis unless the FSA approves.

1. An insurance company cannot enter into a service contract with a connected party on terms and conditions that are significantly different from those applied to normal transactions, unless there is any compelling reason stipulated under the Ordinance for Enforcement of the Insurance Business Act and the FSA approves such transaction.
2. Please see section 9a regarding the approval from the FSA.

If entering into the service contract with the insurtech constitutes an execution of important operations, it needs to be approved by the board of directors.

From an insurance regulatory perspective, there are no disclosure requirements for related-party transactions.

As long as the requirement explained in section 9a is met, there is no other restriction.

Service fees payable by an insurance company is are permitted unless the terms and conditions are significantly different from those applied to normal transactions. Subject to the said arm’s-length requirement, profit sharing with an insurance company is not specifically prohibited.

Intellectual property rights are generally transferred through an assignment agreement. Transfer of certain intellectual properties such as patent right, utility model right, design right and trademark needs to be registered to take effect.

The main legislation is the Act on Protection of Personal Information ("Act No. 57 of 30 May 2003"). In addition to this act, there are various guidelines issued by different Japanese government agencies and industry groups. The guidelines that apply to the insurance sector are the Guidelines for Personal Information Protection in the Financial Sector ("Personal Information Protection Commission and FSA Notice No. 1 of 28 February 2017") and the Practical Guidelines for Security Control Measures Provided in the Guidelines for Personal Information Protection in the Financial Sector ("Personal Information Protection Commission and FSA Notice No. 2 of 28 February 2017").

The Comprehensive Guidelines for Supervision of Insurance Companies also have certain provisions regarding management of customer information.