Japan’s regulators have rewritten the rulebook on cross-shareholdings, and the country’s listed insurers sit squarely in the blast radius. The Financial Services Agency and the Tokyo Stock Exchange have finalized the 2026 revision of the Corporate Governance Code, turning a soft comply-or-explain guideline into a holding-by-holding test insurers can no longer dodge.
The cost-of-capital test that ends the relationship defence
Under revised Principle 1.4, companies holding shares of other listed companies as cross-shareholdings must disclose their policy, including their plans to reduce those holdings. The more consequential change sits beneath that disclosure duty: boards must now assess whether the benefits and risks of each cross-shareholding cover the company’s cost of capital, and publish the results, holding by holding rather than as a single portfolio narrative. That shifts the burden of proof from a general story about strategic relationships to a line-by-line justification insurers must defend every year. The Code also closes a familiar escape route: companies are barred from discouraging a cross-shareholder from selling its stake, including by hinting at a reduction in business ties — the quiet pressure insurers have long used to keep client relationships intact while promising divestment on paper.
The approach mirrors a broader regulatory pattern insurers now face across jurisdictions: a similar shift from qualitative box-ticking to quantitative capital tests is already reshaping board agendas under Australia’s incoming prudential governance reset, and Japan’s insurers are being pulled into the same discipline through their equity holdings rather than their capital models.
Sompo’s own disclosures show what the test will find
Sompo Holdings, Japan’s most transparent non-life group on this question, offers a preview of the arithmetic regulators now expect from every Prime Market insurer. The insurer has committed to cut its policy-held stock balance to zero by the end of FY2030, and raised its Mid-Term Management Plan reduction target to more than ¥800 billion as of May 2025. It is running ahead of its own pace: in FY2024 Sompo reduced cross-shareholdings by ¥429.3 billion, more than double its original ¥200 billion target for the year. Those figures matter well beyond one company’s balance sheet — they are the closest thing the market has to a template for the cost-of-capital disclosures Principle 1.4 will now require industry-wide, and they demonstrate that a faster reduction pace is achievable at scale.
That discipline sits alongside a market where life and non-life earnings are already being tracked closely by the same regulator each fiscal year, giving the FSA a ready-made data trail against which to measure whether reduction promises turn into disposals.
Why insurer governance reports are about to look out of date
The catch is timing. Sompo’s own governance report, filed in April 2026, states that the group complies with all principles of the Code as revised in June 2021 — a statement that was accurate when it was written, because the 2026 revision did not yet exist. It is also a snapshot of how far the industry’s governance paperwork now has to travel. The rulemaking that supersedes it moved quickly: an Expert Panel chaired by Yuri Okina began reviewing the Code in October 2025, held its decisive third meeting on 3 April 2026, and opened the draft for public consultation between 10 April and 15 May 2026, drawing 147 comments from individuals and entities before the FSA and Tokyo Stock Exchange finalized the text.
Every insurer whose governance report still cites the 2021 Code now has a defined gap to close before its next annual filing — Sompo included, and by extension listed peers such as Tokio Marine, still riding the momentum of its overseas expansion, MS&AD and Dai-ichi Life, none of which have yet published a cross-shareholding cost-of-capital assessment under the new Principle 1.4.
Board independence tightens alongside the share disposals
The revision does not stop at shareholdings. Prime Market companies must now appoint at least one-third of their directors as independent directors with sufficient expertise, and those with a controlling shareholder must appoint a majority of directors independent of that shareholder — a provision detailed in the FSA’s revised principle on board composition. The Code also nudges the reporting calendar itself: it recommends filing annual securities reports at least three weeks before general shareholder meetings, giving investors more time to scrutinize cross-shareholding assessments before they vote.
For insurers already tightening board composition, the independence threshold adds one more governance metric that outside directors, proxy advisors and rating agencies will be tracking line by line. Sompo has paired its capital discipline with a parallel diversity commitment, targeting a ratio of female managers group-wide of 30% or more by 2030 — evidence that governance metrics are increasingly bundled together in how the market judges insurer boards, rather than assessed in isolation.
