Japan halts Prudential new business until 31 January 2027, demands oversight reforms
Key Facts
Japan's Financial Services Agency ordered Prudential of Japan to suspend insurance solicitation and the conclusion of contracts from 13 October 2026 until 31 January 2027, as part of measures covering the group's activities in Japan. The order exempts business approved by the agency to protect policyholders, according to the regulatory decision. Prudential Financial said the suspension at Gibraltar Life Insurance covers its insurance consultant channel. It added that Gibraltar's independent agent channel is exempt from the suspension. The measures do not cover other Prudential Financial and PGIM units in Japan, including Prudential Gibraltar Financial Life, according to the group's statement.
The regulatory order followed a voluntary suspension of sales at Prudential of Japan that began on 9 February 2026 for 90 days, according to an earlier group disclosure. The company later extended the voluntary suspension by an additional 180 days, according to its April update. Prudential of Japan acknowledged in a disclosure concerning the special investigation committee that the financial misconduct represented a structural problem arising from its management framework and business model. The Japanese agency also documented cases of unlawful transfers of customer data by sales employees who had left the company. The agency called for management accountability for the misconduct underlying the measures, including the responsibility of former board members.
The total amount associated with cases of improper financial dealings at Prudential Life covered by the initial disclosure was 3.08 billion yen, according to the group's formally filed compensation update. The main types of misconduct in cases eligible for compensation included borrowing money from customers. They also included promoting investments or referring customers to investments, according to the same disclosure. At Gibraltar, the Financial Services Agency identified shortcomings in reforming the sales commission system. The agency said the company continued to operate a compensation system heavily dependent on securing new contracts, as part of its findings on incentives governing the insurer's sales activities.
The reform demands extended to the group's Japanese holding company, which received a business improvement order from the Financial Services Agency. The order requires the holding company to strengthen oversight of its insurance subsidiaries, according to the regulatory decision. The agency called for a framework to ensure those companies' operations are managed soundly and appropriately, as part of the insurance holding company's responsibilities. Hiromitsu Tokumaru, chief executive of Prudential of Japan, said in the group's statement: "We are fundamentally reshaping the way we operate." Andy Sullivan, the group's chairman and chief executive, affirmed that Japan remains one of Prudential's most important markets and a pillar of its global business.
The group said Gibraltar had contacted more than 2 million customers in the months preceding the announcement of the regulatory measures. It affirmed in its statement that Prudential of Japan and Gibraltar remained financially sound. In earlier coverage of the fallout from the Japanese sales suspension, Investing reported in May that Morgan Stanley had downgraded Prudential Financial shares. The recommendation moved from equal weight to underweight, according to the report, which addressed pressures related to the Japanese business. The bank also cut its price target for the shares from $106 to $92, in a revision that preceded the October regulatory order.
The Financial Services Agency required the companies involved to submit business improvement plans by 30 November 2026, the deadline specified in its decision. It instructed them to begin implementing those plans immediately upon submission. It also required the preparation of the improvement plans at the two insurers to undergo review by external experts specializing in insurance and corporate governance. The external review also covers implementation of the plans, according to the Japanese agency's requirements. Prudential, for its part, intends to continue publishing quarterly updates on progress in compensating customers to enhance transparency, while the decision set 31 January 2027 as the end of Prudential of Japan's suspension of insurance solicitation and the conclusion of contracts.