Are types of insurers regulated differently (i.e. life companies, reinsurers)?
Insurance & Reinsurance
Life, non-life and reinsurance businesses are all subject to the Solvency II capital regime and in this respect are subject to the same regulatory structure. Because of the different nature of life and non-life business and the duration of liabilities for long-term business in particular, different rules will be applied to ensure that assets held to protect longer term liabilities are suitable. Sales of long-term investment products are subject to detailed requirements to ensure that customers are given as much information as possible before entering the contract. When an advised policy is sold to consumers, it must be done on the basis of a fee rather than commission.
Under FSMA reinsurers are treated as insurers unless a rule specifies that they are excluded or subject to an alternative approach. For example, reinsurers are excluded from rules on conduct of business as they deal with regulated entities.
Reinsurers are not specifically regulated in Swedish law, but instead fall under general legislation, such as the Contracts Act and Swedish Sales Act (SFS 1990:931), depending on the particular issue.
Life and non-life insurers’ business is primarily regulated in the Swedish Insurance Business Act (SFS 2010:2043), with separate rules regarding the life and non-life insurance companies’ business pursuits. Rules regarding, for example, the companies’ capital and solvency requirements take the specific needs of the different types of insurance companies and the needs of their respective customers into account, in order to provide the best possible conditions for both insurers and customers.
Life, non-life and reinsurance businesses are all subject to the Solvency II capital regime and in this respect are subject to the same regulatory structure established by the German Insurance Supervision Act and Commission Delegated Regulation (EU) 2015/35. Under the German Insurance Supervision Act, reinsurers are treated as insurers unless a rule specifies that they are excluded or subject to an alternative approach. For example, reinsurers are subject to a specific supervisory regime pursuant to section 169 of the German Insurance Supervision Act or special provisions regarding the transfer of a portfolio under section 166 of the German Insurance Supervision Act. These special provisions are normally not applicable for the reinsurance activities of “mixed” insurers.
For reinsurance undertakings from third countries, i.e. countries that are not EU or EEA member states, specific authorisation requirements apply, as detailed above.
All insurers (and reinsurers) in Norway are regulated in accordance with the Insurance Activity Act (2005:44) and the Financial Institutions Act (2015:17). With some minor exceptions they are all regulated in the same way. The Ministry of Finance and the Financial Supervisory Authority of Norway (FSAN) have granted minor exemptions from the regulations to some insurers on a case-by-case basis.
Foreign insurers operating in Norway on a cross-border basis or through a Norwegian branch mostly follow their home state requirements, except that all companies are subject to certain statutory Norwegian requirements, including, among other things, with respect to:
- Terms and conditions.
- Duties of disclosure towards policyholders.
- The keeping of accounts.
- Rights to profits accumulated in life insurance.
Insurance companies are regulated by the Insurance and Surety Companies Law (“LISF”). Reinsurance companies are insurance companies whose operations are limited to take or cede risks in reinsurance. Article 25 of the LISF classifies the following insurance operations and lines of business, each of which is subject to specific regulations:
I. Life operations.
These are insurance contracts that cover risks affecting the insured's existence.
II. Accidents and health operations.
These consist of:
- Personal accidents. Insurance contracts that cover injuries or disabilities affecting the insured's personal integrity or health;
- Medical expenses. Insurance contracts that cover medical, hospital and other expenses considered necessary for the recovery of the insured's health;
- Health. Insurance contracts that cover services to prevent and restore the insured's health.
III. Property and casualty operations.
These include the following lines of business:
- Civil liability and professional risks. Insurance contracts that cover indemnity payments that an insured must pay in favour of third parties, as a consequence of losses caused by specific situations;
- Maritime and transportation. Insurance contracts that cover indemnity payments for damages and losses suffered on cargo, vessels and other maritime assets;
- Fire. Insurance contracts that cover damages and losses caused by fire, explosion, fulmination or related accidents;
- Agriculture and animal. Insurance contracts that cover damages and losses suffered by the insured due to the partial or total loss of expected profits from land or by death, loss or damages of animals;
- Automobiles. Insurance contracts that cover damages and losses caused as a consequence of the use of automobiles;
- Credit insurance. Insurance contracts that cover the insured's losses suffered by total or partial insolvency of commercial loan debtors;
- Mortgage insurance. Insurance contracts that cover damages caused by breach of a mortgage loan debtor;
- Financial guaranty insurance. Insurance contracts that cover damages caused by breach of issuers of securities;
- Miscellaneous. Insurance contracts that cover damages and losses suffered by individuals or in property, caused by any other risk not contemplated in other lines of business;
- Earthquake and other catastrophic risks. Insurance contracts that cover damages and losses caused to individuals or property as a consequence of a non-predictable event.
As noted above, insurers writing different lines of business, particularly in the motor and life/health lines, are subject to differing sets of rules. Life insurers face certain restrictions pursuant to Resolution No. 3 of 2010 regarding their specific offerings, must adhere to additional prudential regulations with respect to funds that they accumulate on behalf of their policy holders, and are further regulated by the Federal Securities and Commodities Authority Resolution No. 9, of 2016 Concerning the Regulation of Mutual Funds, to the extent that they invest in funds related to their VUL products. Pursuant to the Insurance Law, no insurer may participate in both the life insurance and property insurance markets, but in practice this law has been suspended by IA resolution, and the current regulations in force (IA Resolution No. 10 of 2016) allow the joint practice, as long as separate business units are established that completely segregate these business lines, although composite financial statements are still required.
By contrast, reinsurers face little direct regulation of their product offerings, although they are required to comply with the IA prudential regulations as to their financial and data keeping matters.
Different kinds of insurers may be subject to different rules with respect to certain aspects of their business. For example, most state insurance laws differentiate between the reserving and financial requirements applicable to life, property/casualty and health insurers. Additionally, some states have separate rules for the payment of dividends and permissible investments by life and non-life insurers. Although the regulation of rates and forms varies among the states, life insurance rates are generally not regulated while rates for non-life personal lines insurance, such as health or automobile insurance, are more likely to be regulated by the insurance department. Life insurance policy forms generally must be approved before being sold, while some commercial property/casualty forms may be used without regulatory review. Certain specialty insurers, such as financial guaranty or title insurers, may be subject to additional and/or different insurance rules.
Reinsurers are subject to a number of the rules that apply to direct insurers, including licensure. However, some states have adopted rules allowing reinsurers that are “certified” or “accredited” – rather than licensed – to operate in such states. In addition, insurers may reinsure business to reinsurers that are not licensed, certified or accredited in their state of domicile if appropriate security is provided. The status of a reinsurer is an important factor in determining how much reinsurance credit a ceding insurer may claim without requiring the reinsurer to secure its obligations.
The VAG sets out the regulatory regime for insurance companies. On 1 January 2016, an updated version of the VAG came into force, implementing European Union Directive 2009/138/EC (Solvency II). The VAG regulates both insurance and reinsurance companies, but contains specific provisions and requirements depending on the type of insurances provided by the insurance undertaking.
As mentioned under Question 1, the VersVG does not apply to reinsurance contracts.
Yes. Although most of the insurance regulation is of general application, there are specific regulations applicable to life insurance companies, non-life insurance companies and reinsurance companies. Therefore, different kinds of insurers will have to comply with regulations that specifically apply to their type of business, e.g., different kinds of capital requirements, different solvency margins, different debt/financial ratios and maximum levels of indebtedness, etc. Furthermore, Chilean regulations require insurance companies to have an exclusive business purpose and can only write the type of insurance they were authorised to do so by the Insurance Regulator, i.e., life insurance or non-life insurance.
Insurance companies that do life insurance business may not conduct other lines of insurance business, except for health and accident insurance, Art 12 ISA. 36.
Reinsurance companies are exempt from certain provisions of the ISA in accordance with art 35 LAS. The other provisions apply accordingly to Swiss reinsurers.
For life insurance companies, certain additional provisions regarding the maximum guaranteed interest rate, tariff calculation, surplus participation, surrender values and information duties apply, Art 36 ISA in connection with Art 120 et seqq. ISO. Further details are set out in FINMA Circular RS 2016/06.
Collective life insurance in connection with occupational schemes is subject to further regulation in accordance with Art 37 ISA, in connection with Art 137 ISA. In particular, these provisions require separate accounting for this particular type of life insurance. Art 4 para 2 lit r ISA requires, in addition, that tariffs and terms and conditions for life insurance in connection with occupational schemes are subject to FINMA’s in advance approval.
The General Law regulates in a similar way the different types of insurers: insurance companies of a single branch, insurance companies of both branches (property and life) and reinsurance companies. The main regulatory difference between the different types of insurers is the minimum capital requirement, which varies according to the type of company in the insurance system.
Yes, the IRDAI issues specific regulations/guidelines/circulars which govern the establishment, licensing and functioning of life insurers, general insurers, health insurers, Indian reinsurers and foreign reinsurers, including branch offices of foreign reinsurers set up in India under the IRDAI (Registration and Operations of Branch Offices of Foreign Reinsurers other than Lloyd’s) Regulations 2015 (Branch Offices of Foreign Reinsurers) and syndicates of reinsurers operating through service companies set up in India under the IRDAI (Lloyd’s India) Regulations 2016 (Syndicates of Lloyd’s India).
There is no distinction in the regulation of different types of insurers such as life insurers or reinsurers. However, there is a distinction between licensed insurers or foreign insurers in Singapore. Insurers and reinsurers with an establishment in Singapore must be licensed. These insurers are able to carry out the business of direct life and/or general business, life and/or general reinsurance business as well as captive insurance. Foreign insurers authorised to carry on insurance business in another jurisdiction may operate in Singapore under one of two foreign insurer schemes established under Part IIA of the IA, i.e. The Lloyd's scheme and the Lloyd's Asia Scheme.
General insurance companies are regulated by general insurance legislation (Brazilian Civil Code and Decree 73/1966), while specialist health insurers also have to comply with specific statutory provisions, and the rules of specific supervisory bodies, such as the National Supplementary Health Agency (ANS). Reinsurance is subject to specific legislation, enacted in 2007, which regulates the different types of reinsurers.
The law, regulations and circulars are addressed to Israeli Insurance Companies which operate in Life and Non-Life branches. The laws relating to activities of insurance companies i.e. The Contract Law and the Control Law are territorial laws and apply only to companies registered in Israel.
There is no difference between the regulation that applies to life insurance companies and to non –life insurance companies.
Currently there are no reinsurance companies registered in Israel.
Yes, they are. The Supervision Act provides that non- life insurance undertakings are not allowed to simultaneously exercise life insurance activities (article 222). However, and by means of an exception, insurance undertakings which already simultaneously exercised non-life and life insurance activities on 15 March 1979 are allowed to continue such activities (article 223).
Secondly, in respect of reinsurers, Articles 18, 19 and 34 of the Supervision Act authorise a combination of insurance and reinsurance activities, subject to the condition that those activities are exercised by means of the required permissions set out in the said articles. The licence for insurance undertakings may be combined with the licence for reinsurance undertakings within the boundaries set by the National Bank of Belgium (‘NBB’) (Article 18). Each insurance or reinsurance undertaking must ask for an extension of its licence prior to extending its insurance or reinsurance activities respectively (Article 19).
Insurance undertakings must limit their statutory objective to insurance activities, whilst reinsurance undertakings must limit their statutory objective to reinsurance activities (Article 34).
Insurers (whether life or non-life) and reinsurers are governed by a similar regulatory regime, in particular from a licensing and financial/ capital requirements perspective (e.g. solvency requirements under Solvency II as transposed in France apply to all types of insurers and reinsurers if they meet the Solvency II criteria).
However the regime applicable to reinsurers is generally more relaxed as reinsurers deal with regulated entities (e.g. most of the conduct of business rules will not apply to reinsurers) and the regime applicable to life insurers is tailored to the different nature of life and non-life business and the duration of liabilities for long-term business in particular. In addition, sales of life policies and long-term investment products are subject to specific requirements to ensure better information and protection of customers.
Both the Federal Government and most provinces have legislation allowing for the constitution of insurers. The jurisdiction that incorporates an insurer is primarily responsible for its governance, solvency and oversight but, while most domestic and all foreign insurers in Canada now answer to the federal regulator, all insurers, whether domestic or foreign, federal or provincial, are subject to provincial and territorial law and licensing to carry on any insurance or reinsurance activities in a province or territory. While most requirements apply to all insurers, there are different requirements (for example, as to capital or powers) for life and for property and casualty insurers. Reinsurers are generally regulated and subject to the same requirements as insurers although a few jurisdictions, such as Alberta, do have particular rules pertaining to reinsurance. In addition, a foreign insurer wishing to insure risks in Canada must first obtain approval from the federal Minister of Finance (Canada) and the Office of the Superintendent of Financial Institutions (OSFI) to either set up a local insurer subsidiary or to operate as a branch (both options are available under the federal Insurance Companies Act). Canadian insurance regulators (whether OSFI or the provincial or territorial Superintendents of Insurance, or equivalent), generally prescribe certain conditions for a domestic insurer to take capital credit for reinsurance of its risks with non-approved foreign reinsurers, such as maintaining capital equivalent assets in Canada under a reinsurance security agreement.
Prior to the implementation of Solvency II through the 2015 Regulations, distinct regulations governed the activity of life insurance, non-life insurance and reinsurance in Ireland. The 2015 Regulations now provide a uniform regulatory framework for each type of business and the Central Bank adopts a consistent approach in its supervision of these entities. However, given the difference in the nature of business carried on by each distinct insurer, the 2015 Regulations, together with the Insurance Acts 1909-2011, do make certain distinctions between the carrying on of non-life insurance, life insurance or reinsurance business.