What penalty is available for those who operate without appropriate permission?

Insurance & Reinsurance

Ireland Small Flag Ireland

An insurance or reinsurance undertaking, which operates in Ireland without the requisite authorisation from the Central Bank commits an offence under the 2015 Regulations. Where an offence is committed by an undertaking, and it can be proven that the offence was committed with the consent or connivance, or was attributable in any way to the wilful neglect of a person in management of the undertaking, the Central Bank has the power prosecute the relevant person, as well as the undertaking. Therefore, a director, manager, secretary, other officer of the company or any person purporting to act in that capacity could be subject to prosecution from the Central Bank for the unauthorised operations of an insurance or reinsurance undertaking.

The penalties which can be imposed by the Central Bank will depend on the seriousness of the offence. If convicted of a summary offence (ie a more minor offence) the undertaking and / or relevant person is liable to a fine not exceeding €5,000 or to imprisonment of a term not exceeding 12 months, or to both. On conviction on indictment (ie a more serious offence, which operating without a licence most likely constitutes) the undertaking and / or relevant person is liable to a fine not exceeding €500,000 or to imprisonment for a term not exceeding 3 years, or to both.

If an undertaking continues to operate in Ireland without authorisation, the undertaking and / or relevant person will be guilty of an offence for each day on which the contravention continues and liable for a fine of €500 for each such offence.

United Kingdom Small Flag United Kingdom

It is a criminal offence to undertake a regulated activity in the UK without permission, punishable by up to two years imprisonment or a fine. An agreement entered into without permission is unenforceable by the business in contravention of the prohibition against the other party. A policy entered into by an unauthorised insurer is void at common law, accordingly the insured would be entitled to recover premium paid and can recover compensation for any loss sustained as a result of entering into a contract with an unauthorised business. There are limited exceptions that allow the contract to be upheld where just and equitable to do so.

Sweden Small Flag Sweden

If an insurer or reinsurer falling under the FSA’s supervision fails to comply with the legal requirements, the FSA may:

  • order the insurer/reinsurer to take corrective actions,
  • impose limitations on (or prohibit) the disposal of the insurer's/reinsurer's assets in Sweden,
  • impose fines up to SEK50 million, or
  • revoke the authorisation to carry out insurance business. If the authorisation is revoked, the insurer may also be forced to enter into liquidation.

If an entity carries out insurance business without authorisation, the FSA can order the entity to cease its activities under penalty. Any ‘insurance contracts’ issued by such an entity are also deemed unenforceable, making the entity liable to return any received money as well as compensating any losses suffered by the ‘insureds’.

Germany Small Flag Germany

It is a criminal offence to conduct insurance business in Germany without a required authorisation, punishable by up to five years imprisonment or a fine pursuant to section 331 (1) No. 1 of the German Insurance Supervision Act in case of intentional misconduct. Where the lack of authorisation is due to negligence, the breach is punishable by up to three years imprisonment or a fine. BaFin may, among other things, impose the cessation of the business operations with immediate effect and the winding-up of the insurance business conducted pursuant to section 308 of the German Insurance Supervision Act. A policyholder who has entered into an insurance contract with an insurer operating without a licence is normally entitled to claim damages suffered and/or terminate the insurance contract at its discretion with immediate or retroactive effect.

Norway Small Flag Norway

The penalty stipulated in the Financial Institutions Act for violation of the permission requirements is fines or imprisonment of up to one year. A fine in accordance with the corporate penalty provisions may be set at a considerable amount viewed in light of the gravity of the relevant circumstances.

Stricter reactions on a personal level might apply dependent on an evaluation of the scope and extent of the illegal business, pursuant to regulations in the penal act.

The penal sanctions for intermediaries are similar to those for insurance providers, fines or imprisonment of up to one year. Corporate penalties may also apply.

Mexico Small Flag Mexico

The CNSF has authority to suspend the operations or intervene companies or establishments that carry out insurance activities without a license. According to article 495, those breaching articles 20 and 23 of the LISF and practicing active insurance operations without a license or acting as intermediaries in insurance operations performed without a license, may be subject to up to 15 years of imprisonment and a fine of up to 20,000 and those offering directly or as intermediaries insurance without a license may be subject to up to 10 years of imprisonment and a fine of up to 10,000.

Such conduct constitute criminal liability on the part of (i) the non-admitted foreign insurer; (ii) the insurance intermediaries (broker or agent); and (iii) the officers, managers, directors, representatives and agents of the entities referred to in (i) and (ii).

In the case of those conducting Insurance Mediation Activities without a license may be subject to a fine of up to approximately US$ 7,080.

UAE Small Flag UAE

The Insurance Law provides that anyone who engages in insurance activity in the UAE without the appropriate license may be punished by a fine of between 250,000 Dirhams and 1,000,000 Dirhams.

Additionally, HAAD and DHA may issue fines to its permit holders for conducting insurance related business with an unlicensed entity. For example, a HAAD fine can be up to 20,000 Dirhams, and it is not unheard of for these fines to be assessed on a per transactional occurrence basis. Thus, the fines can reach extremely high levels in cases where the licensee has a pattern of engaging in market activities with unlicensed entities.

United States Small Flag United States

A person or entity without an insurance license that conducts insurance activities that require a license is usually subject to monetary penalties imposed by the state insurance commissioner. State laws may empower the commissioner to enforce monetary penalties by resorting to the courts of the state or directly by the state insurance agency. The insurance laws of some states provide that certain insurance violations constitute criminal violations.

Austria Small Flag Austria

The FMA can penalise entities that conduct insurance business in Austria without the appropriate permission with a fine of up to EUR 100,000 (cf. Article 329 VAG). Furthermore, the FMA will prohibit those operating without a valid license from issuing further insurance contracts and force them to terminate existing contracts.

Chile Small Flag Chile

The penalties for carrying out insurance or reinsurance activities, without being duly authorised to do so, may include, the shutdown/closing of the offices or premises were the unauthorised insurance activities were carried out and the termination and liquidation of the unauthorised insurance operations, among others.

Furthermore, the representative of the foreign entity performing the unauthorised activity may be even sanctioned with jail time (between 61 to 301 days).

Those who act as insurance brokers, reinsurance brokers, sales agents, and loss adjusters, without being listed in the Registries as required by law or whose registration has been suspended, eliminated or revoked, and those who have knowingly enabled them to do so, shall be punished with fines of between 20 and 200 monthly tax units (approximately USD 1,415 to USD 14,150).

Switzerland Small Flag Switzerland

Those who intentionally conduct insurance business in Switzerland without appropriate authorisation may be penalised by imprisonment of up to 3 years. In case of negligence, a fine of up to 250 000 Swiss Franc can be imposed, Art 44 FINMASA.

Peru Small Flag Peru

Those operating without the appropriate authorization will be subject to administrative sanctions up to 200 Tax Unit (UIT) and criminal penalties (crimes against the financial and monetary order).

India Small Flag India

A person carrying out direct insurance business in India without valid registration is liable to a penalty of up to INR 25 crores (c. US$ 3,750,000) and imprisonment for a term up to ten years.

A person acting as an insurance intermediary (including an insurance broker) without being registered is liable to a penalty of up to INR 10 lakh (c. US$ 15,000). In addition, the appointment of an unlicensed person to act as an insurance intermediary is punishable with a penalty of up to INR 1 crore (c. US$ 150,000).

Singapore Small Flag Singapore

Section 2 of the IA provides that an unlicensed or unauthorised insurer carrying out business in Singapore shall be guilty of an offence and shall be liable on conviction:-

  • In the case of an individual, to a fine not exceeding $125,000 or to imprisonment for a term not exceeding 3 years or to both, and in the case of a continuing offence, to a further fine not exceeding $12,500 for every day or part thereof during which the offence continues after conviction; or
  • in any other case, to a fine not exceeding $250,000 and, in the case of a continuing offence, to a further fine not exceeding $25,000 for every day or part thereof during which the offence continues after conviction.

Brazil Small Flag Brazil

Individuals or legal entities that engage in insurance or reinsurance operations without proper authorization are subject to the payment of a substantial fine, imposed on the company and its directors, without prejudice to other penalties such as the dissolution of the company, if incorporated in Brazil, payment of damages to third parties and possible criminal prosecution in the event of damage to the local/national economy.

Israel Small Flag Israel

Performing activities as an insurance company in Israel (i.e. soliciting, marketing, publicizing) is a criminal offence. The punishment can be imprisonment for 3 years and a substantial fine.

Belgium Small Flag Belgium

(Re)insurance undertakings performing their activities in Belgium without a licence are subject to a prison sentence of one month up to one year and a fine of 50 EUR up to 10,000 EUR or to only one of those penalties (Article 605 of the Supervision Act).

(Re)insurance intermediaries operating in Belgium without being registered and acting with fraudulent intent are, except in the case of more severe penalties included in the Criminal Code, punished by means of a prison sentence of 8 days up to 3 months and with a fine of 200 EUR up to 2,000 EUR or with one of those penalties alone. If an intermediary is convicted because s/he operated without the appropriate registration, the final or temporary closing of part of or the entire premises used for the exercise of the intermediary’s activity may be ordered. In the absence of fraudulent intent, a fine of 1 up to 25 EUR will be imposed (Article 308, §1 of the Insurance Act).

The prosecuting authority must prove the existence of fraudulent intent.

France Small Flag France

The carrying on of insurance/reinsurance business in France without authorisation is a criminal offence punishable by a fine of up to EUR 75,000 multiplied by five (EUR 375.000) for legal entities and a 3-year prison sentence. In some cases, legal entities that engage in illegal insurance activities may also face a prohibition to conduct business either definitively or for a maximum period of five years.

When an individual commits the above mentioned offense, the publication of the decision may be ordered as an additional penalty.

An insurance policy issued by an entity which is not duly authorised as an insurer will be considered null and void, with the exception that such nullity cannot be raised as against the policyholder or insured acting in good faith.

The ACPR may impose administrative sanctions which range from a warning or a reprimand to the prohibition of carrying on insurance/reinsurance business or the partial or complete withdrawal of licence. The sanctions may be made public in any publications, newspapers or media it may wish to use.

Insurance/reinsurance intermediaries can be subject to a 2 year prison sentence and/or a fine of EUR 6,000 in case of breach of provisions relating to registration obligations, professional capacity and good repute, professional indemnity insurance and/or subscription of a financial guarantee.

Insurance intermediaries introducing, proposing or assisting in the conclusion of insurance contracts with an insurance undertaking which is not authorised to carry on business in France can be subject to a EUR 3,000 fine for each contract concluded, capped at EUR 6,000.

Canada Small Flag Canada

At the federal level, the ICA prescribes fines that can be considerable, and possible imprisonment. Provincial sanctions consist of generally more moderate fines. Officers, directors and agents of entities who authorize or assent to the commission of the offence are also liable and subject to penalties.

Updated: March 16, 2017