This country-specific Q&A provides an overview to insurance and reinsurance laws and regulations that may occur in Norway.
This Q&A is part of the global guide to Insurance & Reinsurance (3rd edition). For a full list of jurisdictional Q&As visit http://www.inhouselawyer.co.uk/practice-areas/insurance-and-reinsurance-3rd-edition
How is the writing of insurance contracts regulated in your jurisdiction?
Insurance contracts will be subject to general principles of Norwegian contract law, including the provisions of the Norwegian Contracts Act. While parties are free to agree the terms that will apply to their contract, their freedom of contract may be limited by the provisions of the Norwegian Insurance Contracts Acts, which is generally of mandatory application to contracts of insurance.
The provisions of Part B (Life Insurance) of the Insurance Contracts Act may not be contracted out of to the detriment of insureds. The provisions of Part A (Non-Life Insurance) may be contracted out of, other than in respect of an injured third party's direct right of action against an insolvent tortfeasor's liability insurer.
It should be noted that the right to contract out of the remaining provisions of the Insurance Contracts Act applies only to the extent the insured entity is a commercial insured; i.e. entities satisfying two of the following three conditions:
- having more than 250 employees;
- having sales income of at least NOK 100 million; or
- having assets of at least NOK 50 million.
The commercial insureds exception also applies to entities whose operations take place mainly abroad, or where the insurance relates to shipping, aviation or international transport.
It is important to note that even where the ICA has been contracted out of under the commercial insureds exception, the ICA's terms will still apply where a policy is silent on an issue that is regulated by the ICA.
Finally, the Norwegian courts have the power to amend the terms of insurance contracts on a case-by-case basis out of reasonableness considerations under the Norwegian unfair contract terms regulations contained in section 36 of the Norwegian Contracts Act, although there is little case law on this and in non-consumer insurance the threshold for applying section 36 is extremely high.
Are types of insurers regulated differently (i.e. life companies, reinsurers?)
Yes. There are separate licences for different types of insurance undertakings. Non-life and life insurance activities cannot be carried out by the same undertaking, as an entity may only obtain a licence to perform one type of insurance activity. Separate rules apply to non-life insurance companies and life insurance companies and credit insurance companies as set out in the Financial Undertakings Act and pertaining regulations. Reinsurance is a separate licence, however, there is no separate legal basis for it and it will rely on the licence requirements applicable for the underlying insurance activities. Note that there is access to perform reinsurance activities for a non-life, life and credit insurance undertaking under certain terms and restrictions.
Are insurance brokers and other types of market intermediary subject to regulation?
All insurance intermediaries in the Norwegian market such as brokers and insurance agents are subject to regulations set out in the Act on Insurance Mediation as of 10 June 2015. The establishment, operations and supervision of insurance intermediaries' businesses are also governed by specific regulations, recommendations and guidelines issued by the Norwegian Financial Supervisory Authority (the "NFSA"). The Insurance Distribution Directive of 2016/97/EU will be implemented in Norway through a new Norwegian act with accompanying regulations.
Is authorisation or a licence required and if so how long does it take on average to obtain such permission?
Providing insurance services in Norway requires a licence. A distinction is made between insurers, including reinsurers, taking on the risks insured, and insurance intermediaries. There are corporate entities in Norway that offer low value non-life insurance products, as an addition to their regular business, which falls outside of the insurance mediation regulation by exemption.
Norway is not a member of the European Union, but of the European Economic Area (the "EEA") made up of the EU, Norway, Iceland and Liechtenstein forming a single market. Within the EEA there is what is known as a single passport system. This means that an insurer can be authorised to do business in one member state and then offer their insurance products and services across the region without having to be separately authorised in each country. Under this system an insurance company can provide services by offering them from its home state (within the EEA) to a customer in another EEA country (whether online or by telephone). Alternatively, it can establish a branch abroad.
A non-EU undertaking may apply for a Norwegian licence to conduct insurance activities through the establishment of a Norwegian subsidiary. Further, a licence may be restricted to a certain geographical area, a categorisation of clients or in other ways. A licence may be restricted to certain insurance classes, e.g. accident insurance, motor vehicles, liability etc.
An application is to be considered and decided by the NFSA within a period of 6 months from the date the NFSA confirmed receipt of the application provided that the application was complete. The regulator may ask for further information and the assessment period will be prolonged. However, the application must be decided conclusively within 12 months from the date of submission. In practice, it takes 6 to 8 months to obtain a licence, although this often depends on the extent of the NFSA's work load.
The activities of an insurance broker requires a licence from the NFSA, as opposed to act in the capacity as an insurance agent. An insurance agent is appointed by the insurer and acts fully under the responsibility of the insurance undertaking. Upon registration of the insurance agent in a publicly available register, the insurance agent is given the authority to mediate the insurer's products.
Are there restrictions or controls over who owns or controls insurers (including restrictions on foreign ownership)?
There is a pre-approval requirement to acquire a qualified holding of an insurance undertaking as set out in the Financial Undertakings Act. If the acquirer becomes the owner of a qualified holding (i.e. reaches or exceeds 10% , 20%, 30% or 50% respectively), the acquirer needs to be approved by the NFSA, or alternatively, the Ministry of Finance in matters of importance. The owner of a qualified holding will be subject to a fit and proper assessment. In general, an acquire must be reassuring and financially equipped to hold the position. We also have provisions about the allocation of ownership applicable to insurance undertakings. There is no specific restriction on foreign ownership under Norwegian law.
Is it possible to insure risks in your jurisdiction without a licence or authorisation? (i.e. on a non-admitted basis)?
Yes, foreign insurers may lawfully cover risks in Norway, but importantly they are not allowed to market their products and operate in the Norwegian market. An insurer with home state in another EEA member state may market their products on a freedom of services basis and passport its licence through their home state regulator into Norway.
What penalty is available for those who operate in your jurisdiction without appropriate permission?
Operating without the appropriate authorisation will be considered a violation of the act and such actions may be punished with fines or imprisonment for up to one year as set out in the Financial Undertakings Act section 22-1. Based on our experience, to the extent the insurer subject to supervision by the NFSA fails to comply with the legal requirements, the NFSA may order the insurer to take corrective actions and/or order the undertaking to cease its activities. The NFSA may also revoke the authorisation to carry out insurance business.
How rigorous is the supervisory and enforcement environment?
We would not describe the supervisory environment for the insurance sector as rigorous in Norway. To our knowledge, the NFSA has not yet withdrawn a licence of an Norwegian licensed insurer, but there is a few cases for insurance intermediaries. We are not familiar with issuance of fines or other enforcement actions in the insurance sector initiated by the NFSA. We expect to see an increase in the number of fines issued by the NFSA related to the anti-money laundering obligations due to provisions set out in the 4th AML directive in the years to come.
How is the solvency of insurers (and reinsurers where relevant) supervised?
In addition to the insurers' own supervision and their self-reporting-obligations, the NFSA supervises insurers' and reinsurers' solvency through risk assessments based on the state of the financial markets and the financial system as a whole, as well as continuous risk assessments of individual insurance undertakings. The monitoring of individual insurers focuses on governance and risk management, capital situation, products and behaviour towards customers, and is based both on the information that companies are obliged to report to the NFSA themselves, as well as carrying out their own investigations by reviewing random sample groups and following up tips about irregularities.
What are the minimum capital requirements?
The insurers will be subject to capital requirements, including start-up capital and liable capital as well as liquidity requirements. In particular, as a minimum, an insurer must have an initial start-up capital in NOK equivalent to:
a. EUR 3,700,000 for life insurance undertakings,
b. EUR 2,500,000 for other insurance undertakings, increasing to 3,700,000 if the undertaking has assumed liability insurances for vehicles, aviation, ships or other liability insurances, or credit or guarantee insurances, and
c. EUR 3,600,000 for reinsurance companies, unless exempted.
In addition to this, there are specific requirements for liable capital under Norwegian law.
Is there a policyholder protection scheme in your jurisdiction?
The policy protection scheme in Norway is the Norwegian Non-Life Insurance Guarantee Scheme (the "Guarantee Scheme"). The purpose of the scheme is to ensure coverage of insurance claims filed under insurance contracts on direct non-life insurance, to the secured and injured party. The task of the Guarantee Scheme is to cover claims from policyholders in insurance undertakings which are placed under public administration and which are members of the Guarantee Scheme, provided that the claim falls within the scope of coverage of the Guarantee Scheme.
How are groups supervised if at all?
The EU Solvency II Directive sets out specific regulations for groups, and has been implemented in Norwegian law through the Norwegian Act on Financial Institutions and Undertakings of 2015 and the Norwegian Solvency II-regulation of 2016. The Solvency II-regulation sets out the circumstances in which group supervision is triggered. Insurance groups are subject to supplementary supervision in addition to the regular supervision of insurance companies. Insurance groups are subject to specific requirements with regard to consolidation of solvency, reporting of risk on a group level to the NFSA, risk assessment and internal audit, market reporting and disclosure of group structure.
Do senior managers have to meet fit and proper requirements and/or be approved?
The board and the management in an insurance undertaking will be subject to a fit and proper assessment and it shall be made as part of the handling of the licence application. Any subsequent changes to the senior managers must be reported to the NFSA. The fit and proper assessment will be based on completed suitability forms and certificate of good conduct, as well as other publicly available information. There is also fit and proper requirements applicable to the management of the insurance intermediaries.
Are there restrictions on outsourcing parts of the business?
The insurers may outsource parts of their business to third parties. There are however certain restrictions on outsourcing of business and as a main rule these restrictions also apply when outsourcing to entities in the same group. Pursuant to the Norwegian regulation the core parts of the business may not be outsourced, cf. Financial Undertakings Act section 13-4. Outsourcing is only allowed to the extent that it is done in a way that is considered justifiable and/or does not makes the supervision of the outsourced business or the total business difficult. The insurer is always responsible for the outsourced activities. There is an obligation to notify the NFSA in advance of the outsourcing unless an exemption applies. The duty to notify follows from the Norwegian Act on Financial Supervision section 4c.
How are sales of insurance supervised or controlled?
As a main rule the NFSA supervises and controls sales of insurance. In addition to this, consumer protection is carried out through the Norwegian Consumer Advisory Council and Consumer Supervision Authority. Consumers also have the possibility to file complaints concerning insurance companies and policies to the Norwegian Financial Services Complaints Board.
Marketing and sale of insurance are subject to a number of Norwegian regulations. Certain general requirements for sales are set out in the Financial Institutions Act of 2015 chapter 16, which includes provisions regarding information obligations to the purchaser, pricing, product packaging and terms and conditions. Marketing is regulated in the Norwegian Marketing Act, and insurance agreements are covered and supplemented by the Norwegian Act on insurance Agreements of 1989.
The Norwegian Act on Insurance Distribution of 2005 also sets out specific provisions for sales that are done through an insurance broker or insurance agent.
Are consumer policies subject to restrictions? If so briefly describe the range of protections offered to consumer policyholders
Consumer policies are subject to several restrictions under the Norwegian Insurance Contracts Acts (the ICA). The ICA is in general of mandatory application to contracts of insurance for the protection of whoever holds a right against the insurance company under the insurance contract, primarily the insured. Regulations to protect the insured includes provisions imposing strict information requirements on the insurance company, provisions relating to the right of cancellation and restrictions on the company's right to change the terms of the insurance contract in the period of cover.
As stated under question 1, the Norwegian courts also have the power to amend the terms of insurance contracts on a case-by-case basis based out of reasonableness considerations under the Norwegian unfair contract terms regulations contained in section 36 of the Norwegian Contracts Act. Thus, a consumer policy might be amended by the court if a contract term is considered unreasonable to the detriment of the consumer. However, as stated under question 1 there is little case law on this.
Are the courts adept at handling complex commercial claims?
In general the courts are adept at handling complex commercial claims. However, judges in Norway are generalists and there are no specialist, commercial courts. Thus, in complex commercial claims, arbitration is sometimes used as an alternative to litigation. In general the higher instances are more adept than the court of first instance at handling complex commercial disputes. In practice this means that many commercial disputes are only resolved at appeal court level.
Is alternative dispute resolution well established in your jurisdictions?
Alternative dispute resolution is well established in Norway. Arbitration and mediation, as well as court-sponsored mediation, are frequently used as alternatives to ordinary litigation.
In addition, the Conciliation Board is in some circumstances the venue of first instance instead of the District Courts. The Conciliation Board consists of lay judges who facilitate discussions aimed at achieving settlement. Cases must be commenced in the Conciliation Boards in claims valued at less than NOK 125,000 or if one of the parties is not represented by a Norwegian lawyer (irrespective of the value of the claim).
Insurance disputes may also be referred to the Financial Complaints Board, which is a quasi-judicial body with highly specialised members and which offers a low-cost alternative to proceedings in the Norwegian courts. Decisions of the Financial Complaints Board are not binding. However, the parties will normally accept the Board's findings.
What are the primary challenges to new market entrants?
The Norwegian insurance market is a highly regulated market, and thus compliance could be a challenge to new market entrants. Another challenge is the tough competition due to a few, large domestic actors that hold more than 70 per cent of the market shares. The Norwegian insurance market is quite saturated, and it is hard to take market shares without acquisitions. However, recent years a few other actors have entered the market, and some of the smaller insurance companies have grown.
To what extent is the market being challenged by digital innovation?
Our general impression is that the insurers are focused on digitalisation and improvement of the customer journey. Norway has been in the forefront of digitalisation and almost all Norwegians have access to secure digital identification online through BankID, which provides the basis for digital service offering. At the same time we do not see a lot of genuine innovation in the insurance sector in Norway. There is a few examples of new concepts and players, but overall it is still early days when it comes to insurtech in Norway.
Over the next five years what type of business do you see taking a market lead?
Transactional insurance products (including Warranty & Indemnity insurance), are becoming increasingly popular.
In view of the increased threat of cyber-attacks, insurers offering cyber insurance products (including products where insurers offer services to help insured guard against attacks and losses in the first place) are sought after in all market segments. Perhaps the area in most need of such products and where insurers could take a market lead is the medium and small business section where there is little or no in-house IT capability. Cyber insurers offering such tailored products over the next five years will probably be in a position to take the market lead.
Another growing trend worth mentioning is the domestic Norwegian insurers' tendency to focus on personal insurance products, whilst special risks products are increasingly becoming the domain of foreign insurers. This is probably a trend that will continue for the next five years as well.