Are there restrictions or controls over who owns or controls insurers (including restrictions on foreign ownership)?
Insurance & Reinsurance (3rd edition)
There are restrictions on the corporate control group of insurers and reinsurers only as in terms of technical and economic-financial capacity. There is no restriction on foreign capital.
It is important to mention that mandatory insurance covering risks in Brazil, taken out by individuals resident in Brazil or legal entities that are domiciled here, can only be issued in Brazil itself. The rule does not apply to insurance taken out by Brazilian citizens to cover risks abroad. In general terms, there are no additional requirements imposed on foreign insurers seeking authorisation to operate in Brazil. In relation to reinsurance, the legislation issued post-2007 ended the state monopoly on reinsurance and permitted the entry of new national and foreign reinsurers.
Even though there is still (to some extent) a reserved market for local reinsurers (albeit a declining one), a significant amount of risk is placed on the international market via reinsurers that have been authorised to operate in Brazil (i.e., foreign capital reinsurers that have a branch in Brazil and are subject to some additional requirements) and “eventual” reinsurers (i.e., foreign capital reinsurers that are not subject to additional requirements other than a minimum rating).
Information regarding persons holding at least 10 per cent of the shares in an insurance company has to be submitted to FINMA during the authorisation process for approval. Anyone who intends to acquire a participation in an existing Swiss insurance company has to inform FINMA if such participation reaches 10, 20, 33 or 50 per cent of the share capital or the voting rights of such company. The same notification duties apply if an existing participation is reduced, Art 21 para 2 and 3 ISA. FINMA is authorised to restrict participation if it might endanger the insurance company or the interests of the insureds, ISA 21 para 4.
In South Korea, the Act on Corporate Governance of Financial Companies (“ACGFC”) together with the IBA are the main laws that are applied for the ownership and control of insurers. In particular from the insurance perspective, the ACGFC focuses on and defines “Large Shareholder(s)” whether domestic or foreign. As a Large Shareholder, there are qualifications, conditions and restrictions to be complied with when a subsidiary is formed for purposes of establishing a new insurer and reporting obligations in terms of any changes in control of the existing insurer such as disclosure of the shareholding relationship, sufficient investment capabilities, and other conditions as set out in the Enforcement Decree to the IBA. Any changes in control of an insurer require prior FSC approval who will undertake an examination of the eligibility of the Large Shareholder in accordance with the qualifications, conditions and restrictions under the ACGFC. In the event that the Large Shareholder fails to satisfy and/or maintain the legal requirements, then it shall promptly report the matter of deficiency or non-compliance to the FSC; otherwise, the Large Shareholder may be subject to administrative fines.
Regarding the restrictions, according to the current Peruvian Constitution, national and foreign investments are subject to the same conditions. Therefore, there is no prohibition for foreigners from holding shares in an insurance company.
Notwithstanding the foregoing, the General Law provides that shareholders must meet requirements of moral suitability and economic solvency, that is to say, they should not be involved in the scenarios of the impediments established in said Law. Therefore, a shareholder cannot be someone who has been convicted of felony crimes, has been expressly prohibited by their functions in public office, has been involved in insolvency proceedings, has exceed the maximum percentage of shares in two companies of the financial system of the same nature, among others.
Regarding the means of control over the owners of insurance companies, the article 50° of the General Law states that any natural or legal person who acquires shares, directly or indirectly, in the amount of one percent (1%) of the stock capital, in the course of twelve months or, who reaches a participation of three percent (3%) or more, is obliged to provide the SBS with the information requested, in order to identify its main economic activities and the structure of its assets. Moreover, the article 57° of the General Law provides that for the transfer of shares for more than ten percent (10%) of the stock capital in favour of a single person, authorization from the SBS will be required.
According to Article 6 of the Measures for the Administration of the Equities of Insurance Companies, the following investors meeting the conditions as prescribed in these Measures may become shareholders of the domestic insurance companies:
(1) domestic enterprise legal persons;
(2) domestic limited partnerships;
(3) domestic public institutions and social groups; and
(4) overseas financial institutions.
According to the Detailed Rules for the Implementation of the Regulation of the People's Republic of China on the Administration of Foreign-Funded Insurance Companies (Consultation Paper), where foreign insurance companies and Chinese companies or enterprises form insurance companies engaging in the personal insurance business within China in the form of equity joint ventures, the foreign stake in such a joint venture shall not exceed 51%. Comparing to the restriction of 50% foreign stake as stipulated in the previous Detailed Rules for Implementation, the restrictions on foreign-funded insurance companies start to be released.
It may be a criminal offence to acquire or increase control in an insurance company authorised in Denmark without prior approval of the Danish FSA. According to the Danish Financial Business Act, approval by the Danish FSA is required when:
- acquiring 10% or more of the shares or voting power in an undertaking (or its parent company) or where it is able to exercise significant influence over the undertaking,
- increasing the shareholdings or voting power in an undertaking (or its parent company) above 20%, 30% or 50%, or
- turning the undertaking into a subsidiary or into another company.
The approval may be given if a number of criteria are fulfilled, among these whether the entity in question is regarded as ”fit and proper” to own such holdings (we refer to reply to question 13).
There are no legislative restrictions on foreign ownership of insurance companies.
When a member of the board (including the chairman) of an insurance company is appointed, the chairman and/or the member of the board must notify the Danish FSA of the person’s experience and knowledge regarding the employment.
A prior notification must be made to the ACPR (by the acquiring and the transferring parties) and authorizations need to be obtained in instances where the envisaged changes in share ownership would lead to:
- the proportion of voting rights held by the buyer or the seller rising beyond or decreasing below certain thresholds, namely 10%, 20%, 33% or 50%, or
- the acquisition or transmission of a subsidiary by one of the parties, or
- a significant change in management.
The following criteria will be taken into account by the ACPR when considering whether to allow the envisaged change in ownership:
- the reputation and the financial strength of the acquiring party, the reputation and experience of the person who will be in charge of the business, the undertaking’s ability to fulfil the French Insurance Code requirements and the absence of reasonable grounds for suspecting money laundering, and
- whether the envisaged transaction calls into question the conditions to which the license is subject (if this proves to be the case, the ACPR will inform the parties within sixty days of the application’s submission).
The ACPR may either agree to, or refuse, the contemplated change in ownership. It can also grant conditional approval, subordinated to one of the parties taking certain steps.
Where the envisaged transaction involves a company situated outside the European Economic Area (“EEA”), the ACPR will need to inform the European Commission, whose approval is also necessary (the European Commission has three months to indicate whether it opposes or approves the change in ownership).
On 6 February 2019, the French Government enacted Ordinance No. 2019-75, which introduces a contingency plan for the financial instructions sector in case of a “hard Brexit”. It would come into force as from the date of exit of the UK in case no agreement is reached.
This Ordinance amends the French Insurance Code and adds Article L310-2-3, which aims to ensure a certain degree of legal certainty and continuity for policyholders who have taken out an insurance policy with a UK risk carrier before Brexit.
However, UK insurers who have lost their passporting rights will not be able to renew or modify existing policies.
The Ordinance also extends the ACPR’s powers regarding activities carried out in the French territory by a foreign person or entity that is no longer established in a Member State. As a consequence, the ACPR will still be able to impose sanctions regarding acts committed before Brexit by entities that had been under its control when the offence was committed. The ACPR will also continue to monitor insurance entities regarding their obligations set out by French law in connection with contracts concluded under the freedom of establishment regime of the European Union.
The Financial Sector (Shareholdings) Act 1998 (Cth) restricts persons from holding more than a 15% stake in an insurer. The Insurance Acquisitions and Takeovers Act 1991 (Cth) (IATA) implements a similar 15% cap on the acquisition of an insurer's total asset value. Any holding above these limits must be approved by the Commonwealth Treasurer who will assess the application on the basis of whether it is in the national interest. Approval is also required under the IATA where there is an agreement with an Australian insurer that proposes to allow the acquiring entity to have the power to control the directorate of the insurer.
The application should demonstrate the financial security of the proposed shareholders and their commitment to long term investment and capital in the insurer. Requirements on capital must also be satisfied. The IATA Decision-Making Principles IDM 1/1992 provides further guidance on the national interest test, which includes whether the proposal could adversely affect the stability and strength of the insurance industry and financial system, the interests of policy holders and compliance with Australia's Foreign Investment Policy.
Pursuant to Sections 16, 7 para. 3 VAG, holders of 10 % or more of the capital or voting rights in an entity must fulfil the requirements for sound and prudent management of the entity. In particular, they have to be trustworthy. If the shares are held by legal entities, the same requirements apply to their legal representatives.
Additionally, under Section 17 VAG, any person or legal entity has to immediately notify BaFin in writing if they intend to acquire 10 % or more of the capital or voting rights. If a holder of more than 10 % of the capital or voting rights intends to increase its shares beyond 20 %, 30 % or 50 %, they also have to inform BaFin. BaFin has to review the request within 60 days of receiving the notification.
According to the Control Law the control of more than 5 per cent of any type of means of control of an insurer is conditioned upon receiving a permit from the Commissioner of Insurance. The Commissioner takes into consideration a wide variety of factors, including the financial means and business background of the entities requesting the permits, prevention of potential conflict of interest, ensuring the insurer is properly managed, as well as issues of money laundering, including the transparency of information about the potential investor. In addition, the Commissioner will not grant a permit to hold means of control unless he is convinced that the applicants have personal and business integrity, and professional experience and knowledge.
The definition of "means of control" includes: rights to vote in the General Assembly of the Company and power to nominate a director in the company.
There is no restriction regarding foreign investors, however the identity of the investor will be taken into consideration before granting the investor a permit for holding means of control.
There are no restrictions regarding investments into a new insurance company or the acquisition of an Italian (re)insurance company, if the funding of the operation does not breach any anti-money laundering provision or public policy in which case IVASS will intervene and suspend the authorization to operate.
Moreover IVASS constantly supervises the life of a company and might intervene if the laws, regulations and administrative provisions of any state to which the company or one or more of its shareholders is subject, and in any case where one or more shareholder have problems in meeting Solvency II requirements, in which case authorization can be suspended or even revoked.
Under the Japanese regulatory framework, shareholders who own a certain percentage of voting rights in insurers are subject to oversight by the regulator.
- A shareholder with more than 50% voting rights in an insurance company is required to obtain approval from the FSA in advance of acquiring such voting rights (Insurance Holding Company; Article 271-18-1 of the Insurance Business Act). Insurance Holding Companies are subject to strict regulations, including those regulating the scope of business and imposing subsidiary restrictions, and, in certain instances, reporting obligations.
- Apart from Insurance Holding Companies, a shareholder with 20% or more voting rights in an insurance company requires approval from the FSA in advance of acquiring such voting rights (Major Shareholder of Insurance Companies; Article 271-10-1), even if such investor resides overseas. The FSA oversees Major Shareholders of Insurance Companies by imposing reporting obligations and taking administrative dispositions.
- A shareholder with more than 5% voting rights in an insurance company is required to report the acquisition of such voting rights to the FSA within five days (or one month in the case of foreign investors) (Shareholders with Large Voting Rights in Insurance Company; Article 271-3-1 of the Insurance Business Act). That shareholder has to submit a report if their percentage of voting rights changes by 1% or more (either as an increase or decrease). The FSA may take administrative dispositions against Shareholders with Large Voting Rights in an Insurance Company if it finds that the submitted report includes false information, or lacks important or necessary information, thus causing a potential misunderstanding.
The acquisition (directly or indirectly) of shares in an insurance and/or reinsurance company representing 1/10, 1/5, 1/3 and 1/2 of the votes exercisable at the general shareholders' meeting or the same percentage of shares in the share capital requires prior notification to and approval from the KNF. The same requirement applies to any entity or person that intends to become a controlling entity of an insurance and/or reinsurance company in any other way.
There is a detailed list of information and documents that must be submitted to the KNF. The approval process is strictly regulated. The KNF examines whether the criteria laid down in the Insurance Law have been satisfied, including:
- the financial condition and reputation of the notifying entity and its capital group;
- the education, experience and reputation of the persons managing the activity of the notifying entity as well as of the persons who are intended to be management board members of the insurance and/or reinsurance company;
- the business plan of the insurance and/or reinsurance company; and
- anti-money laundering aspects.
Some extra requirements apply in the case of a non-EU acquirer.
The process (from the submission of the filing to the obtaining of the KNF's approval) takes approximately from 4 to 6 months.
A change of control over or ownership of insurance intermediaries (agents/brokers) is not regulated (no notification or approval is required).
However, there is a specific regulation under the Insurance Distribution Law regarding agency and brokerage activity. Neither the agent nor the agent's shareholder is able to hold shares in a capital company conducting brokerage activity. Moreover, agents and brokers should not have any "other relations" that could jeopardize the carrying on of brokerage activities honestly, fairly, professionally and in accordance with the client's interests. The concept of "other relations" is not defined. Therefore, the nature of the relationship between brokers and agents needs to be carefully assessed on a case by case basis.
The first restriction is set forth in Article 4 of DFL 251, which establishes that "The trade of insuring risks based on premiums may only be carried out in Chile by national insurance and reinsurance corporations, whose exclusive object is the development of said business and the activities that are related or complementary to it, authorised by the Commission for the Financial Market by means of a general rule”. On the other hand, Articles 8 of DFL 251 and Article 126 of Law 18.046 on Special Corporations (including insurance companies) require an existence permit as a special and essential requirement for their incorporation.
As an exception, insurance entities incorporated abroad -without registration and authorisation obtained in Chile- may commercialise in Chile international maritime transport insurance, international commercial aviation, goods in international transit and satellites, and the cargo they transport.
The second restriction of insurance companies is determined by their exclusive turn, as we have realised by answering question number 2.
There are currently no restrictions to foreign investment in insurance companies. In all cases, the CNSF must approve ownership and control of insurance companies incorporated in Mexico. The respective application must include, among others, the following information:
- Amount of shares they will acquire and source of the assets to acquire such shares;
- Economic reports or financial statements for the last three years; and
- Evidence of good credit reputation and financial capability.
The CNSF must approve any direct or indirect purchase of more than 5% of the shares of an insurance company. The respective application must include, among others, the information set forth above.
For direct or indirect purchases of 20% or more of the shares of an insurance company, the application should include, inter alia, the information set forth above and in addition, information on the candidates to be appointed as directors, officers and manager of the insurance company.
It is a criminal offence to acquire or increase control in an insurer authorised in the UK without the prior approval of the PRA. The PRA may approve the change in control unconditionally, impose conditions or object to the acquisition.
A person will acquire control for their purposes if (i) they (alone or with their associated persons) hold 10% or more of the shares or voting power in an insurance undertaking (or its parent company) or (ii) they are able to exercise significant influence over the undertaking.
Approval by the PRA is also required when an existing controller proposes to increase its shareholding or voting power in an undertaking (or its parent company) above 20%, 30% or 50%.
There are no legislative restrictions on non-UK (or EU) nationals owning insurance companies.
Towards the last quarter of 2018, the UAE introduced a new Direct Foreign Investment Law (Federal Decree-Law No. 19 of 2018), permitting 100 percent foreign ownership of businesses located in on-shore UAE. The rationale behind the law was to promote further foreign investment in a manner consistent with the development policies of the UAE. Despite this, several economic sectors and activities are prohibited from being 100 percent owned by foreign investors including insurance (Article 7(2)(d)).
As such, insurance activities may be exercised within the UAE either by way of a public joint-stock company, listed on a UAE stock exchange and with UAE nationals owning at least a 51 percent stake in the company; a branch of a foreign insurance company; or an insurance agent (article 24 of the Federal Law No. 6 of 2007 on Establishing the Insurance Authority and the Regulation of its Operations as amended by Federal Law No. 3 of 2018).
Shareholders of an (re)insurance undertakings need to be suitable to ensure the prudent and sound management of the undertaking. Persons controlling the undertaking must meet fit and proper requirements.
The NBB also supervises control of undertakings through various mandatory notifications. It can, for example, refuse the appointment of board members, object to transactions, and suspend the exercise of shareholders’ voting rights or order their transfer.
Restrictions concerning the ownership or control of insurers are generally found in the laws governing the formation of insurance companies or the change in their corporate structure or control. The specific requirements for forming new insurance companies or changing control vary from state to state. The requirements of the state where the company is or will be domiciled govern.
Many states, however, have adopted the Uniform Certificate of Authority Applications (“UCAA”) – a system established by the NAIC which streamlines the application process by creating standardized application forms. Nevertheless, some states continue to have specific filing requirements and each state performs an independent review of all applications. The UCAA Primary Application, which a newly formed company would use to seek a certificate of authority to do business in its domicile state, calls for the disclosure of information related to minimum capital and surplus requirements, statutory deposit requirements, name approval, a plan of operation (which includes financial statements and projections), any holding company financial information, biographical information regarding officers and directors, and other similar matters.
Under the latest 2018 OJK regulations, a foreign investor may only own up to 80% of a privately-held insurance company’s paid-up capital (subject to grandfathering for those foreign investors in insurance companies that already owned more than 80% shareholding before the 2018 OJK regulations came into force). No such restriction applies to publicly-listed insurance companies.
Under the Insurance Law, a foreign investor/shareholder in an Indonesian insurance or reinsurance company shareholder must:
(a) be an insurance company that conducts the same type of insurance business as the company being acquired, or a holding company with a subsidiary, where the subsidiary conducts the same type of insurance business as the company being acquired;
(b) have “equity” of at least five times the direct participation in the insurance company at the time of the insurance company’s change of ownership; and
(c) satisfy any other requirements specified by OJK, such as information on the shareholder’s authorised representatives and criminal records (if any).
If an Indonesian insurance or reinsurance company shareholder is that company’s controlling shareholder, that shareholder may not become a controlling shareholder in any other Indonesian insurance or reinsurance company, if the two companies engage in the same type of insurance business in Indonesia.
In addition, all controllers (being either controlling shareholders or any party that has the indirect ability to determine the composition or influence the actions of the board of directors and/or board of commissioners of an insurance company) must pass OJK’s fit and proper test.
Any direct or indirect foreign investment in an insurer or insurance intermediary is restricted to 49% of paid up equity capital. Further, under Indian law, all insurers and insurance intermediaries are required to be Indian-owned and controlled at all times. ‘Indian control’ is defined to mean control by resident Indian citizens or Indian companies, which are owned and controlled by resident Indian citizens. The term ‘Indian ownership’ has been defined to mean more than 50% of the equity capital beneficially owned by resident Indian citizens or Indian companies, which are owned and controlled by resident Indian citizens.
An insurance or reinsurance company must have Thai nationals holding at least 75 percent of the total number of its voting shares that have been sold, and not less than three-fourths of the total number of its directors must be Thai nationals.
Where the OIC deems it appropriate, the OIC may permit non-Thai nationals to hold up to 49 percent of the total number of voting shares that have been sold, and more than one quarter of its directors (but less than half) to be non-Thai nationals.
In the event that the insurance or reinsurance company’s standing or operations are of a condition that might cause damage to the insured or the public, or for the purposes of strengthening the stability of any company or the stability of the life insurance business, the Minister of the MOF (upon the recommendation of the OIC), is empowered to grant a waiver to permit the company to have shareholders or directors other than as specified in the second paragraph.
Entities must notify the FMA, if they intend to acquire, directly or indirectly, an equity holding in an Austrian insurance or reinsurance undertaking or to further increase, directly or indirectly, such an equity holding, as a result of which the proportion of the voting rights or of the capital held would reach 20, 30 or 50 percent (Article 24(2) VAG).
In assessing the intended acquisition or increase in shares, the FMA will scrutinise the reputation of the acquirer and its proposed key personnel, its financial soundness and whether it will be able to comply with regulatory requirements. In addition, the FMA will ascertain that there is no reason to suspect any connection to money laundering or the financing of terrorism (cf. Article 26 VAG).
If the FMA is of the opinion that the influence exercised by the acquirer or holder of such qualified equity holding is likely to operate against the sound and prudent management of the undertaking, it is authorised to take the measures appropriate to put an end to such situation, including appointing a government commissioner or even ordering the discontinuation of business operations (cf. Articles 27 and 284 VAG).
Foreign ownership is not restricted. However, if a foreign investor wishes to acquire an Austrian insurance undertaking, the VAG grants the FMA additional rights in the course of the authorization process, e.g. an extension of the FMA’s timeframe for requesting information from the acquirer (cf. Article 25(3) VAG).