Are types of insurers regulated differently (i.e. life companies, reinsurers?)
Insurance & Reinsurance (3rd edition)
The insurance and reinsurance market are essentially governed by two laws, namely Decree-Law nº 73 of 1966 (insurance) and Complementary Law 126 of 2007 (reinsurance). Insurance contracts are governed by the Brazilian Civil Code, and the sale of insurance policies is regulated by the Consumer Defence Code. In addition to these laws, the market is governed by Resolutions of the National Council for Private Insurance (CNSP) and by circulars issued by the Private Insurance Superintendence (Superintendência de Seguros Privados – SUSEP).
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). In the event of a breach of the norms pertaining to solvency, SUSEP has powers to intervene in insurance companies and to order their winding-up. In terms of conduct, SUSEP has powers to impose administrative sanctions on companies or individuals (directors or officers) who are proven to have breached the applicable legal provisions, or to have participated in such a breach. Although SUSEP has comprehensive, adequate and rigorous legislation to punish administrative infractions, there is a consensus amongst practitioners that the regulatory body needs to be modernised and better equipped to fulfil its institutional mission.
Reinsurance companies are exempt from certain provisions of the ISA that are aimed at consumer protection (LSA 35). Reinsurers are, inter alia, not requested to hold so-called “restricted assets” as direct insurers are. The less intense level of supervision for reinsurance companies is also made apparent by the fact that reinsurance companies having their seat abroad can reinsure Swiss cedants on a cross border basis without any need for a Swiss license. For the time being, foreign reinsurance companies also can conduct reinsurance business in/from Switzerland via a Swiss branch office without any need for a license by FINMA. Similarly, Swiss reinsurers can do business in EU countries on a cross border basis as the Swiss reinsurance supervision is acknowledged as equivalent by the EU Commission.
For life insurance companies, certain additional provisions regarding the maximum guaranteed interest rate, tariff calculation, surplus participation, surrender values and information duties apply (ISA 36 in connection with ISO 120 et seqq.) Further details are set out in FINMA Circulars.
In addition, life insurance companies must not conduct other lines of insurance business, except for health and accident insurance (ISA 12).
Collective life insurance in connection with occupational schemes is subject to further regulation (ISA 37, in connection with ISA 137and ISA 4, 2 lit r), including separate accounting for this particular type of life insurance and prior approval of tariffs and terms by FINMA.
Proposed amendments by Pre-Draft ISA (not exhaustive):
- Foreign Reinsurers acting through a Swiss branch will need a Swiss licence and become subject to FINMA supervision (Pre-Draft ISA 2, para 1 lit b (2)
- Insurers with innovative business models (e.g. InsurTechs) may request relief from supervision if favourable to the sustainability of the Swiss financial market (“regulatory sandbox”) Pre-Draft ISAISAISA 2 para 3 lit b.
- Insurance companies that conclude insurance contracts exclusively with professional customers shall become exempt from certain provisions of the ISA aimed at consumer protection Pre-Draft ISA 30b. Most striking is that such insurance companies will be exempt from the requirement to hold “restricted assets”, which have the purpose of securing claims of the insureds. For companies having partly professional and partly non-professional policyholders the relief from regulation shall apply proportionally. It shall not apply, however, in so far as compulsory TPL insurances (that protect non-professional persons) or occupational life insurance schemes are concluded by the insurance company.
Life insurers and non-life insurers are generally regulated in the same manner in South Korea subject to varying standards and/or protocols accommodating for the differences in the manner in which the business of life insurance and non-life insurance are carried out.
Reinsurers are less regulated and the FSS does not require the filing of reinsurance contracts except when the reinsurance premium is based on an investment income or the risk of the reinsurer is limited pursuant to the Insurance Business Supervisory Regulation. Reinsurers are, however, subject to various regulations regarding business delegation, data processing and information technology outsourcing, reinsurance reserving and intercompany transactions. Reinsurers are also guided by the Best Practices Guidelines for Reinsurance Management.
See also, answer to Question 4.
The General Law regulates in a similar way the different types of insurers: insurance companies of a single branch (general risks), insurance companies of both branches (general risks 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. The General Law also regulates insurance intermediaries (insurance and reinsurance brokers) and insurance auxiliaries (adjusters and loss experts).
The marketing admittance, cooperate governance, organization structure of different types of insures, e.g. life insurers, property insurers, reinsurers are separately regulated by the Insurance Law and other PRC laws and regulations.
Besides, the regulations on domestic and foreign-funded insurers are virtually different. For instance, qualification of the shareholders in the foreign-funded insurers is different from the domestic insurers.
Both life and non-life insurers are regulated in the Danish Insurance Contracts Act.
To some extent, the financial sector, including insurance companies, are also regulated by the Danish Financial Business Act. As a result of the Danish implementation of the EU Solvency II Directive (effective since 1 January 2016), insurance companies are di-vided into two groups with different compliance requirements; “Group 1” insurance companies and “Group 2” insurance companies. Where “Group 1” must comply with the full requirements resulting from the implementation of the EU Solvency II Di-rective, “Group 2” must only comply with simplified, national solvency regulation and changed investment rules that are based on the EU Solvency II Directive.
The Danish Insurance Contracts Act does not apply to reinsurers. Rather, reinsurance contracts are generally considered regular commercial contracts and subject to the general principles of Danish contract law and other legislation, depending on the particular issue at hand.
A single (re)insurance company cannot, as a rule, simultaneously write certain categories of insurance. Insurers cannot, for instance, concurrently offer life and non-life insurance, unless these activities are subject to separate managements, and reinsurers must limit their activities to reinsurance and related activities. In turn, these broad categories of activities are subject to distinct regimens: life insurance, non-life insurance and reinsurance are governed by different provisions of the French Insurance Code and are regulated differently, in particular as regards consumer protection and the provider’s duty to advise and inform.
Moreover, all undertakings are not regulated by the same Codes. By way of example, insurance companies are regulated by the French Insurance Code, whereas mutual insurance companies are regulated by the French Mutual Code.
However, despite the differences highlighted above, certain regulatory requirements are either common to all types of (re)insurance activities or dealt with by distinct but comparable regulatory frameworks. There is, for instance, a great degree of unity regarding the licensing of undertakings or capital requirements.
Yes, different types of insurers are regulated differently. The regulation of general insurers is shared between two regulatory entities: the Australian Securities and Investments Commission (ASIC) and the Australian Prudential and Regulatory Authority (APRA). ASIC has responsibility for issuing financial services providers (including insurers) with an Australian Financial Services Licence (AFSL) under the Corporations Act 2001 (Cth) (Corporations Act). An AFSL permits insurers to provide financial services to Australian clients, which includes the issuing of insurance policies and providing financial product advice for insurance policies.
The definition of general insurers in the IA brings within its confines any insurer carrying on an insurance business including a business of reinsurance, but does not extend to life insurance, accident insurance and pecuniary loss insurance.
APRA is responsible for the administration of the IA. This includes both the publication of legally binding prudential standards for general insurers and the authorisation for an insurer to conduct general insurance business.
A separate regulatory regime applies under the LIA to insurers carrying on a life insurance business. APRA also regulates life insurers and there is a separate authorisation regime that applies under the LIA. Insurers who are authorised under the LIA are prohibited from conducting any non-life insurance business.
This separate regulatory approach between general and life insurers extends to reinsurers. Reinsurers must obtain separate authorisations to underwrite reinsurance for general or life insurance policies.
The VAG applies to direct life and non-life undertakings. As such, both types of insurers are regulated in the same way in principle, with special requirements applying, however, for example to life insurers given the long-term duration of liabilities for life business and to health insurers. Moreover, the VAG also regulates reinsurers and provides for special rules for insurance groups.
For reinsurance undertakings from third countries, i.e. countries that are not EU or EEA member states, specific authorisation requirements apply, as further detailed below (refer to question 6.).
The law, regulations and circulars issued by the Commissioner’s Office are addressed to Israeli Insurance Companies which operate in Life and Non-Life branches. The Life Insurance business is treated as a separate insurance company, although they are part of the same company i.e. separate allocated capital, separated reserve and separate allocated expenses.
There are different rules which apply to conducting Non-Life business from rules which apply to conducting Life business.
Notwithstanding the above, there are general rules which apply to an Insurance Company regardless of the type of business it runs.
Currently there are no reinsurance companies registered in Israel.
Yes life companies, non-life insurers and reinsurers are differently regulated by the Italian Private insurance Code. That is especially true in respect of the required share capital to operate, solvency margins and how reserves are posted in the annual accounts. For life insurances investing into Pension Funds re subject to both the IVASS and the Commission for the Supervision of Pension Funds (COVIP).
Life insurers and non-life insurers are both regulated by the Insurance Business Act. Reinsurers are regulated in the same way as nonlife insurers. Engaging in the underwriting of life insurance and non-life insurance entails obtaining from the regulatory authorities a life insurance business licence and a non-life insurance business licence, respectively. Companies may not run both businesses concurrently.
The general rule is that an insurance company cannot carry out life and non-life business simultaneously. Therefore, there are either life or non-life companies. A life insurance company must use reference to its life business in its business name.
Life and non-life insurance companies are generally subject to the same requirements laid down in the Insurance Law as regards the conduct of their business, the licensing process, supervision etc.
Nevertheless, there are some specific requirements with respect to life insurers, in particular with regard to the level of information provided to consumers, which is due to the complexity and duration of life and insurance investment products. There are also some specific regulations with respect to solvency requirements for a life business (imposing higher levels) and a non-life business (the levels depending on particular groups of insurance written by a non-life company).
As regards reinsurers, the requirements applicable to insurance companies apply to them unless specific provisions provide otherwise (in many cases requirements toward reinsurers are less strict than those laid down for the insurers).
Articles 4, 8 and 11 of DFL 251 divide the Chilean insurance industry into two types of insurance companies: the “General Insurance Companies”, which has as its sole or exclusive business the contracting of damage insurance (non-life) and the “Life Insurance Companies”, the sole purpose of which is to take out personal insurance (life, personal accident and health). Exceptionally, and by express provision of Article 11 of DFL 251, "General" insurance companies may market health and personal accident insurance (this exception is based on the patromonial and indemnifying content of this type of insurance). In addition, and within the category of General Insurance Companies, Chilean law provides the “Guarantee and Credit Insurance Companies (or General Special)” which may exclusively market insurance covering credit, guarantee and fidelity risks. On the other hand, exceptionally, "General Insurance Companies" may market insurance contracts on guarantee and fidelity risks.
Insurance contracts entered into in Chile may be reinsured with:
- national public limited liability companies the sole object of which is reinsurance;
- national insurance undertakings, which may reinsure only risks of the group in which they are authorised to operate; and
- Foreign reinsurance entities, which are classified by internationally recognised risk rating agencies, in the opinion of the Financial Market Commission, in at least BBB risk category or its equivalent (a detail in Article 16 of DFL 251).
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:
a) Personal accidents. Insurance contracts that cover injuries or disabilities affecting the insured's personal integrity or health as a consequence of an external, violent, sudden and accidental event;
b) Medical expenses. Insurance contracts that cover medical, hospital and other expenses considered necessary for the recovery of the insured's health, in the event of an accident or disease affecting the insured;
c) Health. Insurance contracts that main purpose is to provide services to prevent and restore the insured's health.
III. Property and casualty operations. These include the following lines of business:
a) 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;
b) Maritime and transportation. Insurance contracts that cover indemnity payments for damages and losses suffered on cargo, vessels and other maritime assets;
c) Fire. Insurance contracts that cover damages and losses caused by fire, explosion, fulmination or related accidents;
d) 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;
e) Automobiles. Insurance contracts that cover damages and losses caused as a consequence of the use of automobiles;
f) Credit insurance. Insurance contracts that cover the insured's losses suffered by total or partial insolvency of commercial loan debtors;
g) Surety insurance. Insurance contracts that cover damages caused as a consequence of the breach of obligations under an agreement entered into with the insured/beneficiary. This insurance does not include coverage of financial obligations of any type.
h) Mortgage insurance. Insurance contracts that cover damages caused by breach of a mortgage loan debtor;
i) Financial guaranty insurance. Insurance contracts that cover damages caused by breach of issuers of securities;
j) 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;
k) Earthquake and other catastrophic risks. Insurance contracts that cover damages and losses caused to individuals or property as a consequence of a non-predictable and severe event that upon its occurrence accumulates claims for the insurance company.
In principle, all types of (re)insurers are regulated in the same way, all being (subject to a few exceptions) subject to Solvency II and to prudential regulation by the PRA.
The capital requirements under Solvency II are intended to be risk sensitive, realistic and market consistent, with (re)insurers having to hold sufficient assets to cover expected future liabilities. However, given the long-term duration of liabilities for life business in particular, there are a few provisions which relate specifically to life insurers. For example, the matching adjustment and volatility adjustment can be applied, with the consent of the PRA, to ensure that assets held to protect longer term liabilities are suitable and correctly reflect the risks associated with such contracts.
Conduct of business regulation for all (re)insurers falls under the remit of the FCA which has extensive rules relating to advertising and the promotion of insurance contracts, including rules to ensure the fair treatment of customers, for example. Broadly, conduct rules for life and long-term insurance business are governed by the FCA's Conduct of Business Sourcebook (COBS) whilst general business is covered by the Insurance Conduct of Business Sourcebook (ICOBS) – both sourcebooks are extended to apply to intermediaries also. The perceived risk to policyholders and efforts to reduce financial mis-selling influences the degree of regulation by the FCA, for example, sales of long term (i.e. life) insurance products which have an investment element to consumers are subject to additional requirements to ensure that customers are given as much information as possible before entering the contract.
Under FSMA reinsurers are treated as in the same way as direct insurers unless a rule specifies that they are excluded or subject to an alternative approach. There are certain provisions which are applied differently to "pure" reinsurers.
The regulation of insurers offering different lines of insurance varies within the UAE. A key example of this is the regulations governing life insurers. As per the Insurance Law, a guarantee of 4million Dirhams must be submitted to a UAE bank in order to write life insurance, whereas all other types of insurance (property and liability insurance) must have a guarantee of 2million Dirhams (article 42 Insurance Law).
The separation between life insurers and non-life insurers is set to increase further with an upcoming Cabinet decision, which will implement the IA's new life insurance regulations. Whilst the proposed regulation has not been finalised, it is set to place an upper limit on commission paid to financial advisers selling 'Unit Linked Products' (insurance plans that provide the option to invest in any number of investments such as stocks, bonds, mutual funds), 'Savings Products' (any insurance product that has a cash value). The draft regulations stipulate that Indemnity Commission will be payable over the term of the product rather than as an up-front cost. There are also new provisions regarding the transparency of information provided to customers, so that they are aware of fees and commissions.
Further, Takaful insurance (an alternative system of cooperative Islamic insurance) is primarily subject to the same UAE laws as non-Takaful insurance, although there are some differences, for example, relating to policy content (Board of Directors Resolution No. 4 of 2010 Concerning the Takaful Insurance Regulations).
In general, all insurers are subject to prudential rules, set out in the 2016 Law and implementing the Solvency II Directive. The 2016 Law applies to various categories of (re)insurance undertakings, including the Belgian branches of non-EEA (re)insurers. However, certain categories of insurance undertakings, operations and insurance activities are excluded from the scope of the 2016 Law, for example, as a general rule, insurance undertakings that form part of the statutory system of social security.
Insurers are authorised for specific classes of insurance (grouped under life and non-life headings; for example, in life, unit-linked, and in non-life, accident, sickness, etc.; between groups, classes can be combined or “supplementary”). Each class of insurance may be subject to specific laws and regulations. Examples of key differences include advertising, precontractual disclosures, contractual conditions and solvency requirements.
Reinsurers are treated in the same way as insurers, unless specific rules, reflecting the characteristics of the sector, provide otherwise.
State regulators apply different rules to different types of insurance. For example, with respect to property and casualty policies sold to individual consumers, most states require insurers to submit for approval premium rates and policy forms before the policies are made available in the personal lines marketplace. Similarly, many state regulators require prior approval of premium rates for health insurance.
On the other hand, a number of state regulators have a more hands-off approach when it comes to life insurance products and commercial property and casualty business, allowing insurers to sell policies without pre-approval of rates. Those policies and rates, however, are subject to review and disapproval upon a finding that they are not competitive and/or are unfairly priced relative to the coverage provided.
As for reinsurers, although they must comply with licensure and other rules that exist in the state of their domicile, they are generally subject to less regulation than direct insurers because their product offerings are sold to sophisticated customers who do not need protection from state regulators. Accordingly, reinsurers’ policy wordings and rates (no matter the line of business) are typically not subject to review or approval by state regulators. Reinsurers, however, are subject to capital requirements and financial regulation to safeguard their solvency.
Reinsurers do not have to be licensed in every state where they reinsure direct insurers; a number of states authorize reinsurers to issue reinsurance contracts provided they are certified or accredited by the state if they file an application and meet certain requirements. States may also permit reinsurers that are not licensed, accredited, or certified in their state to reinsure risks if they post sufficient collateral securing those risks.
Different insurer and reinsurer types (e.g. life, general and sharia) are all regulated under the umbrella of the Insurance Law and various implementing regulations.
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).
In general, life, non-life insurance and reinsurance companies are regulated in the same way, all being subject to the regulatory requirements and controls by the OIC pursuant to the LIA and NLIA.
An insurance or reinsurance company can only be established as a public limited company or a branch of a foreign insurance company.
To set up an insurance or reinsurance company, promoters of the new company are required to apply for a licence to operate insurance or reinsurance business with the MOF. If the application is approved, the promoters must incorporate a public limited company. The company must place a security deposit and maintain a capital fund of the amount required under relevant regulations within six months from the registration of the public limited company. The Minister of the MOF will issue the insurance licence upon completion of the said requirements.
In setting up a branch of a foreign insurance company, the foreign insurance company would be entitled to apply for a licence to operate insurance or reinsurance business, with the MOF, only if it has held an operating licence (overseas) for not less than three years. Its branch would be permitted to operate insurance or reinsurance business in Thailand within the scope of its existing overseas licence. If the application is approved, the branch of the foreign insurance company must place a security deposit and maintain a capital fund of the amount required under relevant regulations. The Minister of the MOF will issue the insurance licence upon completion of the said requirements.
The VAG sets out the regulatory regime for insurance companies. On 1 January 2016, an updated version of the VAG came into force, implementing the Solvency II Directive (2009/138/EC). 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.
The 2015 Regulations provide the regulatory framework for the undertaking of life insurance, non-life insurance and reinsurance. Whilst the Central Bank is consistent in its approach to supervision of these entities, in light of the differences in the nature of business carried on by each of these types of entities, the 2015 Regulations, together with the Insurance Acts 1909-2011, make certain distinctions between the carrying on of non-life insurance, life insurance or reinsurance business.
The Central Bank operates Probability Risk and Impact System (“PRISM”) which is a systemic risk-based framework against which the Central Bank assesses supervisory requirements i.e. entities that are categorised as being high-impact under PRISM are subject to a higher level of supervision by the Central Bank. Regulated firms are categorised as high-impact (including ultra-high), medium-high, medium-low or low. The ratings are set according to the systemic risk posed by regulated entities, and firms are assigned one of the categories set out above. PRISM allows the Central Bank to recognise a firm’s potential impact and probability for failure and allocate supervisors accordingly. High-impact firms are the most important for ensuring financial and economic stability and are therefore subject to a higher level of supervision.