Are types of insurers regulated differently (i.e. life companies, reinsurers)?

Insurance & Reinsurance

Portugal Small Flag Portugal

All insurers and reinsurers, whether life or non-life, are subject to the same legal framework: that set forth in PIRL, which has implemented the Solvency II Directive in Portugal. All such undertakings fall under the supervision of ASF. However, some different requirements apply to different classes of undertakings. For instance, PIRL sets forth different minimum capital requirements for direct insurers and reinsurers; for life and non-life insurers and reinsurers; within non-life insurance the limits also vary depending on the classes of insurance products to be distributed. In addition, sales of different types of insurance products are subject to specific requirements, notably with regard to information duties.

Japan Small Flag Japan

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.

Australia Small Flag Australia

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.

Denmark Small Flag Denmark

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 divided into two groups with different; “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 Directive, “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 subject to the general principles of Danish contract law and other legislation, depending on the particular issue at hand.

Poland Small Flag Poland

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).

Turkey Small Flag Turkey

In general, life, non-life insurance and reinsurance companies are subject to the same provisions of IA and TCC. However, there are special provisions regulating their activities in certain aspects.

United Kingdom Small Flag United Kingdom

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.

Sweden Small Flag Sweden

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.

Germany Small Flag Germany

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 detailed above.

Norway Small Flag Norway

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.

Mexico Small Flag Mexico

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.

UAE Small Flag UAE

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.

United States Small Flag United States

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.

Austria Small Flag Austria

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.

Chile Small Flag Chile

Insurance companies can be formed to conduct only one of the following kinds of business: general and casualty, credit insurance (including fidelity and guarantee), and life. The norms of the Civil Code and the Code of Commerce are basically the same for them all, although the regulator has issued specific rules for each class of Insurance Companies.

Switzerland Small Flag Switzerland

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.

Peru Small Flag Peru

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.

India Small Flag India

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).

Singapore Small Flag Singapore

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.

Brazil Small Flag Brazil

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.

Israel Small Flag Israel

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.

Belgium Small Flag Belgium

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).

France Small Flag France

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.

Canada Small Flag Canada

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.

Ireland Small Flag Ireland

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.

From an approach perspective, the Central Bank has adopted the PRISM or the Central Bank’s “Probability Risk and Impact SysteM” 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. PRISM recognises that the Central Bank does not have infinite resources and selectively deploys supervisors according to a firm’s potential impact and probability for failure. All 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 below. Although relatively few in number, high-impact firms are the most important for ensuring financial and economic stability and are therefore subject to a higher level of supervision.

Spain Small Flag Spain

The Ordination Supervision and Solvency of Insurance and Reinsurance Companies Act 2015
regulates insurers and reinsurers. Insurers and reinsurers are to be registered with the General Directorate of Insurance.

The Act provides for the following type of insurer formats: a) limited company, b) European
limited company, c) mutual insurance company, d) cooperative, e) European cooperative, d)
welfare mutual insurance company. The Act establishes specific provisions and rules mutual
insurance companies, cooperatives and welfare mutual insurance companies.

Reinsurers are also regulated by the Act 2015. This provides that reinsurers shall adopt the form of a limited company or a European limited company.

If it further stated that insurance and reinsurance business may also be written by any public
entity aimed at conducting the said insurance and reinsurance in conditions equal to the
conditions applicable to private insurers and reinsurers.

Portugal Small Flag Portugal

All insurers and reinsurers, whether life or non-life, are subject to the same legal framework: that set forth in PIRL, which has implemented the Solvency II Directive in Portugal. All such undertakings fall under the supervision of ASF. However, some different requirements apply to different classes of undertakings. For instance, PIRL sets forth different minimum capital requirements for direct insurers and reinsurers; for life and non-life insurers and reinsurers; within non-life insurance the limits also vary depending on the classes of insurance products to be distributed. In addition, sales of different types of insurance products are subject to specific requirements, notably with regard to information duties.

Italy Small Flag Italy

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.

Updated: August 7, 2018