Is it possible to insure risks in your jurisdiction without a licence or authorisation? (i.e. on a non-admitted basis)?

Insurance & Reinsurance (3rd edition)

Brazil Small Flag Brazil

Only at reinsurance level. In this context, it is important to mention the recent evolution of reinsurance in Brazil. A radical legislative reform in 2007 removed the former state monopoly over insurance and established a system of competition. In recent years, the legislator has adopted successive measures favourable to the opening of the reinsurance market to foreign capital. CNSP Resolution 325/15 established a timeline for the preferential offer of assignment of reinsurance to local reinsurers (market reserve), for each automatic or optional reinsurance contract, according to the following percentages:
(a) 40% until 31 December 2016;
(b) 30% as of 1 January 2017;
(c) 25% as of 1 January 2018;
(d) 20%, as of 1 January 2019; and
(e) 15% as of 1 January 2020. In turn, SUSEP Circular 545/17 mitigated the right of preference of local reinsurers vis-à-vis international reinsurers for the purpose of accepting an automatic or optional reinsurance contract.

Switzerland Small Flag Switzerland

Risks located in Switzerland can be covered on a non-admitted basis to a very limited extent only. As a matter of principle, a direct insurance contract (i) made with a policyholder based in Switzerland or (ii) covering a risk located in Switzerland can only be written by an insurance company that holds a Swiss license. ISO 1 para 2 allows non-admitted insurance by companies based abroad in the following cases:

  • Cover of risks in connection with shipping on the high-seas, aviation and cross- border transportation;
  • Cover for risks abroad (where the policyholder is located in Switzerland);
  • Cover for war risks.

Foreign reinsurance companies are allowed to offer reinsurance cover to Swiss cedants from abroad on a non-admitted basis.

Proposed amendments by Pre-Draft ISA (not exhaustive): See at no. 4 above.

South Korea Small Flag South Korea

Pursuant to the Enforcement Decree to the IBA, there are several situations where a person (i.e., a South Korean resident) may conclude an insurance contract with a foreign insurer (e.g., a non-admitted, unauthorised or unlicensed insurer). For example, a person may enter into an insurance contract with a foreign insurer for import/export cargo, aviation, travel, hull, long-term accident, or reinsurance and other exceptions as stated under the Enforcement Decree. The foregoing may only be marketed and sold through means of mail or by telephone, facsimile or over the internet and may not use insurance solicitors, agents, brokers, or employees of any authorised insurer pursuant to the Insurance Business Supervisory Regulation to the IBA. Foreign reinsurers may conduct marketing and sales with a registered reinsurance broker and in no event shall the cession exceed ninety percent (90%) of the entire underlying risk.

Peru Small Flag Peru

It is not possible. The General Law provides that any natural or legal person engaged by its own granting insurance coverages, insurance intermediation and / or other complementary activities must have prior authorization from the SBS and must follow the established conditions for its constitution and functioning. Nonetheless, residents in Peru can engage insurance and reinsurance abroad. However, there are activities that foreign companies cannot perform in Peru without a licence or authorization (e.g., commercialization).

China Small Flag China

Technically speaking, it is impossible to insure risks on a non-admitted basis. Any insurance without a license or authorization within PRC is illegal and shall be fined by CBIRC.

Denmark Small Flag Denmark

Non-licensed foreign insurers may lawfully cover risks in Denmark, but the Danish FSA prohibits the foreign insurers to market their products in Denmark, and intermediaries are prevented from facilitating the writing of insurances offered by non-licensed foreign insurers.

Even though foreign insurers do not need to obtain a license from the Danish FSA, they must still notify the Danish FSA of their activities.

France Small Flag France

The French Insurance Code prohibits non-authorized insurers from insuring risks situated in France.

There are, however, some exceptions, regarding for instance:

- insurance and reinsurance companies whose registered office is in an EEA state (provided they are licensed in their home jurisdiction), or

- inward reinsurance transactions which are carried out on the margin of an insurer’s direct insurance activity.

Germany Small Flag Germany

In order to carry on insurance business, an undertaking has to be authorised by BaFin unless it is headquartered in another member state of the EU/EEA. Any authorisation to carry on business obtained in an EU or EEA member state is valid in all other EU and EEA member states (European Passport or Single Licence Principle). Prior to conducting business, an insurer from an EU or EEA member state must notify BaFin of its intention to conduct business.

Third-country insurers wishing to carry on primary insurance business or reinsurance business in Germany are generally subject to authorisation and must establish a German branch office. However, there is an exception with regard to reinsurance business provided in Section 67 para. 1 VAG. According to this exception, the requirement for authorisation and the establishment of a branch office does not apply if primary insurers or reinsurers from third countries carry on reinsurance business in Germany solely through provision of cross-border services and if the European Commission has decided in accordance with Article 172 para. 2 or 4 of Directive 2009/138/EC that the solvency regimes for reinsurance activities carried out by undertakings in the relevant country are equivalent to the regime in that Directive. This currently applies to Bermuda, Switzerland and Japan.

According to BaFin's interpretative decision of 31 August 2016, the authorisation requirement does not apply to insurance by correspondence. Insurance by correspondence applies to reinsurance businesses if, at the instigation of an insurance undertaking situated in Germany, a reinsurance contract is concluded by correspondence with an insurer situated abroad without one of the parties being assisted by a professional intermediary in Germany or by a professional intermediary situated abroad but acting as intermediary in Germany. The initiative to conclude the reinsurance contract must come from the German insurer.

Further, in October 2017, the EU and the USA signed an agreement allowing US reinsurers and EU (re)insurers to conclude a contract without the US reinsurers being required to establish a branch in the respective EU Member State ("US-EU Covered Agreement"). US reinsurers must fulfil certain capital and local risk-based capital requirements and have to submit certain declarations to the supervisory authority responsible for the EU insurance undertaking. The US-EU Covered Agreement entered into force on April 4, 2018. The EU is required to begin applying the elimination of local presence requirements by September 22, 2019, the reinsurance collateral reduction elements of the agreement shall be fully implemented by September 22, 2022.

In light of Brexit, the "US-UK Covered Agreement" was signed on December 19, 2018, extending the terms almost identical to the EU Covered Agreement to insurers and reinsurers operating in the UK following Brexit.

Israel Small Flag Israel

A non-admitted Insurer can insure Israeli risks if the Insured approached the non-admitted Insurer on its own initiative. A non-admitted Insurer – is an Insurer who did not receive a licence to act as an Insurer in Israel and is not engaged in insurance business in Israel. The term engaged in insurance business was interpreted as performing acts of solicitation in Israel, negotiates the terms of insurance contract from Israel, issues the policy in Israel and handles claims from within Israel.

However, there is nothing in the law that prohibits an Israeli Insured to approach a non-admitted Insurer and request insurance cover. In fact, most of the major companies in Israel are insured with non-admitted Insurers.

Australia Small Flag Australia

All insurers are required to be authorised to carry on business in Australia. This prohibition applies to both insurers and reinsurers. The IA extends this prohibition to any non-admitted insurer which engages an Australian broker or agent to sell policies. In those circumstances a deeming provision will apply which will treat the non-admitted insurer as being taken to carry on an Australian insurance business, requiring APRA authorisation. Only Lloyd's underwriters are permitted to insure risks without obtaining an APRA authorisation, as they are covered by a specific exemption.

There are also some specific exemptions which apply to specific risks. For example, there is an exemption where the policyholder is a high value insured with annual revenue over AUD 200 million or where the insured risk is an atypical risk. An exemption also applies where a broker certifies that the risk cannot reasonably be placed in Australia and where insurance is required by the laws of a foreign country. A foreign insurer will not require APRA authorisation if an Australian customer has approached it directly.

Italy Small Flag Italy

No, in Italy it is not possible to insure risks without a license or authorization. Foreign insurers which are not based or do not have a General Representative in an EU Member State are forbidden from underwriting risks directly on the basis of the freedom of services principle, but they can still underwrite reinsurance risks without limitation if they have applied and obtained the IVASS’s authorization.

Japan Small Flag Japan

For the following insurance contracts, foreign insurers may conclude insurance contracts without obtaining the applicable license:

  • Reinsurance contracts;
  • Marine insurance contracts pertaining to objects such as vessels with Japanese nationality used for international maritime transportation;
  • Aviation insurance contracts pertaining to aircrafts with Japanese nationality used for commercial aviation;
  • Insurance contract pertaining to launching into outer space;
  • Certain insurance contracts covering cargo located within Japan which is in process of being shipped overseas; and
  • Overseas travel insurance.

Poland Small Flag Poland

As a rule, insurance activity is regulated and requires a special licence. In order to insure risks in Poland a company must be either a Polish insurance company which holds a licence issued by the KNF or an EU-based insurance company holding a relevant licence issued by its home state regulator, which is subsequently passported into Poland.

Non-EU insurers must undergo a special licensing procedure in Poland and may provide insurance services in Poland in the form of so-called main branches. The requirements are similar to those imposed on domestic insurance companies.

Chile Small Flag Chile

No, it is not. The requirement of authorisation provided for in Article 126 of Law 18,046 imposes this requirement in an unavoidable manner. It is essential.

Mexico Small Flag Mexico

As a general rule, Article 20 of the LISF provides that only those entities duly licensed by the Mexican federal government through the CNSF to operate as insurance companies may undertake active insurance operations within Mexican territory.

If a non-licensed insurance company operates in Mexico on a non-admitted basis and carries out active insurance operations in Mexico, it shall be deemed to be breaching Mexican law and the transaction shall be null and void. Furthermore, such conduct would constitute criminal liability on the part of (i) the non-admitted foreign insurer; (ii) the insurance intermediaries (broker or agent); and (iii) the officers, managers, directors, representatives and agents of the entities referred to in (i) and (ii).

As an exception to the general rule, non-licensed insurance companies may offer or provide coverage in Mexico in those cases where the risk covered under the insurance policy may not occur in Mexico or if there is no Mexican insurance company that offers the corresponding insurance product. These exceptions require and are subject to the prior authorization of the CNSF.

United Kingdom Small Flag United Kingdom

FSMA prohibits any person from undertaking a regulated activity by way of business in the UK without authorisation. However, simply insuring/reinsuring a policyholder/risk located in the UK does not itself amount to carrying out (re)insurance business in the UK unless activities are also carried on in the UK which amount to the effecting or carrying out of a contract of (re)insurance. Therefore, it is possible for overseas firms to structure their business such that, for the purposes of FSMA, they are not deemed to be carrying on (re)insurance business "in the UK". However, it should be noted that there is a significant amount of case law and regulatory guidance on the question of whether the business of an offshore (re)insurer is deemed to be carried on "in the UK" and the position is ultimately one to be determined on the basis of all the relevant facts and circumstances.

UAE Small Flag UAE

Non-admitted insurers are strictly prohibited under UAE law from writing direct business in the UAE. This prohibition applies to all types of insurance business. Article 26 of the Insurance Law provides that it is not permissible for insurers based outside the UAE to write insurance on property or on liabilities within the state. In addition, it is not permissible to carry out broking activities except with a company registered with the IA. The DIFC and ADGM also prohibit non-licensed insurers operating within their jurisdictions. However, it should be noted that an insurer may reinsure both in and outside of the UAE.

Belgium Small Flag Belgium

Limited business is possible on a “non-admitted” basis.

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.

As for other examples of exclusions set out in the 2016 Law: (i) for non-life insurance contracts, the 2016 Law does not apply to certain assistance activities, to operations of provident and mutual benefit institutions, export credit insurance operations for the account of, or guaranteed by, the State, on-the-spot car breakdown assistance activities and non-life mutual undertakings that are fully reinsured; and (ii) for life insurance contracts, the 2016 Law does not apply to operations of provident and mutual-benefit institutions, and the activities of organisations which undertake to provide benefits solely in the event of death, where the amount of such benefits does not exceed the average funeral costs for a single death or where the benefits are provided in kind.

Subject to detailed conditions, the 1991 RD also allows limited non-admitted business for risks related to maritime shipping, commercial air transport, aerospace and international customs transit – often referred to as “MAT”.

For reinsurance contracts, the 2016 Law does not apply to reinsurance conducted or fully guaranteed by the government.

United States Small Flag United States

Insurers that are not licensed or admitted in a state may cover insureds in that state in one of two ways: (1) the insured purchases a policy out-of-state, with no part of the transaction taking place in the state, e.g., solicitation of the policy, correspondence, and issuance and delivery of the policy; or (2) a non-admitted insurer writes a policy on an excess and surplus lines basis to policyholders that have unique risk profiles or poor loss history and cannot obtain standard coverage from insurers admitted in their state of domicile. While excess and surplus lines insurers are not licensed in the state where they sell their policies, they are allowed to write risks in that state through a broker after the risk is declined by admitted insurers.

A number of states restrict the sale of personal lines business on an excess and surplus lines basis; e.g., individuals in the State of Texas cannot obtain personal automobile insurance from the excess and surplus lines market.

India Small Flag India

Non-admitted insurers are not permitted to directly insure property situated in India or any ship or other vessel or aircraft registered in India.

However, a person resident in India is permitted to take or continue to hold a health insurance policy issued by an insurer outside India provided the aggregate remittance does not exceed the limits prescribed by the Reserve Bank of India (RBI).

In this regard, a person resident in India may take or continue to hold a life insurance policy issued by an insurer outside India, provided that the policy is held under a specific or general permission of the RBI. Similarly, a person resident in India may take or continue to hold a general insurance policy issued by an insurer outside India, provided that the policy is held under a specific or general permission of the Central Government.

Non-admitted insurers who are listed with IRDAI as Cross Border Reinsurers can reinsure risks in India in accordance with the IRDAI’s regulations on the reinsurance of life and general insurance business and subject to compliance with the order of preference for cessions. Further, the IRDAI has recently issued the IRDAI (Re-insurance) Regulations 2018 (Reinsurance Regulations) which applies to life, general and health insurers, which repeal the IRDAI (General Insurance – Reinsurance) Regulations 2016 and IRDAI (Life Insurance – Reinsurance) Regulations 2013. They also amend to some extent the IRDAI (Registration and Operations of Branch Offices of Foreign Reinsurers Other than Lloyd's) Regulations 2015 and the IRDAI (Lloyd’s India) Regulations 2016 (Lloyd’s India Regulations). The Reinsurance Regulations prescribe the new order of preference to be followed by Indian Insurers for placement of reinsurance business. Furthermore, the Reinsurance Regulations also provide that Indian Insurers may now adopt alternative risk transfer solutions, subject to the prior approval of the IRDAI.

In addition to the above, foreign reinsurers are allowed to access the Indian market and are permitted to set up branch offices in India or operate through service companies set up in India under the Lloyd’s India Regulations.

Indonesia Small Flag Indonesia

The Insurance Law does not contemplate insurance being provided on a non-admitted basis. Instead, the Insurance Law and its implementing regulations require that every insurance business in Indonesia be duly licensed by OJK (as considered in our response to question 4).

However, in certain limited circumstances where insurance or reinsurance coverage is not available in Indonesia, non-admitted insurance or reinsurance may be available.

Thailand Small Flag Thailand

The LIA and NLIA prohibit non-authorized insurers from insuring risks situated in Thailand.

Foreign insurers are not entitled to write business directly with an insured person/organisation. If a foreign insurance company wishes to write insurance directly, it would be required to establish a branch to conduct insurance business in Thailand. However, the foreign insurance company may write reinsurance of a domestic insurer at the initiation or request of the domestic insurers, either directly or through a licenced reinsurance broker or international reinsurance broker. In other words, a reinsurance licence would not be required if there is no initiation or offer to sell reinsurance products, or advertisements of such products made by foreign reinsurance companies directly to insurers in Thailand.

Austria Small Flag Austria

Insurers are required to obtain a licence with the FMA, which acts as supervisory institution pursuant to the VAG. The requirements for obtaining a licence are set out in Article 8 VAG. Insurance and reinsurance undertakings must operate under the legal form of either a stock company, a Societas Europaea (SE) or a mutual insurance company. Moreover, the administrative headquarters have to be located in Austria.

A licence will not be granted if the insurance undertaking’s business plan does not fulfil certain requirements (cf. Article 10 VAG). In particular, it must be safeguarded that the undertaking’s obligations towards its customers will be complied with in the long run. Similarly, authorisation will be denied if the insurer does not fulfil the requested minimum capital requirements (see Question 10), is unable to prove it will satisfy solvency capital requirements (see Question 9) or comply with the governance rules set out in the VAG.

An insurer’s or reinsurer’s license to conduct insurance business in one of the member states of the European Union (EU) or the European Economic Area (EEA) is , in principle, valid for conducting insurance business within the EU/EEA. However, where such undertakings want to write business in Austria, they have to notify the FMA of the intended establishment of a branch or of the intended commencement of cross-border services (cf. Article 21 and Article 23 VAG, respectively).

Branches of foreign insurance undertakings, i.e. those not licensed in the EU/EEA, must provide additional information when applying for a licence in Austria (cf. Articles 16 to 19 VAG).

Ireland Small Flag Ireland

In accordance with the EU passporting provisions, an insurer authorised in another EEA Member State can write business directly in Ireland on a FOE or FOS basis. Generally, non-EEA insurers cannot write business directly in Ireland, however, they may apply to the Central Bank for authorisation under the 2015 Regulations which enable third country insurers to establish a branch in the state (“Third Country Branch”). Third Country Branches do not have the right to passport into other EEA member states and so a Third Country Branch that has been authorised by the Central Bank can only carry on business in Ireland. There is a limited exemption available for third country reinsurers i.e. reinsurers authorised outside the EEA. To benefit from the exemption from the requirement to be authorised by the Central Bank, the reinsurer must be duly authorised in their home country and limit their activities in Ireland strictly to reinsurance.

Norway Small Flag Norway

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.

Updated: December 16, 2019