What penalty is available for those who operate without appropriate permission?

Insurance & Reinsurance

Japan Small Flag Japan

A person who engages in the business of insurance without a license is subject to punishment by imprisonment with work for not more than three years or a fine of not more than 3,000,000 yen (cumulative imposition thereof as the case may be) (Article 315, item 1 of the Insurance Business Act).

Australia Small Flag Australia

The IA imposes a fine of 60 penalty units for any entity that operates a general insurance business without APRA authorisation. As at 31 March 2018, 60 penalty units equates to AUD 12,600.

Denmark Small Flag Denmark

It is generally a criminal offence to undertake a regulated activity in the Denmark without permission.

If an insurance or reinsurance company fails to comply with the legal requirements, the DFSA may issue warnings, impose injunctions and fines, and, in severe cases, the DFSA is also empowered to revoke licenses. If the DFSA detects illegal activity, it will report the business to the State Prosecutor for Serious Economic and International Crime, which is a special unit with the public prosecutor that investigates and prosecutes cases concerning particular economic crimes.

Poland Small Flag Poland

The provision of insurance activity without the required permission is a criminal offence in Poland, which is subject to a fine, restriction of liberty or imprisonment for up to two years.

The same penalties apply in the case of persons who, without authorisation from an insurance and/or reinsurance company, conclude insurance and/or reinsurance contracts in the name of such insurance and/or reinsurance company.

The above offences may be the basis for liability of the entity in the name of which such unlawful insurance activity has been carried out. Such entity may be subject to a fine from PLN 1,000 (approximately EUR 240) to PLN 5,000,000 (approximately EUR 1,200,000) (but not more than 3% of the revenue achieved in the financial year in which such activity was carried out). Moreover, the benefits derived from such activity are forfeited. For the entity to be held liable, it is necessary to first issue an appropriate ruling against an individual (e.g. a director) who acted in its name.

However, this regulation has rarely been used in practice. The Polish government is currently working on a new Act on Corporate Criminal Liability, which is to make the procedure against corporate entities more efficient. It will be possible to conduct criminal proceedings against a corporate entity, irrespective of criminal proceedings pending against an individual, and conviction of an individual will not be a precondition for instituting criminal proceedings against a corporate entity (which is the case at present). The new law also considerably increases the maximum penalty for criminal liability of corporate entities to PLN 30,000,000 (approximately EUR 7,000,000). Although the work on the new law is at an early stage, it is possible that it could come into force quite soon. Although it is still difficult to judge, it is quite probable that there will be more appetite in the future for penalizing the corporate entities.

Similarly, the carrying out of insurance agency activity in breach of the requirements laid down for such activity as well as the carrying out of insurance brokerage activity without the required authorisation is a criminal offence in Poland and is subject to the same penalties mentioned above.

There is also a special list of public warnings maintained by the KNF where entities conducting unlawful activity in Poland are placed. The KNF may conduct an independent investigation against an entity before placing it on the list. The entity must provide all necessary information and documents to the KNF during such investigation. Failure to do so is subject to penalties of up to PLN 500,000 (approximately EUR 120,000) and up to 2 years in prison.

Turkey Small Flag Turkey

There are both administrative and judicial penalties to be imposed on those carry out insurance or reinsurance activities in breach of license requirements.

According to Article 34 of IA, workplaces where unlicensed insurance and reinsurance activities carried out shall be shut down by the authorities and all their advertisements and commercials are prevented or collected. Furthermore, real persons involved in insurance activities by undertaking the risk without obtaining a license, or use references to insurance market participants as regulated by IA in their corporate titles, documents, advertisements and commercials, or public statements, or use such words and phrases in a manner to give the impression that they are engaged in insurance activities shall be sentenced to imprisonment from three years to five years, and a judicial fine from 600 days to 1000 days.

Ireland Small Flag Ireland

A (re)reinsurance undertaking, which operates in Ireland without the requisite authorisation from the Central Bank commits an offence under the 2015 Regulations. The Central Bank plays a pivotal role in the supervision and regulation of financial service providers in Ireland to ensure compliance with regulatory requirements. The Central Bank’s administrative sanctions regime provides it with a credible tool of enforcement and acts as an effective deterrent against breaches of financial services law.

Where an offence is committed by an undertaking, and it can be proven that the offence was committed with the consent or connivance, or was attributable in any way to the wilful neglect of a person in management of the undertaking, the Central Bank has the power prosecute the relevant person, as well as the undertaking. Therefore, a director, manager, secretary, other officer of the company or any person purporting to act in that capacity could be subject to prosecution from the Central Bank for the unauthorised operations of an insurance or reinsurance undertaking.

The penalties which can be imposed by the Central Bank will depend on the seriousness of the offence. If convicted of a summary offence (ie a more minor offence) the undertaking and / or relevant person is liable to a fine not exceeding €5,000 or to imprisonment of a term not exceeding 12 months, or to both. On conviction on indictment (ie a more serious offence, which operating without a licence most likely constitutes) the undertaking and / or relevant person is liable to a fine not exceeding €500,000 or to imprisonment for a term not exceeding 3 years, or to both.

If an undertaking continues to operate in Ireland without authorisation, the undertaking and / or relevant person will be guilty of an offence for each day on which the contravention continues and liable for a fine of €500 for each such offence.

United Kingdom Small Flag United Kingdom

It is a criminal offence to undertake a regulated activity in the UK without permission, punishable by up to two years imprisonment or a fine. An agreement entered into without permission is unenforceable by the unregulated firm against the other party. A policy entered into by an unauthorised insurer is void at common law, accordingly the insured would be entitled to recover premium paid and can recover compensation for any loss sustained as a result of entering into a contract with an unauthorised business. There are limited exceptions that allow the contract to be upheld where just and equitable to do so.

Sweden Small Flag Sweden

If an insurer or reinsurer falling under the FSA’s supervision fails to comply with the legal requirements, the FSA may:

  • order the insurer/reinsurer to take corrective actions,
  • impose limitations on (or prohibit) the disposal of the insurer's/reinsurer's assets in Sweden,
  • impose fines up to SEK50 million, or
  • revoke the authorisation to carry out insurance business. If the authorisation is revoked, the insurer may also be forced to enter into liquidation.

If an entity carries out insurance business without authorisation, the FSA can order the entity to cease its activities under penalty. Any ‘insurance contracts’ issued by such an entity are also deemed unenforceable, making the entity liable to return any received money as well as compensating any losses suffered by the ‘insureds’.

Germany Small Flag Germany

If an undertaking carries on insurance business without prior authorisation from BaFin, BaFin can order the immediate cessation of its business activities or prompt carrying out of its business activities. The VAG provides for an exemption if primary insurers or reinsurers from third countries carry out reinsurance business in Germany solely through provision of cross-border services and if the European Commission has decided in accordance with Article 172 (2) or (4) of Directive 2009/138/EC that the solvency regimes for reinsurance activities carried out by undertakings in the relevant countries are equivalent to the regime described in that Directive. This is currently the case for Switzerland, Bermuda and Japan.

Norway Small Flag Norway

The penalty stipulated in the Financial Institutions Act for violation of the permission requirements is fines or imprisonment of up to one year. A fine in accordance with the corporate penalty provisions may be set at a considerable amount viewed in light of the gravity of the relevant circumstances.

Stricter reactions on a personal level might apply dependent on an evaluation of the scope and extent of the illegal business, pursuant to regulations in the penal act.

The penal sanctions for intermediaries are similar to those for insurance providers, fines or imprisonment of up to one year. Corporate penalties may also apply.

Mexico Small Flag Mexico

The CNSF has authority to suspend the operations or intervene companies or establishments that carry out insurance activities without a license. According to article 495, those breaching articles 20 and 23 of the LISF and practicing active insurance operations without a license or acting as intermediaries in insurance operations performed without a license, may be subject to up to 15 years of imprisonment and a fine of up to approximately USD$87,000, and those offering directly or as intermediaries insurance without a license may be subject to up to 10 years of imprisonment and a fine of up to approximately USD$43,500.

Such conduct constitute criminal liability by (i) the non-admitted foreign insurer; (ii) the insurance intermediaries (broker or agent); and/or (iii) the officers, managers, directors, representatives and agents of the entities referred to in (i) and (ii).

UAE Small Flag UAE

The Insurance Law provides that anyone who engages in insurance activity in the UAE without the appropriate license may be punished by a fine of between 250,000 Dirhams and 1,000,000 Dirhams.

Additionally, HAAD and DHA may issue fines to its permit holders for conducting insurance related business with an unlicensed entity. For example, a HAAD fine can be up to 20,000 Dirhams, and it is not unheard of for these fines to be assessed on a per transactional occurrence basis. Thus, the fines can reach extremely high levels in cases where the licensee has a pattern of engaging in market activities with unlicensed entities.

United States Small Flag United States

Persons or entities that sell insurance policies or engage in other regulated insurance activities without a license in a state may be subject to monetary penalties. State regulators may also issue orders prohibiting them from engaging in insurance activities in their state. Persons or entities operating without a license may also be subject to criminal prosecution depending upon the nature of the activities in which they engaged.

Austria Small Flag Austria

The FMA can penalise entities that conduct insurance business in Austria without the appropriate permission with a fine of up to EUR 100,000 (cf. Article 329 VAG). Furthermore, the FMA will prohibit those operating without a valid license from issuing further insurance contracts and force them to terminate existing contracts.

Chile Small Flag Chile

These actions may constitute a criminal offense. In the last two decades, there have been no criminal prosecutions for this potential offense.

Switzerland Small Flag Switzerland

Those who intentionally conduct insurance business in Switzerland without appropriate authorisation may be penalised by imprisonment of up to 3 years. In case of negligence, a fine of up to 250 000 Swiss Franc can be imposed, Art 44 FINMASA.

Peru Small Flag Peru

Those operating without the appropriate authorization will be subject to administrative sanctions up to 200 Tax Unit (UIT) and criminal penalties (crimes against the financial and monetary order).

India Small Flag India

A person carrying out direct insurance business in India without valid registration is liable to a penalty of up to INR 25 crores (c. US$ 3,852,500) and imprisonment for a term up to ten years.

A person acting as an insurance intermediary (including an insurance broker) without being registered is liable to a penalty of up to INR 10 lakh (c. US$ 15,410). In addition, the appointment of an unlicensed person to act as an insurance intermediary is punishable with a penalty of up to INR 1 crore (c. US$ 154,100).

Singapore Small Flag Singapore

Section 2 of the IA provides that an unlicensed or unauthorised insurer carrying out business in Singapore shall be guilty of an offence and shall be liable on conviction:-

  • In the case of an individual, to a fine not exceeding $125,000 or to imprisonment for a term not exceeding 3 years or to both, and in the case of a continuing offence, to a further fine not exceeding $12,500 for every day or part thereof during which the offence continues after conviction; or
  • in any other case, to a fine not exceeding $250,000 and, in the case of a continuing offence, to a further fine not exceeding $25,000 for every day or part thereof during which the offence continues after conviction.

Brazil Small Flag Brazil

Individuals or legal entities that engage in insurance or reinsurance operations without proper authorization are subject to the payment of a substantial fine, imposed on the company and its directors, without prejudice to other penalties such as the dissolution of the company, if incorporated in Brazil, payment of damages to third parties and possible criminal prosecution in the event of damage to the local/national economy.

Israel Small Flag Israel

Performing activities as an insurance company in Israel (i.e. soliciting, marketing, publicizing) is a criminal offence. The punishment can be imprisonment for 3 years and a substantial fine.

Belgium Small Flag Belgium

(Re)insurance undertakings performing their activities in Belgium without a licence are subject to a prison sentence of one month up to one year and a fine of 50 EUR up to 10,000 EUR or to only one of those penalties (Article 605 of the Supervision Act).

(Re)insurance intermediaries operating in Belgium without being registered and acting with fraudulent intent are, except in the case of more severe penalties included in the Criminal Code, punished by means of a prison sentence of 8 days up to 3 months and with a fine of 200 EUR up to 2,000 EUR or with one of those penalties alone. If an intermediary is convicted because s/he operated without the appropriate registration, the final or temporary closing of part of or the entire premises used for the exercise of the intermediary’s activity may be ordered. In the absence of fraudulent intent, a fine of 1 up to 25 EUR will be imposed (Article 308, §1 of the Insurance Act).

The prosecuting authority must prove the existence of fraudulent intent.

France Small Flag France

Writing insurance without the appropriate permission is a criminal offence, punishable by a prison sentence of up to three years and a fine of up to €75.000 for natural persons or €375.000 for legal entities. Legal entities may also face sanctions from the ACPR and can, moreover, be temporarily or definitively prohibited from conducting business in France.

The policyholder may also risk criminal fines of up to €4.500 for contracting with a foreign insurer that is non-admitted to insure French risks, except for marine and air insurance or where a specific derogation is granted by the ACPR (in instances where the same cover is not offered by insurers admitted to operate in France).

Conducting insurance intermediation without permission is also an offence, which may be punishable by a fine of up to a €6.000 and a prison sentence of up to 2 years.

An insurance policy issued by a non-admitted entity will be deemed to be null and void. The ensuing nullity cannot, however, be raised against the insureds, the policyholders or the beneficiaries, provided they acted in good faith and believed the entity at issue was authorized to write insurance in France.

Canada Small Flag Canada

At the federal level, the ICA prescribes fines that can be considerable, and possible imprisonment. Provincial sanctions consist of generally more moderate fines. Officers, directors and agents of entities who authorize or assent to the commission of the offence are also liable and subject to penalties.

Spain Small Flag Spain

The Ordination Supervision and Solvency of Insurance and Reinsurance Companies Act 2015
provides that insurance contracts entered into by a non-admitted insurer, or beyond the scope of the licence granted, shall be null and void, and that in these cases the policyholder shall not be required to pay the premium. It is further provided that if the premium was paid, the policyholder shall be entitled to the refund of the same, but if a loss covered under the policy takes place before the premium is refunded, the insurers shall be bound to pay the relevant indemnity and any damages which could have caused. The senior management of the insurer shall be jointly and severally liable for this debt.

In addition, writing insurance without appropriate licence may amount to a very serious
regulatory infringement under the Act 2015, and the following sanctions may be imposed: a)
cancelation of the licence, suspension of the licence for a period ranging between 5 and 10 years; a fine for an amount up to 1% of the turnover of the company.

Austria Small Flag Austria

The FMA can penalise entities that conduct insurance business in Austria without the appropriate permission with a fine of up to EUR 100,000 (cf. Article 329 VAG). Furthermore, the FMA will prohibit those operating without a valid license from issuing further insurance contracts and force them to terminate existing contracts.

Portugal Small Flag Portugal

According to article 356 of PIRL, it is a criminal offence to pursue the insurance or reinsurance businesses in Portugal without the necessary authorisation/license. The offender might be punished with up to 5 years imprisonment or a fine. In some cases, the offence is also punishable with an additional penalty, which may include the prohibition to conduct business for a period of up to 5 years or even the judicial dissolution of the entity.

Under article 370 of PIRL, it is a serious misdemeanour to carry out insurance or reinsurance activities without the relevant authorisation. The aforementioned misdemeanour is punishable with a fine of up to € 300,000, for individuals, and up to € 1,500,000 for corporations.

According to article 16 of PICL, if a non-authorized entity carries out insurance activities and enters into an insurance contract, such contract is null and void. However, such nullity does not exonerate the non-authorized entity from having to comply with the obligations that would result from such agreement or the law if the agreement was valid (unless the counterparty to the agreement knew about the lack of proper authorization).

Italy Small Flag Italy

Art. 305 of the Italian Private insurance Code provides for the case of insurance activity abusively exercised (i.e. in absence of the required authorization). According to the norm, anyone who carries out (re)insurance activities in the absence of authorization is punished with imprisonment from two to four years and with a fine from twenty thousand euros to two hundred thousand euros.

The very same provision provides for intermediaries that abusively are broking insurance business. In this case, anyone who intermediate insurance or reinsurance mediation in the absence of registration in the RUI shall be punished with imprisonment from six months to two years and with a fine from ten thousand euros to one hundred thousand euros.

Updated: August 7, 2018