What penalty is available for those who operate in your jurisdiction without appropriate permission?
Insurance & Reinsurance (3rd edition)
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.
Those who intentionally conduct insurance business in Switzerland without appropriate authorisation may be penalised by imprisonment of up to 3 years. In the case of negligence, a fine of up to 250 000 Swiss Franc can be imposed, FINMASA 44.
In accordance with the IBA, insurers who conduct the business of insurance without authorisation with an Insurance Business Licence duly issued by the FSC shall be punishable with a fine of up to KRW 50 million and imprisonment of up to five (5) years
Those operating without the appropriate authorization will be subject to administrative sanctions up to 200 Tax Unit (UIT, £193,594.80 approx.) and criminal penalties (which are considered crimes against the economic order - performance of unauthorized activities, article 243°- B of the Criminal Code).
Any insurance company or insurance asset management company who operates without approval or insurance license shall be subject to the confiscation of illegal gains and a fine between the range of one and five times the amount of the illegal gains; and if there are no unlawful gains or the amount of the illegal gains is less than RMB 200,000, the fine shall be between RMB 200,000 and RMB 1 million.
Any insurance broker, insurance agency who operates without an insurance business or brokerage license shall be subject to the confiscation of the illegal gains and a fine less than the amount of the illegal gains but not more than five times the amount of the illegal gains; and if there are no illegal gains or the amount of the illegal gains is less than RMB 50,000, the fine shall be between RMB 50,000 and RMB 300,000.
It is generally a criminal offence to undertake a regulated activity in the Denmark with-out permission.
If an insurance or reinsurance company fails to comply with the legal requirements, the Danish FSA may issue warnings, impose injunctions and fines, and, in severe cases, the Danish FSA is also empowered to revoke licenses. If the Danish FSA detects illegal ac-tivity, it will report the business to the State Prosecutor for Serious Economic and In-ternational Crime, which is a special unit with the public prosecutor that investigates and prosecutes cases concerning particular economic crimes.
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.
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 (cf. section 308 VAG). These measures may be made public by BaFin if they are incontestable or immediately enforceable; personal data may only be published if this is necessary for security purposes. In addition, all measures and the respective publication may also be directly imposed on board members of the undertaking. Further, according to section 331 (1) No. 1 VAG, a prison sentence of up to five years or a fine shall be imposed on anyone who conducts an insurance or reinsurance business without permission.
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.
Engaging in insurance business company in Israel (without a license) (i.e. soliciting, marketing, publicizing) is a criminal offence. The punishment can be imprisonment for 3 years and a substantial fine.
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.
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.
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).
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. In the Polish parliament, work is underway on the amendment of the Act on Liability of Corporate Entities for Acts Prohibited Under Penalty, which applies also to the business activity of insurance companies. It 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 draft provides for, among other things: (a) an extension of the list of prohibited acts covered by this regulation; (b) the application of the Act to foreign entities, if the prohibited act was committed in Poland or, although it was committed abroad, its effects materialize in Poland; (c) the obligation to implement effective solutions for detecting and preventing the commission of offences; (d) higher fines of up to PLN 30,000,000 (approximately EUR 7,000,000), and in specific cases up to PLN 60,000,000 (approximately EUR 14,000,000); (e) a wide range of preventive measures, including a ban on applying for public contracts, a ban on promotion and advertising, a ban on performing specific activities, and the introduction of receivership for the duration of the proceedings. Currently, the draft is being dealt with in the lower house of the Polish parliament. For it to enter into force, the approval of both houses of the parliament and the signature of the president are required. The new regulation will come into force six months after its date of publication. Although it is still difficult to judge, it is quite probable that there will be more appetite in the future for penalizing 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.
Infringement of Article 4 of DFL 251 (related to Article 126 of Law 18,046 on Special Corporations) is contemplated in Article 46 of DFL 251, and is a minor prison in its minimum degree (custodial sentence ranging from 61 to 545 days). This sanction extends to representatives (executives and directors) of companies that contravene the law.
In addition to the above, the CMF may impose administrative disqualification sanctions and fines, in addition to compensation for damages in accordance with the law.
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$ 89,292, 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$ 44,646.
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).
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.
In accordance with the recent Cabinet Resolution No. 7 of 2019 Concerning the Administrative Fines Imposed by the IA, any person carrying out insurance or reinsurance activities within the UAE, without obtaining a licence from the IA is liable to a fine of 250,000 Dirhams.
The 2016 Law provides for civil, administrative and criminal sanctions in case of operating on the Belgian market without appropriate permission.
Contracts covering risks situated in Belgium concluded in breach of the prohibitions are null and void. However, in order to protect insureds’ interests, an insurer which has concluded such contracts is bound to perform the contract provided the policyholder has taken out the contract in good faith.
Book V of the 2016 Law provides for administrative fines up to 10% of the revenues of the (re)insurance undertaking and €5,000,000 for a natural person. The amount will be determined taking into account factors such as the gravity and duration of the breach, the financial capacity and the cooperation of the undertaking, the damage to third parties and the potential impact on financial stability.
Furthermore, undertakings and their management risk imprisonment of up to one year.
Insurance intermediaries acting without registration, as well as their directors and managers, risk an administrative fine of €5,000,000 or 5% of total annual revenue, whichever is higher, and, for natural persons, an administrative fine of €700,000. These fines may be increased if the breach has given rise to a profit or avoidance of a loss.
Non-registered insurance intermediaries risk imprisonment up to three months or a fine in lieu.
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.
Any person who operates, without a business licence:
(a) an insurance, sharia insurance, reinsurance or sharia reinsurance business, may be imprisoned for up to 15 years and / or fined up to Rp200 billion (about US$14 million);
(b) an insurance brokerage or reinsurance brokerage business, may be imprisoned for up to 10 years and / or fined up to Rp3 billion (about US$200,000); or
(c) a loss adjustment insurance business, may be imprisoned for up to three years and / or fined up to Rp1 billion (about US$70,000).
A person carrying out direct insurance business in India without valid registration is liable to a penalty of up to INR 25 crores (c. US$ 3,612,625) 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$ 14,452). 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$ 144,520).
It is a criminal offence to undertake an insurance business in Thailand without authorisation. Punishment includes imprisonment of two to five years, or a fine between THB 200,000 to THB 500,000, or both, and an additional fine not exceeding THB 20,000 per day for every consecutive day during which the offence continues.
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.
A (re) insurer that operates in Ireland without the requisite authorisation from the Central Bank commits an offence under the 2015 Regulations. 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 may prosecute such 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 a (re)insurance business.
The penalties which can be imposed by the Central Bank will depend on the seriousness of the offence. If convicted of a summary offence (i.e. 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 (i.e. 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.
Operating without the appropriate authorisation will be considered a violation of the act and such actions may be punished with fines or imprisonment for up to one year as set out in the Financial Undertakings Act section 22-1. Based on our experience, to the extent the insurer subject to supervision by the NFSA fails to comply with the legal requirements, the NFSA may order the insurer to take corrective actions and/or order the undertaking to cease its activities. The NFSA may also revoke the authorisation to carry out insurance business.