Client Alert 11 June 2014

Transcription

1 Baker & McKenzie Belgium Client Alert 11 June 2014 For more information, please contact Pierre Berger Partner Isabelle Van Biesen Associate Baker & McKenzie CVBA/SCRL Meir Antwerpen Tel.: The new Insurance Act The Act of 4 April 2014 on insurances, as published on 30 April 2014 in the Belgian Official Gazette (hereinafter the Insurance Act), introduces several new rules with respect to insurances and codifies certain existing insurance regulations. 1. Purpose of the Insurance Act According to the explanatory memorandum, the Insurance Act pursues the following fourfold objective: - Implementation of the Solvency II Directive into Belgian legislation. - Simplification of the existing legislation on the protection of the insurance consumer by codifying the existing regulation in one act. - Clarification of the division of powers between the Financial Services and Markets Authority (FSMA) and the National Bank of Belgium (NBB) with regard to insurances. - Extension of the protection of insurance consumers in certain areas. 2. Codification of existing regulations An important objective of the Insurance Act is the codification of existing legislation on insurances in one act. The following (existing) acts are largely codified: - Certain provisions of the Act of 9 July 1975 on the control of insurance undertakings (hereinafter the Insurance Undertakings Act). - Most of the provisions of the Act of 25 June 1992 on non-marine insurances (hereinafter the Non-Marine Insurance Act). - All provisions of the Act of 11 June 1874 holding titles X and XI of the first book of the commercial code Insurances in general Some Insurances in particular (hereinafter the 1874 Act). - All provisions of the Act of 27 March 1995 on insurance and reinsurance mediation and the distribution of insurances (hereinafter the Insurance Mediation Act). As a result of this codification, certain provisions of the Insurance Undertakings Act, most provisions of the Non- Marine Insurance Act, the entire Insurance Mediation Act and the 1874 Act are abolished. The existing implementing decrees, including the Royal Decree of 22 February 1991 on the general regulation

2 regarding the control of insurance companies (hereinafter the Control Royal Decree) and the Royal Decree of 14 November 2003 on life insurance activities (hereinafter the Life Insurance Royal Decree), will remain applicable as long as they are not modified or dissolved. In case of conflict between the provisions of these implementing decrees and the new Insurance Act, the latter will prevail. 3. Scope of application The scope of application of the new Insurance Act is very broad. Unless it explicitly states otherwise, the Insurance Act applies to: - Belgian insurers. - Foreign insurers who are established in Belgium or exercise insurance activities in Belgium without establishment. - The insurance and reinsurance intermediaries with Belgium as country of origin or who exercise their activities in Belgium. The scope of application of the Insurance Act is further determined per title, chapter, section and/or provision. It is remarkable that the Insurance Act uses the concept of insurer to define its scope of application, and not the concept of insurance undertaking, as used in the Insurance Undertakings Act. This can be explained by the broad scope of application of the Insurance Act, which is not limited to insurance undertakings, i.e., undertakings that are subject to prudential supervision (of the NBB). The concept insurer is defined as each person or undertaking offering insurance agreement(s) as a contract party, irrespective of the professional capacity of this person and whether or not actuarial techniques were used at the conclusion of the agreement. Consequently, whether a person or undertaking falls within the scope of application of the Insurance Act depends on the exercised activity itself and not on whether or not a license was obtained in order to exercise such activity. The Insurance Act does not apply to undertakings that only exercise reinsurance activities without providing directly, or through an establishment, insurance activities elsewhere (thus not only in Belgium). The prudential matters concerning insurance undertakings that fall within the power of the NBB do not fall within the scope of the Insurance Act. Consequently, the application of and the compliance with the provisions of the Insurance Act do not prejudice the application of the remaining provisions of the Insurance Undertakings Act. 2 The new Insurance Act

3 4. Substantive modifications 4.1 Overview Most provisions of the Non-Marine Insurance Act, the 1874 Act and the Insurance Mediation Act have generally been adopted unaltered by the new Insurance Act. Since the Insurance Undertakings Act contains prudential provisions regarding the control of the insurance undertaking (which falls under the authority of the NBB), as well as provisions on the protection of the insurance consumer, the legislator has isolated the provisions on the protection of the insurance consumer falling under the authority of the FSMA from the Insurance Undertakings Act and included them in the new Insurance Act. New provisions cover the implementation of the (pre-) contractual information requirements included in the Solvency II directive. Furthermore, several new provisions regarding life insurances linked to investment funds were introduced, as well as some legal restrictions on segmentation and transparency requirements in respect of profit sharing. Last but not least, the powers of the FSMA in relation to the supervision of the insurance industry and the protection of the insurance consumer were broadened. 4.2 Review of the most important substantive modifications (a) Definitions Certain definitions are copied unaltered from existing legislation. Other definitions were modified in order to ensure the coherence between the different regulations that have been merged. Furthermore, certain new definitions are introduced, such as insurer, Belgian insurer, Belgian insurance undertaking, EEA insurer, EEA insurance undertaking, foreign insurer, foreign insurance undertaking, insurer of a third country, insurance undertaking of a third country, license and principal office. The Insurance Act also clarifies that, for the application of the Insurance Act, capitalization transactions must be considered as personal insurances. Given the special features of a capitalisation transaction, i.e., the absence of an insured risk sensu stricto, certain provisions will not be relevant for or will not be applicable to capitalisation transactions. The Insurance Act contains a list of provisions that are not applicable to capitalisation transactions. Article 6, section 1 of the Insurance Act describes the circumstances under which the risk (for non-life insurances), or the obligation (for life insurances) is considered to be located in Belgium for the purpose of the Insurance Act. (b) Nullity Non-rebuttable presumption of causality Article 8 of the Insurance Act replicates the civil sanction of nullity as already foreseen in article 3, section 3 of the 3 The new Insurance Act

4 Insurance Undertakings Act in case of unlawful offering of insurances. For foreign insurers, such nullity is limited to those agreements relating to risks or obligations located in Belgium. In light of article 86ter, section 1, clause 2 of the Act of 2 August 2002 on the supervision of the financial sector and the financial services (hereinafter the Financial Supervision Act), the legislator clarified that the insurer, despite any provision to the contrary to the detriment of the policy holder, the insured and/or beneficiary, is also liable to compensate the damages caused by the nullity of the agreement at hand to the policy holder, the insured and/or the beneficiary. There is a non-rebuttable presumption that the damages are caused by the illicit conclusion of the insurance agreement by an insurer not authorised to exercise insurance activities in Belgium. (c) Special rules regarding life insurances linked to investment funds The legislator deemed it necessary to create a level playing field between investments in UCITs on the one hand, and life insurances linked to investment funds on the other, as to the type of assets or reference values to which the cash benefits resulting from insurance agreements may be linked. Therefore, article 19 of the Insurance Act states in a general manner that the policy holder must be informed in a comprehensive way about his investment risk. Furthermore, the insurance benefits may only be linked to assets and instruments of which the risk can be adequately assessed by the insurer, if the investment risks are directly or indirectly borne by the policy holder. Article 20, section 1 of the Insurance Act further provides that if the policy holder is a non-professional client and the obligation is located in Belgium, the insurance performance may only be, directly or indirectly, linked to: - units in undertakings for collective investment that are registered in accordance with article 33 or article 149 of the Act of 3 August 2012 on certain forms of collective portfolio management; - units in undertakings for collective investment in transferable securities under Belgian law or under the law of a member state of the European Economic Area (EEA); - the assets of the categories of investments available to Belgian public undertakings for collective investment in transferable securities, as long as the provisions of chapter VII and X of the Directive 2009/65/EC are respected; - the assets belonging to the categories of investments available to Belgian public undertakings for collective investment, as long as the provisions regarding the investment policy of the funds to which the benefits are linked do not deviate from the current provisions regarding the conforming investment category 4 The new Insurance Act

5 available to these Belgian public undertakings for collective investment. Any deviation of these rules on investment restrictions is only allowed under certain conditions as defined in article 20, sections 2, 3, 4 and 5 of the Insurance Act. With the implementation of investment restrictions that are applicable as soon as the obligation is located in Belgium - which might therefore also apply to foreign insurers - the legislator decided not to follow the advice of the Council of State. The Council of State was of the opinion that the adoption of restrictions to the investment policy, as allowed by article 133, section 3 of the Solvency II directive, forms part of the prudential statute of insurance undertakings, so that the Belgian legislator could only introduce such investment restrictions for insurance undertakings with Belgium as home country. The legislator concurred with the opinion of the Council of State that the competence regarding investment restrictions belongs to the authority of the home country of the insurance undertaking. However, since the member states only have to implement the relevant provisions of the Solvency II directive before 31 March 2015, and given the fact that this date has already been postponed several times since the publication of the directive, the legislator deemed it desirable not to limit the scope of application of the provisions of the Insurance Act depending on the home country of the insurer. It is important to note that these rules only apply to insurance agreements that are closed after the entry into force of the Insurance Act. Insurance agreements that have been closed prior to the entry into force of the new Insurance Act are in general not subject to the new investment restrictions, unless: - the existing insurance agreement is linked to one or more new investment funds or the management rules are modified; or - the conditions in respect of (minimum) return are modified. (d) Interpretation of the contractual provisions Article 23 of the Insurance Act was introduced to strengthen the protection of the insurance consumer in case of discussion about the interpretation of contractual provisions. In case of doubt about the meaning of a provision in the insurance agreement, the most favourable interpretation for the policy holder will prevail. Insurers are also not allowed to implement clauses in the insurance agreement that prejudice the equivalence between the obligations of the insurer and those of the policy holder. (e) Information duties regarding advertisements and other documents and notices Article 28 contains general rules on the distribution of advertisements and other documents and notices on Belgian territory. Particularly, it provides that the information may not 5 The new Insurance Act

6 be false or misleading, the data must be compliant with other information that should be legally communicated and advertisements must be recognizable as such. The connecting factor for this rule is the commercialisation on Belgian territory, irrespective of the insurer s origin and the location of the obligation or risk. The King has been granted power to further clarify the fundamental requirements with which advertisements must comply. In this respect, we refer to, amongst others, Royal Decree of 25 April 2014 on certain information duties in case of commercialisation of financial products to non-professional clients, which will, among others, be applicable to insurance products. Articles 32 until 38 of the Insurance Act contain general obligations regarding (pre-) contractual information that should be communicated to the policy holder, insured or beneficiary. These rules are largely copied from Control Royal Decree and are different depending on whether it concerns life insurances or non-life insurances. (f) Segmentation Segmentation is peculiar to the insurance technique, but may not be applied in an arbitrary or discriminatory way. Therefore, articles 42 until 48 of the Insurance Act provide a legal framework in respect of segmentation of insurances. Insurers are currently already bound by the prohibition of discrimination as implemented in anti-discrimination legislation. As such, an insurer is not allowed to discriminate based on any of the criteria listed in this anti-discrimination legislation (religion, sex, colour of skin, etc.) when taking a decision regarding acceptation, pricing and coverage. The Insurance Act supplements these rules by imposing a special transparency and motivation obligation in case of segmentation in respect of insurances listed in the Insurance Act. This special transparency and motivation obligation is only applicable in case the policy holder is a consumer as defined in the Act of 6 April 2010 on market practices and consumer protection. The new rules on segmentation are applicable to all insurers who exercise their activities in Belgium and to insurance agreements of which the risk or obligation is located in Belgium, to the extent one of the insurances listed in article 43 is concerned (including civil private liability insurances, legal expenses insurances and individual life insurances). Since these rules are considered to be in the interest of the general good, they are also applicable to foreign insurers active in Belgium. Each distinction (based on any criteria, so not only based on the criteria listed in the anti-discrimination legislation) in respect of acceptation, pricing and/or the scope of the coverage has to be justified objectively by a legitimate purpose, and the means to achieve such purpose must be adequate and necessary. This rule is immediately applicable 6 The new Insurance Act

7 to agreements that are offered or closed after the entry into force of the Insurance Act. Agreements already existing prior to the entry into force of this Act and which are modified or extended are grandfathered until 1 June After this date, both the agreements existing prior to the entry into force of the Insurance Act as well as new agreements must comply with these legal requirements. Moreover, insurers are obliged to publish the segmentation criteria used by them on their website, together with an explanation. Finally, an insurer must explain the used segmentation criteria when making an offer, refusing an offer, as well as when modifying or cancelling the insurance agreement in case of a change of the risk. (g) Profit sharing The provisions on profit sharing are applicable to all insurance agreements of which the risk or obligation is located in Belgium. According to article 48 of the Insurance Act, the disclosure of profit sharing in an advertisement is only allowed if a contractual or legal obligation to share profit in the future under certain legal or contractual conditions exists. If the right to profit sharing only depends on the discretion of the insurer, neither the profit shares granted in the past nor future forecasts may be published in advertisements. The policy holder must be informed at least annually on the profit sharing situation and, during the entire life cycle of the insurance agreement, on every change in the profit sharing situation. If the profit sharing is mentioned in an advertisement, insurers must also draft a profit sharing plan that complies with the fundamental requirements of article 51 of the Insurance Act. The obligation to draft a profit sharing plan is immediately applicable to agreements offered or closed after the entry into force of the Insurance Act. Existing agreements closed prior to the entry into force of the Insurance Act and which are modified or extended, are grandfathered until 1 June The King has been empowered to impose a mandatory system of profit sharing. (h) The Non-Marine Insurance Act various modifications Article 57 of the Insurance Act provides that the right of withdrawal in respect of life insurance agreement and capitalisation transactions applies to all such insurance agreements and not only to those that have been entered into by means of an insurance proposal form or a "policy signed in advance", as was the case in the past. Following the conviction of Belgium by the European Court of Human Rights in its judgement of 7 July 2009 ( the Stagno case ), article 89, section 1 of the Insurance Act was 7 The new Insurance Act

8 amended in such a way that the prescription of a claim resulting from an insurance agreement does not commence vis-à-vis minors, legally incompetent persons and other persons lacking capacity until the day they become adults or the declaration of incompetence is revoked. Other modifications to the Non-Marine Insurance Act concern the communication of medical information (article 61); the amounts paid to minors, legally incompetent persons or other persons lacking capacity (article 68); consequences of nonpayment of the premium (article 71); and the dissolution of the agreement after the occurrence of an accident (article 86). (i) Supervision by the FSMA Understandably, the FSMA must have sufficient powers to ensure compliance with the provisions of the Insurance Act. Currently, article 71 of the Insurance Undertakings Act only provides for an independent power for the FSMA with regard to insurance undertakings located in the EEA. Article 288 of the Insurance Act therefore introduces an independent power for the FSMA to act against Belgian insurers and foreign insurers that are non-eea insurance undertakings. The provisions regarding the supervision of the FSMA and the measures at its disposal were largely copied unaltered from the Insurance Undertakings Act and the Insurance Mediation Act. If an insurance intermediary does not remedy the violations of the conditions for registration within the period imposed by the FSMA, this will result in an automatic cancellation of the registration. The rules were not changed in this respect. However, in case of a violation of the rules of conduct on precontractual information duties or non-compliance with the insurance MiFID rules by an insurance intermediary, the FSMA has a discretionary margin with regard to the measures to be taken. Therefore, the FSMA does not need to automatically cancel the registration of the insurance intermediary. Furthermore, the FSMA can also prohibit the commercialisation of insurance agreements in certain cases (e.g., if the insurer does not comply with the provisions of the Insurance Act). However, the prudential control on insurance undertakings remains under the NBB's competence. 5. Implementing decrees Given the complex and technical character of the insurance regulations, the Insurance Act entitles the King to further implement several provisions of the Insurance Act, upon advice of the FSMA (e.g., the King is entitled to exempt foreign insurers or insurance intermediaries of all or part of the obligations under the Insurance Act, and he can modify or increase the information duties in respect of advertisements and other documents and notices). 8 The new Insurance Act

9 6. Entry into force and transitional provisions With some exceptions, the Insurance Act enters into force on the first day of the month after the end of a period of six months, starting as of the day following the publication of the Insurance Act in the Belgian Official Gazette, i.e., 1 November The Insurance Act also provides a range of different transitional provisions, some of which have already been mentioned above under item 4 (Substantive modifications). In general and unless explicitly stated otherwise, article 311, section 6 of the Insurance Act provides that insurers must formally adapt their insurance agreements and other insurance documents to comply with the provisions by 1 June Until that date, existing and new insurance agreements must not formally comply with the provisions of the Insurance Act Baker & McKenzie. All rights reserved. Baker & McKenzie International is a Swiss Verein with member law firms around the world. In accordance with the common terminology used in professional service organizations, reference to a partner means a person who is a partner, or equivalent, in such a law firm. Similarly, reference to an office means an office of any such law firm. This may qualify as Attorney Advertising requiring notice in some jurisdictions. Prior results do not guarantee a similar outcome. 9 The new Insurance Act