Rules so insurance and reinsurance companies stay solvent and supervised

Automatic summary, not yet reviewed

1. The law regulates access to and the exercise of private insurance and reinsurance activity, with the main purpose of protecting policyholders, insured persons and beneficiaries.
2. Operating in Spain requires prior administrative authorization from the Minister of Economy and Competitiveness. Applications must be resolved within six months and, if there is no answer, they are deemed denied.
3. Companies must maintain two capital levels at all times: the required solvency capital, calculated with a 99.5% confidence level over one year, and the minimum required capital, a floor their resources should never fall below.
4. Companies must have an effective governance system with risk management, compliance, internal audit and actuarial functions, and must publish an annual report on their financial and solvency position.
5. If a company fails the required solvency capital it must submit a recovery plan, and if it fails the minimum required capital, a short-term financing plan. The supervisor can adopt special control measures, such as banning the disposal of assets or intervening in the company.
6. The Dirección General de Seguros y Fondos de Pensiones is the supervisory authority: it can demand information, carry out inspections and prohibit policies or premium rates that do not comply with the law.
7. Offenses are classified as very serious, serious and minor, with penalties ranging from fines to revocation of authorization. Anyone operating without authorization can be fined up to €1,000,000 if they continue after being ordered to stop.
8. If an insurer is wound up, the claims of policyholders, insured persons, beneficiaries and injured third parties have special priority over the assets assigned to technical provisions, and the Consorcio de Compensación de Seguros can act as liquidator.

Who it affects

• Policyholders, insured persons and beneficiaries: They gain protection: insurers must prove solvency, provide information before contracting, and their claims are protected if the insurer is wound up.
• Insurance and reinsurance companies: They must obtain authorization, maintain minimum capital, have a governance system, and submit to supervision and the penalty regime.
• Directors and shareholders of insurers: They are liable for offenses and can be sanctioned with fines, suspension or disqualification.
• Mutual insurance companies, cooperatives and social welfare mutual societies: Specific rules apply to them on mutual funds, benefits and, where applicable, authorization to operate by insurance lines.
• Consorcio de Compensación de Seguros: It can act as liquidator of insurance companies and cooperate in special control measures.

Words worth knowing

Capital de solvencia obligatorio (required solvency capital)

Money an insurer must hold so it can pay claims even if things go badly.

Provisiones técnicas (technical provisions)

Money the insurer sets aside to meet the obligations of insurance contracts already signed.

Fondos propios (own funds)

The company's own financial resources (capital, reserves and other items) that cover the solvency requirements.

Reaseguro (reinsurance)

Insurance that insurers themselves take out to transfer part of their risks to another company.

Cesión de cartera (portfolio transfer)

A transaction in which one insurer transfers its policies and contracts to another insurer.

It summarizes the law as published in the BOE. It is written by artificial intelligence and may contain mistakes: the official text is what counts. Read the official text · How we make summaries