At present, the Ecuadorian Parliament is debating the Draft Bill on the Ecuadorian Monetary and Financial Code, which content shall definitely have a direct impact on some relevant provisions contained in the Ecuadorian General Insurance Act.
In this regard, it should be noted that the most important legislative amendment to be implemented relates to the significant increase of the paid-up share capital required for the incorporation of Life and Non-Life Insurance and Reinsurance Companies in the country:
- While, until now, the Insurance companies’ initial share capital amounted to USD 3,94 million, this new Draft Bill envisages a USD 8 million share capital, which shall be fully paid up in cash.
- Moreover, all Reinsurance Companies (and also all the Insurance Companies involved in Reinsurance activities) shall hold an even higher share capital requirement, amounting to USD 13 million fully paid in cash, instead of the USD 4,5 million required to date.
Likewise, another notorious amendment consists of the change of the Insurance Regulatory Authority in Ecuador, which is the Banking and Insurance Supervisory Agency (“Superintendencia de Bancos y Seguros“), which shall be integrated within the Companies, Securities and Insurance Supervisory Agency (“Superintendencia de Compañías, Valores y Seguros“).
Furthermore, it is also noteworthy that this new Insurance Regulatory Body shall be empowered to determine:
- The validity of the clauses that the insurance policies shall contain;
- The prohibited clauses which shall be considered null and void, as well as
- The premium fees,
On the other hand, an additional relevant amendment envisaged by the Draft Bill relates to the new investment requirements concerning technical reserves: All Insurance and Reinsurance Companies shall invest, at least, the 60 % of the paid share capital and the legal reserve in stock market securities and real estate properties.
In conclusion, despite the majority of these amendments may not be well received by the new investors, it is easily visible that the strengthen of these regulatory issues under the Ecuadorian General Insurance Act is made with the view to obtain a higher level of control over investors and the insurance practice.