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Ownership and organisational requirements

Ownership of (re)insurers

Are there any restrictions on ownership of or investment in (re)insurers in your jurisdiction, including any limits on foreign ownership/investment?

No legal restrictions apply to the ownership of, or investment in, Italian (re)insurers.

However, during a licence or authorisation process for the acquisition of a shareholding in a (re)insurance undertaking, IVASS (the insurance market regulator) will verify that the relevant shareholders comply with the sound and prudent management requirements set out by law.

For this purpose, IVASS will assess whether the subjects that will have direct or indirect controlling interests or qualifying holdings in an insurance undertaking meet the integrity requirements provided by Italian law, such as, among others:

  • not be disqualified from holding managing offices in enterprises; and
  • not be subjected to prevention measures or not have received a prison sentence that cannot be appealed for crimes provided by law.

What regulations, procedures and eligibility criteria govern the transfer of control of/acquisition of a stake in a (re)insurer?

The Insurance Code (Legislative Decree 209/2005) and relevant implementing provisions issued by IVASS make up the Italian legal framework for the transfer of control in an insurance undertaking and the acquisition of a shareholding.

The acquisition of the direct or indirect control over an insurance undertaking, or of a shareholding that represents 10% or more of the capital or of the voting rights, or that guarantees a significant influence over the management of that insurer, is subject to IVASS authorisation.

Prior communication to IVASS IVASS must be informed in advance by anyone intending to become the holder of a controlling shareholding or a qualifying shareholding.

Application for authorisation The acquisition of a controlling shareholding or a qualifying shareholding in an Italian insurance undertaking is subject to IVASS's prior authorisation on the basis of an application to be filed by the potential acquirer. In addition, IVASS must authorise in advance any change in participations whenever the proportion reaches or exceeds 20%, 30% or 50% of the voting rights or capital, or in case the changes affect the control or create a significant influence over the insurance.

Authorisation process IVASS will assess:

  • the good reputation of the potential buyer by verifying the integrity of the persons charged with the administration of the  same, its legal representatives, statutory auditors and chief executives, as well as its financial stability;
  • the financial solidity of the acquisition;
  • the future compliance of the target with prudent management requirements, financial stability and relevant provisions set out by law as implemented by IVASS; and
  • the probity, professional and independence requirements of prospective directors, statutory auditors, legal representatives and chief executives of the target insurance undertaking.

IVASS will issue or reject the authorisation within 60 business days of the date of receipt of the application.

Organisational requirements

Must (re)insurers adopt a certain legal structure in order to operate? If no mandatory company organisation applies, what are the common structures used?

The Insurance Code provides that an Italian insurer must be incorporated as:

  • a joint-stock company;
  • a cooperative company;
  • a mutual undertaking whose units are represented by shares;
  • an EU company under Regulation 2157/2001; or
  • a European cooperative society under Regulation 1435/2003.

Insurers are most commonly structured as joint-stock companies.

The Insurance Code provides that reinsurers incorporated in Italy must be either joint-stock companies or EU companies.

Do any particular corporate governance requirements apply to (re)insurers, including any eligibility criteria for directors and officers?

Yes.

General corporate governance requirements 

Pursuant to the Insurance Code, as implemented by IVASS regulations, Italian insurance undertakings must set up an effective system of corporate governance that:

  • guarantees the sound and prudent management of the insurance business; and
  • must be proportionate to the nature, scale and complexity of the business of the undertaking.

For this purpose, insurance undertakings must establish an adequate organisational structure with a clear allocation of competences and responsibilities. Insurance undertakings must set up an internal audit function, a risk management system and a compliance function; the board of directors must approve the relevant policies governing such functions.

Italian law and IVASS set out specific conditions and procedures for outsourcing of functions within the insurance undertaking organisation to other entities.

Eligibility criteria

 Eligibility criteria are set out by Italian law and IVASS regulations for directors, persons charged with management and control functions and those who carry out key functions.

In particular, such persons must meet the professional, integrity and independence requirements, graded according to the principle of proportionality and of the importance and complexity of the function filled.

The requirements are assessed by taking into account the following aspects:

  • the relevant working experience;
  • any legal disqualification from holding managing offices in enterprises and any definitive conviction with imprisonment for the crimes provided by law;
  • the existence of business relationships and other relationships with financial nature with controlled or controlling (re) insurance undertakings; and
  • the existence of interlocking positions as per Law 214/2011.

Operating requirements

Authorisation procedure

Which (re)insurers must obtain authorisation from the regulator before operating on the market and what is the procedure for doing so?

Italian insurance undertakings must apply to IVASS (the insurance market regulator) for a licence before starting any insurance activity.   

The licence application must be filed together with a number of documents and information required by the Insurance Code (Legislative Decree 209/2005) as implemented by IVASS regulations.

IVASS grants the licence when, among others, the following conditions are met:

  • Organisational requirements: corporate form and structure comply with the law;
  • Capital and solvency requirements: the applicant holds the eligible basic own funds to cover the absolute floor of the minimum capital requirement and demonstrates that the insurance undertaking will be in a position to hold eligible own funds to cover the solvency capital requirement;
  • Administrative and financial requirements: a business plan and the by-laws are filed with IVASS together with the application; and
  • Corporate governance requirements: holders of qualifying holdings meet the good repute requirements and persons charged with the administration, management and control functions and those who perform the fundamental functions meet the professional, good repute and independence requirements set out by law and IVASS regulations.

IVASS must issue its decision on an application within 90 days of receiving the application.

Pursuant to the ‘single licence principle’, the Italian licence is valid within the territory of Italy and the relevant EU member states, in compliance with their local legislations.

Insurance undertakings that are licensed in a EU member state other than Italy are authorised to carry out insurance business in Italy directly, under the ‘freedom to provide services’ regime, or through an Italian branch, provided that the relevant communication procedures have been completed between the home country and IVASS.

Insurers with their registered office in a third country outside the European Union wishing to carry out business in Italy must:

  • establish a branch in Italy that must be licensed by IVASS; and
  • appoint an authorised agent resident in Italy and possessing the powers envisaged by the Insurance Code.

Financial requirements

What are the minimum capital and solvency requirements for (re)insurers operating in your jurisdiction?

Italian insurance undertakings must provide evidence – during the authorisation's application process and on a continuous basis –- that they will be in a position to hold eligible own funds to cover the minimum capital requirement and the solvency capital requirement provided by the EU Solvency II Directive (2009/138/EC) as implemented by the Insurance Code.

As for the minimum share capital, the Insurance Code provides that insurance undertakings hold the eligible basic own funds to cover the absolute floor of the minimum capital requirement, equal to no less than the following amounts:

  • For undertakings exercising separately life or non-life insurance business lines, the minimum capital requirement is equal to no less than €3.7 million;
  • For non-life insurance business lines, the minimum capital requirement can be equal to no less than €2.5 million if the activity carried out does not concern any of the following classes: motor vehicle liability, aircraft liability, liability for ships, general liability, credit and suretyship; and
  • For undertakings that exercise life insurance business together with accidents and health insurance business lines, the minimum capital requirement must be equal to no less than €6.2 million.

Insurance undertakings must calculate the minimum capital requirement at least quarterly and report the result of that calculation to IVASS.

Do any other financial requirements apply?

In order to guarantee the stability of the insurance markets, the Insurance Code and IVASS regulations set out specific rules governing the investment activity of the insurance undertakings in line with the general principles set out by the Solvency II Directive (eg, the ‘prudent person’ principle).

Personnel qualifications

Are personnel of (re)insurers subject to any professional qualification requirements?

Yes the directors, the statutory auditors and the general managers of insurance undertakings must comply with the professional qualification requirements set out by Italian law.

For this purpose, the insurers' personnel must declare to have gained relevant experience by exercising management, supervision or control activities in companies or entities in the insurance, credit or financial sectors, or in public entities or public administrations with some links with the relevant sectors, or in public or private companies of an adequate size, or teaching activity at university level in law, economics or other fields relevant for the insurance sector.

Business plan

What rules and requirements govern the business plans of (re)insurers?

Pursuant to Insurance Code rules and IVASS Regulation 10/ 2008, the business plan to be submitted to IVASS for the purpose of the licence process must contain, among others, information on:

  • the insurance activity that will be carried out and the nature of the risks and commitments that the insurance undertaking will cover, the sales network structure and the operating arrangements for distribution, the procedures for the issuing policies and collecting premiums, the claims settlement structure and the general principles on reinsurance policy;
  • the organisational structure of the insurance undertaking, with particular focus on the estimates of administrative services' cost and the financial resources intended to meet those costs, the internal control mechanisms, risk management and compliance functions, the procedures set up in compliance with the anti-money laundering regulations and outsourcing measures;
  • capital requirements; and
  • for the first three financial years, predictions on financial statements, on the financial resources for covering technical provisions and on the minimum capital and solvency requirements.

Risk management

What risk management systems and procedures must (re)insurers adopt?

The management body of insurance undertakings must define directives governing the system of internal controls, including policies on risk management.  

The risk management function shall be set up by a board of directors' resolution and its organisational position will be decided in accordance with the principle of separation between operational and control functions, and it will be nevertheless separated from the internal audit function.

The risk management function shall:

  • provide, among others, risk management policy and the criteria and relevant methods for measuring risks;
  • set out the procedures for reporting to the management body; and
  • validate the information flows required to ensure prompt control of exposures to risk and the immediate detection of faults found in operations.

Reporting and disclosure

What ongoing regulatory reporting and disclosure requirements apply to (re)insurers?

Solvency II implementing rules provide a complex framework concerning:

  • reporting and disclosure obligations regarding financial prudential requirements (eg, the own risk and solvency assessment and the Solvency and Financial Condition Report);
  • corporate governance; and
  • general organisation requirements.

Specific reporting obligations apply to the corporate governance system. Thus, in addition to the annual financial statements, insurance undertakings must provide IVASS with a report on their risk management systems and internal controls, including the composition and appointment of the management body, and the composition, roles and responsibility of the internal audit, risk management and compliance function.  

Other requirements

Do any other operating requirements apply in your jurisdiction?

Yes, both the Insurance Code and IVASS regulations provide operating requirements to be met by insurance undertakings depending upon the insurance class of business exercised by the insurer (eg, motor car insurance, assistance insurance).

Non-compliance

What are the consequences of non-compliance with the operating requirements applicable to (re)insurers?

Non-compliance with the operating requirements set out by Italian laws and regulations for insurance undertakings will result in, among other things:

  • criminal sanctions, in case of insurance activity carried out without authorisation or impediments to the exercise of supervisory functions; and
  • administrative fines, in most cases of non-compliance with the conditions for carrying out insurance activity set out by the Insurance Code and IVASS regulations (up to €100,000).

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