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What general rules, requirements and procedures govern the conclusion of (re)insurance contracts in your jurisdiction?
No general rules govern the conclusion of (re)insurance contracts (ie, how said contracts may be entered into). This is determined by the national law of the respective EU member state. However, there are rules regarding the information which a policyholder must receive before the conclusion of a contract in order to be make an educated decision.
For example, EU Directive 2009/138/EC (Solvency II) provides for general, life insurance and non-life insurance-related information obligations on the insurer towards (potential) policyholders before the conclusion of the contract, as well as additional information where non-life insurance is offered under the right of establishment or the freedom to provide services.
EU Directive 2011/83/EU on consumer rights determines consumer information requirements. Under the directive, traders must provide consumers with certain information for distance and off-premises contracts, as well as for all other contracts, as applicable, with the former exceeding the information requirements of the latter, before the consumer is bound by the contract or any corresponding offer. Further, when transposing the directive into national law, member states had to ensure that consumers had 14 calendar days to withdraw from the contract without penalty and without giving any reason.
EU Directive 2002/92/EC on insurance mediation stipulates that an insurance intermediary must provide customers with specific information before the conclusion of any initial insurance contract. This directive was replaced by the Insurance Distribution Directive (2016/97/EC), which extends these information obligation to the extent that (re)insurers and (re)insurance distributors must provide (among other things) information regarding:
- the distribution chain;
- the (re)insurance distributor itself;
- the (re)insurance product;
- potential conflict of interests; and
Are (re)insurance contracts subject to any mandatory/prohibited provisions?
With respect to insurance contracts, Article 7 of the Rome I Regulation (593/2008) provides for the applicable law governing insurance contracts. Parties may choose one of the following laws only:
- the law of any member state in which the risk is situated at the time of the conclusion of the contract;
- the law of the policy holder’s habitual residence;
- for life assurance, the law of the member state of which the policy holder is a citizen;
- for insurance contracts covering risks limited to events occurring in a member state other than that where the risk is situated, the law of that member state; or
- where the policy holder of a contract pursues a commercial or industrial activity or a liberal profession and the insurance contract covers two or more risks which relate to those activities and are situated in different member states, the law of any of the member states concerned or the law of the policy holder’s habitual residence.
Regarding the first, second and fifth points, if member states grant greater freedom of choice with regard to the laws applicable to insurance contracts, parties may take advantage of this freedom.
If the applicable law has not been lawfully chosen by the parties, contracts must be governed by the law of the member state in which the risk is situated at the time of conclusion of the contract. However, this does not apply to reinsurance contracts.
Can any terms be implied into (re)insurance contracts (eg, a duty of good faith)?
This is determined by the national laws and case law of the respective member states.
What standard or common contractual terms are in use?
This is determined by the national laws, case law and market practices of and in the respective member states.
What is the state of development in your jurisdiction with regard to the use of ‘smart’ contracts (ie, blockchain based) for (re)insurance purposes? Are any other types of financial technology commonly used in the conclusion of (re)insurance contracts?
The development of blockchain-based insurance products is one of the major challenges facing (re)insurers. An insurance giant recently announced that it had launched a blockchain prototype for a global captive insurance programme. The project focuses on professional indemnity and property insurance for a customer with a captive insurance programme with local subsidiaries in the United States, China and Switzerland. The programmes collect premiums from each operating unit, much like an ordinary insurer. Likewise, the captive entity pays out claims as they arise. The insurer administers the captive insurer as a so-called ‘fronting insurer’ and uses its diverse multinational network to ensure global reach and compliance. Blockchain technology automatically connects all parties involved in the insurance programme by using distributed ledger technology, which is shared among all programme participants and can record transactions and data entries. Updates and changes to the data are shared in real time across all users. This creates a much faster, transparent, secure and efficient means of:
- distributing information;
- conducting business processing; and
- recording transactions across multiple parties.
Other insurers are working on similar blockchain-based insurance products at a growing speed.
What rules and procedures govern breach of contract (for both (re)insurer and insured)?
This is determined by the national laws and case law of the respective member state.
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