UK and Europe based Clyde & Co lawyers answer important questions in the Reinsurance industry.


(1) What are the rules and procedures for setting up a new reinsurance company in your country?

To establish a new reinsurance company, an authorisation application must be made to the Prudential Regulatory Authority ("PRA") for permission to carry out regulated activities under Part 4A of the Financial Services and Markets Act 2000 ("FSMA"). This must include: a regulatory business plan; financial projections; details of financial resources; details of systems, controls and compliance arrangements; and details of personnel, including key individuals who will be performing “controlled functions” and of the controllers of the applicant. It must also contain an address in the UK for service of any notice or other document under the FSMA. The PRA leads and manages the application process, coordinating with the Financial Conduct Authority ("FCA").

The PRA assesses applicants from a prudential perspective, and the FCA from a conduct perspective. In either case, the relevant regulator will assess whether, if authorised, the applicant would meet the relevant Threshold Conditions at authorisation and on a continuing basis.

The Threshold Conditions constitute the minimum requirements for becoming and remaining authorised.

A foreign (re)insurance companies whose head office is elsewhere in the European Economic Area (EEA) is permitted to set up a branch and conduct insurance business in the UK on the strength of an authorisation in its Home State (under the so-called ‘passport regime’).

A foreign (re)insurer whose head office is outside the EEA would be prohibited from carrying on (re)insurance activities from within the UK (or through an agent in the UK) without authorisation. Authorisation would be available for a branch or a subsidiary of the (re)insurer.

(2) What are the capital and surplus requirements for a reinsurance company?

UK capital requirements currently adopt the requirements established by the EU Insurance Directives (now consolidated in Insolvency II) and are contained in the PRA Rulebook. Pillar 1 of Solvency II came into force on 1 January 2016 and introduced new capital requirements: a minimum capital requirement (MCR) representing the minimum amount of capital that an insurer or reinsurer needs to cover its risks, and a solvency capital requirement (SCR), which is effectively the amount of capital that an insurer or reinsurer requires to operate as a going concern, assessed on a value at risk measure.

(3) Are there any restrictions on foreign ownership of a reinsurance company?



(1) What are the rules and procedures for setting up a new reinsurance company in your country?

For reinsurers established in France, authorisation must be received from the regulator, the Autorité de contrôle prudentiel et de résolution ("ACPR"). The authorisation for a reinsurer is not branch-specific. There are currently 14 reinsurers authorised in France according to the ACPR's records.

Reinsurers with a head office in another EEA member state can provide reinsurance in France without needing authorisation from the ACPR, provided that they are authorised in their home member state. They can do so either on a cross-border basis or via a branch.

Non-EEA reinsurers may reinsure insurers and reinsurers established in France provided they are authorised in the country where their head office is established. There are no additional constrains or requirements from a purely regulatory perspective.

(2) What are the capital and surplus requirements for a reinsurance company?

In order to authorise a reinsurance company to start conducting business in France, the ACPR will require a substantial set of information and documents, including a three-year business plan with prospective balance sheets, profit and loss accounts and cash flows.

Reinsurance companies subject to Solvency II are subject to the requirements contained in the Solvency II Directive as transposed under French law, namely to have sufficient assets to cover the Solvency Capital Requirement calculated in accordance to either the standard formula or an ACPR-approved internal model. The Minimum Capital Requirement is subject to an absolute floor of EUR 3.6mn.

As mentioned above, French insurers and reinsurers which are subject to Solvency II may cede or retrocede their risks to reinsurance companies authorised in a country with is not part of the EEA without any specific limitation. Insurers and reinsurers which are not subject to Solvency II will only be able to take credit for such reinsurance up to the value of assets pledged in their favour by the reinsurer. In practice, it is usual for French cedants to require some sort of collateral contractually.

(3) Are there any restrictions on foreign ownership of a reinsurance company?

No, but the ACPR will verify a company's shareholding structure, and the quality of its shareholders, prior to granting a licence and thereafter on an ongoing basis whenever changes occur in such shareholding. The ACPR may also decline to grant an authorisation if the use of its supervisory powers would be hampered because of close links between the company and other non-EEA person or company, or by the laws and regulations which apply to that non-EEA person/company.


(1) What are the rules and procedures for setting up a new reinsurance company in your country?

Approval must be obtained from the Federal Financial Supervisory Authority (Bundesanstalt für Finanzdienstleistungsaufsicht, "BaFin"). A detailed business plan must be filed and the company must demonstrate that it has sufficient capital for the first three business years. Information must be supplied about the intended reinsurance.

Foreign reinsurers located in an EEA Member State can write business directly on a freedom of services basis or can establish a branch in Germany, provided that they are licensed in their home state.

Foreign reinsurers located outside the EEA (third country reinsurers) have – as a general rule – to obtain a licence from BaFin before writing business in Germany and to establish a local branch. There are exemptions for third country reinsurers that intend to carry out solely reinsurance business in Germany from their seat through provision of cross-border services and if the home state solvency regime is deemed equivalent by the European Commission.

(2) What are the capital and surplus requirements for a reinsurance company?

Reinsurance companies must meet the solvency capital requirement and must also maintain a minimum capital requirement of between EURO 1.2 million for reinsurance captives and EURO 3.6 million for all other reinsurers. Different amounts apply for mixed insurers depending on class of business.

(3) Are there any restrictions on foreign ownership of a reinsurance company?

In principle, no. However, BaFin will supervise any investor if it acquires a qualified participating interest. BaFin will also need to be satisfied about the effectiveness of the home regulator.

Germany update:

German regulator specifies requirements for reinsurance business in Germany by third country reinsurers

By interpretative decision dated 31 August 2016, the German Federal Financial Supervisory Authority (Bundesanstalt für Finanzdienstleistungsaufsicht, BaFin) specified some aspects regarding the conduct of reinsurance business in Germany by insurance undertakings situated in a third country, i.e. non-EU/EEA-country. The statement applies to reinsurance contracts concluded on or after 1 January 2016, including renewals that require a contractual agreement between the parties.

As a general principle, third country insurers need to obtain an authorisation and establish a German branch office if they wish to carry on insurance business in Germany. The German Insurance Supervision Act (Versicherungsaufsichtsgesetz, VAG), which stipulates these requirements, provides for an exemption that applies (i) if primary insurers or reinsurers from third countries carry out solely reinsurance business in Germany through provision of cross-border services and (ii) if the European Commission has decided that the solvency regimes for reinsurance activities carried out by undertakings in the relevant countries are equivalent to the regime described in that Directive, which currently is the case only for Switzerland, Bermuda (except captives) and Japan.

Carrying on business in Germany

BaFin clarified that carrying on reinsurance business in Germany does not only include the execution of legal transactions, but also the main steps leading up to signing the contract as well as the performance of the contract. The decisive element is whether the third-country insurance undertaking deliberately targets the German market (e.g. advertisement of specific products, an internet presence targeted at the German market, employees of the third-country insurance undertaking visiting customers with the aim of concluding reinsurance contracts) in order to offer reinsurance contracts to German insurers or to initiate such business. Deliberate targeting is also the case if the third-country insurance undertaking uses intermediaries situated in Germany or abroad to contact German insurers or to provide offers to the German market. Such activities would be classified as carrying on insurance business in Germany and, thus, trigger the authorisation requirement.

Insurance by correspondence

There is, however, no authorisation requirement if reinsurance contracts are concluded by correspondence (Korrespondenzversicherung), since such activities are not deemed carrying on business in Germany. The crucial elements here are that (i) the initiative to conclude the reinsurance contract must come from the German insurer and (ii) the reinsurance contract must be concluded by way of correspondence, e.g. telephone, fax, e-mail or post. Taking into account the above clarification, for a national insurer's initiative to be given, the respective third-country insurance undertaking must not have distribution structures in Germany or have targeted the German market with e.g. advertisements. Pursuant to BaFin, insurance by correspondence also covers cases where a German insurance undertaking, on its initiative, authorises a third party, e.g. an insurance intermediary, to prepare and/or conclude a reinsurance contract.


Insurers should bear in mind that by law the supervisory authority is granted powers to order also third-country insurance undertakings to cease conducting business immediately and run-off the business without delay. Also, the operation or commencement of reinsurance business without the necessary authorisation is considered a criminal offence under German law.

Europe Updates 

U.S. and EU agree on bilateral Agreement on insurance and reinsurance measures.

The news of 16 January 2016 that after more than twenty years of discussions the U.S. and EU successfully concluded negotiations on a U.S./EU Agreement on insurance and reinsurance is of particular relevance for reinsurers from both areas. With regard to Germany, this simplifies the options for U.S. reinsurers to conduct business in Germany, which is of importance taking into account recent publications from the German regulator indicating a to some extent strict approach with regard to the interpretation of exemptions from the general authorisation requirement.

The new U.S./EU Agreement does now provide for a widely equal treatment of U.S./EU reinsurers, in particular these shall be able to conduct business in the respective other region without the obligation to establish a local presence or provide for a collateral.

Besides reinsurance, the Agreement covers two other areas of insurance supervision: group supervision and the exchange of insurance information between regulators. Insurance groups will as a general rule only be subject to worldwide prudential insurance group oversight by the supervisors in their home jurisdiction. EU and U.S. regulators intend to cooperate much closer in the future and enter into a productive exchange in order to ensure supervision at a high quality level.

The Agreement has not yet entered into force. In a next step, it has to be ratified by the European Parliament and the U.S. Congress.