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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?

Law 20/2015 on the regulation, supervision and solvency of insurance and reinsurance entities lays down some specific requirements for the acquisition of stakes in (re)insurers.

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

(Re)insurers must comply with notification requirements in regard to certain transactions:

  • Any acquisition of shares that involves obtaining a percentage of a company’s share capital or voting rights equal to or greater than 5% must be notified to the DGIPF within 10 working days of the acquisition.
  • Any acquisition or increase of a significant shareholding that involves obtaining a percentage of a company’s share capital or voting rights equal to or greater than 20%, 30% or 50%, or obtaining a dominant position, is subject to prior notification to the DGIPF, which may oppose or object to the acquisition.
  • Any disposal of shares that involves ceasing to have a significant shareholding or a dominant position is subject to prior notification to the DGIPF.

Insurers must notify the DGIPF of the identity of shareholders with significant stakes, the amount of those holdings and any changes in the shareholding percentages. Significant shareholding data must be disclosed at shareholders’ meetings.

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?

Insurers must adopt one of the corporate structures allowed under Law 20/2015:

  • a public limited company;
  • a European company,
  • a mutual company;
  • a cooperative;
  • a European cooperative society; or
  • a social welfare mutual association.

Reinsurers must take the corporate structure of a public limited company or an European company.

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

(Re)insurers must have an effective system of governance in place that ensures a sound and prudent management of the business. That system must at least include an adequate transparent organisational structure with a clear allocation and appropriate segregation of responsibilities and an effective system for ensuring the transmission of information.

Regarding directors and officers, Law 20/2015 establishes that those who are in charge of the effective management of the insurer or reinsurer must be commercially and professionally trustworthy, and have the appropriate professional qualifications, knowledge and experience to ensure sound and prudent management.

In addition, where applicable, directors and officers must comply with the duties of diligence and loyalty set out in the Capital Companies Law.

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?

Insurers or reinsurers based in the European Economic Area (EEA) which are duly authorised to write business in their countries will be entitled to carry out business in Spain under either the freedom of establishment regime (as a branch) or the freedom to provide services regime (FOS) subject to compliance with the EU notification procedure. In both cases, they must abide by the regulations dictated by Spain, as the host member state, for reasons of the general good, as well as the applicable regulatory rules. To set up an insurance branch, after the appropriate EU notification procedure has been completed and all other applicable requirements have been met, the DGIPF must enter the branch office in the Administrative Register of Insurance Entities. Further, the branch office must be recorded in the Companies Register. Insurers acting under FOS will be entered in an administrative register kept by the DGIPF.

However, reinsurers willing to write business in Spain may do so by setting up a branch in Spain or under the FOS regime without obtaining prior administrative authorisation or giving prior notification to the DGIPF.

Foreign insurers and reinsurers other than EEA companies must obtain authorisation from the Ministry for the Economy and Competitiveness if they wish to set up a branch in Spain.

Financial requirements

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

Under the EU Solvency II Directive, (re)insurers must comply with minimum capital and solvency capital requirements.

In terms of the minimum capital requirements, their own funds must reach the following amounts:

  • €2.5 million for non-life insurance undertakings, including captive insurance undertakings;
  • €3.7 million for life insurance undertakings, including captive insurance undertakings;
  • €3.6 million for reinsurance undertakings, except in the case of captive reinsurance undertakings, in which case no less than €1.2 million; and
  • for both life and non-life insurance undertakings, the sum of the first two amounts set out above (ie, €6.2 million).

These amounts represent the lowest possible capital that any (re)insurer should hold. Not reaching this minimum level of financial resources will imply that policyholders and beneficiaries are exposed to an unacceptable level of risk. Capital minimum must be calculated at least quarterly and the results reported to the DGIPF.

In regard to the solvency capital requirements, (re)insurers must meet a solvency margin calibrated to ensure all of the quantifiable risks to which an (re)insurer is exposed, as well as new business expected to be written over the following year. Solvency margin must be calculated at least once a year and reported to the DGIPF.

Do any other financial requirements apply?

Aside from minimum capital and solvency requirements, (re)insurers companies must establish technical provisions to cover all of the obligations assumed under their insurance and reinsurance contracts. The value of technical provisions must correspond to the amount that a (re)insurer would have to pay if it were to transfer its (re) insurance obligations immediately to another (re)insurer.

Personnel qualifications

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

Law 20/2015 on the regulation, supervision and solvency of insurance and reinsurance entities establishes that those who are in charge of the effective management of the insurer or reinsurer must be commercially and professionally trustworthy, and have the appropriate professional qualifications, knowledge and experience to ensure sound and prudent management.

Business plan

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

Law 20/2015 establishes that a business plan is a compulsory requirement to obtain the authorisation to operate in the insurance sector in Spain. The business plan must outline:

  • the intended lines of business;
  • the project objectives;
  • the nature of the risks;
  • the territories in which the company intends to do business;
  • the distribution and sales system;
  • marketing;
  • operational structuring; and
  • the financial and technical resources available.

Risk management

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

(Re)insurers must establish an effective risk-management system covering the strategies, processes and reporting procedures necessary to identify, measure, monitor, manage and report, on a continuous basis, the risks to which they are or could be exposed. This system must be effective and well integrated into the organisational structure and in the decision-making processes of the (re)insurer.

Regarding this risk-management system, every (re)insurer must:

  • conduct its own risk and solvency assessment regularly and without delay following any significant change in the risk profile;
  • establish an effective internal control system with regulatory compliance functions;
  • provide for an effective internal audit function that will include an evaluation of the adequacy and effectiveness of the internal control system and other elements of the system of governance; and
  • provide for an effective actuarial function.

Reporting and disclosure

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

(Re)insurers must disclose publicly and submit to the DGIPF, on an annual basis, a solvency and financial condition report.

The report must include descriptions of:

  • the business and its performance;
  • the system of governance;
  • the risk-management system;
  • the bases and methods used for financial valuation; and
  • the capital management.

The non-disclosure of information is permitted by the DGIPF where:

  • by disclosing such information, competitors would gain a significant undue advantage; or
  • there are obligations to policyholders or other counterparty relationships binding an undertaking to secrecy or confidentiality.

Where non-disclosure is permitted, a (re)insurer must make a statement to this effect in its solvency and financial condition report stating the reasons.

Regarding updates, in the event of a major development significantly affecting the relevance of the information disclosed in the solvency and financial condition report, a (re)insurer must disclose appropriate information as to the nature and effect of that major development. A ‘major development’ is defined as involving non-compliance with the minimum capital requirement or significant non-compliance with the solvency capital requirement.

Concerning additional voluntary information, (re)insurers may disclose any information or explanation related to their solvency and financial conditions which is not already required to be disclosed in accordance with Law 20/2015 and Royal Decree 1060/2015.

Other requirements        

Do any other operating requirements apply in your jurisdiction?

(Re)insurers must also comply with certain accounting requirements to ensure that their accounts books clearly reflect the actual financial situation.

Non-compliance

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

Without prejudice to civil or criminal provisions, a (re)insurer that fails to comply with operating requirements laid down by Law 20/2015 will be subject to the administrative penalties prescribed for that infringement.

Administrative infringements and their penalties are classified depending on the seriousness of the infringement:

  • Very serious infringements are penalised by:
    • revocation of the authorisation;
    • suspension of the authorisation to operate in one or several insurance classes for five to 10 years;
    • publication of the infringement in the Official State Gazette; or
    • a fine of between 1% of the entity's equity or €240,001.

Very serious infringements are time barred after five years.

  • Serious infringements are penalised by:
    • suspension of the authorisation to operate in one or more insurance class for up to five years;
    • publication of the infringement in the Official State Gazette; or
    • a fine amounting of between €60,000 and €240,000.

Serious infringements are time barred after four years.

  • Minor infringements are penalised by:
    • a fine of up to €60,000; or
    • a private admonition.

Minor infringements are time-barred after two years.

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