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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?
There are no restrictions on ownership of or investment in (re)insurers in Greece. However, within the framework of the EU Solvency II Directive (2009/138/EC), the Bank of Greece will not authorise the acquisition of qualifying holdings in a (re)insurer if it is not satisfied as to the qualifications of the shareholders, including related parties. The assessment of qualifications for the acquisition or increase of qualifying holdings takes place in accordance with Act 120/2017 of the Bank of Greece Executive Committee, which outlines the information that must be submitted and the procedure for the prudential assessment. The act makes available template forms for the submission of the necessary information. The Bank of Greece also takes into account the principles laid down in the European Supervisory Authorities’ Joint Guidelines on the Prudential Assessment of Acquisitions and Increases of Qualifying Holdings in the Financial Sector (JC/GL/2016/01), as well as the results of cooperation with other EU supervisory authorities where relevant.
If there are close links between the (re)insurer and other individuals or legal entities, the Bank of Greece will grant authorisation only if those links do not prevent the effective exercise of its supervisory powers.
What regulations, procedures and eligibility criteria govern the transfer of control of/acquisition of a stake in a (re)insurer?
According to Article 43 of Law 4364/2016, any (natural or legal) person intending to acquire a qualifying holding in a (re)insurer or increase their participation in a (re)insurer to 20%, one-third or 50% of the undertaking’s share capital must notify the Bank of Greece in writing. With respect to individuals acquiring qualifying holdings, and subject to Act 120/2017, the Bank of Greece may request information on the identity, financial condition and origin of the financial means of these persons. In the case of legal entities, it may require, next to information on the legal entity, information on the individuals with direct or indirect control over the legal entity and the ultimate beneficial owner provided that no listed entity breaks the line. Article 43 of Law 4364/2016 sets out the procedure and the timeframe within which the Bank of Greece must authorise or prohibit the qualifying holding’s acquisition. The Bank of Greece makes use of information obtained from other EEA supervisory authorities to assess the qualifications of foreign-interested acquirers. Judging from its regulatory practice, the Bank of Greece wants to avoid financial distress being placed on a local insurer on foreign acquisition when the local entity to be acquired is solvent and the acquirer’s group is in financial difficulty.
Must (re)insurers adopt a certain legal structure in order to operate? If no mandatory company organisation applies, what are the common structures used?
Greek (re)insurers may take the legal form of a société anonyme or a mutual association. Greek life insurers may take the legal form of a société anonyme.
Law 4364/2016 introduces the corporate governance system for (re)insurers in accordance with the Solvency II framework. It sets out:
- how (re)insurers can create internal procedures to ensure efficient operations;
- the fit and proper requirements for members of the administration or the persons who occupy key functions in the company;
- the characteristics and objectives of the main systems that (re)insurers must have in place, including the risk management system, the internal control system, the internal audit function and the actuarial function; and
- rules for outsourcing processes.
These rules are supplemented by the Solvency II Implementing Regulations.
Do any particular corporate governance requirements apply to (re)insurers, including any eligibility criteria for directors and officers?
Law 4364/2016 sets the minimum criteria for the directors who can serve on the board of a (re)insurer. Directors must have a good reputation, integrity and credibility, and be trustworthy. They must be professionally competent to fulfil their duties and cumulatively hold experience in insurance matters, financial markets, governance systems, actuarial analysis and the applicable legislative framework. Article 31 of Law 4364/2016, implementing Articles 42 and 43 of Solvency II, describes the necessary qualifications for members of the board of directors and the specific requirements for persons who effectively run the undertaking or have other key functions.
The Bank of Greece provides guidance on the tests that it applies to assess whether directors and officers possess the necessary qualifications. Act 60/2016 of the Bank of Greece Executive Committee asks for documented information including an extract of the individual’s criminal record and details from his or her experience that may affect their ability to perform their duties effectively. Any possible conflicts of interest due to close family members working in the same business field should be reported. The questionnaire is also available in English to facilitate the process for any foreign directors or officers. Although legal quotas have been imposed that make international work experience an obligation for bank directors, no such restrictions apply in the insurance sector.
Law 3213/2003 requires resident executive directors and key officers of insurers to report annually to the money laundering authority information about their income and financial assets (as it does for members of parliament, public officers, mass media owners and other categories of person).
Which (re)insurers must obtain authorisation from the regulator before operating on the market and what is the procedure for doing so?
Only licensed (re)insurers may legally operate in the Greek market. (Re)insurers registered in Greece and branches of non-European Economic Area (re)insurers must obtain a licence from the Bank of Greece before commencing operations.
The licence is granted for the specific classes in which the applicant intends to operate. The applicant submits the company statutes and a business plan for the classes of insurance in which it intends to operate, including projected financial statements for the next three financial years, predictions for the solvency capital requirements and the minimum capital requirements that it will maintain and the calculation methods for such predictions.
The business plan must also include the basic principles of reinsurance that the undertaking will apply, its own basic funds to cover the minimum capital requirements and predictions regarding establishment costs.
The applicant must provide evidence that it will be able to fulfil the quantitative requirements described in Law 4364/2016 and that it will comply with the corporate governance requirements of the law. Additional information is required if the insurer intends to practise certain specific classes of business, such as third-party motor liability.
Licences for new entrants on the market are issued for either non-life or life insurance activities (ie, not for composites). The Bank of Greece must decide on the licence application within six months of submission of a complete request.
What are the minimum capital and solvency requirements for (re)insurers operating in your jurisdiction?
Chapter F of Part 1 of Law 4364/2016 (Articles 50-106) is devoted to describing the quantitative (first pillar) requirements that (re)insurers must fulfil.
Articles 76 to 100 of Law 4364/2016 refer to the solvency capital requirements. As a general rule, the solvency capital requirements must be calculated at least once a year on the presumption that the undertaking will pursue its business on an ongoing basis and ensure that all quantifiable risks to which it is exposed are taken into account, covering both existing business and new business expected to be underwritten over the following 12 months. The solvency capital requirements may be calculated either in accordance with the standard formula or based on an internal model. The results of the calculation are reported to the regulator.
- Articles 101 to 102 of Law 4364/2016 specifically refer to the minimum capital requirements – an amount of eligible basic own funds below which policyholders and beneficiaries would be exposed to an unacceptable level of risk. The absolute floors are:
- €2.5 million for non-life insurers, including captives;
- €3.7 million for life insurers, including captives;
- €3.6 million for reinsurers; and
- €1.2 million for captive reinsurers.
The minimum capital requirements for composite insurers that operate specific legal provisions are the sum of the above mentioned amounts for each category.
Subject to the above limits, the minimum capital requirements must be no lower than 25% and no higher than 45% of the solvency capital requirements of the (re)insurers.
Do any other financial requirements apply?
Chapter F of Part 1 of Law 4364/2016 (Articles 50-106) transposes the first pillar of the EU Solvency II Directive (2009/138/EC), including the quantitative requirements with which (re)insurers must comply. Apart from the methods of calculating the solvency capital requirements and the minimum capital requirements, the first pillar includes rules concerning:
- the valuation of assets and liabilities;
- the calculation of the technical provisions of (re)insurers;
- the determination of the own funds of a (re)insurer and their categorisation; and
- the investments that a (re)insurer is allowed to make.
Are personnel of (re)insurers subject to any professional qualification requirements?
According to Article 31(1) of Law 4364/2016, the persons that undertake key functions of the (re)insurer must fulfil the fit and proper requirements that apply for the members of the board of directors (or other administrative body) of the undertaking, as set out in Article 31 of Law 4364/2016 and Act 60/2016 of the Bank of Greece Executive Committee. Actuaries and auditors must abide by the professional qualification standards set out by law, as must other qualified professionals employed by insurers (eg, specialised surveyors and lawyers).
The draft law on the implementation of the EU Insurance Distribution Directive (2016/97/EC) provides further requirements in respect of the employees of insurers who are engaged in the distribution of insurance products.
What rules and requirements govern the business plans of (re)insurers?
The (re)insurer’s business plan must be submitted when it seeks either initial authorisation or the extension of its licence to a further business class. Article 16 of Law 4364/2016 reiterates the provisions of Solvency II regarding the required content of the business plan. This must include information that will allow the regulator to assess whether the licensing requirements are met:
- on the basis of the nature of the risks or commitments which the insurer intends to cover; and
- in light of its initial expenditure, retrocession prospects and financial, governance and operational projections for the first three years of operation.
What risk management systems and procedures must (re)insurers adopt?
Greek (re)insurers must maintain an effective risk-management system comprising the strategies, processes and reporting procedures necessary to identify, manage and report, on a continuous basis, the risks, at an individual and at an aggregated level, to which they are or could be exposed, and their interdependencies. The risk management system must cover both the risks included in the calculation of the solvency capital requirements and the risks not or not fully included in the calculation thereof, and at least the areas of underwriting and reserving, asset-liability management, investment (particularly derivatives and similar commitments), liquidity and concentration risk management, operational risk management, reinsurance and other risk mitigation techniques. (Re)insurers must adopt a written policy on risk management that addresses all of these points.
Reporting and disclosure
What ongoing regulatory reporting and disclosure requirements apply to (re)insurers?
Part 1, Chapter D, Section 3 of Law 4364/2015 transposed the provisions of the third pillar of Solvency II. These establish the obligations for disclosure of information to the public, the Bank of Greece and the European Insurance and Occupational Pensions Authority, and the market discipline rules in the private insurance sector. They detail the information which must be included in the annual report on the undertaking’s solvency and financial condition, which is publicly disclosed. They also regulate the conditions under which certain information may not be disclosed by the undertaking, as well as the powers of the Bank of Greece to require the disclosure of supplementary information or clarifications.
With respect to the exact form and standard templates for the annual report and the regular submission of information to the national regulatory authorities, Greek (re)insurers must comply with the implementing technical standards adopted by the European Commission. The information and reports that must be submitted by Greek (re)insurers to the Bank of Greece for supervisory purposes are further detailed in Acts 93/2016 and 94/2016 of the Bank of Greece Executive Committee. Notably, following the first publication of the reports in Summer 2017, insurers operating in Greece have suggested that the technicality level of the published information is too high to help consumers wishing to assess the financial condition of insurers operating in the market. Therefore, they are interested in developing a more consumer-oriented information tool.
Do any other operating requirements apply in your jurisdiction?
According to Article 18 of Law 489/1976, Greek insurers operating in the class of third-party motor liability insurance, including via passporting, automatically become members of the Auxiliary Fund for Insurance of Liability Arising out of Motor Accidents, to which they pay 6% of their gross written premiums in the third-party motor liability class. In addition, they automatically become members of the Motor Insurers’ Bureau, to which they also pay a contribution.
Greek insurers intending to undertake third-party motor liability business must communicate to the Bank of Greece the name and address of all claim representatives which they appoint and use in other EU member states.
Greek life insurers and Greek branches of third-country life insurers mandatorily become members of the Greek Private Life Insurance Guarantee Fund under Law 3867/2010. EU life insurers undertaking business in Greece through a branch or through freedom of services become members of this fund to the extent that they are not covered by respective guarantee funds in their home member states. The guarantees that the insurance beneficiaries of insolvent life insurers will be compensated, even if to a limited extent.
What are the consequences of non-compliance with the operating requirements applicable to (re)insurers?
Law 4364/2016 provides for administrative and criminal penalties in the event of non-compliance with the applicable insurance law provisions.
With respect to administrative penalties (Law 4364/2016), the Bank of Greece has wide discretionary powers which are exercised under the scrutiny of proportionality, and which take into account criteria such as:
- the effect of the violation on the proper functioning of the insurance market;
- the risk to the systemic stability;
- the avoidance of future violations; and
- the willingness to cooperate with the regulatory authority.
Penalties may include fines to (re)insurers and their administration members or third parties involved in violating the laws governing insurance or insurance mediation. For example, the imposition of:
- a fine of up to €2 million on a (re)insurer, its administration members or any other individual or legal entity violating any EU or national insurance law provision;
- a fine of up to €200,000 on a (re)insurer, its administration members or any natural or legal person refusing to cooperate or obstructing a research or audit;
- a fine of €100,000 (rising to €300,000 in case of repeat offence) on any natural or legal person violating the law on third-party motor liability insurance or insurance mediation; and
- special administrative penalties if a qualifying holding is acquired in breach of Law 4364/2016.
Special fines apply under more specialised provisions (eg, third-party motor liability insurance law).
Article 258 of Law 4364/2016 sets out the violations of the applicable insurance law provisions that may lead to imprisonment and other criminal penalties.
Administrative penalty decisions are subject to the scrutiny of administrative courts when challenged by the penalised party.
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