Meet the Law - New Law on Insurance and Reinsurance

New Law on Insurance and Reinsurance

A new law on Insurance and Reinsurance was recently published (Law no. 18/22 of July 7th). The new statute reflects the recommendations of the International Association and of the Committee of Insurance, Securities and Non-Banking Financial Authorities (CISNA), including ensure healthy competition and protection of policyholders; promote the stability and regular operation of the market; and prevent the systemic risk.

We highlight the following aspects:

 Object: The new regime focuses on:

• The conditions to access and exercise the insurance and reinsurance business;
• The process to obtain the authorization for the establishment offshore of any forms of representation by insurance or reinsurance companies with headquarters in Angola;
• The impacts that can occur during the exercise of the insurance and reinsurance business by insurance and reinsurance companies headquartered in Angola;
• The recovery and liquidation of insurance and reinsurance companies;
• The micro-insurance business;
• The penalty system applicable to the insurance and reinsurance business.

Access to Insurance Activity: The insurance or reinsurance business in Angola can only be exercised by:

• Public limited companies by shares (sociedades anónimas) headquartered in Angola, with national or foreign capital;
• Branches of insurance and reinsurance companies with head office outside the national territory;
• State owned companies, or with public capital, created under Angolan law;
• Micro-insurance companies.

Access to Insurance and Reinsurance Business: Access to the insurance and reinsurance business is subject to prior authorization of the Insurance Supervisory Authority. The authorization is now the responsibility of the Angolan Regulation and Supervision Agency (ARSEG).

The conditions for the issuance of the authorization depend on whether it is the incorporation of a company headquartered in Angola, or of a local branch of a company headquartered abroad. In the first case it is necessary:

• To adopt the form of a public limited company (SA);
• That the company has a share capital of no less than the minimum established by ARSEG, which depends on the line of insurance or reinsurance;
• To have a Board of Directors with a minimum of three members who have the power to guide the company's activity;
• The ability of the founding shareholders to ensure the sound and prudent management of the company, as well as the adequacy and sufficiency of human, technical and financial resources. 

If the authorization is for the access to the insurance and reinsurance business in Angola by a company with headquarters abroad, it is necessary:

• That the company has been incorporated and in activity for at least five years;
• To allocate to the branch's operations an establishment fund of not less than the share capital established by ARSEG;
• To have premises of their own, as well as technical, human and financial resources.
• That an Angolan resident occupies one of each two workplaces to be created at the beginning of the branch's activity and assurance of the respective technical training.

Financial Guarantees: To meet the commitments made in the insurance and reinsurance contracts, insurance and reinsurance companies must have the following financial guarantees:

• Technical provisions established by the statute;
• Solvency margin set by ARSEG;
• Guarantee fund as provided by the statute.

Qualifying Holdings: No shareholder, except the State, may, directly or through an intermediary, hold more than 10% of the voting rights or share capital of an insurance company, unless the holding of a higher stake is authorized by the Insurance Supervisory Body.

Responsibilities and General Corporate Governance Requirements: Insurance and reinsurance companies must have an effective system of governance that ensures the sound and prudent management of their business. This system should be based on an appropriate and transparent organizational structure. Policies regarding risk management, internal control, internal audit, remuneration and outsourcing should be defined and implemented. Members of the companies' management and supervisory bodies (including non-executive directors, senior managers and those responsible for relevant management functions) must:

• Possess an appropriate qualification, through professional experience and/or academic degree;
• Have a recognized good standing;
• Have availability and independence.

Mandatory Functions and Systems: Insurance and reinsurance companies must always ensure the following functions and systems:

• Risk Management System - appropriate to the size, nature and complexity of operations;
• Internal Control System - effective at all levels of the company;
• Compliance Function - in order to control the fulfilment of the company's legal obligations and policies;
• Internal Audit System - in order to assess the adequacy and effectiveness of the Internal Control System;
• Actuarial Function - which must be assured by an actuary, nominated or subcontracted, who is registered and approved by the Insurance Supervisory Body (ARSEG).

Access to Micro-Insurance: Micro-insurance has been authorized since the law came into force. It is aimed at assuming the risk of small and medium-sized operations, as well as specific risks. Insurance companies may now commercialize insurance products within the micro-insurance segment, provided they are authorized by the Insurance Supervisory Body. The Law also allows the incorporation of companies exclusively for micro-insurance.

Transitional Regime: The obligations described below will have to be fulfilled within the following maximum time periods: