ICP 4 Licensing

A legal entity which intends to engage in insurance activities must be licensed before it can operate within a jurisdiction. The requirements and procedures for licensing must be clear, objective and public, and be consistently applied.


Licensing requirements


4.1
The insurance legislation:
  • includes a definition of insurance activities which are subject to licensing;
  • prohibits unauthorised insurance activities;
  • defines the permissible legal forms of domestic insurance legal entities;
  • allocates the responsibility for issuing licences; and
  • sets out the procedure and form of establishment by which foreign insurers are allowed to conduct insurance activities within the jurisdiction.


4.2

A jurisdiction controls through licensing which entities are allowed to conduct insurance activities within its jurisdiction.


4.2.1    

Entities should neither be allowed to present themselves nor act as licensed insurance legal entities without or before having been granted a licence.

4.2.2    

Depending on the legal forms that are permitted in a jurisdiction, foreign insurers may be allowed to conduct insurance activities within the jurisdiction by way of a local branch or subsidiary or on a cross-border provision of services basis. A subsidiary is a domestically established legal entity that needs to be licensed. A branch is not separate from the insurance legal entity, and can be established in a jurisdiction other than the insurance legal entity's home jurisdiction. A host jurisdiction may require that branches of foreign insurance legal entities be licenced or otherwise authorised by the host supervisor. Cross-border provision of services does not require a local establishment but may require authorisation from the host supervisor.

4.2.3    
In some regions, a number of jurisdictions have agreed to a system of passporting as a manner of acknowledging each other’s licences. This provides the opportunity for insurance legal entities established in one of the jurisdictions to open branches or provide insurance services across borders on the basis of their home jurisdiction authorisation to conduct insurance activities. Where a foreign insurer may be allowed to operate through a branch or cross-border provision of services without a licence or other authorisation from the host supervisor, it is important that bilateral or multilateral agreements are in place which ensure that the insurer:
  • is subject to supervision in its home jurisdiction which has been recognised as adequate by the host jurisdiction; and
  • may be subject to sanction or other supervisory measures if it does not meet the legal provisions of the host jurisdiction. In such circumstances, the home supervisor should be informed.

4.3
Licensing requirements and procedures are clear, objective and public, and are consistently applied. The applicant is required at least to:
  • have sound business and financial plans;
  • have a corporate or group structure that does not hinder effective supervision;
  • establish that the applicant’s Board Members, both individually and collectively, Senior Management, Key Persons in Control Functions and Significant Owners are suitable;
  • have an appropriate governance framework; and
  • satisfy capital requirements.


4.3.1    

In addition to being publicly available, licensing requirements should also be easily accessible. Supervisors should issue guidelines on how to file an application for a licence, which include advice on the required format of documents and the expected time it would take to process an application upon the receipt of all relevant documents.

4.3.2    

Supervisors should assess the applicant’s business and financial plans to ascertain that the proposed business lines will be soundly managed and adequately capitalised. Business and financial plans should be projected for a minimum of three years by the applicant and include information such as the products to be offered, distribution methods and channels to be used, risk profile, projected setting-up and development costs by business line, capital requirements and solvency margins. Information regarding insurance and reinsurance should also be provided.

4.3.3    

Where the applicant is part of a group, the applicant should submit its corporate and group structure, indicating all of the material entities within the group (including both insurance legal entities and other entities, including non-regulated entities). Information on the type of related party transactions and/or relationships between all material entities within the group should also be provided.

4.3.4    

The applicant should also provide information to demonstrate the appropriateness of its systems of risk management and internal controls, including contracts with affiliates, outsourcing arrangements, information technology systems, policies and processes.

4.3.5    

If applying to be licensed to underwrite both life insurance business and non-life insurance business (where such is allowed), the applicant should demonstrate to the satisfaction of the supervisor that its systems of risk management and internal controls are adequate to manage the risks separately for each business stream.

4.3.6    

Further guidance on suitability, governance and capital requirements can be found in ICP 5 (Suitability of Persons), ICP 7 (Corporate Governance), ICP 8 (Risk Management and Internal Controls) and ICP 17 (Capital Adequacy).


Requirements on the Supervisor


4.4

The supervisor assesses applications, makes decisions and informs applicants of the decision within a reasonable time, which is clearly specified, and without undue delay.


4.5

The supervisor refuses to issue a licence where the applicant does not meet the licensing requirements. Where the supervisor issues a licence, it imposes additional requirements, conditions or restrictions on an applicant where appropriate. If the licence is denied, conditional or restricted, the applicant is provided with an explanation.


4.6

A licence clearly states its scope.


4.7

The supervisor publishes a complete list of licensed insurance legal entities and the scope of the licences granted.


4.7.1    

The supervisor should publish the complete list of licensed insurance legal entities and clearly state the scope of licence that has been granted to each insurance legal entity. This would provide clarity to the public as to which entities are licensed for specific classes of business.

4.7.2    

If the conditions or restrictions to the license would impact the public or any person dealing with the insurance legal entity, the supervisor should either publish these conditions or restrictions or require the insurance legal entity to disclose these conditions or restrictions accordingly. Conditions or restrictions that would impact the public could include, for example, the lines or classes of insurance business an insurance legal entity is permitted to conduct.


Foreign operations


4.8

In deciding whether and if so on what basis, to license or continue to license a branch or subsidiary of a foreign insurer in its jurisdiction, the supervisor consults the relevant supervisor(s) as necessary.


4.9

Where an insurance legal entity is seeking to conduct cross-border insurance activities without a physical presence in the jurisdiction of the host supervisor, the host supervisor concerned consults the home supervisor, as necessary, before allowing such activities.

4.9.1    

Jurisdictions or regions may have a system or cooperation agreements in place whereby such consultation is not necessary or required.

4.9.2    
Information exchanged as part of a consultation should include:
  • confirmation from the home supervisor that the insurance legal entity is authorised to conduct the proposed types of insurance activities; and
  • confirmation from the home supervisor that the insurance legal entity meets all the insurance regulatory requirements in the home jurisdiction.