Licensing of insurance activities in the Russian Federation

In the article we will consider what licensing of insurance activities is.

Only legal entities and entrepreneurs are allowed to engage in such a business. Licensing of such activities is not required if it is associated with:

• insurance risk assessments;
• determination of the size of insurance payments;
• activities in the form of consultations or research in the field of insurance;
• determination of the amount of damage.

Since 2013, the only insurance supervision body in the Russian Federation has been operating - the Bank of Russia. Any activity is subject to licensing. The main thing is that it should be associated with the creation of insurance reserves for payments.

Licensing of insurance activities is carried out by the insurance supervision body for voluntary and compulsory types of insurance in the following areas:

• property insurance;
• liability Insurance;
• personal accident insurance.

In addition, licenses are issued for reinsurance. This document indicates the specific types of activities, the implementation of which is permitted to a particular insurance subject.

Who is involved?

Licensing of insurance activities is carried out by decision of the Bank of Russia, which, in addition, is engaged in:

• maintaining a register of insurance brokers;
• maintaining the State Register of associations of insurers and individual insurers;
• development of normative and methodological documents related to insurance.

The Bank of Russia has the right:

1. Suspend the validity of a license document - until the elimination of violations of work for the conclusion of new and extension of existing contracts for all types of insurance activities for reinsurance. However, the insurer must work on the contracts concluded at the moment.
2. Limit the validity of a license - impose a moratorium until the deadline for eliminating established violations of the licensing conditions for the same activity as during the suspension.

The Bank of Russia may also revoke the license of the entity. This means that its action is terminated by the decision of this body together with the activity of the subject, only its obligations under existing insurance contracts will remain.

What else involves licensing insurance activities in the Russian Federation?

Who is licensed?

Insurance organizations are called upon to protect the rights of legal entities and individuals in the event of a variety of insured events. Licenses are issued by decision of the body licensing applicants:

• reinsurers for reinsurance;
• insurance brokers;
• mutual insurance societies;
• insurance organizations.

Insurance Licensing Terms

A person who is an applicant for a license to carry out insurance activities must comply with the various requirements established by law. Legal entities that wish to engage in insurance activities must have:

• the minimum amount of the authorized capital defined in the law, which directly depends on the type of insurance;
• high level of professional training of employees in the insurance sector;
• the legal form regulated by law;
• no more than 49% participation in the authorized capital of foreign investors.

Package of documents

Licensing of insurance activities in the Russian Federation is based on their applications and necessary documents. A permit document for insurance, mutual insurance, reinsurance, insurance brokerage is executed in the manner prescribed by law.

For licensing the activities of insurance entities, the applicant submits to the insurance supervision the following package of documents:

• application for a license document;
• a document on the state registration of the applicant in the form of a legal entity;
• constituent documentation;
• the minutes of the meeting of all existing founders on the approval of such and approval for the posts of the executive body, the head of the executive collegial body;
• information on the composition of shareholders;
• documents that confirm payment in full of the authorized capital;
• documents on state registration of legal entities, founders of the object for licensing, as well as an audit report on their financial statements for a certain reporting period, if they require a mandatory audit;
• information on insurance actuary;
• information about the executive body, head of the executive body, head of the audit commission, chief accountant;
• calculation of insurance tariffs using the applicable methodology of actual calculations and indicating the main data source, as well as tariff rates;
• information on the formation of the insurance reserve;
• economic justification for the types of insurance.

In order to obtain a permit document for mutual insurance, it is necessary to submit the following documents to the insurance supervision:

• a license application corresponding to a special form;
• document on state registration of a mutual insurance company as a legal entity;
• company charter;
• information about the director, chairman of the board, chief accountant and auditor;
• provision on the formation of insurance reserves.

To license insurance activities in the territory of the Russian Federation and obtain a permit document for insurance brokerage, the following is required:

• application for a license;
• a document on state registration of a person in the form of an individual entrepreneur or legal entity;
• constituent documentation of a legal entity;
• documents that confirm the qualifications of the insurance broker and the qualifications of employees of the insurance broker;
• sample contracts that are necessary for the implementation of brokerage insurance activities.

In order to verify the received information, insurance supervision has the right to send written requests to organizations to provide information regarding the documentation submitted by the license applicant. If all the documents are provided in the proper form, the insurance supervision issues a notification to the applicant about their admission.

The decision to provide a license document or to refuse to issue it is made by this body within a period of not more than 120 days from the receipt of all the above documents. The adoption of a direct decision is carried out in a period not exceeding 2 months. The supervisor must inform the applicant about the decision within 5 days from the date of its adoption.

Licensing of insurance activities in the territory of the Russian Federation implies certain qualification requirements.

Qualification and other requirements

The list of such requirements includes:

1. The leaders of the insurance entity - legal entity or individual entrepreneur must have a higher financial or economic education, which is confirmed by a document recognized in the Russian Federation, as well as at least 2 years of experience in insurance or finance.
2. The insurance actuary is required to have a higher economic or technical (mathematical) education, confirmed by relevant documentation recognized in the Russian Federation, as well as a qualification certificate.
3. The chief accountant of an insurance broker or policyholder must have documents confirming the existence of a higher economic or financial education, as well as seniority in the specialty of at least 2 years in a reinsurance, brokerage or insurance organization that has been registered in the country.
4. The chief accountant, managers or the sole body of the legal entity for executive activities must reside in the Russian Federation permanently.

Thus, in order to issue a license document, the head and chief accountant need to have a university degree in the economic or financial sphere, a certain length of service in the insurance industry and reside in the country.

So, we know that the licensing of insurance activities in the Russian Federation is carried out by the Bank of Russia. For what reasons can they refuse to issue permits?

Refusal to issue a license and its cancellation

The grounds for refusing insurance licensing are:

• the use by a legal entity that has applied to insurance supervision of a designation that individualizes another insurance entity, information about which was previously entered into a single state register;
• the subject has a license for additional types of insurance, reinsurance or mutual insurance at the time of the decision to provide a license document, the decision of this body to suspend or limit the validity of a license document issued earlier;
• non-compliance of the documentation provided by the applicant with the requirements of the law and regulatory acts of the insurance supervision body;
• non-compliance of the constituent documentation with the requirements of the law;
• the presence of false information in the documents;
• the head or chief accountant has an outstanding or unexpunged criminal record;
• insolvency (bankruptcy, or fictitious or intentional bankruptcy) of the entity (legal entity) due to the fault of the founder.
• unfulfilled order on non-compliance with the requirements for solvency and financial stability, as well as non-reporting.

A decision containing a refusal to issue a license document shall be sent in writing to license applicants within 5 business days from the date of their adoption. It should contain the grounds for refusal with reference to the violations committed.

The decision to provide a license document is canceled or canceled in the following cases:

• failure by the applicant of measures to issue a license within 2 months from the date of issuance of the notice;
• establishment before the deadline for issuing a license of information on the provision of false information by the applicant.

How long is the licensing of insurance activities in the Russian Federation?

License validity

A license document for insurance work is issued without limitation of its validity.

The license may be temporary, and may be issued for the following periods:

• indicated in the application of the applicant, but not more than three years;
• from 1 to 3 years in the absence of information, which allows a reliable assessment of insurance risks provided for by the insurance rules;
• the validity of the temporary license document is extended upon application, however, this may also be refused if certain violations by the applicant have been established during the period of its validity, which have not been eliminated within the established time period.

These are the basic conditions for licensing insurance activities in the Russian Federation.

The license may be terminated in the event of termination of the insurance organization, if we are talking about an individual entrepreneur, reorganization and liquidation of an entity that is a legal entity, with the exception of reorganization by the type of spin-off or merger.The license does not terminate in this situation if all the conditions of the newly established legal entity are met.

Thus, two types of licenses should be distinguished: unlimited (without limitation of validity) and temporary (issued for a period of up to 3 years, after which it is renewed).

What should be in the license?

So, insurance activity is subject to licensing. In accordance with the regulatory framework, a license form has been established, which should contain the following details:

• territory of the subject of insurance operations;
• the name of the insurer who owns the license document, its legal address;
• the name of the industry, forms and types of insurance activities with a special application, which indicates the type of insurance available to the insurer;
• registration number of the licensed item according to the state register of insurers;
• date of issue and license number;
• official stamp of the insurance supervision authority that issues the license, signature of the head.

Insurance brokerage

Licensing the activities of insurance entities has its own nuances. The production of this type of activity in the field of insurance implies that the applicant obtains licenses for intermediary activities in the field of insurance. The list of documents required for issuing such a license is indicated above.

If the insurance company is a subsidiary of the main foreign organization or part of the participation of foreign investors is more than 49%, it does not receive a license in the territory of the Russian Federation, as it does not have the right to engage in:

• state compulsory insurance;
• life insurance;
• insurance of property interests of various state organizations and municipalities;
• property insurance for contracting and supplies for state needs.

The procedure and purpose of licensing the activities of insurance organizations is a rather complicated legal issue, therefore, the assistance of a qualified lawyer is necessary before the process of obtaining a permit.

Suspension, limitation and renewal of a license

If violations of the insurance legislation are detected, the licensing authority issues an order to the licensing body, which indicates the conditions for their elimination.

Prescriptions are given in such cases:

1. The licensed entity carries out activities that are prohibited by law, as well as activities in which the conditions established for issuing a license are violated.
2. If the insurer does not comply with the legislation regarding the placement or formation of insurance reserves funds and other funds guaranteeing payment of insurance claims.
3. If the insurer does not comply with the requirements established by regulatory enactments to ensure the ratio of accepted obligations and assets, as well as other requirements to ensure solvency and financial stability;
4. If the subject violates the requirements for submission to the insurance supervision or its territorial reporting authority.
5. If the entity fails to submit documents within the established time period that are requested in the manner of insurance supervision in the amount of competence of the relevant body.
6. When establishing the fact of submission by an entity of incomplete or inaccurate information data.
7. If you fail to submit information on additions and various changes that have been made to the constituent documents by the due date.

The order is sent to the licensed entity, if necessary, a copy of it can be sent to certain executive authorities. The licensing subject must provide, within the time period specified by this regulation, submit to the insurance supervision documentation confirming the elimination of the violation.These documents are considered within 30 days from the date of receipt. This is the procedure for licensing insurance activities.

The submission by the entity of documents on time confirming the elimination of violations is the basis for the recognition of such a requirement as fulfilled. The withdrawal of the order must be reported to the insurance business entity within 5 working days from the date of the decision. The further establishment of the fact that the subject has submitted documents that contain false information is the main basis for recognizing a previously issued order as unfulfilled. In cases of non-fulfillment of the precept within the prescribed time period or appropriately, or when the subject evades receipt of this document, the license is suspended or limited.

We examined how licensing of insurance activities goes.