COLOMBIA Law and Practice Contributed by: Rebeca Herrera Diaz, Rebeca Herrera Abogados
Foreign Reinsurers and Insurance Intermediaries of Marine and Aviation Insurance (RAIMAT), which the SFC maintains. In the same sense, foreign insurers offering agro insurance can underwrite insurance in Colombia from abroad if registered in the Registry of Foreign Agro Insurers and Agro Insurance Intermedi- aries (RAISAX), which the SFC also maintains. Domiciled insurers must have the legal form of a stock company and obtain prior authorisation from the SFC before incorporating the company and before com- mencing operations. These approvals are granted following verification of key prudential requirements, including minimum capital, provisions, solvency, directors’ and officers’ fit-and-proper mandates, and risk management policies. Foreign investors are per- mitted to own 100% of the capital of a Colombian insurance company. In general cases, foreign insurers may also receive authorisation to establish a branch in Colombia; however, these branches must comply with the exact same prudential requirements as local insur- ers operating as stock companies. As of today, no foreign insurer or reinsurer has established a branch in Colombia. Colombian residents are authorised to purchase insur- ance services abroad according to Law 1328 of 2009, except for: • compulsory insurance; • insurance policies in which a public entity is the policyholder, the insured, or the beneficiary; • insurance services linked to the social security regime; and • any other insurance service that requires the con- sumption of other compulsory services before the policy is issued. Colombian residents purchasing insurance from abroad must report these transactions in Colombia for taxation purposes according to Article 476-1 of the Colombian Tax Statute. The reinsurance market in Colombia is broadly acces- sible, with foreign reinsurers playing a dominant role by accepting risks from Colombian cedents abroad. For- eign reinsurers may underwrite reinsurance for Colom- bian cedents in all business lines on a cross-border
basis, provided they are registered in the Registry of Foreign Reinsurers and Reinsurance Intermediaries (REACOEX), maintained by the SFC. As foreign rein- surers are not directly supervised by the SFC, placing reinsurance with an unregistered reinsurer does not result in penalties for the reinsurer itself. However, the Colombian insurance company acting as the cedent is significantly affected. In such cases, the cedent cannot account for an asset as pending obligations from reinsurers, which matches its provisions for the specific risk based on the reinsurance placement, and thus, must retain 100% of the risk, potentially leading to regulatory insolvency. Similar to foreign insurers, foreign reinsurers can apply to the SFC for authorisation to establish branches in Colombia, provided they meet the exact prudential requirements as domestic reinsurers. Foreign rein- surers can also promote their services in Colombia after registering with REACOEX. Alternatively, they can establish a commercial presence by licensing a representative office. Market access conditions for reinsurers do not impose restrictions based on the structure of reinsurance agreements. This means that Colombian market access regulations do not differentiate between quota share treaties, working excess of loss arrangements, facultative (FAC) reinsurance, or treaty reinsurance. Similarly, no specific regulations govern retrocession agreements. The requirements for foreign insurers to obtain reg- istration in RAIMAT or RAISAX, as well as for foreign reinsurers to be listed in REACOEX, are detailed in Chapters II, IV, and V of Title I, Part I of the CBJ. 2.3 Taxation of Premium Article 420 of the Colombian Tax Law ( Estatuto Tribu - tario , ET) provides that the price of every service ren- dered in Colombia must include VAT ( Impuesto sobre las Ventas , IVA), unless the service is excluded from this tax regime. Accordingly, insurance premiums must include the IVA, which is set at 19% according to Article 468 of the ET. In exceptional cases, life and pension insurance policy premiums are excluded from the application of this tax.
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