COLOMBIA Law and Practice Contributed by: Rebeca Herrera Diaz, Rebeca Herrera Abogados
3.2 Fronting Fronting is permitted in Colombia, and there are no regulatory requirements for the cedant to retain a spe- cific amount or percentage of the insured risk. 4. Transaction Activity 4.1 M&A Activities Relating to Insurance Companies In Colombia, any merger or acquisition activity involv- ing insurance companies, reinsurers and insurance and reinsurance brokers requires prior authorisation from the SFC. Specifically, Article 55 of the EOSF stipulates that mergers of insurance companies must receive prior approval from the SFC. Furthermore, under Article 88 of the EOSF, acquisitions of 10% or more of the shares of such entity also require prior authorisation. This 10% threshold also applies to indi- rect acquisitions, where the beneficiary of the direct acquirer will ultimately hold 10% or more of the target entity’s shares. It is worth noting that foreign investors are permitted to own 100% of the shares of a Colombian-domiciled insurance company, reinsurer, insurance broker, or reinsurance broker; there are no restrictions on foreign investment in this regard. Currently, and as far as can be foreseen, the only fac- tor affecting mergers and acquisitions in this sector is the time taken to obtain the necessary authorisa- tions from the SFC. There are a few M&A transactions within the insurance market currently awaiting SFC authorisation, and we are also seeing new insurers incorporating in the Colombian market. Also, recently incorporated brokers and insurance companies are changing their control after M&As, with new investors seeking to purchase new licences in the market or the licences held by a speciality insurer. 5. Distribution 5.1 Distribution of Insurance and Reinsurance Products Colombian regulation establishes distribution chan- nels for insurance services. Insurers can offer insur-
ance policies directly through their own offices under Article 92 of the EOSF, or distribute their services through insurance intermediaries (brokers, agencies, and agents), network contracts with other financial institutions, and non-banking correspondents. Insurance brokers are supervised by the SFC and gen- erally must act on behalf of the policyholder, although they operate as independent intermediaries. Insur- ance agents and agencies are not supervised. There- fore, the insurance company that authorises them to distribute their products is responsible for ensuring their compliance with the applicable regulations, as outlined in the CBJ, the EOSF, and D.2555. Insurance agencies and agents represent the insurance com- pany, meaning they act on behalf of the insurer. Under the provisions of Law 389 of 1997 and Arti- cle 2.31.2.2.2.5 of D.2555, insurance companies and insurance brokers may utilise the networks of credit institutions, financial services companies, stock exchange brokerage firms, independent securities brokers, investment management companies, and centralised securities depository management firms. They must adhere to the conditions outlined in D.2555 and the CBJ, specifically regarding the language of the network usage agreement ( contrato de uso de red ). According to CE 006 of 2025, this agreement must include specific provisions and be submitted to the SFC at least 30 days before execution. The insur- ance products offered through these networks should be straightforward, standardised, easily understood, and suitable for mass distribution. These business lines are: • compulsory traffic accident insurance (SOAT); • automobile insurance; • funeral insurance; • personal accident insurance; • unemployment insurance;
• educational insurance; • individual life insurance; • voluntary pension insurance; • health insurance; • civil liability insurance; • fire insurance; • earthquake insurance; • theft insurance;
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