LIECHTENSTEIN Law and Practice Contributed by: Alexander Ospelt, Lukas-Florian Gilhofer, Vivianne Auer and Laura Bayer, Ospelt & Partner Attorneys at Law Ltd
5. Distribution 5.1 Distribution of Insurance and Reinsurance Products Anyone who takes up or pursues the distribution of insurance and reinsurance products in Liechtenstein or from Liechtenstein is subject to licensing requirements under the Insurance Distribution Act (VersVertG). The VersVertG covers the activities of insurance brokers – who act in the interests of the customer and are not tied to a specific insurer – and agents – who act on behalf of or are bound to one or more insurers – as well as the direct distribution of insurance products by insurer. Brokers may not conduct business for insurers that are not licensed to conduct business in Liechtenstein. The requirements for approval of dis- tribution activities are regulated in Article 6 et seq of the VersVertG. Activity as a tip provider – where the provider simply gives information to the insurer with regard to potential clients and vice versa but does not otherwise interfere with or facilitate the conclusion of the contract – is not licensable under the VersVertG. Exemptions from licensing requirements are available for intermediaries that distribute products as an ancil- lary activity, if certain conditions (such as the com- plementary nature of the insurance with the services provided by the firm and a maximum premium for the insurance product) are met. 6. Making an Insurance Contract 6.1 Obligations of the Insured and Insurer Annex 4 of the VersAG sets forth a detailed cata- logue of information that insurers are required to dis- close to the policyholder prior to the conclusion of the insurance contract and throughout the duration of the contractual relationship. This information must be provided irrespective of whether the policyholder qualifies as a consumer or otherwise. The information is either included in the application form issued by the insurer or given to the applicant before the application form is submitted. The applicant has the opportunity to review and study all general terms and conditions before making a commitment. If these information
Foreign-incorporated insurers that carry out reinsur- ance business only in Switzerland are not subject to Swiss regulation. Consequently, Liechtenstein rein- surers may operate in Switzerland without authorisa- tion. The same applies for reinsurance business from Switzerland to Liechtenstein: insurers that only carry out reinsurance business in Liechtenstein are exempt from supervision there, provided that they are subject to equivalent supervision in their home country. Operating an insurance or insurance intermediary activity without a licence constitutes a misdemeanour under Article 257 of the VersAG and Article 82 of the VersVertG. Anyone who conducts insurance business in Liechtenstein without the appropriate permission of the FMA may be punished by the District Court with imprisonment or a fine. The FMA is entitled to publish information on the application of the final penalty. 3.2 Fronting “Fronting” refers to an arrangement where a licensed, admitted insurer issues (underwrites) an insurance policy in its own name but immediately cedes the entire risk (or most of it) to another insurer or cap- tive/reinsurer. The fronting insurer must be licensed and authorised in the jurisdiction where the policy is issued. If the ultimate risk-bearer (reinsurer/captive) is not licensed locally, the arrangement relies on the fronting insurer’s licence – which then brings the usual obligations (solvency, reporting, governance) under, for example, supervisory law in Liechtenstein. As long as these obligations are met, fronting is feasible. 4. Transaction Activity 4.1 M&A Activities Relating to Insurance Companies Given with the size of the country, transaction activ- ity has been noticeably high recently. Several insur- ance groups have restructured, consolidated and rea- ligned their group operations. Further, several private equity investors have been active buyers of insurers and reinsurers, including, in particular, businesses in run-off (and these buyers have become increasingly accepted by FMA as qualified or controlling investors in insurers).
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