MEXICO Law and Practice Contributed by: Carlos de la Garza, Raúl Acosta and Enrique Tamez, De la Garza & Acosta Abogados, S.C.
• Insurance in other branches, against risks that may occur within the national territory. Regarding the last point, the contracting of insur- ance for risks that may occur within national territory on goods transported from the national territory to a foreign territory or vice versa is excluded, as is the contracting of insurance by non-residents within the national territory for their persons or vehicles with the intention of covering risks during their occasional stays. An applicant must receive approval from the Gov- erning Board of the National Insurance and Bonding Commission in order to be recognised as an insurance organisation, and must meet the requirements stipu- lated in Title 37 of the Sole Insurance and Bonding Circular and its Annexes. In order to enter into reinsurance contracts with a for- eign reinsurance entity, an insurance company must be registered in the General Register of Foreign Rein- surers ( Registro General de Reaseguradoras Extran - jeras ) for the undertaking of reinsurance and bonding operations in the country. This register is maintained by the National Insurance and Bonding Commission, which grants discretional authorisation to first-tier for- eign insurance, reinsurance or bonding entities that meet solvency and stability requirements to conduct reinsurance and bonding operations. The registration is valid until December 31st of the year in which it is granted, and must be renewed annually. Following the United Kingdom’s exit from the Europe- an Union, British insurers and reinsurers lost the ben- efits of the “European passport” that allowed them to operate in other member countries without requiring additional authorisations. In the Mexican context, Brit- ish entities must follow the same procedures as any other foreign entity to operate in the country, without special privileges derived from previous agreements with the European Union. Mexico maintains strict regulation regarding the operation of foreign insurers and reinsurers, requir- ing specific authorisations and compliance with local requirements. Foreign licences are not automatically recognised, and there are no passporting or equiva-
lence mechanisms. Entities interested in operating in Mexico must follow the procedures established by the National Insurance and Bonding Commission and comply with current regulations. 3.2 Fronting In Mexico, the practice of fronting is permitted in the insurance sector. Fronting involves a local insurance company issuing a policy and transferring all or most of the risk to its reinsurers, acting primarily as an inter- mediary. The Insurance and Bonding Institutions Law estab- lishes that insurers may cede risks through reinsur- ance contracts, provided they comply with retention limits and the provisions established by the National Insurance and Bonding Commission. The Insurance and Bonding Institutions Law does not impose a spe- cific retention percentage for insurers; however, the National Insurance and Bonding Commission super- vises that institutions maintain adequate retention levels to ensure their solvency and financial stability. Although fronting is an accepted practice, insur- ers must verify that the reinsurers involved have the necessary authorisation and solvency to operate in Mexico. Insurers must also comply with the informa- tion and transparency obligations established by the National Insurance and Bonding Commission, includ- ing the disclosure of reinsurance contracts and asso- ciated conditions. Regardless, Article 18 of the Law on the Insurance Contract establishes that the insurance company will remain solely liable to the insured, even when it rein - sures the risks it has insured. Therefore, formally, the company issuing the policy assumes the obligation towards the insured. 4. Transaction Activity 4.1 M&A Activities Relating to Insurance Companies The insurance market in Mexico has undergone nota- ble integration, with various M&A transactions aimed at strengthening companies’ market positions and expanding their product offerings. These transactions
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