|Alvaro Castellanos Howell|
After a few years of intensive debate and discussion, the Congress of the Republic of Guatemala has finally enacted the new Law of Insurance Activities (Decree 25- 2010, published in the Official Gazette on August 13 2010).
The new regulations for insurance activities cover not only insurance and reassurance companies, but also agents or brokers of insurance products.
The new act regulating all insurance activities was enacted mainly for two purposes: a) allowing foreign insurance companies to operate in Guatemala through branches, and b) strengthening rules applicable against the offer and sale of insurance products of entities that are not allowed to operate in Guatemala.
Before the new law, if a multinational or foreign insurance company was interested in the Guatemalan market, the only way to invest and offer products locally was through the creation of a subsidiary. That is, by way of creating a local sociedad anónima fulfilling all the requirements of the old Insurance Law and the Commercial Code. Now, in addition to the possibility of creating a local company, with 100% of foreign shareholders, a branch (sucursal) of a foreign insurance company can be authorised to operate in Guatemala.
In that regard, in addition to several other requirements, it is necessary for the foreign insurance company to demonstrate that it has authorisation from its regulatory body in its place of origin to open such branch in Guatemala. It must also have authority that it is willing to share information with the Superintendency of Banks of Guatemala for a better and more efficient compliance of all rules, including anti-terrorism and many laundering provisions.
The minimum required capital for a fully fledged insurance company is 13 million quetzales ($1.625 million) and for an reassurance company is 26 million quetzales.
The Superintendency of Banks is the regulatory body for all insurance and reassurance activities.
In respect to local insurance agents or brokers, the new rules became much more stringent in the sense of forbidding the offering of foreign insurance products of companies not duly allowed to operate in Guatemala. Before the new act, the sale of such type of insurance was a misdemeanour, punishable with the payment of a fine. Now, it is regarded as a crime punishable with imprisonment, from five to 10 years of jail, and a fine from $10,000 to $100,000.
Simply said, Guatemalan insurance regulations have been brought to international standards. It remains an interesting question to see if this will encourage attention from new participants in the local insurance market, but it seems that it is already having some positive effects in that regard.
Alvaro Castellanos Howell