On 17 March 2020 the National Association of Insurance Companies (ANIA) approved the new self-regulation codes for co-insurance in non-life and life insurance, replacing the previous codes.

What are the new codes for co-insurance?

Essentially, the new codes set out standard clauses governing the relationship between co-insurers.

Green light from tax authorities

The new codes have been submitted to the Tax Agency. In response to a specific request for legal advice submitted by the ANIA, the Tax Agency confirmed that the share of premium that insurers acting as leaders receive from the policyholder as a consideration for such a role in the context of a co-insurance agreement is exempted from value added tax, provided that the agreement complies with the new codes (see below).

In so doing, the tax authorities have clarified some uncertainties as to the previous applicable tax regime.

Nature of new codes

The new codes are not mandatory; insurers can adhere to them on a voluntary basis.

Main changes introduced by new codes

The main changes introduced by the new codes include the fact that:

  • the policyholder shall entrust the leader to manage the policy;
  • the leader will be entitled to retain a higher share of the premium, determined as a lump sum, on account of consideration for the services rendered to the policyholder as a leader. The leader will collect the premium from the policyholder and pay it on a pro rata basis to the other co-insurers withholding its share, corresponding to the higher expenses for the management and execution of the policy; and
  • express reference shall be made in the policy to the amount of premium retained by the leader as per above.

Effective date of new codes

The new codes apply to co-insurance agreements entered into effective from 1 January 2020. The previous codes can be used only up until 31 December 2020.

As of 1 January 2021, the previous ANIA co-insurance codes will no longer apply. Consequently, effective 1 January 2021, no proxy commissions will be payable in relation to premiums collected, claims paid and indemnifications paid under co-insurance agreements concluded prior to the aforementioned date.(1)

In the event of renewals of policies issued before 1 January 2020, co-insurance agreements will be amended in accordance with the new codes.

Endnotes

(1) With the exception of life insurance co-insurance agreements providing for the proxy fees higher than €100,000 (see Article 13.3 of the new codes).