The new law on the insurance sector (the “New Law” ), adopted by the Luxembourg Parliament on 7 December 2015, entered into force on 1 January 2016 and repealed the law of 6 December 1991.
The purpose of this recast is mainly to implement Directive 2009/138/EC, known as “Solvency II”, the purpose of which is to adapt the level of shareholders' equity to risks of all kinds to which insurance and reinsurance companies are exposed.
Additional elements have been introduced in the New Law, the most significant of which are as follows:
- The powers of the Luxembourg Insurance Regulator (Commissariat aux Assurances, the “CAA”) are now explicitly listed (art. 4).
- The links between the CAA and the Luxembourg Supervisory Commission of the Financial Sector (Commission de Surveillance du Secteur Financier, the “CSFF”) are now specified as regards the supervision of the insurance and reinsurance sector (art. 8).
- The exchange of information between supervisory authorities of other Member States is now formalized, on the basis that such other Member States also observe professional secrecy, and that the latter must be shared (art. 9 et seq.).A breach of professional secrecy is now a priority concern of the Luxembourg legislator and its scope has been widened.
- The concept of conflict of interest is now expressly set out under the New Law (art. 23).
- Exclusions regarding the scope of application of the New Law are now clearly detailed for life and non-life insurance transactions (art. 37 et seq.).
- The mission of control of the CAA has been clarified and now tends to the analysis and synthesis of the risks as a decision-making support for strategic decisions that involve an individual or group (art. 56).The transparency and accountability obligations of the CAA are now clearly defined (art. 58).
- Internal control and compliance (art. 77), the internal audit function (art. 78) and the actuarial function (art. 79) are now clearly defined.
- The procedure of suspension or withdrawal of approval has been supplemented, in particular by strengthening control measures (art. 130 et seq.).
- On the freedom of establishment and to provide services, the powers of the CAA have now been strengthened, in particular with respect to the opposition of the CAA to the establishment of a branch (art. 132 et seq.).
- In terms of financial penalties:
- Max Penalty: EUR 250,000 per day for insurance and reinsurance companies; and
- Max Penalty: EUR 50,000 for managers and/or directors or any other natural persons exercising a leading function in management or other leading operational services in an insurance and reinsurance company (art. 303).