Insurance and reinsurance in Norway: overview

A Q&A guide to insurance and reinsurance law in Norway.

The Q&A gives a high level overview of the market trends and regulatory framework in the insurance and reinsurance market; the definitions for a contract of insurance and a contract of reinsurance; the regulation of insurance and reinsurance contracts; the forms of corporate organisation an insurer can take; and the regulation of insurers and reinsurers, including regulation of the transfer of risk. It also covers: operating restrictions for insurance and reinsurance entities; reinsurance monitoring and disclosure requirements; content requirements for policies and implied terms; insurance and reinsurance claims; remedies; insolvency of insurance and reinsurance providers; taxation; dispute resolution; and proposals for reform. Finally, it provides websites and brief details for the main insurance/reinsurance trade organisations in Norway.

To compare answers across multiple jurisdictions visit the Insurance and Reinsurance Country Q&A tool.

This Q&A is part of the global guide to insurance and reinsurance. For a full list of jurisdictional Q&As visit www.practicallaw.com/insurance-guide.

Klaus Henrik Wiese-Hansen and Audun Kleppestø, Advokatfirmaet Steenstrup Stordrange DA
Contents

Market trends and regulatory framework

1. What were the main trends in the insurance and reinsurance markets over the last 12 months?

As of 1 January 2014, the Norwegian insurance market consisted of:

  • 12 life insurance companies.

  • 59 non-life insurance companies.

  • 11 marine insurance associations.

In addition, 34 branches of foreign insurance companies were established in Norway.

The positive sentiment in the stock market during 2013 had a positive effect on the buffer capital of the Norwegian life insurance companies. However, stress tests performed by the Financial Supervisory Authority of Norway (FSAN) in connection with Solvency II-requirements show that several Norwegian life insurance companies need to reduce their risk or strengthen their capital base in order to meet the capital requirements that will be implemented through Solvency II. Additionally, Norwegian life insurance companies are challenged by the increase in life expectancy in the Norwegian population, which implies that life insurers must allocate substantial parts of their profits for several years ahead to their portfolios' premium reserves. The FSAN has signalled that it will accept reservation plans of up to seven years in this respect.

Norwegian non-life insurance companies reported somewhat weaker profits in 2013 than in 2012. However, results from insurance operations were slightly improved due to a higher increase in premiums compared to insurance claims, which also improved the companies' combined ratio in 2013. Norwegian non-life insurance companies are solidly capitalised in general, and are expected to be well prepared for the new capital requirements under Solvency II.

 
2. What is the regulatory framework for insurance/reinsurance activities?

Regulatory framework

The regulatory framework for insurance/reinsurance activities in Norway consists of the:

  • Insurance Contract Act (1989:69). The Insurance Contract Act establishes the fundamental principles of insurance contracts, and consists of three main parts:

    • Section A, which regulates casualty insurance (including liability insurance);

    • Section B, which regulates personal insurance (including life insurance and health insurance);

    • Section C, which sets out certain common requirements relating to resolution of disputes, calculation of deadlines and the use of electronic communications.

Sections A and B are structured similarly, and contain in large part the same provisions, but with certain variations in section B due to the special nature of personal insurance contracts. Certain chapters are specific to each of the two sections, such as the chapter on liability insurance in section A and the chapter on the life insurance registry in section B.

The Insurance Contract Act applies to all insurance contracts governed by Norwegian law, other than guarantee insurance contracts and reinsurance contracts. As a rule, the provisions of the Act are mandatory, and many have been drafted to protect the policyholders from unfavourable and unreasonable terms. However, insurers can freely design their own products and determine their own terms and conditions for their policies, within certain outer limits.

The mandatory nature of the provisions does not apply in relation to business insurance covering large risks (where the policyholder meets certain criteria in relation to annual turnover, balance sheet and/or number of employees) and in certain specific trades, including shipping, aircraft insurance and the international transport of goods. In certain trades in which the Insurance Contract Act is not mandatory, specific agreed documents have been prepared by the insurers' and the policyholders' associations, most notably the Nordic Marine Insurance Plan which covers most aspects of marine insurance in the Nordic countries.

  • Act on Choice of Law in Insurance (1992:111). The Act on Choice of Law in Insurance governs the principles for the choice of law in insurance contracts.

  • Insurance Activities Act (2005:44). The Insurance Activities Act establishes the regulatory requirements for insurance activities as such, and contains organisational requirements and rules on licensing, solvency capital, capital requirements, asset management and so on.

In addition, numerous regulations apply under the these Acts relating to, among other things, organisational requirements, solvency capital, capital requirements, asset management, information requirements for the policyholders, and so on.

In addition to the general legislation described above, certain special legislation exists in relation to mandatory insurance schemes, including (but not limited to) the Act on Damage Caused by the use of Motor Vehicles (1961) and the Act relating to Industrial Injury Insurance (1989.65).

Regulatory bodies

The official supervision of insurance activities in Norway is conducted by the Financial Supervisory Authority of Norway (FSAN).

 

Regulation of insurance and reinsurance contracts

3. What is a contract of insurance for the purposes of the law and regulation? How does it differ from a contract of reinsurance?

Although the term "insurance" is used in a large variety of different laws and regulations, Norwegian law does not provide a statutory definition of insurance or contract of insurance. The core of an insurance arrangement is the transfer of specific risk from the insured to the insurer for consideration (a premium payment).

A contract of reinsurance differs from an insurance contract in that the direct insurer is the insured party in a contract relation with a reinsurer, with the purpose of limiting the insurer's own exposure to a particular risk or in relation to its business as a whole. Reinsurance contracts are not governed by the Insurance Contract Act, and there is limited Norwegian case law in relation to reinsurance contracts. No Norwegian reinsurance company has yet been established, and the Norwegian reinsurance market is dominated by foreign reinsurers. For these reasons, reinsurance contract practice is heavily influenced by foreign law and foreign practice.

 
4. Are all contracts of insurance/reinsurance regulated?

Not all contracts of insurance and reinsurance are regulated. Reinsurance contracts fall outside the Insurance Contracts Act. The same applies to contracts of credit insurance and guarantee insurance. As regards the specific regulation in the Insurance Contract Act, certain insurance classes as well as industries, in addition to large risks in general, are also exempted from the mandatory nature of the act (see Question 2). However, insurance activities as such can only be performed by insurance companies.

 

Corporate structure

5. What form of corporate organisation can insurers take?

Norwegian insurers can be established as limited liability companies, public limited liability companies, or as mutual companies. Insurance activities can also be provided by pension funds that are exclusively for existing and former employees of the sponsoring entity/entities, and only with respect to pension insurance and certain related insurance products.

 

Regulation of insurers and reinsurers

6. Are all insurers and reinsurers regulated? Are they all regulated in the same way?

All insurers (and reinsurers) in Norway are regulated in accordance with the Insurance Activity Act. With some minor exceptions they are all regulated in the same way. The Ministry of Finance and the FSAN have granted minor exemptions from the Act to some insurers on a case-by-case basis.

Foreign insurers operating in Norway on a cross-border basis or through a Norwegian branch mostly follow their home state requirements, except that all companies are subject to certain statutory Norwegian requirements, including, among other things, with respect to:

  • Terms and conditions.

  • Duties of disclosure towards policyholders.

  • The keeping of accounts.

  • Rights to profits accumulated in life insurance.

 
7. Can insurers and reinsurers carry on non-insurance business? Are there any restrictions on their business activities?

Insurers and reinsurers cannot carry out non-insurance business, other than services and business that are naturally connected to their insurance activities. Insurers and reinsurers are also prohibited from owning more than 15% of the shares/votes in a company that carry out non-insurance business, unless the ownership has been acquired with the insurance company's own capital (free equity) and the financial risk is limited to the value of the investment. The Ministry of Finance and the FSAN have traditionally been restrictive in allowing insurers to engage in non-insurance business. Recent examples are Norwegian insurers' investments in infrastructure such as power production and power supply companies, where the Ministry on several occasions have rejected insurers' requests to own more than 15% of such companies.

 
8. Are there any statutory limits or other restrictions on, or requirements relating to, the transfer of risk by insurance or reinsurance companies?

There are no restrictions on the transfer of risk by insurance or reinsurance companies.

 

Operating restrictions

Authorisation or licensing

9. Does the entity or person have to be authorised or licensed?

Insurance/reinsurance providers

Norwegian insurance legislation does not grant personal licences and instead the insurance undertaking itself must be authorised. However, "fit and proper" requirements apply to the CEO, any other factual leader of the company, and to the company's board of directors. In addition, owners of qualified holdings of the company's shares or votes must be fit and proper to own such holdings. (Qualified holdings are shareholdings that represent 10% or more of the company's shares or votes, with further thresholds at 20%, 30% and 50 %.)

An insurance licence is granted for one or more classes of insurance, as defined in the regulation on separation in insurance classes (based on Directive 73/239/EEC on direct insurance):

  • Life insurance.

  • Non-life insurance

  • Guarantee insurance.

  • Reinsurance.

The Ministry of Finance grants authorisations to conduct insurance activities in Norway, with the FSAN as the preparatory body. An application must include:

  • A business plan for the company's first three years of operation

  • An overview of the insurances to be offered by the company.

  • Details of the company's capital.

  • A budget for establishment and administration expenses.

  • Details of the principles to be applied for calculating premiums.

  • Details for the plan regarding reinsurance arrangements.

  • A forecast of financial position after three years' operation.

In practice, the FSAN requires far more detailed analyses from the applicant's side, not least with respect to solvency capital, capital adequacy, actuarial and organisational matters. The level of detail depends on the complexity of the applicant's planned product range, that is, if it will offer conventional insurance products or more complex products such as various longevity products, defined benefit products and so on.

The application must also be accompanied by particular documentation, including the company's articles of association, certified copies of the company's memorandum of association and minutes of the first general meeting.

An insurance licence may be revoked in the event of certain irregularities, including irregularities relating to the company's management or if the company no longer has an adequate financial basis.

Insurance and reinsurance companies that are established in the EEA can operate in Norway on a right of establishment or freedom of services basis under the applicable EU insurance directives. Norwegian branches of such foreign companies can commence their activities two months after the FSAN has received a notification from the home state regulator of the foreign insurance company. An EEA-based insurer or reinsurer who wants to operate on a freedom of services basis can commence its activities in Norway once the company has received confirmation from its home state regulator that the latter has filed the notification of the insurer's intention of providing cross border activities in Norway with the FSAN.

Non-EEA based insurance/reinsurance companies can also establish a branch in Norway, provided that the FSAN has entered into an agreement on supervisory activities with the home state regulator of the foreign insurance company. Non-EEA based insurance/reinsurance companies must apply the Ministry of Finance for a licence to conduct insurance activities, and cannot make use of a simplified notification procedure.

Insurance/reinsurance intermediaries

Insurance mediation in Norway is governed by the Act on Insurance Mediation, which is based on Directive 2002/92/EC on insurance mediation. The Insurance Mediation Act governs two kinds of insurance mediators, insurance brokers and insurance agents. Insurance brokers act as true brokers on behalf of the clients (policyholders) whereas insurance agents act for and on behalf of an insurance undertaking.

Insurance broking is subject to a soft licensing requirement in Norway. The main conditions are that:

  • The company is established as a public/private limited company, general partnership, limited partnership or sole proprietorship.

  • The company are not subject to bankruptcy proceedings or debt negotiations.

  • The company has taken out statutory liability insurance.

  • The person(s) being in charge for the insurance brokering activities are fit and proper to hold such position(s).

EEA-based and licensed insurance broker undertakings can provide the same activities in Norway through a branch or on a cross-border basis, subject to a notification procedure. There is also a limited possibility for non-EEA based insurance brokers to establish a branch in Norway, although to date this has not been used.

Insurance agent activities are not subject to a licence requirement, and are only registered with the insurance undertaking it represents. Fit and proper requirements apply. The FSAN requires that insurance agents representing EEA-based insurance companies must be registered with the FSAN, not with the foreign insurance company, unless the insurance company's home state legislation itself requires that local insurance companies register their insurance agent with a publicly available register.

The Norwegian legislation in insurance intermediaries applies to direct insurance mediation as well as reinsurance mediation, save for certain disclosure requirements which do not apply for reinsurance intermediaries.

 
10. What are the main exemptions or exclusions from authorisation or licensing?

Insurance/reinsurance providers

The Ministry of Finance can exclude Norwegian reinsurance companies, and smaller mutual insurance companies, from part or whole of the Insurance Activities Act. No reinsurance companies have been excluded to date, whereas smaller mutual insurance companies have been granted some minor exemptions. The Ministry of Finance has also granted some minor exemptions for companies that exclusively insure war risk at sea.

Insurance/reinsurance intermediaries

See Question 9, Insurance/reinsurance intermediaries.

Restrictions on ownership or control

11. Are there any restrictions on the ownership or control of insurance-related entities?

Insurance/reinsurance providers

Insurance companies qualify as financial institutions and are subject to ownership control, see Questions 9 and 12.

Insurance/reinsurance intermediaries

There are no direct restrictions on the ownership or control of insurance-related entities in Norway except for notification and approval requirements in relation to certain takeover transactions (see Question 12).

 
12. Must owners or controllers be approved by or notified to the relevant authorities before taking, increasing or reducing their control or ownership of the entity?

Insurance/reinsurance providers

Insurance companies qualify as financial institutions and are subject to ownership control under the Financial Institutions Act. Owners of "qualified holdings" of the company's shares or votes must be fit and proper to own such holdings, and be pre-approved by the FSAN, or the Ministry of Finance in import cases. Qualified holdings are shareholdings that represent 10% or more of the company's shares or votes, with further thresholds at 20%, 30% and 50%.

The FSAN/Ministry of Finance normally requires an owner of a qualified holding to apply the FSAN/Ministry of Finance if it wishes increase its holding further, even if not reaching the next threshold. This will depend on the conditions given by the FSAN/Ministry of Finance.

Owners of a qualified holding who want to reduce the holding, or reduce a qualified holding to a level below a threshold, must notify the FSAN in advance. If the sale will take place outside a regulated market (stock exchange) the FSAN must also receive specified information on the new owner of the shareholding.

Insurance/reinsurance intermediaries

Insurance and reinsurance intermediaries are not subject to ownership requirements.

Ongoing requirements for the authorised or licensed entity

13. What are the key ongoing requirements with which the authorised or licensed entity must comply?

Insurance/reinsurance providers

All insurance and reinsurance providers must operate in accordance with good business practice principles under the general law. Certain key on-going requirements for insurers and reinsurers are stipulated in the Insurance Business Act. These requirements include but are not limited to:

  • Solvency margin and capital adequacy requirements.

  • Maintaining prudent asset management.

  • Employment of reasonable and adequate insurance terms.

  • Adequate reinsurance viewed in relation to the company's risk exposure and its financial position

  • Maintaining a proper organisation for the continued running of the company's operations.

In addition to these requirements, insurance companies are subject to extensive regulations in accordance with the Insurance Contract Act. These regulations include disclosure requirements towards policyholders, as well as compliance with detailed regulation on the conclusion and handling of insurance contracts, claims handling, and so on.

Insurance/reinsurance intermediaries

Licensed insurance brokers and insurance agents have specific disclosure requirements towards policyholders, which are similar to the requirements applicable to insurance companies.

An insurance brokering entity must operate in accordance with good brokering practice, and must ensure that it acts as an independent intermediary, as opposed to an insurance agent. Insurance brokers are also prohibited from receiving payment from insurers for the services the brokers render to their customers. Kick-backs from insurers to insurance brokers are therefore prohibited. However, it is permitted to grant premium reductions to the policyholders for insurance policies and portfolios that are managed through a broker.

Penalties for non-compliance with legal and regulatory requirements

14. What are the possible consequences of an entity failing to comply with applicable legal and regulatory requirements? What recourse do policyholders have if they have done business with a non-approved entity?

Insurance/reinsurance providers

An insurance entity which fails to comply with applicable legal and regulatory requirements may risk civil as well as penal sanctions, depending on the nature of the breach. If the FSAN becomes aware of a relevant breach of the regulations, it may impose an order on the entity to rectify the situation. If this order is not complied with, the Ministry of Finance may require the entity to pay a cumulative daily fine until the circumstance is rectified. In the event of more serious violations against the regulations, the Ministry may also revoke the entity's licence to operate. A revocation of licence may take place if:

  • The board of directors or other bodies of the insurance company are guilty of gross or repeated violations of their legal duties.

  • Irregularities are present in the company's management.

  • Present circumstances give cause to fear that the company will not be able to fulfil its legal requirements or that the continuation of business will have detrimental effects for the policyholders or groups of policyholders.

  • The insurance company no longer has an adequate financial basis

Any act in contravention of the regulations in the Insurance Activities Act may also lead to penal sanctions for the responsible persons within the insurance company or for the company itself (corporate penalty). Personal penal sanctions in accordance with the Insurance Activities Act are limited to fines or imprisonment for up to one year, while the corporate punishment will be a fine. A fine in accordance with the corporate penalty provisions may be set at a considerable amount viewed in light of the gravity of the relevant circumstances.

In general, insurance contracts entered into with a foreign insurance company that is licensed in its home state to provide insurance activities but that has failed to comply with Norwegian regulations (such as a non-EEA insurance company that has offered insurances in Norway without a licence from the Ministry of Finance), are in principle valid according to their terms. Violation of the Insurance Activities Act is a civil violation and does not affect the validity of the insurance contract. However, an insurance contract entered into with an entity that has no insurance licence at all will be void and unenforceable, and the policyholders may be entitled to recover all sums paid, in addition to claiming compensation for any losses sustained.

Insurance/reinsurance intermediaries

An insurance brokering entity may have its licence revoked by the FSAN in the event of non-compliance with the Insurance Mediation Act. Insurance agents that fail to comply may have their right of registration revoked, implying that the entity can no longer operate as an insurance intermediary.

The penal sanctions for intermediaries are similar to those for insurance providers, fines or imprisonment of up to one year. Corporate penalties may also apply.

Restrictions on persons to whom services can be marketed or sold

15. Are there any restrictions on the persons to whom insurance/reinsurance services and contracts can be marketed or sold?

There are no restrictions on the persons to whom insurance or reinsurance services and contracts can be marketed or sold in Norway. However, there are detailed regulations in the Insurance Contract Act which determine relevant requirements in relation to non-disclosure and so on, intended mainly for consumer policyholders (even though these requirements apply generally).

Marketing and sales activities are also subject to relevant general legal requirements, such as unfair contract terms legislation under the Marketing Act. Cooling-off rights also apply to sales to consumers by telephone or online.

 

Reinsurance monitoring and disclosure requirements

16. To what extent can/must a reinsurance company monitor the claims, settlements and underwriting of the cedant company?

It is common to include claims control or claims co-operation clauses in facultative reinsurance contracts, requiring the cedant company to provide information about claims to the reinsurer, and not to settle or compromise them without the reinsurer's consent. In the case of treaty business, there is usually provision for the inspection of records by the reinsurer as well as an obligation on the cedant company to provide periodic reporting of claims and loss figures.

The Insurance Contract Act does not apply in relation to reinsurance, meaning that any specific obligation which the reinsurer wants to impose on the cedant company must follow from the reinsurance contract. If a question arises which is not regulated in the contract, general contract law will apply. Arbitration case law in Norway indicates that the Marine Insurance Plan may be applied analogously in such cases to some extent due to its commercial nature; however, this must be determined individually in each case.

 
17. What disclosure/notification obligations does the cedant company have to the reinsurance company?

Under general contract law, the cedant company has a pre-contractual obligation to disclose to the reinsurer any circumstances known to him that are material to the reinsurer's underwriting decision, an obligation which mirrors that of the insured to the insurer.

Once the contract is concluded, the cedant company's obligation to present information to the reinsurer becomes largely a matter of contractual stipulation (see Question 16).

 

Insurance and reinsurance policies

Content requirements and commonly found clauses

18. What are the main general form and content requirements for insurance policies? What are the most commonly found clauses?

Form and content requirements

Generally, Norwegian insurance companies design and use their own insurance terms and conditions. However, as the Insurance Contract Act is mandatory with regard to a large number of regulations, the terms and conditions for different companies are frequently similar. This is particularly common in casualty insurance due to the fact that the insurance companies have worked out standard regulations covering areas that are not directly covered by the regulations of the Insurance Contract Act (such as the definition of the relevant covers and exceptions, see Question 22).

Terms based on specific agreed documents are widely in used in trades that are except from the mandatory nature of the Insurance Contract Act, replacing the provisions included in the act. Examples include the Marine Insurance Plan and the Norwegian Cargo Clauses which apply in relation to cargo insurance for international sales of goods (see Question 2). These standard-form terms are considered part of the insurance agreement, which is usually amended by specific terms in each case.

Commonly found clauses

In practice, most insurance policies contain the following categories of clause:

  • Definition of the policyholder (the insured party).

  • Definition and scope of the relevant cover with applicable exclusion clauses, including definition of the geographical area within which the insurance contract is in effect.

  • Term of the contract and regulation regarding termination.

  • Insurance premiums (stated in the insurance certificate).

  • Amount of insurance and loss deductible.

  • Applicable safety regulations.

  • Claim conditions, including notification requirements on behalf of the policyholder.

  • Claim procedures.

  • Beneficiaries (life insurance).

  • Dispute resolution.

 
19. Is facultative or treaty reinsurance more common? What are the most commonly found clauses in reinsurance policies?

Facultative/treaty reinsurance

Facultative and treaty reinsurance contracts are equally common in relation to Norwegian direct insurers.

Commonly found clauses

The following types of clauses are often found in reinsurance contracts:

  • Disclosure requirements regarding the cedent company's underwriting policy.

  • Reinsurance premiums.

  • Inspection of records by the reinsurer.

  • Commencement and duration of the contract.

  • "Follow the fortune" or "follow the settlements" clauses.

  • Choice of applicable law.

  • Dispute resolution (usually in the form of arbitration clauses).

Implied terms

20. Are there any terms that are implied by law or regulation (even if not included in the insurance or reinsurance contract)?

The Insurance Contract Act includes various regulations which are mandatory within both life and non-life insurance (but excluding certain trades, including large risks, and insurance classes, see Question 2). These regulations are usually repeated in the insurance terms for information purposes, but apply even if this is not the case. In addition, certain regulations in the Act are optional, meaning that they apply unless otherwise stipulated in the insurance contract. Examples of (part mandatory and part non-mandatory) provisions included in the Insurance Contract Act include:

  • The insurer's disclosure requirements before conclusion of the contract and in connection to renewal.

  • Contents of the insurance certificate.

  • Principles regarding commencement and term of the contract.

  • Termination rights.

  • Information requirements on the policyholder and consequences in the event of breach.

  • Consequences in the event of failure to comply with safety and security regulations.

  • Consequences where the insured has brought about the insurance event intentionally or by being grossly negligent.

  • Payment of insurance premium, including consequences relating to delayed payment.

  • Right of third parties under the insurance contract, including co-insureds and the injured party under liability insurance.

  • Duties upon the insured to give details in a claims settlement.

  • Notification deadlines and limitation of insurance claims.

  • Specific group insurance regulations.

  • Dispute resolution (see Question 33).

In addition to regulations stipulated by the Insurance Contract Act, certain general contract law principles apply to all insurance contracts, including the duty of loyalty, also known as the "utmost good faith" principle. Provisions based on this principle are included in the Insurance Contract Act, such as the policyholder's duty to provide the insurer with complete information regarding the nature of the relevant risk.

Customer protections

21. How do customer protections in the general law affect insurance contracts? What customer protections are generally included in insurance policies to supplement this?

Customer protection is a key element in the Insurance Contract Act as well as the Act on Cancellation Rights (see Question 15), leaving limited need for supplemental protection in consumer insurance policies.

Standard policies or terms

22. What are the main standard policies or terms produced by trade associations or relevant authorities?

Casualty insurance companies in Norway mainly use the same standard wordings with regard to the scope of the cover as well as relevant exclusions and so on due to a previous co-operation project. However, it is up to each insurance entity whether it wants to employ these standard wordings or develop its own wordings.

Standard agreed terms have been developed in relation to marine insurance, the insurance of cargo in international transporting and certain other insurance classes. These apply to insurance contracts within the relevant category, unless others have been used.

 

Insurance and reinsurance policy claims

Establishing an insurance claim

23. What must be established to trigger a claim under an insurance policy?

The requirements to trigger a claim under an insurance policy vary depending on the class of insurance. Generally, the insured must furnish the insurer with all relevant information and documents that are required by the insurer to consider its liability and to calculate the loss. In relation to large casualties, the documentation process is typically extensive and time-consuming, while smaller casualties usually follow more standardised procedures.

Under some personal insurance covers, the insurer may require documentation of certain facts before the claim is triggered, for example in relation to disability insurance, where "permanent disability" is normally determined a minimum period of time after the sick leave/disability started to run, often a minimum of two years.

In connection with a claim under a liability insurance policy, the insurer and the insured will have to discuss whether to accept the claim or not. The insurance policy often stipulates that the insurer is entitled to negotiate with the claimant and to decide whether to contest the claim as well as decide how to act during legal proceedings with the claimant.

Third party insurance claims

24. What are the circumstances in which third parties can claim under an insurance policy?

Under the Insurance Contract Act, a third party who is a claimant under a liability insurance policy can claim compensation directly from the insurance company. This provision is also mandatory in relation to large risks and excluded trades (see Question 2) if the policyholder becomes insolvent.

Third parties may also have a right to claim compensation from the insurer due to co-insurance. For example, in certain cases the mortgagee may be entitled to receive the amount of insurance in the event of a total loss, if the policyholder does not intend to rebuild the mortgaged property.

Under life insurance contracts, the beneficiary can claim payment under the contract, as stipulated either by the policyholder or in accordance with the main provisions of the Insurance Contract Act (which applies if the policyholder has not stipulated otherwise).

Time limits

25. Is there a time limit outside of which the insured/reinsured is barred from making a claim?

In insurance contracts governed by the Insurance Contract Act, the insured must in most cases notify the insurer of his claim within a year after becoming aware of the circumstances on which the claim is based. Extended time limits apply in life insurance (other than accident/sickness insurance).

In addition, the standard limitation period of three years applies in relation to most insurance claims, with the exception of capital insurances and life annuities (including pension insurance) which are subject to a limitation period of ten years. However, specific regulations apply under the Insurance Contract Act with regard to the commencement of the limitation period. Standard agreed documents within classes of insurance that are not governed by the Insurance Contract Act may stipulate other time limits.

The statutory limitation period can be prolonged by agreement between the parties.

Enforcement

26. Can the original policyholder or other third party enforce the reinsurance contract against a reinsurer?

Clauses granting the original policyholder or other third parties a right to enforce a reinsurance contract directly against a reinsurer are not common under Norwegian law, as the policyholders will be covered in accordance with the guarantee scheme established in the event of insolvency of the direct insurer (see Question 29). In the absence of such a clause, no such direct right exists.

Remedies

27. What remedies are available for breach of an insurance policy?

If the insurer fails to pay the insurance claim, the policyholder can either bring the case forward with the applicable out-of-court complaint scheme or initiate legal proceedings. Statutory interest is added to the claim in such cases, usually from two months after the insurance event took place and until the payment date.

In the event of a breach by the insured, the insurer may have various remedies based on the nature of the breach. If the breach relates to the duty to provide the insurer with complete information regarding the nature of the relevant risk, the insurer may cancel the insurance contract as well as mitigate insurance claims relating to the breach. Mitigation of the claim is also a relevant sanction if the insurance event is brought about by the insured by intent or as a result of gross negligence.

If the policyholder acts dishonestly in a claims settlement and tries to receive a compensation he is not entitled to, the general rule under the Insurance Contract Act is that the insured loses his entire claim in relation to the same insurance event, even if the dishonesty only relates to parts of the claim. In such cases, the insurer can also cancel all insurance contracts it has with the policyholder with one week's notice. 

Punitive damage claims

28. Are punitive damages insurable? Can punitive damages be reinsured if they are covered by an underlying policy?

Punitive damages are insurable under Norwegian law, but losses related to such incidents are usually exempt from cover in accordance with the applicable insurance terms. Punitive damages are often excluded from cover based on general insurance law, as the award of compensation in such cases is subject to the intent of, or gross negligence by, the insured. However, cover for punitive damages is not unusual within certain classes of company insurance, for instance in relation to excessive liquidated damages clauses, and similar contractual liabilities that may be covered by liability insurance.

 

Insolvency of insurance and reinsurance providers

29. What is the regulatory framework for dealing with distressed or insolvent insurance or reinsurance companies, or other persons or entities providing insurance or reinsurance related services? What regulatory and/or other protections exist for policyholders if the insurance company is insolvent?

Insurers and reinsurers

The regulatory framework for dealing with distressed or insolvent insurance or reinsurance companies is found in the Act on Guarantee Schemes for Banks, Insurance Companies and Public Administration etc. of Financial Institutions (Guarantee Schemes Act). The act determines certain obligations for the board of directors and the CEO if the insurer enters into financial difficulties. If the directors and/or CEO become aware of such difficulties, they each have a personal responsibility to notify the FSAN, which may initiate further investigation based on this information. The FSAN can also initiate investigations without a notice, if it has reason to believe that the company's financial position is weak or threatened.

If this is the case, the FSAN consults the insurance company to determine the necessary measures to rectify the situation, if possible. The FSAN supervises the implementation of such measures and may order the company to wind-up its business if the management do not act accordingly. If the insurance company becomes insolvent, the Guarantee Schemes Act applies. If the FSAN considers that the insurer cannot secure a financial basis for satisfactory operation, the Ministry of Finance must be informed immediately, and receives an assessment from the FSAN as to whether the institution should be placed under public administration.

The Ministry can then order the initiation of a public administration, which is announced at the earliest possible opportunity. An administration board is then appointed to draw up possible arrangements enabling continued operations of the institution's activities on a sufficient financial basis. This may imply that the insurer merges with, or transfers its activities to, another institution. If a restructuring scheme is not accomplishable, the administration board must prepare to wind-up the institution. As a rule, liquidation proceedings must be initiated if another arrangement is not in place within a year after the public administration was begun.

If a non-life insurance company becomes insolvent, the policyholders are protected by the non-life insurance companies' guarantee scheme, which is an independent legal entity established and financed by the non-life insurance companies which operates in Norway. Membership in the guarantee scheme is mandatory for all non-life insurance companies covering risks in Norway, including branches of foreign insurers. The guarantee scheme is only applicable to direct insurance contracts.

A guarantee scheme in relation to life insurance has not yet been established, although the Guarantee Schemes Act opens up the possibility of regulations in this regard.

Insurance intermediaries

Insurance intermediaries are subject to the general insolvency regime under the Insolvency Act and Creditors Recovery Act of 1984. Intermediaries are required under the Insurance Mediation Act to keep clients' accounts separately from their own funds, which implies that clients' assets are out of reach of any insolvency practitioner, provided the intermediary has complied with this requirement.

 
30. Can excess insurance policies "drop down" to provide coverage if the primary insurer goes into insolvency?

This depends on the contractual regulations between the reinsurer and the cedent company. If it is agreed in the excess insurance contract then a "drop down" of the excess coverage is possible.

 
31. Is a right to set-off mutual debts and credits recognised in an insolvency proceeding involving an insurer or reinsurer?

Set-off is recognised under Norwegian law in connection with insolvency proceedings. There are no distinctions between set-offs in case of an insurer's insolvency compared to other non-insurance companies' insolvency.

 

Taxation of insurance and reinsurance providers

32. What is the tax treatment for insurers, reinsurers, and other persons or entities providing insurance and reinsurance-related services?

General insurance and reinsurance is a trade for taxation purposes, so general insurers and reinsurers are typically taxed on their trading profits in the same way as normal companies. Insurance services in Norway qualify as financial services and are exempted from value added tax (VAT).

Insurance companies are subject to the general exemption method under Norwegian tax law, entailing that gains and share dividends related to ownership of shares are not generally taxable in the hands of the company. However, the exemption method only applies to the insurer's self-owned portfolio (the company portfolio), and not to unit-linked portfolios or group portfolios which belong to policyholders. Insurance companies are entitled to a deduction for provisions for insurance funds or other funds needed to cover or secure contractually assumed obligations to policyholders.

For branches of foreign general insurance companies, the taxable income is calculated as 3% of the gross premium plus the amount of net assets in real estate and other locally based assets that exceed ten times the estimated income of insurance premium.

 

Insurance and reinsurance dispute resolution

33. Are there special procedures or venues for dealing with insurance or reinsurance complaints or disputes?

Insurance and reinsurance claims and disputes are handled by the ordinary courts. The Norwegian Financial Services Complaints Board, which is an out-of-court dispute resolution panel, handles complaints in relation to non-life and life insurance. The complainants are in most if not all cases the policyholder, the insured, or another beneficiary. The panel's decision is not binding for the insurer if notice is given to the panel within 30 days that the insurer will not comply with the decision. The panel's decision is followed in most cases.

 
34. Are arbitration clauses in insurance and reinsurance agreements enforceable?

Arbitration clauses are enforceable in Norwegian law, and such clauses are common in relation to insurance of large risks (including marine insurance) and in reinsurance. Arbitration clauses are not binding for consumer policyholders unless the arbitration clause itself is agreed after the insurance event took place.

 
35. Are choice of forum, venue and applicable law clauses in an insurance or reinsurance contract recognised and enforced?

In general, applicable law clauses are not recognised in relation to direct insurance contracts, as the applicable law is determined by the Act on Choice of Law in Insurance (see Question 20). However, in certain cases where the contract is related to several states, the parties may apply the law of one of the states involved; typically in cases where the policyholder has his habitual residency or central administration in a different state that the one in which the risk is situated. In addition, certain insurance classes are exempt from the mandatory regulations, including aircraft, seagoing vessels and goods in transit, as well as large risks in general.

Choice of venue clauses are generally accepted in Norwegian law, with the exception of policies taken out by consumers. A consumer policyholder is always entitled to sue the insurer in his own domicile provided the claim concerns a payment from an insurance policy.

 

Reform

36. What proposals are there for reform of the law, regulation or rules relating to the provision of insurance or reinsurance services?

Insurance regulation reform

The Norwegian Banking Law Commission, a publicly appointed commission consisting of experts in banking, finance and insurance law, have been working for several years to draft new and consolidated legislation in the finance business sector, which also affects the regulatory provisions on insurance. A new Act on Financial Enterprises, regulating the operations of banks, financial institutions and insurance companies is being prepared, which will lead to the repeal of several provisions in the Insurance Activities Act. However, the content of the applicable regulations for insurers and reinsurers will not be significantly amended.

Further reforms include the Solvency II requirements, which are expected to be implemented in Norwegian legislation in 2016, provided Solvency II comes in force by then.

 

Main insurance/reinsurance trade organisation

Finance Norway (Finans Norge) (FNO)

W www.fno.no

Main activities. Finance Norway is the federation for banks, insurance companies and other financial institutions in Norway and represents around 200 financial institutions operating in the Norwegian market. FNO's main objectives include the ensuring of good working conditions and equal legal framework for its member institutions both nationally and internationally.



Online resources

Lovdata

W www.lovdata.no

Description. Lovdata is an institution which was originally formed by the Ministry of Justice and the Faculty of Law at the University of Oslo. The purpose of the institution is to "establish, maintain and run legal information services". The authentic Norwegian text of all Norwegian legislation can be found on the free version of this webpage, while other sources of legal information, such as preparatory works and case law, are available through a payable service.

Financial Supervisory Authority of Norway (Finanstilsynet)

W www.finanstilsynet.no/en/

Description. This is the official website of the FSAN, which contains links to authorised translations of Norwegian legislation within the insurance and financial sectors. The translations are not always up to date. The translations are authorised but published for information purposes only, and the legal authenticity remains with the Norwegian versions.



Contributor profiles

Klaus Henrik Wiese-Hansen, Partner

Advokatfirmaet Steenstrup Stordrange DA

T +47 22 81 46 85
F +47 22 81 45 01
E kwh@steenstrup.no
W www.steenstrup.no

Professional qualifications. Norway, Attorney-at-law.

Areas of practice. Insurance, financial markets legislation, asset management, litigation, M&A relating to the main fields of expertise.

Recent transactions. Steenstrup Stordrange has a broad practice within the insurance field and represents several larger Norwegian and foreign life- and non-life insurers in all aspects of their line of business, including claims handling and litigation, financial regulatory work, transfer of insurance portfolios, product development, drafting of terms and conditions, and so on. The firm frequently also assist larger policyholders (companies) in claims settlement processes, including litigation.

Languages. Scandinavian languages, English

Professional associations/memberships. Member of the Norwegian Bar Association

Publications. Klaus Henrik Wiese-Hansen has written and contributed to a number of publications within his fields of expertise, including

  • The Private Equity Review – Fundraising in Norway (Law Business Research, 2014)
  • Buy-outs and buy-ins – The elimination of Defined Benefit Scheme Liabilities (Globe Law and Business, 2009)
  • Investment Fund Regulations in Norway (Fund Management Legal and Regulatory Report, 2006)
  • Pension funds' investments in real estate (Audit and Accounting 5/2005)
  • Individual pension rights in transfer of undertakings (Employment Right, Volume 1, No. 2, 2004)
  • Pension Schemes – accounting and tax (The Norwegian Institute of Public Accountants / the Norwegian Actuarial Society, 2003, 2008, 2013)
  • Collective and individual pension agreements (Gyldendal Akademisk, 2003)

Audun Kleppestø, Senior Associate

Advokatfirmaet Steenstrup Stordrange DA

T +47 22 81 45 74
F +47 22 81 45 01
E akl@steenstrup.no
W www.steenstrup.no

Professional qualifications. Norway, Attorney-at-law.

Areas of practice. Insurance; restructuring and insolvency; litigation

Professional associations/memberships. Member of the Norwegian Bar Association


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