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Newsletter Insurance Nº1

The Insurance Moratorium

On May 13, 2020, in Portugal, Decree-Law No. 20-F/2020 came into force, establishing an exceptional and temporary regime related with the payment of the insurance premium and the effects of the temporary reduction of risk in insurance contracts resulting from a significant reduction or suspension of activity motivated by the COVID-19 pandemic. Said Decree-Law established three measures whose main objective is the protection of policyholders, insured persons, subscribers, participants, beneficiaries and injured parties in the context of the current pandemic.

The measures relate to (i) the easing of the premium payment scheme, it being possible that the insurer and the policyholder agree to a more favourable regime to the policyholder, (ii) the automatic extension of mandatory insurance, being that in the absence of an agreement between the parties, and in case of non-payment of the premium or fraction on the due date, the contract is automatically extended for a period of 60 days and (iii) the adjustment of the insurance premium in the event of a significant reduction or suspension of activity.

The ASF (the Portuguese Insurance and Pension Funds Supervisory Authority) is responsible for supervising and monitoring these measures and has the competence to exercise sanctioning powers in cases of non-compliance by insurers.

The moratorium is in force until September 30, 2020.

€750 Million for Export Credit Insurance

In June 2020, the Portuguese Government reached an agreement with insurers, announcing the creation of a €750 million line with a state guarantee. This amount was distributed among the various market operators in accordance with their respective market shares.

Credit Insurance gives companies an assurance that their credits arising from their sales of goods and services will be paid in situations where customers have defaulted.

The protocol followed the temporary framework adopted by the European Commission allowing Member States to adopt public support measures for export credit insurance for the following countries: Germany, Australia, Austria, Belgium, Bulgaria, Canada, Cyprus, Croatia, Denmark, Slovakia, Slovenia, Spain, United States of America, Estonia, Finland, France, Greece, Hungary, Ireland, Iceland, Italy, Japan, Latvia, Lithuania, Luxembourg, Malta, Norway, New Zealand, Netherlands, Poland, United Kingdom, Czech Republic, Romania, Sweden and Switzerland.

Regulatory Standard No. 8/2020-R and the duties of Insurers

The ASF (the Portuguese Insurance and Pension Funds Supervisory Authority) recently published the Regulatory Standard No. 8/2020-R, of June 23rd, which densified the information duties of Insurers, establishing the content, format, means and deadlines for the reporting of information to the ASF.

Among the duties of the Insurers are (i) the duty of disclosing to their clients the measures foreseen in Decree-Law No. 20-F/2020, of May 12th, which should be done at least in customer services locations and on the Insurers’ web page, (ii) the duty of information, which should be provided on a durable medium, preferably resorting to digital means, (iii) the duty of diligence and (iv) the duty of applying the measures to contributory group insurances.

Insurers should also provide qualitative and quantitative information on other measures that they have adopted, following the COVID-19 disease pandemic, that have an impact on the insurance contract or its premium and that do not result from Decree-Law No. 20-F/2020, of May 12th.

The first reporting of information is due by July 20, 2020 covering the reference period from May 13 to June 30, 2020.

Insurance sector solidarity fund pays compensation for the death of professionals

The Insurance companies operating in Portugal have set up a Solidarity Fund in the APS (the Portuguese Association of Insurers) to finance the granting of extraordinary compensations, of an exceptional nature, to family members of a group of professionals, who during the period of the State of Emergency and in the exercise of their profession have tested positive for the COVID-19 disease and, as a consequence of it, have died or will die.  The criteria for granting the Solidarity Fund compensations have already been defined, being that €1,5 million is the initial value of the fund, which may be increased.

The amount to be granted to beneficiaries will be subject to many considerations, which may imply an increase or decrease in the amount to be paid, depending on the number of household members, the degree of economic dependence of the deceased, the ages and the financial situation of such beneficiaries.

In July 2020, the insurers extended the list of beneficiaries covered to now include the persons comprised in the list of professions and sectors delimited in the establishing act of the Fund that acted on a voluntary basis. The Fund’s period of support has been extended until the end of 2020, and those who wish to benefit from the Fund should submit their application to the APS using the form created for this purpose.

The ASF’ recommendations to Insurance Companies and Insurance Distributors

In the context of the current pandemic, the ASF (the Portuguese Insurance and Pension Funds Supervisory Authority) issued the Circular Letter No. 2/2020, of March 30th, addressed to Insurance Companies and the Circular Letter No. 3/2020, of April 1st, addressed to Insurance Distributors with recommendations to be adopted in this exceptional situation.

Regarding Insurance Companies, it is recommended that the monitoring of the financial position is maintained, with the purpose of taking timely decisions in case of unfavourable developments and adopting measures to restrict actions entailing the decapitalization of Companies. Extraordinary requests of information will be sent to Companies to assess the impact of the pandemic.

As for Insurance Distributors, virtual communication with Customers should be favoured. The information should be provided in a clear manner, namely the contractual terms of their products and modifications resulting from the pandemic. There will be a relaxation of the deadlines for replying to enquiries and for the reporting mandatory information, for insurance and reinsurance intermediaries.

The ASF is aware that Companies and Distributors should adopt a more flexible stance towards the situation of vulnerability that their Clients are experiencing, without prejudice to the compliance with the applicable legislation.

Authors:

The content of this information does not constitute any specific legal advice; the latter can only be given when faced with a specific case. Please contact us for any further clarification or information deemed necessary in what concerns the application of the law.

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