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Newsletter | February 2014, Issue 1
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INSURANCE |
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Revisions to the Reinsurance Best Practices Guidelines |
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On November 26, 2013, the Financial Supervisory Service (“FSS”) announced its revisions and implementation of the Reinsurance Best Practices Guidelines (“Guidelines”). The following is a summary highlighting the key revisions to the Guidelines.
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Calculation and Payment of Appropriate Ceding Commissions: The Guidelines prohibit the application of different reinsurance ceding commissions to the same risk without any reasonable grounds, which violates the premium rate calculation principle under the Insurance Business Law. |
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Regulation on Reinsurance Transactions by Non-Licensed Foreign Reinsurers: Under the Guidelines, domestic insurers cannot be a counterparty to a non-licensed foreign reinsurer with respect to illegal reinsurance transactions. This will strengthen regulations against reinsurance transactions by non-licensed foreign reinsurers. |
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Management of Contractual Relations through Reinsurance Brokers: In order to improve business relations regarding reinsurance contracts, reinsurance brokers must provide domestic insurers with information on business relations under the relevant reinsurance contract if the domestic insurer is reinsured by the reinsurance broker. |
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Exception to Foreign Insurer Branches on Mandatory Operation of a Risk Management Committee: The Guidelines provide an exception to small-sized domestic branches of foreign insurers with respect to the requirement to establish, operate and maintain a risk management committee when the head office conducts audits relating to risks and appropriateness of reinsurance strategies. |
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