South Korea Cross Border Insurance Registration and Disclosure Requirements Abolished
The Guidelines on the Cross-Border Sale of Insurance Products have now been abolished, meaning Lloyd’s underwriters can continue to write exempted classes of cross-border insurance without having to comply with the Guideline’s registration and disclosure requirements.
The South Korean regulator, the Financial Supervisory Service (FSS), recently confirmed to Lloyd’s that the Guidelines on the Cross-Border Sale of Insurance Products (the Guidelines) have been abolished, meaning that Lloyd’s will no longer be required to centrally register on behalf of the market and Lloyd’s underwriters will no longer be required to comply with the Guidelines’ disclosure requirements - although underwriters will still need to comply with other regulatory requirements, as outlined below.
In August 2014, Lloyd’s informed the market of new registration and disclosure requirements, following Lloyd’s registration as a foreign insurer in South Korea.
In particular, Article 6 of the Guidelines required that the following disclosures were made to prospective policyholders in all contract related documentation for every cross-border sale:
- the insurer’s name, head office location, location of a relevant branch (if any), internet website address, email address, and telephone number;
- whether the insurer has reported to the FSS in accordance with Article 4 of the Guidelines;
- that the insurer is not licensed, incorporated or represented in Korea;
- that the insurer is not supervised by the FSS, and
- that its products are not covered by Korea's policyholder protection scheme.
With the abolishment of the Guidelines, Lloyd’s underwriters are no longer required to comply with these disclosure requirements, and Lloyd’s is no longer required to register centrally on behalf of the market.
No change in trading status
There has been no change to Lloyd’s trading status. As such, Lloyd’s underwriters are still permitted to write the following exempted classes of business on a cross-border basis outside of the country, as permitted under the Enforcement Decree of the Insurance Business Law of Korea:
- Export and import cargo
- Marine hull
- Long-term casualty
- Any insurance product which three or more domestic insurance companies have refused to underwrite (each of the three insurers must complete a relevant form, supplied by the General Insurance Association of Korea, declining the business).
- Any insurance product which the insurance regulator has approved for placement on a non-admitted basis. This approval may be granted for cases where the insured has had difficulty in acquiring coverage from domestic insurers.
- Any insurance product that was purchased in another country but has not expired upon the policyholder’s return to Korea.
- Any insurance products that are not sold in Korea. For this business, a confirmation letter stating that the particular type of insurance is not available in Korea must be obtained from a relevant Insurance Business Association (eg the Korea Life Insurance Association or the General Insurance Association of Korea).
Marketing restrictions still in force
Please note that the Insurance Business Supervisory Regulation (IBSR), which regulates cross-border insurance marketing methods, still remains in force. According to these rules:
- Contact with Korean clients must only be made on a direct basis by means of mail, telephone, video conference, fax or the internet.
- Korean residents are prohibited from entering into an insurance contract with non-admitted insurers through an insurance company, solicitor, agent or broker located in Korea – although non-admitted insurers are permitted to sell reinsurance products through a locally licensed broker.
With respect to the advertising of offshore insurance in Korea, the IBSR allows non-admitted insurers to advertise the exempted classes of business in Korea through newspapers, television, radio, magazines, and over the internet, as long as they file a report with the FSS prior to advertising. The report must set out the name and address of the insurers’ head office and describe the contents of the advertisement. Should managing agents wish to advertise in Korea then they should contact Lloyd’s International Trading Advice (LITA) to discuss further.