Insurance allows someone who suffers a loss or accident to be compensated for the effects of their misfortune. It lets you protect yourself against everyday risks to your health, home, business and financial situation. Concepts of insurance have been extended beyond the coverage of tangible assets. Now the risk of losses due to sudden changes in currency exchange rates, political disturbance, negligence and liability for the damages can also be covered.

The growing interest of the trade sector in issues related to the provision of insurance raises the need to review the laws and regulations applicable in order to present the requirements to contract with an insurance company and the relevant aspects of this contract.

In this article we will address the key legal issues for the marketing of insurance such as regulatory framework, regulated institutions, industries in which companies can operate here in Nicaragua, requirements for marketing, consumer protection insurance, etc.

Regulatory framework of the insurance market in Nicaragua

The Law No. 773 on Insurance Law, Reinsurance and Surety (“Insurance Law") published in the Official Newspaper, The Gazette No. 162, 163 and 164 of the 25, 26 and 27 of  August of 2010, is the current law on insurance, since it revoked the former General Law of Insurance Institutions from 1970.

This new Law in Nicaragua was driven by the requirements of the Dominican Republic--Central America Free Trade Agreement (DR- CAFTA), particularly under the Chapters of Specific Commitments and Financial Services.

The Insurance Law is a law of public order and social interest and fundamentally overhauls the regulatory schemes applicable to both domestic and foreign insurance and reinsurance entities with activities concerning these jurisdictions, including minimum requirements for authorization, approval of insurance products, conduct of cross-border business and penalties for non-compliance with local laws and regulations.

This Law has not been regulated yet, but there are different rules on insurance mediation and reinsurance which in some way replace the Regulations.

The Insurance Regulator in Nicaragua

The insurance regulator is the Superintendence of Banks and Other Financial Institutions (SIBOIF) and it has the task of regulating all aspects of the insurance industry.

The SIBOIF does not get involved much with complaints from the consumer against insurance companies, but focuses more on company issues: such as capital requirements,  quality and type of re-insurance contracts the local companies use and the approval of the forms of the insurance policies.

Who can sell insurance in Nicaragua? 

• The legal persons, national or foreign domiciled in the country, engaged to subscribe or sell insurance, reinsurance and surety, which have been previously authorized by SIBOIF.
  


• Individuals or entities authorized by SIBOIF engaged in the country to pursue activities relating to the intermediation of insurance contracts, reinsurance and surety. 
  


• The governmental companies or entities or those which have a mixed nature that have been authorized by the SIBOIF to underwrite or sell insurance, reinsurance and surety.
  

Which are the companies that are licensed to sell insurance in Nicaragua and which insurance activities are these companies authorized to perform?

The insurance companies authorized by the SIBOIF are: Seguros LAFISE, SA, ASSA Compañía de Seguros, S.A., Instituto Nicaragüense de Seguros y Reaseguros, S.A., and Seguros América, S.A. 

Moreover currently there are 56 brokerage firms and 33 individual brokers authorized by SIBOIF.

The insurance companies, according to the authorization granted by the SIBOIF can perform one or more of the following insurance activities: Life, Personal Accident, Health, Pension Plans, Revenue, Property and Surety.

Can Nicaraguan banks and financial institutions conduct insurance activities?

Financial institutions can only perform brokerage activities, they can offer to their clients the services to underwrite insurances linked to its own operations, always respecting their freedom to choose the insurance companies or the intermediary, as long  as they are authorized by the SIBOIF.

Do companies need authorization to commercialize massive insurance?

Yes, the Insurance Law states that companies which want to sell massive insurance need an authorization from the SIBOIF. This massive insurance placement is an aggregate function to the main functions of the companies and they are only authorized to distribute insurance policies underwritten by insurance companies.

By registering as an Insurance Seller Company, the respective entity shall comply with the obligations, duties and obligations established in the Insurance Law for the Insurance Intermediaries.

In case the company does not want to register as an insurance intermediary, the company may have the option to offer the insurance policies through a spot belonging to any of the insurance companies authorized by the SIBOIF, that could be located in the company’s facilities.

How the consumer can verify if the company he is contracting with is licensed to sell insurance?

All this information is available on the website of SIBOIF in the Insurance Intendance section. All information available on this website is publicly available to everyone.

Can a consumer of the insurance subscribe a contract with a foreign insurance company?

Contracting with foreign insurers is valid as long as it takes place outside of Nicaragua and the subscription of the contracts is with a duly authorized insurer.

The Insurance Law provides that it is prohibited to individuals or legal entities domiciled in Nicaragua, to contract with insurance companies that are not authorized by the SIBOIF, except where it is shown to the Superintendent that the specific insurance can not be obtained in this country with any authorized company or that the Nicaraguan companies do not have approved policies for those risks. In such cases, the Superintendent shall grant special permission to contract with the foreign insurance company offering it; in such event, the  insured shall assume the risks associated to this contract.

If a contract is executed with an insurance company not authorized to operate in Nicaragua, the law provides that the contract will not produce any legal effect, without prejudice to the right of the insured to request the insurer the  reimbursement of the premiums that have been already paid and regardless of responsibilities incurred by the person or company in question, against the insurer, insured or beneficiary or his successors in good faith and the sanctions to be imposed on that person or company.

The principle of Insurance Consumer Protection in the Nicaraguan Legislation

The Insurance Law is based on the principle of Free Competition and Consumer Protection Security, therefore SIBOIF has the obligation to protect the freedom of users to decide the engagement with an insurance company without limitations and if applicable, the intermediary, and shall apply appropriate sanctions when finding behaviors or practices that conflict with the provisions of law.

Similarly, in case there is a conflict between the insured and the insurance companies, the insured may appear  before the consumer protection office to request the processing of his claim under the regulations of Law No. 182 Law on Protection of Consumers, published in the Official Newspaper, The Gazzette No. 213 of November 14, 1994.