France: Insurance Comparative Guide

1 Legal framework

1.1 Which legislative and regulatory provisions govern the insurance sector in your jurisdiction?

Institutions that wish to conduct insurance or reinsurance business must be licensed. The institutions in question are covered by:

• the Insurance Code;
• the Mutual Insurance Code; and
• the Social Security Code.

1.2 Which bilateral and multilateral instruments on insurance have effect in your jurisdiction?

At an international level, the insurance field is regulated by various multilateral instruments. They include:

• Directive 2016/97/EU on insurance distribution, which aims to harmonise national provisions concerning insurance and reinsurance distribution;
• the Solvency II Directive (2009/138/EC), which harmonised the prudential framework for insurance companies; and
• Directive 2009/103/EC on motor insurance.

1.3 Which bodies are responsible for enforcing the applicable laws and regulations? What powers do they have?

Based on the reports drawn up further to the controls implemented by the secretary general of the Autorité de Contrôle Prudentiel et de Résolution (ACPR), the college of the ACPR may, as soon as it receives these reports, decide to initiate a disciplinary procedure. Such procedures may be initiated where a reporting entity:

• has failed to respect the applicable regulations;
• has not complied with an administrative enforcement measure decided by the college; or
• has not complied with the terms and conditions of a licence or with the commitments made when the licence was granted.

When the competent session of the college decides to initiate a disciplinary procedure, the chairman notifies the complaints to those concerned and, at the same time, refers the case to the Sanctions Committee by sending it the complaint notification (Article L612-38 of the Monetary and Financial Code (MFC)).

The Sanctions Committee ensures the adversarial nature of the disciplinary procedure:

• on the one hand, the college – the plaintiff authority acting through an appointed representative; and
• on the other, the person(s) under investigation (Article L612-38 of the MFC).

For disciplinary procedures initiated under the Banking and Financial Regulation Act of 22 October 2010, the chairman of the Sanctions Committee appoints a rapporteur whose functions are similar to those of an investigating magistrate. The purpose of this pre-hearing investigation is to facilitate the committee's decision making, given the complexity of the cases submitted to it. The rapporteur puts down in writing the result of his or her investigations in a report that is communicated to the person under investigation and to the plaintiff authority for them to submit comments (Article R612-38 of the MFC).

According to Articles L612-39, L612-40, L612-41 and L612-42 of the MFC, the sanctions risked by the reporting entity include:

• a warning;
• a reprimand;
• a prohibition on conducting certain operations for a maximum period of 10 years;
• any other restrictions on the conduct of its activity;
• the temporary suspension of senior managers for a maximum period of 10 years;
• the compulsory resignation of senior managers;
• the partial or total withdrawal of its licence or authorisation; and
• striking off from the list of authorised entities.

Instead of, or in addition to, these sanctions, a financial penalty of up to €100 million may be imposed.

In addition, Article L612-40 of the MFC holds that in the event of non-compliance with EU Regulation 575/2013 on prudential requirements for credit institutions and investment firms, the penalties incurred by legal entities amount to:

• 10% of their turnover or twice the benefits derived from the breach, when these can be assessed; and
• a maximum amount of €5 million for the responsible leaders.

The decisions taken by the Sanctions Committee are published in the official register of the ACPR and may be published in any publications, newspapers or media it may wish to use, in a format that corresponds to the violation committed and the sanction imposed. The costs of any such notices are borne by the entity sanctioned. However, the committee's decision may provide for publication without specifying names in certain exceptional cases where there could be a "risk of seriously disrupting financial markets or of causing a disproportionate prejudice to the parties involved".

1.4 What is the regulators' general approach in regulating the insurance sector?

The ACPR endeavours to guarantee adequate protection of policyholders by promoting the prudent management of insurance and reinsurance companies, and their transparency and correctness towards clients. It also seeks to ensure the stability of the financial system and markets.

2 Insurance contracts

2.1 What are the main types of insurance available in your jurisdiction?

The Insurance Code sets out rules common to all land insurance contracts and lays down special provisions for the two main categories of insurance: damage insurance and personal insurance. Finally, it goes into more detail on the regime applicable to sub-categories (eg, fire insurance).

The first classification distinguishes between non-life insurance and life insurance. In addition to various regulations, EU law is divided into non-life and life directives.

Non-life insurance can be divided into two categories:

• property insurance, which covers risks relating to an asset; and
• liability insurance, which covers a liability debt (ie, an asset liability).

The Insurance Code lays down some specific standards for particular risks, including fire, hail, acts of terrorism, legal protection and death.

Law 2014-344 of 17 March 2014 (JO 18 March) created a new category of insurance, which is taken out in addition to goods or services ‘sold' by a supplier. This is what the market (not the law) calls ‘affinity insurance'.

2.2 Are all insurance contracts regulated? What terms do they typically include?

Before the issuance of the insurance policy, three types of documents must be exchanged between the insurer and the policyholder.

Information documents: Under Law 89-1014 of 31 December 1989 (D 1990 66), the contractual process begins, in principle, with the insurer providing information documents. The next steps are the sending of an insurance proposal by the policyholder and possibly the issue of a cover note by the insurer.

It has long been recognised that the insurer is obliged to provide information and advice to the policyholder throughout the insurance relationship. At the time of conclusion of the contract, this obligation is now formalised by the compulsory sending of three types of documents, described very precisely by Laws 89-1014 of 31 December 1989 and 2003-706 of 1 August 2003, as well as by Order 2018-361 of 16 May 2018 transposing Directive 2016/97 on insurance distribution (D 2003 1947; Article L112-2 of the Insurance Code).

These must be drawn up in writing, in clear characters and in principle in French. The following documents are involved:

• the provision of an information sheet;
• the delivery of a draft contract or information notice; and
• in the sole event that the future contract includes liability guarantees, the provision of a second information sheet describing the operation of these guarantees over time (Article 80-III of Law 2003-706 of 1 August 2003, known as the ‘Financial Security Law').

Insurance application: The insurance application is a document in which the policyholder asks the insurer to cover a certain risk that it describes precisely. The application includes an attached risk questionnaire to which the policyholder must answer truthfully and accurately, failing which it may be subject to the penalties provided for in the event of a false declaration.

Cover note: The cover note – sometimes called a ‘letter of guarantee' or, for mutuals, a ‘provisional application form' – is a provisional document issued by the insurer or its representative to establish the cover before the policy is issued.

Once these preliminary documents have been provided by the insurance company and filed out and/or signed by the policyholder, an insurance policy is issued.

The Insurance Code imposes very strict formal requirements on insurance policies. They must be drawn up in writing (Article 112-3) and contain certain mandatory information (Articles L112-4 and R112-1).

Article L112-4 of the Insurance Code states that "clauses in policies which provide for nullities, forfeitures or exclusions are only valid if they are mentioned in very clear characters". This requirement is necessary for the validity of the clause. This legal protection does not apply to clauses other than those referred to in Article L112-4 of the Insurance Code.

In the insurance policy, a distinction is generally made between:

• the general conditions, which are often pre-printed and contain the clauses common to all contracts covering the same category of risk; and
• the special conditions, specific to each contract, which reflect the adaptation of the general conditions to the risk covered.

They indicate the amount of the premium and bear the signature of the parties.

Article L112-3 of the Insurance Code indicates that the insurance contract, as well as the information sent by the insurer to the policyholder, must be drawn up "in writing, in French, in visible characters". The general provisions must be written in clear characters (Article L112-3 of the Insurance Code); while the clauses stipulating nullities, forfeitures or exclusions, as well as those mentioning the duration of the contract (Article L113-15 of the IC), must be written in very clear characters.

These formal requirements also result from the obligation to include certain information detailed in Articles L112-4 and R112-1 of the Insurance Code. Article L112-4 thus requires that the following be specified in the policy:

• the names of the parties;
• their domicile;
• the risks covered (in the dual sense of risk event and risk object of the guarantee – that is, the person or thing insured);
• the amount of the guarantee;
• the premium to be paid;
• the applicable law (where this is not French law);
• the address of the insurer's head office and, where applicable, of the branch office granting cover; and
• the names and addresses of the supervisory authorities.

The policy must also mention:

• the duration of the contract (Article L113-15); and
• the starting point and duration of the guarantee (Article L112-4).

Article R112-1 requires that the following be specified:

• the conditions for tacit renewal, if stipulated;
• the causes and conditions of extension or cancellation of the contract or suspension of its effects;
• the obligations of the insured, at the time of taking out the contract and possibly during the course of the contract, concerning the declaration of the risk and the declaration of other insurance covering the same risks;
• the conditions and procedures for the declaration to be made in the event of a claim; and
• the legislative provisions concerning the proportional rule and the statute of limitations for actions deriving from the insurance contract.

2.3 What are the formal and documentary requirements for conclusion of an insurance contract?

Please see question 2.2.

2.4 What are the procedural requirements for conclusion of an insurance contract?

Please see question 2.2.

2.5 What are the respective obligations and liabilities of insurer and insured, both on concluding an insurance contract and during its term? What are the consequences of any breach?

The insurer's obligations and liabilities are as follows:

• Coverage of the risk: Article L113-1 of the Insurance Code determines precisely which risks are covered by the insurer – excluding, in particular, loss and damage resulting from an intentional fault of the insured. Furthermore, Article 6 of the Civil Code prohibits illicit or immoral agreements; and Article L113-1 prohibits insuring the consequences of the insured's intentional or fraudulent fault. Despite the existence of legal exclusions – such as that of intentional fault on the part of the insured – the principle is that the content of the insurance cover is determined by the contract. It is determined positively by clauses defining the risk covered and thus delimiting the ‘contractual area'. It is determined negatively by the stipulation of exclusions, which create as many ‘holes' in the cover corresponding to cases where, for reasons of excessive cost, the insurer does not wish to grant cover.
• Settlement of the claim: According to Article L113-5 of the Insurance Code, "when the risk occurs or when the contract expires, the insurer must perform the service specified in the contract within the agreed time limit and may not be held to do so beyond that time". This settlement obligation is largely subject to contractual freedom. The law intervenes, however, to determine the date of birth – that is, the occurrence of a claim – identified at the realisation of the risk or at the expiry of the contract (in the case of life insurance).
• Duty to inform and advise: According to the law, the policyholder is informed by means of information documents, which were considered when the contract was formed. However, this documentary information is not sufficient. Case law has established a general obligation on the part of the insurer – either personally or through its agents or on the part of other professionals – to provide information, advice and warnings. This obligation relates to the adequacy of the cover offered to the needs of the insured and to its specific situation. Since 1 October 2018, when Order 2018-361 of 16 May 2018 transposing the Insurance Distribution Directive came into force, the duty to advise of all insurance distributors has a legal basis in Article L521-4 of the Insurance Code.

The policyholder's obligations and liabilities are as follows:

• Contractually, the policyholder may be subject to a wide variety of obligations. This is especially the case after a loss, where policies may require it to:
• • take all rescue measures that aim to limit the damage to itself and to third parties;
  • transmit any useful document or evidence to identify the circumstances of the loss; or
  • report the loss to the administrative or judicial authorities (eg, by filing a complaint for theft).

Depending on the case, these obligations may be sanctioned by forfeiture of the policy or only entail the policyholder's civil liability.

• Payment of the premium: Article L113-2 of the Insurance Code requires the insured to "pay the premium or contribution at the agreed times", which leaves a great deal to contractual freedom. Although the text refers to the insured, the debtor of the premium is, in fact, the policyholder which is party to the contract. The date of payment is fixed by the policy (Article L113-2 of the Insurance Code, which refers to the ‘agreed times'), and by it alone.
• Reporting obligations: Article L113-2 of the Insurance Code requires the insured to declare the risks to be covered and the possible occurrence of a loss. Under Article L113-2 of the Insurance Code (which is not applicable to life insurance, for which there is no urgency to make a declaration), the insured is obliged "to give notice to the insurer, as soon as he becomes aware of it and at the latest within the time limit fixed by the contract, of any claim likely to entail the insurer's guarantee".

3 Making a claim

3.1 What are the formal and documentary requirements for making a claim?

Please see question 2.5.

3.2 What are the procedural requirements for making a claim?

Please see question 2.5.

3.3 On what grounds can the claim be denied? How can the insured challenge the denial of claim?

There are many grounds on which a claim can be refused, depending on the type and scope of the insurance contract. In particular, the insurer might argue that the claim:

• is outside the object/scope of the policy; or
• arose outside of the policy's period of effectiveness.

Special attention should be paid with regard to so-called ‘claims made' policies, which provide cover when a claim is made against the policyholder during the policy period. In such cases, the date of the facts from which the claim originated may be irrelevant.

The insured can challenge the denial by sending a complaint to the Autorité de Contrôle Prudentiel et de Résolution (ACPR). However, the ACPR cannot intervene on the merits of the contractual relation; therefore, the only effective way to obtain payment of the indemnity by the insurance company is to file an application with judicial bodies.

3.4 How can third parties make a claim?

Please see question 2.5.

Apart from compulsory insurance, which may include the list of persons being considered as third parties, there is no legislative or regulatory text which defines ‘third parties'. An insurance contract may stipulate, for example, that a co-contractor is a third party.

It is therefore necessary to refer to the insurance contract, which will define who is a third party and who is not. For example, the contract may stipulate that not only the insured, but also other persons such as family members or agents, are not considered as third parties, using, for example, the following formula: "any person other than..."

4 Form and structure of insurers

4.1 What types of insurance companies are typically found in your jurisdiction?

Article L322-1 of the Insurance Code provides that any French company mentioned in Article L310-1 of the code must be established in the form of a public limited company or a mutual insurance company or, since the enactment of Order 2008-556 of 13 June 2008, a European company. Only these three forms of company are allowed.

4.2 How are these insurance companies typically structured and funded?

Insurance organisations are financed through insurance contracts and insurance premiums paid by the policyholder.

They can also seek financing on the financial markets.

4.3 Are there any restrictions on foreign ownership of insurance companies?

Under Article R322-11-3 of the Insurance Code, any transaction enabling a person – acting alone or in concert with other persons, within the meaning of Article L233-10 of the Commercial Code – to dispose of or reduce its holding in the relevant undertakings is subject to prior notification to the Autorité de Contrôle Prudentiel et de Résolution (ACPR) when:

• the fraction of voting rights held by that person or persons falls below the thresholds of one-tenth, one-fifth, one-third or one-half of the voting rights; or
• the insurance or reinsurance undertaking ceases to be a subsidiary of that person or persons.

The ACPR verifies that this operation does not call into question the conditions to which the authorisation is subject.

The abovementioned transactions (which are subject to prior authorisation or notification) must be brought to the immediate attention of the ACPR only when they are concluded between persons governed by the law of an EU member state and belonging to the group of those which already hold effective control over the target undertaking (financial restructuring within the same group).

In the case of prior notification, the shareholder must send a letter to the Authorisations Department, to be filed on the Authorisations portal, in which it indicates the exact terms of the transaction. In accordance with Article R322-11-3 of the Insurance Code, the ACPR must acknowledge receipt of a notification of a transfer or reduction of shareholding within two working days of receipt.

The ACPR has 60 working days from the date of the acknowledgement of receipt of the notification to inform the declarant and the undertaking concerned by the proposed transaction of any refusal.

5 Authorisation

5.1 What authorisations are required to provide insurance services in your jurisdiction? What activities do they cover?

The authorisation of direct insurance undertakings is based on three principles:

• The principle of speciality: An insurance undertaking may only carry out the operations for which it has been authorised. However, it may be authorised, under certain conditions, to provide cover on behalf of other authorised bodies with which it has concluded an agreement to this effect.
• The principle of specialisation: Organisations are authorised to carry out activities exclusively in life insurance or non-life insurance. However, this principle can be mitigated to cover all risks relating to the person; and organisations authorised to provide life insurance can also be authorised to cover health and accident risks.
• The principle of licensing by class: The classes are defined at EU level. There are 18 EU classes in non-life insurance and seven branches in life insurance in France. Insurance companies are authorised to carry out activities in all of these branches; the field of activity is more restricted for mutuals and provident institutions.

The principle of specialisation is softened for French institutions engaged solely in reinsurance: a reinsurance institution may be licensed in life or non-life insurance for all classes (Article L321-1-1 of the Insurance Code, Article L211-8-1 of the Mutual Insurance Code and Article L931-4-1 of the Social Security Code).

5.2 What requirements must be satisfied to obtain authorisation?

Insurance or reinsurance undertakings wishing to be authorised to carry on insurance business or to engage only in reinsurance business must:

• contact the Insurance Organisations Department of the Authorisation Directorate to present their project and examine the proposed timetable for its implementation; and
• compile a file including a legal section on the constitution of the organisation and its directors and a technical and financial section. The application must be submitted on the Authorisations portal. All of these elements are defined in Instruction 2015-I-15 (Annex 1 - Annex 2). The legal part relating to the constitution of the organisation and its directors essentially comprises:
• • a list of the classes or sub-classes of insurance or the reinsurance activity that the organisation proposes to carry on;
  • the constitutive documents of the organisation and the signed articles of association;
  • the minutes of the decision-making body applying for authorisation or extension of authorisation;
  • proof that the minimum amount of the guarantee fund or basic own funds has been established; and
  • the elements relating to the good repute, competence and experience of the persons in charge of leading or managing the organisation as they result from Instruction 2017-I-10 or Instruction 2018-I-09 and Annexes 1 and 2.
• The technical and financial part essentially comprises:
• • a three-year programme of activities;
  • detailed projections showing the expected development of turnover, technical results, net results, claims experience, technical provisions and solvency elements; and
  • a description of the activities that the organisation proposes to carry out (target clientele, distribution method), the reinsurance programme and the technical resources that will be used to ensure management.

5.3 What is the procedure for obtaining authorisation? How long does this typically take?

The Autorité de Contrôle Prudentiel et de Résolution (ACPR) has a period of six months to issue a decision once it has received a complete application.

If no reply is received within six months of the date of receipt of a complete application for authorisation, the decision will be deemed to be an implicit rejection. If the supervisory authority decides to refuse approval before the end of the six-month period, the undertaking must first be given formal notice to submit its observations within 15 days. The refusal to grant approval is substantiated and notified to the undertaking, which then has two months to appeal to the Conseil d'Etat.

In granting approval, the supervisory authority generally bases its decision on the following criteria:

• the good character, competence and experience of the persons in charge of running or managing the organisation;
• the administrative, technical and financial resources proposed to be implemented in accordance with the programme of activities;
• the distribution of capital and the quality of the shareholding in the case of insurance undertakings constituted as limited companies; and
• the procedures for setting up the establishment fund for mutual or parity-based organisations (provident institutions).

The ACPR may refuse authorisation if it finds that the exercise of supervision could be hindered by:

• the existence of capital links between the applicant company and other legal or natural persons; or
• the laws, regulations or administrative provisions of a state that is not a member of the European Economic Area to which one or more of these persons belong.

6 Regulatory capital and liquidity

6.1 What minimum capital requirements apply to insurance companies in your jurisdiction?

The basic own funds held by undertakings must cover the minimum capital requirement, which may not be lower than an absolute floor (Article L352-5 of the Insurance Code). This corresponds to an amount of eligible basic capital below which the beneficiaries of the contracts would be exposed to an unacceptable level of risk if the undertaking were allowed to continue its activity.

The absolute floor thresholds are as follows:

• €2.5 million for non-life insurance;
• €3.7 million for Classes 10 to 15 (civil liability, credit, surety);
• €3.7 million for life insurance; and
• €3.6 million for reinsurance.

For companies, the absolute floor is €6.2 million. The minimum capital requirement is between 25% and 45% of the solvency capital requirement. Companies calculate it at least once a quarter and send the results to the Autorité de Contrôle Prudentiel et de Résolution (ACPR) (Article R352-29 of the Insurance Code).

6.2 What liquidity requirements apply to insurance companies in your jurisdiction?

Insurance companies must have sufficient own funds to cover the solvency capital requirement. This is determined in such a way as to ensure that all quantifiable risks to which the insurance company is exposed are considered, according to specific rules set out by French and European law. At least the following risks must be covered:

• underwriting risk;
• market risk;
• credit risk; and
• operational risk.

Insurance undertakings must respect a financial regime which aims to protect the rights of the insured. In order to ensure that its financial situation enables it to meet its commitments, an insurance undertaking must:

• establish technical provisions;
• represent these by appropriate financial investments; and
• justify the equity capital constituting its solvency margin.

The transposition of the Solvency II Directive has introduced new prudential obligations, such as:

• new solvency rules;
• new governance and risk management requirements; and
• an obligation to publish reports to the supervisor and the public.

Book III of the Insurance Code now comprises two separate titles devoted to the prudential regime:

• Title III (Articles L330-1 and following of the Insurance Code), applicable to insurance undertakings not covered by the Solvency II regime; and
• Title V (Articles L350-1 and following), applicable to insurance and reinsurance undertakings subject to the Solvency II regime.

These two separate regimes are now applicable to mutuals and unions falling under the Mutual Insurance Code (Article L212-1 of the Mutual Insurance Code); and to provident institutions and unions falling under the Social Security Code (Article L931-9 of the Social Security Code).

Entities covered by the Solvency II regime are those that have met – as from 1 January 2012 and for three consecutive financial years – one of the following conditions (Article L310-3-1 of the Insurance Code, Article L211-10 of the Mutual Insurance Code; and Article L931-6 of the Social Security Code):

• Their annual gross premium or contribution income exceeds €5 million;
• Their total technical provisions (gross of reinsurance cessions or cessions to securitisation vehicles) exceed €25 million;
• They belong to a group as defined in Article L356-1 of the Insurance Code; or
• They carry out reinsurance operations that:
• • exceed €500,000 in premiums or €2.5 million in technical provisions; or
  • represent more than 10% of premiums collected or of their technical provisions.

Even where these conditions are not met, the Solvency II regime also covers:

• insurance organisations dealing with civil liability, credit or surety risks;
• reinsurers;
• branches of foreign companies authorised in France and French companies that use the freedom to provide services or that have branches abroad; and
• unions of mutual insurance companies or provident institutions that conduct reinsurance activity.

Entities that apply for authorisation are also subject to this regime if they are expected to exceed one of the above amounts over the next five financial years; while those that have not met these conditions over the last three financial years and which, according to the ACPR's forecasts, will not meet them over the next five financial years are no longer subject to the regime.

7 Supervision of insurance groups

7.1 What requirements apply with regard to the supervision of insurance groups in your jurisdiction?

Groups of insurance companies are supervised by the Autorité de Contrôle Prudentiel et de Résolution (ACPR) in collaboration with other relevant authorities (national and foreign). The ACPR has supplementary supervisory powers over financial conglomerates and prudential control powers over national and cross-border insurance groups, pursuant to the new regulatory framework introduced by the EU Solvency II Directive. Insurance group supervision is also pursued through the appointment of colleges of supervisors, which aim to:

• enhance the efficiency and effectiveness of the supervision of cross-border groups; and
• reinforce cooperation between the supervisory authorities of various countries with regard to the exchange of information, planning and coordination of operational activities.

8 Reporting, governance and risk management

8.1 What key disclosure requirements apply to insurance companies in your jurisdiction?

Rules applicable to all insurance organisations: French insurance and reinsurance undertakings and their foreign branches must prepare annual accounts in accordance with the accounting requirements defined by the Accounting Standards Authority (Article L341-1 of the Insurance Code). They are also subject to certain provisions of the Commercial Code (Articles L341-2 and R341-2 of the Insurance Code).

French insurance and reinsurance undertakings, as well as insurance group companies and mutual insurance associations, must also publish the following:

• the annual accounts;
• the management report;
• the auditors' report on the annual accounts; and
• where applicable:
• • the consolidated or combined accounts;
  • a group management report; and
  • the auditors' report on the consolidated or combined accounts (Article L341-3 of the Insurance Code).

Companies must implement procedures for preparing and verifying the financial and accounting information necessary for the preparation of the annual financial statements, described in a report submitted each year to the board of directors or the supervisory board for approval, which is sent to the Autorité de Contrôle Prudentiel et de Résolution (ACPR) (Article R341-9 of the Insurance Code).

Unless they are controlled by a mixed insurance group company, insurance and reinsurance undertakings with their head office in France, insurance group companies (Article L322-1-2 of the Insurance Code) and mixed financial holding companies ( Article L517-4 of the French monetary and financial Code) must prepare and publish consolidated or combined accounts.

Where two or more entities form a whole that is not linked by capital, one of them must prepare and publish combined accounts. Combined accounts must be published where the entities have:

• by virtue of an agreement concluded between them, either a common management or common services of sufficient scope to give rise to common commercial, technical or financial behaviour; or
• significant and lasting reinsurance links between them by virtue of contractual, statutory or regulatory provisions (Article R345-1-1 of the Insurance Code).

Rules applicable to companies outside the scope of Solvency II: Insurance undertakings must establish a permanent internal control system (Article R336-1 of the Insurance Code).

At the end of each financial year, the board of directors or the executive board draws up a written solvency report setting out the conditions under which the undertaking guarantees the commitments it makes to policyholders or reinsured undertakings by constituting sufficient technical provisions, with the calculation methods and assumptions used being explained and justified. This report, which is communicated to the statutory auditors and the ACPR:

• explains the investment guidelines as defined;
• presents and analyses the results obtained;
• indicates whether the solvency margin is constituted in accordance with the applicable regulations; and
• analyses the conditions under which the undertaking can meet all its commitments in the medium and long term (Article L336-1 of the Insurance Code).

At least once a year, the board of directors or the supervisory board approves a report on internal control, which is sent to the ACPR (Article R336-1 of the Insurance Code).

At least once a year, the board of directors or the supervisory board must determine the guidelines of the investment policy, such as:

• the procedures for selecting financial intermediaries;
• asset liability management;
• asset quality; and
• transactions in financial futures instruments (Article R336-2 of the Insurance Code).

If the undertaking uses financial futures instruments for the first time, it must inform the ACPR in advance (Article R336-3 of the Insurance Code). It must carry out permanent monitoring of transactions and, to this end, must keep a daily record of positions taken for each category of underlying investment, maturity by maturity (Article R336-4 of the Insurance Code).

The board of directors or the supervisory board must approve the guidelines of the reinsurance policy at least once a year. For this purpose, a report on the reinsurance policy must be submitted to it. Once approved, it may be included in the solvency report (Article R336-5 of the Insurance Code).

Each year, in accordance with the procedures defined by the ACPR, undertakings must send the ACPR a detailed annual report on their operations and any statements, tables or documents that will enable it to monitor:

• their financial situation;
• the performance of their operations;
• the collection of premiums or contributions;
• the settlement of claims;
• the valuation; and
• for undertakings subject to the obligation to draw up annual accounts in accordance with the accounting requirements defined by the French Accounting Standards Authority (Article L341-1 of the Insurance Code; Article L211-8 of the Mutual Insurance Code; Article L931-4 of the Social Security Code), the representation of provisions and reserves (Article R336-6 of the Insurance Code).

At the ACPR's request, they must provide it with:

• all information and documents enabling it to assess the value of the real estate, loans, securities or claims appearing in their balance sheet for any reason and in any form whatsoever; and
• any other information on the transactions that the ACPR considers necessary for the exercise of its supervision (Article R336-6 of the Insurance Code).

Each year, they must carry out a solvency test – the terms of which are set by the ACPR – to assess their ability to meet their commitments to policyholders and reinsured companies under deteriorated market conditions (Article R336-7 of the Insurance Code).

Rules applicable to companies governed by Solvency II: In addition to the information required by the Monetary and Financial Code (MFC) to enable the ACPR to carry out its supervision (Article L612-14 of the MFC), undertakings must regularly submit the following to the ACPR (Article L355-1 of the Insurance Code):

• a report on their solvency and financial situation (Article L355-5 of the Insurance Code);
• a regular report to the supervisor;
• annual and quarterly quantitative statements; and
• a report on the internal assessment of risks and solvency (Articles L355-6, L355-5 and L354-2 of the Insurance Code).

All of these reports must have been duly approved by the competent bodies (Article R355-1 of the Insurance Code).

At the request of the secretary general of the ACPR, undertakings must provide all information on contracts held by intermediaries or concluded with third parties (Article L355-2 of the Insurance Code). They must also provide the ACPR with:

• their written risk adequacy policies (Article L355-4 of the Insurance Code); and
• all information necessary for supervision in the event of events that have led or may lead to significant changes in:
• • their activities and results;
  • their system of governance;
  • their risk profile;
  • their solvency; and
  • their financial situation (Articles L355-3 and A355-1 of the Insurance Code).

Companies must publish an annual report on their solvency and financial situation. In the event of a major event that significantly affects the relevance of the information contained in this report, they must publish information on the nature and effects of this event (Article L355-5 of the Insurance Code). They must also:

• put in place appropriate structures and systems to meet these requirements; and
• develop written policies to ensure the ongoing adequacy of these requirements (Article L355-6 of the Insurance Code).

This report – which must be approved by the board of directors or the supervisory board – includes information listed by decree. It includes, for example:

• a description of the information that makes it possible to understand the main differences between the underlying assumptions of the standard formula and those of the internal model;
• an explanation of the difference in the case of a breach of the minimum capital requirement or a serious breach of the solvency capital requirement, even if the problem has subsequently been resolved (Article R355-7 of the Insurance Code); and
• the amount of any supplementary capital requirement imposed by the ACPR (Article R355-8 of the Insurance Code).

8.2 What key reporting requirements apply to insurance companies in your jurisdiction?

Please see question 8.1.

Moreover, pursuant to European Central Bank (ECB) regulations, insurance companies must report statistical data to the ECB concerning insurance assets and liabilities.

8.3 What key governance requirements apply to insurance companies in your jurisdiction?

When the Solvency II Directive was transposed, common governance rules were adopted for the three insurance families.

Thus, a person may not manage an insurance undertaking, be a member of a collegiate supervisory body, have the power to sign on behalf of an insurance undertaking or body or be responsible for a key function if he or she has been convicted for less than 10 years of certain offences, such as money laundering, tax fraud, personal bankruptcy or bankruptcy, including by a foreign court (Article L322-2 of the Insurance Code; Article L114-21 of the Mutual Insurance Code; Article L931-9 of the Social Security Code).

Operational managers and heads of key functions are subject to competence requirements: they must be of good repute, competent and experienced in their functions. Similarly, the members of the board of directors or the supervisory board must be of good repute, competent and experienced. The ACPR assesses their competence by taking into account their training and experience in a manner commensurate with their duties, as well as the competence, experience and duties of the other members of the body to which they belong (Article L322-2 of the Insurance Code).

The ACPR ensures that such persons collectively have the necessary knowledge and experience of:

• the insurance and financial markets;
• the company's:
• • strategy and business model;
  • system of governance; and
  • financial and actuarial analysis; and
• the legislative and regulatory requirements applicable to the insurance undertaking, appropriate to the exercise of the responsibilities assigned to the board of directors or the supervisory board (Article R322-11-6 of the Insurance Code; Article R114-9 of the Mutual Insurance Code; Article R931-3-10-1 of the Social Security Code).

This competence requirement is also assessed in accordance with Article 258 of Commission Delegated Regulation (EU) 2015/35 of 10 October 2014, as amended by Delegated Regulation (EU) 2019/981 of 8 March 2019 (Article R322-167 of the Insurance Code).

Managers of Solvency II companies are subject to enhanced requirements. According to the ‘four eyes' principle, their effective management must be ensured by at least two persons. The heads of key functions report to the managing director or the executive board, and may inform them directly and on their own initiative of any event that occurs. The managing director or the executive board must interview them whenever this is considered necessary, and at least annually. The appointment and renewal of these persons are notified to the ACPR (Article L322-3-2 of the Insurance Code; Article L211-13 of the Mutual Insurance Code; Article L931-7-1 of the Social Security Code).

Rules applicable to companies concerned by Solvency II: The governance system to be put in place should ensure sound and prudent management of the business and be subject to regular internal review. It should be based on a clear separation of responsibilities and include an effective reporting system. It should be proportionate to the nature, scale and complexity of the undertaking's operations.

Companies should develop and implement written policies on:

• risk management;
• internal control;
• internal audit; and
• where appropriate, outsourcing.

To ensure the continuity and regularity of their activities, they should:

• draw up contingency plans; and
• implement appropriate and proportionate systems, resources and procedures (Article L354-1 of the Insurance Code).

The undertaking must specify whether these written policies are the responsibility of the board of directors or the managing director or, where applicable, the supervisory board or the executive board. These policies should be reviewed at least once a year and adapted to take account of any significant changes. They are subject to the prior approval of the board of directors or the supervisory board, as the case may be (Article R354-1 of the Insurance Code).

The governance system includes the following key functions:

• the risk management function;
• the compliance function;
• the internal audit function; and
• the actuarial function (Article L354-1 of the Insurance Code).

The company's internal control system includes at least:

• administrative and accounting procedures;
• an internal control framework;
• appropriate reporting arrangements at all levels of the company; and
• a compliance function (Article R354-4 of the Insurance Code).

The purpose of the compliance function is to advise the managing director or the executive board, as well as the board of directors or the supervisory board, on all matters relating to compliance with the laws, regulations and administrative provisions governing access to and the conduct of insurance and reinsurance activities. It assesses the possible impact of any change in the legal environment on the company's operations and identifies and assesses compliance risk (Article R354-4-1 of the Insurance Code).

The internal audit function, exercised objectively and independently of the operational functions, assesses the adequacy and effectiveness of the internal control system and other elements of the governance system. Its findings, recommendations and proposals are communicated to the board of directors or the supervisory board by the managing director or the executive board. The latter ensures that these actions are carried out and reports to the board of directors or the supervisory board (Article R354-5 of the Insurance Code).

The purposes of the actuarial function are as follows:

• to coordinate the calculation of prudential technical provisions;
• to ensure the appropriateness of the methodologies, underlying models and assumptions used to calculate prudential technical provisions;
• to assess the adequacy and quality of the data used in the calculation of these provisions;
• to supervise this calculation; and
• to compare the best estimates with empirical observations (Article R354-6 of the Insurance Code).

The risk management function facilitates the implementation of the risk management system (Article R354-2-3 of the Insurance Code). Undertakings must set up a risk management system based on an internal assessment of risks and solvency (Article L354-2 of the Insurance Code). This assessment is an integral part of the company's business strategy. It is carried out once a year and in the event of significant changes to its risk profile. The conclusions of these assessments are communicated to the ACPR (Article R354-3-4 of the Insurance Code).

The risk management system includes the strategies, processes and information procedures necessary to identify, measure, monitor, manage and report, on an ongoing basis, on:

• the risks – at both the individual and aggregate levels – to which undertakings are or could be exposed; and
• the interdependencies between these risks.

It is integrated into the organisational structure and decision-making procedures and is carried out by the persons who effectively direct the undertaking or who are responsible for its key functions (Article R354-2 of the Insurance Code).

When outsourcing functions or activities, companies retain full responsibility for meeting their obligations. Such outsourcing must not:

• involve important or critical activities or functions;
• seriously compromise the quality of their governance system;
• unduly increase operational risk;
• compromise the ACPR's ability to verify compliance with their obligations; or
• adversely affect the quality of the services due to policyholders.

Companies must inform the ACPR of their intention to outsource significant or critical activities or functions, as well as of any subsequent significant developments. They must ensure that:

• they cooperate with the ACPR; and
• the persons responsible for auditing the accounts and the ACPR have access to the data relating to outsourced functions or activities (Article L354-3 of the Insurance Code).

Important or critical operational activities or functions are considered to be:

• key functions; and
• those functions whose interruption is likely:
• • to have a significant impact on the business of the undertaking or on its ability to manage risks effectively; and
  • to call into question the conditions of its authorisation.

This impact is assessed in light of the following factors:

• the costs of the outsourced activity;
• the financial, operational and reputational impact on the company of the provider's inability to provide the service within the required timeframe;
• the difficulty of finding another provider or taking over the activity directly;
• the company's ability to meet regulatory requirements in the event of problems with the provider; and
• the potential losses to policyholders, subscribers or beneficiaries of contracts in the event of the provider's failure.

In a report dated 15 July 2020, the ACPR recalls that reporting insurance undertakings must inform it of:

• their intention to outsource ‘important' or ‘critical' activities or functions; and
• any subsequent significant change in these functions or activities.

This is done by means of a notification form submitted no later than six weeks before the outsourcing takes effect (Rapp ACPR, Implementation of the new governance rules in the insurance sector: assessment and prospects, 15 July 2020).

8.4 What key risk management requirements apply to insurance companies in your jurisdiction?

Please see question 8.3.

9 Senior management

9.1 What requirements apply with regard to the management structure of insurance companies in your jurisdiction?

The managers and members of the collegiate bodies of an insurance company must meet the conditions of good repute, competence and experience.

When applying for authorisation of their company, they must produce a detailed file to assess this. This file includes, among other things:

• a dated and signed CV, indicating in particular training and diplomas and, for each of the positions held over the last 10 years:
• • the responsibilities exercised;
  • the name of the companies concerned; and
  • the results obtained in financial terms and in terms of business development;
• the name and activity of companies with their registered office in France or abroad of which they are or have been, over the last 10 years, shareholders holding a stake, partners in name or general partners, as well as, where applicable, the amount of the holdings and the links between these companies and the company filing the application;
• the list of corporate offices held in France or abroad, specifying:
• • those held in companies that do not belong to the company's group; and
  • from among these, those for which they may have conflicts of interest and the measures they intend to take to remedy them; and
• where applicable:
• • administrative or disciplinary sanctions taken against them by a supervisory authority or professional organisation;
  • dismissals for serious misconduct; and
  • the exercise of administrative or management functions in companies which have been the subject of reorganisation or judicial liquidation measures.

When appointing or reappointing a manager, insurance undertakings have 15 days to notify the Autorité de Contrôle Prudentiel et de Résolution (ACPR). The ACPR has two months to refuse the appointment or renewal if it finds that the person concerned does not meet the applicable conditions of good repute, competence and experience applicable (Article R612-29-3 of the Monetary and Financial Code (MFC)).

When the ACPR considers objecting to the continuation of the mandate of a natural person who is a member of the board of directors or the supervisory board of an insurance undertaking, where that person does not meet the conditions of good repute or the applicable conditions of competence and experience, it must notify the undertaking, the natural person concerned and the chairman of the body of which he or she is a member of the grounds for its objection. It will invite them to submit their written observations within one month (Article R612-29-3 of the MFC).

The term of office or function of natural persons whose appointment or renewal has been refused by the ACPR – whether they are executives or members of the board of directors or supervisory board – ceases 15 days after the company is notified of the refusal decision.

With regard to the conditions of competence and experience, the ACPR may require insurance undertakings to submit for its approval a training programme for the members of their board of directors or supervisory board. The deadline for submitting this document is 45 days, after which the ACPR must be kept regularly informed of the implementation of the training programme it has specified (Article R612-30-1 of the MFC).

When the ACPR takes into account, in its assessment of each member of the board of directors or supervisory board of an insurance undertaking, the competence, experience and powers of the other members of the body to which he or she belongs, it will ensure that they collectively have the necessary knowledge and experience of:

• the insurance and financial markets;
• the company's strategy and business model;
• its system of governance;
• financial and actuarial analysis; and
• the legal and regulatory requirements applicable to the body, appropriate to the exercise of the responsibilities devolved to the board of directors or the supervisory board (Article R322-11-6 of the Insurance Code; Article R931-3-10-1 of the Social Security Code; Article R114-9 of the Mutual Insurance Code).

9.2 How are directors and senior executives appointed and removed? What selection criteria apply in this regard?

Please see question 9.1.

9.3 What are the legal duties of directors and senior executives of insurance companies?

EU Directive 2016/97 sets out a general principle that distributors of insurance products "shall always act honestly, impartially and professionally and in the best interests of their customers"; and must not remunerate their staff against the best interests of their customers. These requirements have been transposed into Article L521-1 of the Insurance Code.

In practice, these requirements will result in an obligation for any distributor of insurance products to have a policy on the remuneration received by the company and by the staff responsible for marketing insurance contracts.

It is strongly discouraged to pay ‘incentives' to sales advisers for the purchase of an insurance contract from a particular insurance company by their clients. It is preferable to give preference to variable remuneration paid to sales advisers for the overall number of insurance contracts sold. It is also recommended to introduce a share of remuneration based on qualitative criteria, such as:

• compliance with regulations and internal procedures;
• quality of services provided; and
• customer satisfaction.

9.4 How is executive compensation regulated in your jurisdiction?

The transfer of a portfolio of insurance contracts from one organisation to another is subject to the authorisation of the Autorité de Contrôle Prudentiel et de Résolution (ACPR), which checks the solvency of the transferee (Articles L324-1 and following of the Insurance Code). This also applies to the portfolios of:

• reinsurers (Article L324-1-2 of the Insurance Code);
• mutual insurers (Article L212-11 of the Mutual Insurance Code); and
• provident institutions (Article L931-16 of the Social Security Code).

If the undertaking is established in another EU member state, the ACPR requires a certificate from the supervisory authorities of that other state justifying the adequacy of the transferee's solvency margin, taking into account the transfer.

The supervision is carried out whether the transfer is carried out by sale, contribution to a company, merger or division.

The draft transfer is made public by a notice published in the Official Journal, which gives creditors a period of two months to submit observations. At the end of this period, and insofar as the ACPR has considered that the rights of policyholders and creditors have not been prejudiced, the operation is authorised. The administrative approval makes the transfer enforceable against policyholders and creditors. Policyholders may terminate their contract(s) within one month of publication of the decision (Article L324-1 of the Insurance Code).

10 Change of control and transfers of insurance companies

10.1 How are the assets and liabilities of insurance companies typically transferred in your jurisdiction?

The transfer of a portfolio of insurance contracts from one organisation to another is subject to the authorisation of the Autorité de Contrôle Prudentiel et de Résolution (ACPR), which checks the solvency of the transferee (Articles L324-1 and following of the Insurance Code). This also applies to the portfolios of:

• reinsurers (Article L324-1-2 of the Insurance Code);
• mutual insurers (Article L212-11 of the Mutual Insurance Code); and
• provident institutions (Article L931-16 of the Social Security Code).

If the undertaking is established in another EU member state, the ACPR requires a certificate from the supervisory authorities of that other state justifying the adequacy of the transferee's solvency margin, taking into account the transfer.

The supervision is carried out whether the transfer is carried out by sale, contribution to a company, merger or division.

The draft transfer is made public by a notice published in the Official Journal, which gives creditors a period of two months to submit observations. At the end of this period, and insofar as the ACPR has considered that the rights of policyholders and creditors have not been prejudiced, the operation is authorised. The administrative approval makes the transfer enforceable against policyholders and creditors. Policyholders may terminate their contract(s) within one month of publication of the decision (Article L324-1 of the Insurance Code).

10.2 What requirements must be met in the event of a change of control?

The shareholding control mechanism does not apply if the application for authorisation is made for a mutual insurance company, a mutual society or a provident institution, as these organisations do not have shareholders. In their case, the ACPR verifies the procedures for setting up the formation of the establishment fund, which is similar to the capital of commercial companies.

The quality of the shareholders is a criterion for granting authorisation to public limited companies. To this end, the information required for approval includes, in the case of a public limited company, a list of shareholders holding 5% or more of the capital or voting rights, with a file containing information on the activities and assets of each of them.

Where one of the shareholders of the undertaking has sole control of the insurance undertaking and is itself a company whose main business is to acquire holdings in insurance undertakings, a list of its shareholders must also be provided, under the same conditions as the list of shareholders of the insurance undertaking.

Subsequently, all acquisitions, extensions or disposals of shareholdings – whether direct or indirect – must be reported to the ACPR in advance if they result in:

• one person or several persons acting together acquiring or losing effective control of the insurance undertaking; or
• the thresholds of 50%, 33%, 20% or 10% of the voting rights at the meetings being exceeded or fallen below.

The notification must be accompanied by a file containing information on the transaction and on the acquirer of the holding (Article R322-11-1 of the Insurance Code).

The ACPR has 60 working days from the date of acknowledgement of receipt of the notification to object to the transaction. The ACPR has a limited list of criteria on which it bases its analysis, including:

• the reputation and financial soundness of the acquirer; and
• the ability of the undertaking to continue to comply with regulatory provisions and to have sound and prudent management (Article R322-11-2 of the Insurance Code).

11 Consumer protection

11.1 What requirements must insurance companies comply with to protect consumers in your jurisdiction?

Consumer protection is regulated by the Consumer Code.

Companies must comply with the code's provisions in concluding a contract with a natural person who is acting for purposes that are unrelated to any entrepreneurial, commercial or professional activity.

In particular, in this regard, all contractual clauses that result in a significant imbalance of rights and obligations to the detriment of the consumer are considered void.

The following clauses are not considered unfair:

• clauses which aim to limit the risk of the insured;
• clauses which impose certain obligations of diligence on the insured; and
• clauses which provide for the loss of the right to the indemnity in the event of wilful exaggeration of the damage.

11.2 What other measures has the state implemented to protect consumers in the insurance sector?

Please see question 11.1 and question 15.1 concerning guarantee funds.

12 Data security and cybersecurity

12.1 What is the applicable data protection regime in your jurisdiction and what specific implications does this have for insurance companies?

Insurance companies must comply with the EU General Data Protection Regulation (2016/679) (GDPR).

12.2 What is the applicable cybersecurity regime in your jurisdiction and what specific implications does this have for insurance companies?

The entry into force of the GDPR on 25 May 2018 considerably modified the obligations of ‘data controllers' (ie, persons that process personal data for purposes that they determine) and possible ‘data processors' (ie, persons that process personal data on behalf of a data controller).

An insurance organisation that processes personal data for purposes that it determines is therefore subject to the GDPR and the French Data Protection Act (Law 78-17 of 6 January 1978 relating to data processing, files and freedoms, as most recently amended by Act 2018-1125 of 12 December 2018 relating to personal data protection).

In this respect, it must, in particular, ensure compliance with the general conditions for lawful processing (eg, consent; performance of a contract or implementation of a pre-contractual mechanism; performance of a legal obligation), which are stricter in the case of ‘sensitive' data (eg, health data) or data linked to offences or criminal convictions. As a data controller, it must:

• draw up a register detailing:
• • all categories of processing that it carries out;
  • their purposes; and
  • all technical and operational measures intended to ensure data security; and
• if necessary, carry out impact analyses in the event of a processing operation that threatens the rights and freedoms of individuals.

The insurance organisation responsible for data processing is also the guarantor of respect for the rights of data subjects. Beyond its own obligations in terms of data security, it must:

• adapt all of its commercial documentation to the legal requirements for obtaining customer consent; and
• ensure that customers are informed of:
• the nature, author and purposes of the processing; and
• the rights that they may exercise in this regard (eg, rectification; erasure; portability; opposition for data use; and opposition to the taking of an automated individual decision including profiling).

Controlling the GDPR compliance function at an insurance organisation presupposes the appointment of a data protection officer, as the insurer's core business involves the processing of personal data requiring regular or systematic large-scale monitoring of individuals, or even the processing of special categories of data (eg, health) (Articles 37(b) and (c) of the GDPR).

This control also assumes an extremely rigorous consolidation of contractual relations with third parties, including partners – whether they be the organisation's employees (integration of GDPR requirements into the employment contract) or commercial partners (eg, insurance intermediaries, delegates, reinsurers). Processing shared with these partners will most often be subject to a ‘co-processing' clause or sub-processing.

Finally, the insurance company must pay particular attention to the extraterritorial dimension of the GDPR, including when processing operations are carried out outside the European Union.

13 Financial crime

13.1 What provisions govern money laundering and other forms of financial crime in your jurisdiction and what specific implications do these have for insurance companies?

‘Money laundering' is defined as "facilitating, by any means, the false justification of the origin of the assets or income of the perpetrator of a crime or offence which has procured him a direct or indirect profit". It is also defined as "the fact of assisting in the investment, concealment or conversion of the direct proceeds of a crime or offence" (Article 324-1 of the Penal Code).

Insurance undertakings are called upon to exercise greater vigilance with regard to financial products that may be used to finance terrorism and in the context of the fight against money laundering and tax fraud (Article L561-2 of the Monetary and Financial Code (MFC)). They must adopt internal procedures to implement their anti-money laundering obligations.

A new regulatory framework was introduced by Order 2020-115 of 12 February 2020 transposing the Fifth EU Anti-money Laundering Directive (2018/843), accompanied by its two implementing decrees (Decree 2020-118 and Decree 2020-119 of 12 February 2020).

The legal and regulatory anti-money laundering/counter-terrorist financing (AML/CFT) system follows a risk-based approach. Every business relationship presents a greater or lesser degree of AML/CFT risk. The number and nature of the checks to be carried out by the insurance organisation will depend on this level of risk.

The regulations themselves assign a certain level of risk to certain situations. The provisions of the MFC require insurance undertakings to draw up their own classification of the risks inherent in their activity, according to five criteria:

• the nature of the products or services offered;
• the transaction conditions proposed;
• the distribution channels used;
• the characteristics of the customers; and
• the country or territory of origin or destination of the funds (Article L561-4-1 of the MFC).

The ACPR and the TRACFIN department have drawn up "joint guidelines on reporting and information obligations to TRACFIN" (ACPR-TRACFIN Guidelines, 1 October 2018), which detail:

• the obligations of persons subject to AML/CFT vigilance, reporting and information requirements; and
• the interplay between these requirements and other similar mechanisms (eg, freezing assets; filing a complaint with the public prosecutor; transferring funds).

In addition, the ACPR has developed "guidelines on identification, verification of identity and knowledge of customers" (ACPR Guidelines, 18 February 2019).

Based on its risk classification, the insurance organisation can determine the level of vigilance to be applied before and during each business relationship.

14 Competition

14.1 What specific challenges or concerns does the insurance sector present from a competition perspective? Are there any pro-competition measures that are targeted specifically at insurance companies?

The rules on competition law apply to the insurance sector. The specificity of the insurance sector cannot justify the exclusion of insurance law from the application of Articles 101 and following of the Treaty on the Functioning of the European Union (TFEU) (European Court of Justice (ECJ), 27 January 1987, Case 45/85, Verband der Sachversicherer v European Commission). In the same judgment, the ECJ stated that this finding does not imply that EU competition law cannot take account of the particularities of certain economic sectors, such as insurance. However, it is for the European Commission to take account of its particularities in the context of the exemptions it grants on the basis of Article 101(3) TFEU.

15 Restructuring and insolvency

15.1 What provisions govern insolvency in your jurisdiction and what specific implications do these have for insurance companies?

The rules on receivership and liquidation apply to insurance companies. However, the administrative control and specific regulations applicable to insurance undertakings require the dissolution and liquidation of an undertaking if its administrative authorisation is withdrawn by the Autorité de Contrôle Prudentiel et de Résolution (Article L326-2 of the Insurance Code). In 2001, the EU member states adopted a directive on the reorganisation and winding up of this type of company (EU Directive 2001/17). The suspension of payments is referred to as ‘insolvency', following the example of the Community Regulation on Insolvency Proceedings adopted in 2000 (Regulation (EU) 2015/848, 20 May 2015). The directive was transposed by Order 2004-503 of 7 June 2004.

The liquidation procedure opened against an insurance company is governed by the rules on judicial liquidation, except for the provisions specific to insurance companies (Article L326-2 of the Insurance Code).

The withdrawal of authorisation, pronounced as a disciplinary sanction, automatically entails the dissolution of the insurance company and its liquidation by a judicial representative, independently of the opening of a judicial liquidation procedure based on its suspension of payments.

In the event of an insurance company's failure, various guarantee funds may intervene on behalf of policyholders, members, subscribers and beneficiaries, depending on the nature of the risks covered. Compensation by a guarantee fund is paid under certain conditions and, where applicable, within the limits set by the regulations.

According to the terms of the applicable regulations, some funds intervene in the event of the insurance undertaking's ‘failure'; while others intervene in the event of withdrawal of its authorisation.

A company is generally considered to be in default when it is in a state of suspension of payments and is subject to receivership or liquidation proceedings. In the case of insurance organisations, default is closely linked to the withdrawal of authorisation, so that the conditions for intervention by the various funds are often similar.

Withdrawal of an insurance company's authorisation leads to its being placed in liquidation (Article L326-1 of the Insurance Code). In addition, the suspension of payments by an insurance company is a situation that may justify the withdrawal of authorisation (Article L325-1 of the Insurance Code).

16 Trends and predictions

16.1 How would you describe the current insurance landscape and prevailing trends in your jurisdiction? Are any new developments anticipated in the next 12 months, including any proposed legislative reforms?

Despite the risks and concerns that still exist among some insurance players, there is no longer any doubt that digital platforms and ecosystems are here to stay. As a result, a growing number of insurance players in France and Europe have integrated these into their offerings, influenced in particular by the success of the Asian giants, which were pioneers in applying this model to insurance. Digital platforms and ecosystems enable insurance players to remain relevant to policyholders and meet their expectations: personalisation, contextualisation and consumption through use have become the new standards. On the other hand, the technical capabilities offered by these platforms facilitate and encourage innovation by allowing them to ally themselves with the most innovative companies (platform commercial partners/start-ups/insurtech) in the sector.

The ‘platformisation' of the global economy is no longer a pipe dream; and it is predicted that business models based on digital platforms organised in ecosystems will account for up to 30% of global economic activity by 2025 (according to the World Economic Forum).

17 Tips and traps

17.1 What are your top tips for insurance companies operating in your jurisdiction and what potential sticking points would you highlight?

As a result of the COVID-19 crisis, it is expected that insurers will come under greater pressure, which may affect their business and results. The most important phenomena include:

• mass vaccination of the population;
• a decline in activity in some fields; and
• potential class actions against pharmaceutical companies, insurance companies and so on.

The class action was first introduced to settle consumer disputes (Law 2014-344 of 17 March 2014; Articles L623-1 and following of the Consumer Code), and then cases involving damages caused by health products (Article 184 of Law 2016-41 of 26 January 2016; Articles L1143-1 and following of the Public Health Code)

Subsequently, Law 2016-1547 of 18 November 2016 created a ‘common base' for class actions. Likely to be exercised before both the judicial and the administrative judge, this common base is applicable in various fields (eg, discrimination, including in the workplace; environmental damage; computer data processing), and may subsequently be extended to other fields.

In addition, a directive on representative actions to protect the collective interests of consumers (Directive 2020/1828) provides for the establishment of a harmonised European collective redress mechanism, which member states must transpose by 25 December 2022. The directive covers actions for injunctions and damages in the areas listed in its Annex 1, such as:

• consumer law;
• data protection;
• financial services (including insurance);
• air and rail transport;
• tourism;
• energy;
• telecommunications;
• environment; and
• health.

It should give new impetus to French-style class actions, which have had a disappointing track record so far.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.