Entry on the list of insurance broker undertakings
Insurance Brokerage Firm Authorisation and the List of Insurance Brokerage Firms
The aim of this Guide is to introduce persons concerned with the procedures of entering the list of insurance broker undertakings handled by the Bank of Lithuania and requirements for insurance broker undertakings, set out the approach of the Bank of Lithuania to new market participants, provide a list of the documents to be submitted with an application to be entered on the list of insurance broker undertakings, and to identify other major aspects.
Activities of an insurance broker undertaking
An insurance broker undertaking shall have the right to engage in insurance mediation authorised by an insurer, a policyholder, an insured person, a beneficiary or an injured third party; however, an insurance broker undertaking must act in the interests of the policyholder, the insured person, the beneficiary or the injured third party. Insurance mediation is an economic activity whereby it is sought to introduce a possibility of concluding an insurance contract, it is proposed to conclude an insurance contract or other preparatory work is carried out for the purpose of conclusion of insurance contracts, as well as an economic activity whereby it is sought to conclude an insurance contract, assistance in administering or performing such contracts, first of all, upon submission of an insurance claim, including the provision of information regarding conclusion of one or more insurance contracts according to the criteria chosen by a policyholder via the Internet or other means, and compilation of the list of ranked insurance products, including comparison of prices and products or a discount for an insurance contract when a policyholder can directly or indirectly conclude an insurance contract via the Internet or other means. Activities that shall not be considered as insurance mediation:
1) the provision of information regarding insurance on an incidental basis in the context of another professional activity, where the purpose of the provision of information is not to assist the recipient of information in concluding or performing an insurance contract;
2) solely administration of insured events and determination of the size of damage (loss) and the insurance claim as well as an expert evaluation of insurance claims;
3) solely provision of data and information on prospective policyholders to insurance intermediaries, insurance undertakings, when the provider of information does not take any further action in order to assist in concluding an insurance contract; or provision of information only on insurance products, an insurance intermediary, an insurance undertaking to prospective policyholders, when the provider of information does not take any further action in order to assist in concluding an insurance contract.
The process of entering the list of insurance broker undertakings
When handling the list of insurance broker undertakings, the Bank of Lithuania takes an open attitude. We encourage all to contact the Bank of Lithuania as early as possible so that we can discuss it together and help assess operating plans proposed by interested parties. This allows us to be clearer in explaining the procedures and meaning of entering the list of insurance broker undertakings, our requests, requirements, expectations and all other major aspects.
The following basic stages of entering the list of insurance broker undertakings can be singled out:
• the pre-application stage: introducing the representatives of a prospective insurance broker undertaking to the regulation applied in Lithuania, pre-application meetings and discussions with specialists of the Bank of Lithuania, a concise discussion of the list of submitted documents and their contents;
• submission of an application to be entered on the list of insurance broker undertakings to the Supervision Service of the Bank of Lithuania (hereinafter – Supervision Service): within 5 business days, the Supervision Service reviews whether all necessary documents have been submitted and, where no formal deficiencies are identified, accepts the application for consideration;
• assessment of an application to be entered on the list and all documents submitted: where all required documents have been submitted and no obvious formal deficiencies have been identified, the Supervision Service reviews the application and the contents of documents. Our experience shows that submitted documents only in exceptional cases do not contain deficiencies of some sort; therefore, the Supervision Service usually submits comments to the applicant undertaking, asking to submit additional information or documents. In such a case, the time limit for review is extended;
• approval or dismissal of application to be entered the list of insurance broker undertakings: after finishing assessment of the submitted documents, the Bank of Lithuania analyses the application and decides on whether to approve or dismiss the application to be entered on the list.
In case the Bank of Lithuania decides to approve the application to be entered on the list of insurance broker undertakings, the undertaking shall be informed within 3 months of the receipt of the application, all documents and information.
The Bank of Lithuania, knowing that the legal acts may not always be clear for both newcomers to the financial sector and experienced specialists, encourages applicants to contact the Bank of Lithuania at an early stage. The Bank will provide more detailed information about the procedures of entering the list and the requirements for the applicant undertakings.
The representatives of undertakings who participated in pre-application meetings with representatives of the Bank of Lithuania have repeatedly emphasised the benefits of such meetings, as they helped get the answers to their questions. The number of pre-application meetings is subject to the applicant’s experience and knowledge. The attendees of such meetings typically include at least two specialists from the Bank of Lithuania; however, more specialists may be required as well.
During the pre-application meeting, the Bank of Lithuania aims at finding out the following:
• who the applicant is and what kind of undertaking it will be;
• who the shareholders, holders of voting rights and investors of the prospective insurance broker undertaking are (will be) and what is their country of origin;
• whether the applicant belongs to a group of undertakings;
• who will be responsible for management of the insurance broker undertaking;
• summary of the business plan;
• details of the services, target markets, delivery channels, pricing policy, and the corresponding activities that will be applied for;
• financing sources of the insurance broker undertaking;
• anticipated number of employees;
• planned outsourcing of functions.
It is our view that the pre-application meeting will be productive only if the above information is provided in advance. We therefore urge undertakings planning to apply for entering the list to prepare answers to all the above points in order to be able to examine them in more detail during the anticipated meeting.
Levy for entering the list of insurance broker undertakings
Prior to applying to be entered on the list of insurance broker undertakings it is necessary to pay into the account of the State Tax Inspectorate (hereinafter – STI) a state levy for entering the list, which currently is EUR 201 (the amounts of levies are fixed according to Resolution No 1458 of the Government of the Republic of Lithuania of 15 December 20001).
The procedure for the generation of on-line banking orders to the income collection accounts of the STI and the numbers of the income collection accounts are available on the STI website. The documentary proof to the payment of the levy must be submitted to the Supervision Service together with an application to be entered on the list.
1 – Available only in Lithuanian.
Key requirements for an insurance broker undertaking
In order that an insurance broker undertaking complies with all requirements set for it and the process of entering the list of insurance broker undertakings is as smooth and quick as possible, the Bank of Lithuania requests that correct and detailed data is submitted at the time of application. Nevertheless, when assessing the critical aspects that may determine whether the undertaking will be entered on the list, the following basic elements can be singled out:
• the documents submitted must comply with the requirements of the legal acts regulating activities and supervision of insurance broker undertakings; all correct data established in legal acts or requested additionally must be submitted;
• persons controlling an insurance broker undertaking and undertakings participating in it must be of good repute;
• managers of an undertaking must be eligible to perform their duties;
• the business plan must correspond to the possibilities of the founders (shareholders and/or holders of voting rights) of the insurance broker undertaking to implement it, while the prospective broker undertaking must be prepared to provide insurance brokerage services in a safe and sound manner.
An insurance broker undertaking must comply with other requirements established by the Republic of Lithuania Law on Insurance (Law on Insurance) and its implementing legal acts.
Assessment of submitted documents
Prior to submission of documents to the Supervision Service, we recommend you to perform a self-control test which will help determine whether all necessary documents have been prepared.
The submitted documents are verified and assessed by specialists from different structural units of the Supervision Service; they assist in formation of a common opinion and in reaching a decision about the application. During the assessment period, the following processes are also carried out:
• regular communication and meetings with representatives of the applicant undertaking (when required);
• upon identification of significant deficiencies in the submitted documents, the Supervision Service passes comments to the undertaking, according to which it must eliminate the identified deficiencies. Upon request of additional information or data, the decision must be taken within 3 months of the receipt of the additional documents and data.
All applicant undertakings have direct access to specialists of the Bank of Lithuania who are experts in assessing submitted documents. We are on hand to provide all relevant information and inform the applicants about the progress of the process since we aim to ensure a cooperation-based relationship between the Bank of Lithuania and financial market participants.
Documents and information to be submitted to the Bank of Lithuania
When applying to be entered on the list of insurance broker undertakings, the following shall be submitted:
1) the application to be entered on the list of insurance broker undertakings;
2) the information and documents demonstrating that members of supervisory and management bodies of the insurance broker undertaking meet the suitability requirements laid down in Article 1581(2) of the Law on Insurance and that the manager possesses at least minimum necessary knowledge established in the Description of requirements for the qualification and training, qualification control and assessment criteria and qualification recognition procedure of insurance and reinsurance intermediaries approved by Resolution No 03-93 of the Board of the Bank of Lithuania of 12 June 2018 on approval of the description of requirements for the qualification and training, qualification control and assessment criteria and qualification recognition procedure of insurance and reinsurance intermediaries (data about members of supervisory and management bodies shall be provided in the questionnaires of the member of the management body and of the key function holder of the financial market participant supervised by the Bank of Lithuania the form of which is approved by Resolution No 03-181 of the Board of the Bank of Lithuania of 14 November 2013 on the approval of the guidelines on the assessment of members of the management body and key function holders of the financial market participants supervised by the Bank of Lithuania (hereinafter – the questionnaire); in this questionnaire the manager shall also provide the information about at least minimum necessary knowledge possessed by him as provided for in this paragraph);
3) the information and documents demonstrating good repute of persons controlling the insurance broker undertaking and the undertakings participating in it (the data about the persons controlling the insurance broker undertaking and the participating undertakings shall be provided in the questionnaires of the Notification of the proposed acquisition of the form approved by Resolution No 03-138 of the Board of the Bank of Lithuania of 12 September 2017 on the approval of the rules for the submission of the notification on the acquisition and disposal of a qualifying holding of the capital and/or of the voting rights in financial market participants under supervision of the Bank of Lithuania);
4) the information about the identity of the applicant’s participants who hold more than 10% of the authorised capital and/or of the voting rights and about the size of their holding of the authorised capital and/or of the voting rights, the information about the identity of closely linked persons, as well as the data demonstrating that the participation of these persons in the activities of the insurance broker undertaking will not prevent the supervisory authority from the effective exercise of the supervision the insurance broker undertaking;
5) the information about measures for protection of funds used by insurance policyholders, insured persons, beneficiaries and injured third parties provided for under Article 161(6) ;
6) the policy of the professional civil liability insurance provided for under Article 161(3) of the Law on Insurance;
7) the business plan describing services to be provided, the planned number of persons to whom the services will be provided, turnover of the undertaking, its internal structure, business territory, number of insurance brokers to be employed and measures for the protection of the interests of insurance policyholders, insured persons and injured third parties;
8) the document confirming payment of the state levy.
Laws and legal acts regulating the activities and authorisation of insurance broker undertakings
- Republic of Lithuania Law on Insurance2;
- Republic of Lithuania Law on Companies3;
- Law of the Republic of Lithuania on the Prevention of Money Laundering and Terrorist Financing4;
- Resolution No 58 of the Board of the Bank of Lithuania of 6 May 2004 on the approval of the General Regulations on the Submission and Examination of the Applications for Authorisations of the Financial Market Participants Supervised by the Bank of Lithuania and on the Granting of the Authorisations (62 KB );
- Resolution No 03-181 of the Board of the Bank of Lithuania of 14 November 2013 on approval of the Guidelines on the Assessment of Members of the Management Body and Key Function Holders of the Financial Market Participants Supervised by the Bank of Lithuania (94.6 KB );
- Resolution No 03-43 of the Board of the Bank of Lithuania of 28 March 2014 on the Inspection Regulations for the Financial Market Participants Supervised by the Bank of Lithuania (63.3 KB );
- Resolution No 03-98 of the Board of the Bank of Lithuania of 12 June 2018 on registration of insurance, reinsurance and ancillary insurance intermediaries
- other legal acts.
2 Lithuanian consolidated version valid as of 1 March 2017. English version last amended on 1 January 2016.
3 – Lithuanian consolidated version valid as of 1 November 2016. English version last amended on 14 October 2014.
4 – Lithuanian consolidated version valid as of 1 December 2016. English version last amended on 17 January 2008.