Insurance laws Micronesia
The Federated States of Micronesia (FSM) has a specific legal framework governing its insurance industry, with a notable emphasis on captive insurance. The primary legislation is The Insurance Act of 2006 (Public Law 14-66, enacted as Title 37 of the Code of the Federated States of Micronesia).
Here's a breakdown of the key aspects:
1. Primary Laws and Regulations:
The Insurance Act of 2006 (Title 37 FSM Code): This is the foundational law for all insurance business in the FSM. It establishes the regulatory framework, licensing requirements, and defines various aspects of insurance operations.
Captive Insurance Act (Chapter 10 of Title 37 FSM Code): This is a dedicated part of the Insurance Act focusing on captive insurance companies, which are a significant component of FSM's insurance market. It sets out specific rules for licensing, capital, solvency, and operations of captives.
FSM Captive Insurance Regulations: These regulations provide detailed rules and requirements for captive insurance companies, including financial reporting, record-keeping, and other supervisory aspects.
Other Relevant Laws: General laws such as the FSM Civil Code and laws related to foreign investment also apply to the insurance sector.
2. Key Regulatory Body:
FSM Insurance Board: This Board is established under the Insurance Act of 2006 and is the primary regulatory and supervisory authority for the insurance industry in the FSM. Its responsibilities include:
Licensing and registration of domestic insurers, foreign insurers, agents, brokers, and solicitors.
Monitoring and regulating insurance business operations.
Ensuring compliance with the Insurance Act and related regulations.
Overseeing the financial soundness and solvency of insurers.
Setting standards for captive insurance companies.
Handling applications, renewals, and other administrative tasks related to insurance licenses.
3. Key Features of FSM Insurance Laws:
Licensing and Registration:
No insurance business can be carried on in the FSM except under the provisions of the Act.
Domestic Insurers and Intermediaries (agents, brokers, solicitors) must be licensed.
Foreign Insurers are generally registered, especially if they generate a certain level of premium income ($2 million or more in premiums collected in the FSM in each fiscal year for three consecutive fiscal years requires them to become licensed as an insurer).
Emphasis on Captive Insurance: The FSM has actively positioned itself as a domicile for captive insurance companies, particularly appealing to Japanese-owned captives.
Types of Captives: The Act distinguishes between Class 1 (pure captives, insuring risks of parent and affiliated companies) and Class 2 (insuring parent/affiliated companies and/or related third-party businesses).
Multiple Corporate Captive Insurance Companies (MCC): Specific provisions exist for groups of captive insurance companies.
Capital and Solvency: Captive insurers have specific minimum paid-in capital and surplus requirements (e.g., at least $100,000 for a Class 1 captive, and higher for Class 2 and MCC core companies). Solvency margins are also prescribed.
Principal Representative: Captive insurance applicants are required to appoint a principal representative in the FSM who maintains records of the captive's business activities.
No FSM Citizen Risk: Captive insurance companies licensed under Chapter 10 are generally not allowed to insure the risks of individual citizens of the Federated States of Micronesia.
Policy Requirements:
Policies must be written in English and clearly legible.
They must contain specific information, including parties, description of insured property/life/interest, premium details (in US dollars), and signatures of officers.
Cancellation of Policies: The Act outlines procedures for cancellation by both policy-owners and insurers, with specific notice periods (e.g., 30 days for policy-owner, 90 days for insurer for non-life, and specific conditions for life insurance).
Claim Settlement Practices: The Act addresses misrepresentation, timely acknowledgment of claims, and standards for prompt investigation.
Jurisdiction: FSM courts generally retain jurisdiction, and clauses attempting to oust their jurisdiction might be void if they are not freely negotiated agreements between parties with equal bargaining power, especially when an FSM citizen is involved.
Taxation: The Captive Insurance Act includes provisions for tax on premiums collected by captive insurers.
For the most accurate and up-to-date information, it is always recommended to consult the official FSM Code, particularly Title 37 (The Insurance Act of 2006 and its amendments), and the regulations issued by the FSM Insurance Board.
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