Insurance & Reinsurance 2020

Last Updated January 20, 2020

Italy

Law and Practice

Authors



Nctm Studio Legale is a leading independent Italian law firm in terms of dimensions, quantity and relevance of transactions followed, with more than 250 professionals, 62 partners and five offices, both in Italy and abroad (Milan, Rome, Brussels, London and Shanghai). Nctm provides its assistance, nationally and internationally, in legal and tax matters and on all areas of business law. The practice areas and the departments are fully committed, through multidisciplinary team-working, to meeting the clients’ needs. The firm's insurance and reinsurance practice is one of the most successful in the country, with extensive experience in advising international and domestic insurers, reinsurers and other industry participants on Italian insurance and reinsurance law with regard to both contentious and non-contentious matters. The team is committed to providing high quality service, working closely in partnership with clients, using experience to aid the achievement of their business goals in Italy.

In Italy, the rules governing insurance and reinsurance contracts and business are spread over a number of different statutory instruments.

Articles 1882 to 1932 of the Civil Code (CC) set out the general principles governing insurance contracts and several other provisions of the CC are, or can be, relevant for insurance and reinsurance contracts. Furthermore, the Private Insurance Code (Legislative Decree No 209 of 7 September 2005 – CPI) provides the main legal framework for the exercise of insurance and reinsurance activities and business. Also, some laws deal specifically with compulsory insurance (eg, the Motor Insurance Act No 990 of 29 April 1969).

There are also a number of secondary regulatory provisions (regulations and letters to the market) issued by the Italian Institute of Insurance Supervision (IVASS) – ie, the Insurance Regulator - the National Commission for Companies and the Stock Exchange (CONSOB) and the National Commission for the Supervision of pension funds (COVIP).

In addition, there are a number of other statutory instruments which do not specifically regulate insurance matters but nonetheless include rules affecting insurance companies and insurance business, such as, amongst others:

  • the Consumer Code (Legislative Decree No 206 of 6 September 2005);
  • the Personal Data Protection Code (Legislative Decree No 196 of 30 June 2003);
  • the Navigation Code (Royal Decree No 327 of 30 March 1942);
  • the Consolidated Law on financial Intermediation (Legislative Decree No 58 of 24 February 1998);
  • the E-Government Code (Legislative Decree No 82 of 7 March 2005);
  • the Anti-Money Laundering Law (Legislative Decree No 231 of 21 November 2007);
  • the Supplementary Pension Law (Legislative Decree No 252 of 5 December 2005); and
  • the Anti-Terrorist Funding Law (Legislative Decree No 54 of 11 May 2009).

With regard to international rules, EU regulations as well as directives with certain requirements are immediately enforceable in Italy and many other EU directives have been implemented by means of local regulations.

Italy has a civil law system, therefore legal precedents and case law are not binding. However, case law and in particular the decisions of the Supreme Court (Corte di Cassazione) tend to be influential and used in the interpretation and application of the law.

IVASS, which is the Institute of Insurance Supervision, acts on the basis of organisational, financial and accounting independence from the Bank of Italy, as well as in line with the principles of transparency and cost-effectiveness, in order to provide the stability and smooth operation of the insurance system and consumer protection.

In this perspective, IVASS took over all functions of the former body, ISVAP, including supervision of transparency and fairness in the activity of insurers, reinsurers, intermediaries and other insurance market players.

The main aims of IVASS are:

  • protecting policyholders, insured persons and beneficiaries;
  • ensuring the sound and prudent management of insurance companies; and
  • guaranteeing the stability of the market.

IVASS issues regulations, procedures and sanctions to insurance/reinsurance companies and intermediaries. It also keeps registers of all insurance companies and intermediaries operating in Italy.

The register of insurance experts and the Italian Information Centre, providing information to parties entitled to compensation following a motor accident that has occurred in an EU Member State, have been transferred to an independent public authority: the Concessionaire for Public Insurance Services (CONSAP).

Finally, depending on the products and/or business, the following additional authorities may have concurrent supervisory authority:

  • CONSOB, the public authority responsible for governing and overseeing the financial intermediaries in the financial market. Particularly, CONSOB is in charge of ensuring transparency requirements that must be followed by insurers and banking/financial intermediaries when issuing financial insurance products.
  • COVIP, the public authority responsible for governing and overseeing the pension fund system.

The supervisory authorities have the power to issue binding regulations and to enforce precautionary measures and sanctions, where appropriate.

IVASS activity is regulated under Law Decree 6 July 2012, No 95; furthermore, regulatory activity is subject to the provisions set out in the CI and in the regulations and letters to the market issued by IVASS and CONSOB.

Insurance and reinsurance are regulated activities under Italian law and carrying out insurance and reinsurance activities (including the distribution/intermediary activity) is subject to the prior “authorisation” (or “passport”) from the Italian Institute for the Supervision of Insurance (IVASS). This applies to companies issuing both life and non-life insurance products. The main requirements for a company to be authorised to carry out (re)insurance business are the following:

  • corporate structure as a joint stock company, a co-operative company, a mutual insurance company or European company under Regulation (EC) 2157/2001 (see Article 14 CPI);
  • adequate fund to cover the minimum capital requirement;
  • proof that it will have the required funds to cover solvency capital requirements;
  • individuals in charge of carrying out the management and supervisory tasks in the company, and those who will have a key position in the undertaking, as well as the owners of qualifying shareholdings, must meet the integrity, professionalism and independence requirements listed in Articles 76 and 77 of the CPI;
  • the presentation of an agenda that points out:
    1. the type of the risks or liabilities that the company intends to insure;
    2. whether the company intends to undertake reinsurance risks; and
    3. the guidelines for reinsurance and retrocession; and
  • for foreign companies, proof of the appointment of a general representative who must be domiciled at the address of the branch. If a company is appointed as general representative, then the registered office must be within the territory of Italy.

According to Article 11, paragraphs 1 and 57 of the CPI, insurers and reinsurers shall limit their activity to solely carrying out insurance and reinsurance business, with some limited exceptions (for example, activities of direct lending). In addition, insurers and reinsurers may provide coverage in relation to the classes of risks in relation to which their undertaking is expressly authorised.

In Italy, only licensed or accredited reinsurers can write reinsurance business.

Different rules apply to EU insurance and reinsurance companies with the main offices in a Member State passported in Italy in order to carry out business under the freedom of services or establishment principles. In a nutshell, EU undertakings are subject to so-called “home country control” (therefore, to the laws and regulations of their home member states) but should comply with the general good provisions, as listed by the IVASS.

The same rules apply to the underwriting of excess layers. Furthermore, Italian legislation does not include specific and different rules applying to consumer, SME or corporate insurances. However, insurance contracts, which fall within the application of the consumer code, could be subject to some strict rules protecting consumers (mainly in terms of information requirements, specific approvals of oppressive clauses, etc).

IPT applies on collected premiums with a tax rate varying from 2.5% to 21.25% depending on the nature of the insured risk (ie, on accident and healthcare insurance premiums IPT applies at 2.5%, whereas on fire and property insurance premiums IPT applies at 21.25%). Certain exemptions may apply on specific types of insurances (such as insurances on natural disasters affecting residential real estate stipulated as from 1 January 2018).

The insurer is entitled to charge to the policyholder with the amount of the IPT due on the premium and is responsible for the payment of the IPT on a monthly basis (also an advance payment is due on a yearly basis) as well as for other compliance obligations (such as filing of a yearly IPT return and keeping an IPT register).

Foreign insurers based in an EU Member State can carry out insurance and/or reinsurance business in Italy under the freedom of establishment regime, ie, by opening a branch in Italy, or under the freedom to provide services regime, ie, by entering into insurance contracts in Italy without a branch, in accordance to EU legislation and national implementation rules.

Insurers with their registered office in a third country outside the European Union wishing to carry out business in Italy cannot proceed under the passport rights and must:

  • establish a branch in Italy that must be licensed by the IVASS; and
  • appoint an authorised agent resident in Italy and possessing the powers envisaged by the CPI.

For those foreign insurers and reinsurers, license is subject to compliance with the rules provided for under the CPI and license granted by the IVASS.

All the overseas insurers and reinsurers shall comply with the general good provisions and supervisory rules and are subject to the local supervisory authority (for EU bodies this is a concurrent supervision with the home country body).

As regards the scenario of a no-deal Brexit, transitional provisions were implemented in Italy by Law 41 of 20 May 2019. According to this law, in the event of a no-deal Brexit, UK-authorised insurers will no longer be able to enter into new insurance contracts or renew existing contracts; however, during the 18-month transitional period, they will be able perform their obligations under contracts in place prior to a no-deal Brexit. Moreover, UK-authorised insurers are required to keep Italian regulator, IVASS, informed of their plans to run off existing business in Italy. Also, in the event of a no-deal Brexit, UK-authorised insurance intermediaries will no longer be able to conduct business in Italy; however, during a six-month transitional period they will have permission to conduct activities necessary for the orderly termination of existing distribution relationships.

In Italy there are no particular requirements/restrictions regarding reinsurance treaties and the amount of the ceded portion. In this perspective, the decision depends upon the capacity of the reinsured as well as, inter alia, its margin of solvency. Theoretically, policies may be 100% reinsured, however, it is usual for a fronting company retain a portion of the risk up to 5%.

Mergers and acquisition activities relating to insurance companies in Italy are subject to prior IVASS authorisation. However, the authorisation of the Italian Antitrust Authority might also be required depending on the circumstances.

In recent years there have been a significant number of transaction in the insurance market. In most cases these operations were aiming at business reorganisation or, following the trend in the mid-size acquisition, at strengthening the position on the market.

Generali has consolidated its presence in the EU through the acquisition of Portuguese insurers Segurdoras Unidas and Advancecare for EUR600 million. These acquisitions are part of an investment strategy which expects three billion of investments in mid-size acquisitions.

The InsurTech trend is also expected to play a significant role in the merger and acquisition activities relating to insurance companies, who are willing to invest in capabilities to improve product development, sales and distribution, policyholder services, underwriting and claims management.

The distribution of insurance products has been completely re-ruled by the implementation of EU Directive No 97/2016 (ie, IDD Directive). In this respect, IVASS issued, on 2 August 2018, three regulations: No 39, 40 and 41.

Regulation No 40 provides insurance and reinsurance distribution discipline, setting the principles regarding the access to the market, the exercise of the activity, also in the case of distance promotion and placement, the training and professional updating of (re)insurance operators.

The distribution of insurance products in Italy is done through intermediaries or by the insurer directly. Insurance and reinsurance intermediaries are entities or individuals that must be recorded in a specific register held by IVASS (the Register of Insurance and Reinsurance Intermediaries).

Following the last amendments of Regulation No 40, the Register of Insurance and Reinsurance Intermediaries has six sections for (re)insurance intermediaries: Section A for Agents; Section B for Brokers; Section C for Direct providers of insurance undertakings; Section D for Banks and financial intermediaries as per Article 107 of the Consolidated Banking Law, stock-broking houses and the Italian Post Office's banking division (Bancoposta); Section E for the collaborators of the intermediaries registered under Sections A, B and D conducting business outside the premises of such intermediaries under Article. 109 bis paragraph 5 CPI; and Section F for ancillary insurance intermediaries which, pursuant to Article 109 bis, paragraph 1 CPI, act on behalf of one or more insurance companies.

Foreign intermediaries performing business in Italy are registered in an annex to the Register, with no distinctions among agents, brokers, financial institutions, etc.

To be registered, intermediaries must meet certain requirements set out in IVASS regulations and the Insurance Code and hold professional capabilities and qualifications, proven using specific tests.

The enforcement of the Insurance Distribution Directive will have a significant impact on the above-mentioned requirements.

Moreover, IVASS has implemented the EIOPA's "Preparatory Guidelines on product oversight and governance (POG) arrangements by insurance undertakings and insurance distributors".

When an insurance contract is negotiated, the insured has to provide all the information relating to the risk, (these are sometime included within the proposal form submitted by insurers). Failure to provide such information (wilfully or with negligence) could lead to denial or limitation of coverage under Articles 1892 and 1893 of the CC.

Relevant information to be provided in the pre-contractual phase by the insured is all those affecting the risk to be covered, irrespective of whether the insured is a consumer or a commercial company.

Consumer protection under Italian law is mostly regulated by the provisions set out under Legislative Decree No 206, dated 8 October 2005 (Consumer Code).

Moreover, specific measures are set out in respect of insurance contracts to protect the insured customer's interests.

General protection measures that may affect the insurance sector include information obligations relating to negotiation of policies outside the insurance/intermediary trading premises and policies negotiated at a distance.

In addition to the regime governing unfair terms and conditions that apply to all kinds of contracts (Articles 1341 and 1342 CC), the Consumer Code additionally regulates vexatious clauses.

The remedies for misrepresentation and non-disclosure before inception are provided by Article 1892 and following of the Italian Civil Code. In general terms the remedies are for wilful or grossly negligent misrepresentation (termination or denial of indemnity) or “simply” negligent misrepresentation (typically reduction of coverage).

In short, when an omission/misrepresentation is wilful or made with gross negligence, then the contract can be voided/terminated by insurers – which must be done within three months from the knowledge of the misrepresentation - subject to certain conditions.

It is an established principle under Italian Law set by a number of Court of Cassation rulings, that when the event/circumstance triggering coverage and the relevant indemnity obligation materialises before the Insurers have knowledge of the misrepresentation/non-disclosure, then insurers can deny policy straightaway and avoid paying indemnity on the relevant loss (of course as long as the misrepresentation is relevant and meets the other statutory requirements), with no need to necessarily void/terminate the policy and to comply with the three months deadline.

When the omission/misrepresentation is “simply” (as opposed to “grossly”) negligent, then insurers can terminate/withdraw from the policy (again the term is three months from knowledge of the misrepresentation) and in case the triggering event arises before the knowledge of the misrepresentation by insurers, then indemnity is reduced.

CPI and regulations IVASS No. 40/2018 define different type of intermediaries.

Under Article 109, paragraph 2, lett. a), agents are appointed by the (re)insurers and they act in the name (and sometime also and on behalf) of (re) insurers.

Pursuant to Article 109, paragraph 2, lett. b), brokers are professional independent intermediaries that could act on behalf of the insured without any power of representation of (re)insurers.

Moreover, under Article 109, paragraph 2, there could also be further type of intermediaries such as direct producers, bank and financial intermediaries, collaborators of intermediaries and ancillary insurance intermediaries, which usually are on the insurers’ side.

Generally speaking, the intermediary has to comply with exhaustive information obligations imposed by Italian law.

However, the scope and content of such information obligation varies depending on the specific nature and characteristics of the insurance product.

The rationale of such pre-contractual information obligation is to inform the consumer of all characteristics and limitations of the particular insurance product giving him the opportunity to properly evaluate whether the product fits his needs.

After the implementation of the IDD directive, the Regulation IVASS No 41/2018 is aimed at the following purposes:

  • to provide new pre-contractual information document, which replaces the current briefing note;
  • to improve the digitalised information;
  • to ensure a greater protection for the contractors; and
  • to simplify the wording of the Regulation.

In line with the European system, according to the Regulation IVASS No 41, the intermediary provides the potential policy-holder with the following:

  • IPID (Insurance Product Information document) for non-life insurance contract;
  • DIP (Pre-contractual Information Document) for life Insurance contract; and
  • KID (Key information document) for insurance investment products.

With each standard document it is also provided the additional DIP (Pre-contractual Information Document), reporting additional information to the above-mentioned standard documents.

Finally, as mentioned above, IVASS has implemented the EIOPA's "Preparatory Guidelines on product oversight and governance (POG) arrangements by insurance undertakings and insurance distributors". Therefore, by means of the IDD Directive, insurers and intermediaries, who prepare insurance products, should activate a process of internal approval of each product, before marketing or distributing them to customers.

Insurance contracts must be evidenced in writing pursuant to art. 1888 CC and the contract conditions should be clearly and exhaustively drafted as per Article 166 CPI.

According to IVASS letter to the market on 14 March 2018, insures have been requested by the local supervisory authority to comply with the ANIA’s (the Italian Insurance Company Association) guidelines in order to “simplify” the policy wordings.

The insurance contract is void if there is no actual risk at policy inception. In other words, pursuant to Article 1895 CC not only there must be an insurable interest of the insured, but it is required that the risk to be covered exists has not already materialised (and may materialise in the future).

On top of the pre-contractual documentation, as set forth under Regulation IVASS 41/2018 , policies do normally (or must) include terms and details as to:

  • the policyholder;
  • the insurer;
  • the beneficiary of the coverage (if different from the policyholder);
  • the object of the coverage;
  • the insurance period;
  • the amount of the premium;
  • limits and deductibles;
  • territorial limits (if any); and
  • exclusion and extension of coverage.

Certain kind of clauses – which are defined as “vexatious”, ie, particularly burdensome for the insured – must in most cases be specifically approved in writing (essentially through a “second signature” by the insured.

Articles 1890 and 1891 CC provide specific rules governing policies issued in the name of a third party and policies issued on behalf of a third party which is already determined or undetermined.

In particular, in the case of policies issued in the name of a third party, the CC clarifies that the beneficiary is entitled to ratify the policy (and obtain coverage) also after the policy expiry or after the insured risk has occurred; in the case of policies issued on behalf of a third party, the policyholder is subject to all the obligations set forth in the policy (such as informative duties and payment of premiums) but the beneficiaries/insurers (whether identified or not at policy inception) are those entitled to insurance indemnity and to further rights arising from the insurance contract.

In relation to consumer contracts, they are subject to the Consumer Law provisions (which do not affect the type of coverage). Whereas, reinsurance contracts are not much regulated under Italian law. They are usually subject to analogic principles applicable to insurance contract. According to our experience, however, it is market standard and quite common that reinsurance treaties contains specific clauses such as claims notification/control clauses, loss settlement clauses, follow the form and/or follow the fortune clauses or "Sunset" clauses.

ART solutions have been implemented in Italy in connections with companies’ risk management plans. Especially, in those areas where it is difficult to find adequate coverages for specific risks or at affordable costs, captive structures have been often implemented.

Furthermore, ART solutions have been also used with the aim of solving problems connected with moral hazard, adverse selection or insolvency risks by means of finite risk reinsurances or integrated risk management solutions.

Most ART transactions are treated as reinsurance contracts.

In Italy, insurance contracts are interpreted according to the same rules applied to any other contract. In particular, the main and guiding principle is that interpretation (when necessary) must first and foremost investigate the common intention of the parties.

However, with regards to policies which have been drafted by the Insurer in the form of General Terms and Conditions to be approved by the insured, according to Article 1370 CC, the clauses – if unclear – are interpreted in favour of the insured, under a principle similar to the contra proferentem rule. Moreover, any cancellation or amendment to the original policy wording, that was not negotiated between the insured and insurers, would prevail over conflicting policy terms pursuant to Article 1342 CC. The behaviour, good faith and common interest of the parties in the pre-contractual phase are criteria that can be used in case of uncertainty.

Insurance contracts are meticulously regulated by the Civil Code, by the CPI and the IVASS secondary regulations which apply whether or not the parties refer to them in the agreement.

These dispositions are in fact implied terms and implied conditions dealing with matters such as regulations of premium, risk aggravation or risk reduction, non-existence of risk, mitigation, claims reporting, damages caused by wilful action of the insured, damages arising from defects of the insured property, co-insurance, insured value and over/under-insurance, subrogation, defence costs in civil liability matters and several others.

According to Article 1932 CC, a number of these provisions/implied terms cannot be derogated by the parties in a way less favourable to the insured. This frequently results in the possibility for the policy to establish additional remedies or protection for insurers (or the consequences of breaches by the insured) being somehow limited.

In recent years, new legislation established compulsory civil liability coverage in areas such as medical and professional liability. This is a relatively new phenomenon in our jurisdiction and the new legislation resulted, in certain cases, in “minimum terms” to be strictly applied to the relevant policy, which also reduces the scope for the parties’ ability to include in the policy tools for insurers’ protection and limits to liability.

As a consequence, although it is unusual to introduce warranties in an insurance contract, under a general point of view it cannot be excluded that warranties can be included in any insurance contracts and they are not treated differently to other contractual terms and are subject to the same limits (including the impossibility to derogate, to the insurers’ advantage, a number of statutory implied terms).

As per previous comments, according to Article 1932 CC, a number of provisions/implied terms cannot be derogated by the parties in a way less favourable to the insured. This frequently results in the possibility for the policy to establish additional remedies or protection for insurers (or the consequences of breaches by the insured) being somehow limited.

In light of the above (eg, subject to the compliance with the limitation under Article 1932 CC), although it is unusual to introduce condition precedent in an insurance contract, under a general point of view it cannot be excluded that they can be included in any insurance contracts and they are not treated differently to other contractual terms and are subject to the same limits (including the impossibility to derogate, to the insurers’ advantage, a number of statutory implied terms).

Typically, in relation to third-party liability insurance, dispute over coverage occur before Ordinary Courts when the insured is sued for damages. What usually happens is that the insured joins insurers in the same litigation where the claimant is seeking compensation for damages against the insured: this almost invariably happens when the insurer denies coverage, but also frequently when it has not done so. In that case, Courts are requested to decide simultaneously on the underlying claim and also on the coverage claim/dispute (eg, ascertain whether the claim is covered and insurers should indemnify the insured).

In relation to car insurance, the damaged party may seek damages directly from insurers under the policy (ie, the damaged party has direct action against insurers, which is not normally the case otherwise).

With reference to first party loss coverage or life insurance, disputes on coverage are also frequently dealt with before Ordinary Courts, subject to any different term of the policy (eg, providing for arbitration). 

Pre-litigation mediation procedure is mandatory, and a constitutes a requirement to commence litigation over insurance contracts.

Unless there is any arbitration clause (which is very common in reinsurance treaties), also disputes on reinsurance contracts are brought before Ordinary Courts and there are not peculiar rules applicable to those litigations.

Pursuant to Article 2952 of the Civil Code entitlement to the payment of premium instalments is subject to a one-year statute of limitation from the individual due dates.

For non-life insurance contracts and reinsurance contracts, the time bar for filing claims to insurance undertaking is normally two years. For general non-life insurance, the limitation period runs from the date on which the event on which the claim is based occurred. In the case of third-party liability insurance, the period begins on the day on which the third party has claimed compensation from the insured or has brought an action against the insured.

Notification to the insurer of the claim of the injured third party or of the action brought by the injured party shall suspend the limitation period until the injured party's claim has become liquid and enforceable or the injured third party's claim is time-barred.

With regards to life insurance contract, the time bar is ten years.

The choice of law is determined in accordance with EU Regulation No 593/2008 – Rome I, and the jurisdiction is regulated under the provisions set by EU Regulation No 44/2001, as amended by EU Regulation Bruxelles I-BIS No 1215/2012.

Insurance disputes on coverage (and in general to obtain indemnity under a policy) are subject to a preliminary mediation proceeding (which is a requirement in order to bring a legal action before a Court). Disputes are then held before the ordinary courts (unless an arbitration clause is set forth in the contract).

Proceedings start with a writ of summon by the plaintiff/insured and the defendant/insurer has an adequate term to file its defence pleading. During the proceedings, parties are granted with further terms to clarify/amend their defensive arguments, to request and file further evidences (in line with the burden of proofs principles) and to object to the counter-party request for evidence. It is important to know that – in general and broad terms – there is no formal discovery.

Normally, proceedings in the first instance may last from three to five years and the appeal proceeding may last from two to three years. Judgments issued by the Court of Appeal can be then appealed before the Court of Cassation exclusively on specific grounds of law.

Foreign (non-EU) judgments can be enforced subject to a declaration of enforceability by the Court of Appeal. In particular, the Court shall ascertain that the judgment complies with mandatory rules under Italian law, that it does not infringe general public rules and that the ruling is enforceable in Italy.

Judgments issued by EU Courts are immediately enforceable within the Italian Territory according to EU Regulation Bruxelles I bis No 1215/2012.

In general terms arbitration clauses are enforceable in Italy. However, in third-party liability claims, insureds who are sued by a damaged party/claimant have the unrestricted right to join insurers in the same litigation, which may occasionally prevent the application or enforcement of arbitral jurisdiction on coverage disputes.

Italy is part of the New York Convention and the arbitration award can be enforced subject to the enforceability order issued by the competent Court of Appeal pursuant to Articles 825 and 839 of the Italian Code of Civil Procedure.

Mediation proceedings have been a requirement in order to commence any litigation involving insurance contracts since 2010. Unfortunately, experience shows, for several reasons, that mandatory ADR proceedings have not always been effective and it has not been able to prevent or reduce the number of litigations before the Courts involving insurance contracts.

According to the case-law, in the event of an unjustified delay or bad management of a claim by an insurer or in case of failure of the duty to act in good faith in the context of a claim, under certain circumstances, insurers could be liable also over and above the policy limit.

More specifically, insurers may be liable for an amount higher than the policy limit in case the unjustified denial of coverage and/or delay in settling the claim increases (over the policy limit) the insured’s liability.

Also, in case insurers’ violate regulatory provisions, they may be sanctioned by IVASS.

The insurance industry is working on technology drivers such as blockchain, cyber security, internet of things, artificial intelligence. In particular, there are many investments on applications and automations in all the areas of underwriting and claims handling, in order to have faster and cost-effective procedures.

In 2018, the implementation of the GDPR had a great impact on Insurance and Reinsurance companies and the local regulator requested them to adopt adequate compliance policies. In this perspective, on the market side, increased attention is put on coverage of cyber risks that both individuals and corporate entities (whether private or public) are facing due to the Regulation (EU) 679/2016 (GDPR), which entered into force on 25 May 2018. The mentioned Regulation led many individuals and entities to look for adequate measures in order to prevent cyber risks, which – in many cases and, in particular, with regards to small business that are not able to set up cyber compliance procedures – are found in insurance products. In this area, the real innovation, is that insurers are granting not only the usual and typical insurance coverage for damages suffered, but mainly services, such as Forensic, Legal and PR activities in order to allow the insured to comply with the GDPR.

Recently, an IVASS report noticed the increasing development of the so-called micro-coverage, instant insurance, distributed through partnerships between insurtech start-ups and traditional insurers (eg, short travel coverage, electrical appliances coverage).

According to statistics, last year in Italy, 11 million people have used a fintech or insurtech service, ie, 25% of the population between 18 and 74 years of age, which is 54% more than in 2017. Moreover, the insurtech start-up market in Italy had a growth rate of 174% from 2017 to 2018. One of the most successful Italian insurtech start-ups is Yolo, that provides on-demand and ad hoc digital insurance brokerage services to consumers via a dedicated app. With Yolo, customers can use their smartphones to take out instant and pay per use products across a variety of regular insurance packages from major banks and insurance companies. Intesa Sanpaolo has recently led a EUR5 million funding round in Yolo.

For the time being, there has not been a clear and specific response of IVASS with regards to insurtech issues. However, the local regulator has strongly suggested the insurer to comply with the different regulations in force which might have an impact on insurtech business and namely:

  • GDPR and privacy laws;
  • EU Regulations: NIS, PSD2 and Solvency II;
  • Regulatory rules: DPCM on 17 February 2017 concerning addresses for national cyber security and cyber security; and
  • Co-ordination with international and national initiatives on cyber security.

Furthermore, IVASS invites also insurers:

  • to strengthen IT governance and control processes;
  • update the risk assessment to identify the measures needed to ensure corporate cyber security; and
  • launch action plans to implement the planned measures, including:
    1. identifying priorities;
    2. strengthening the existing; and
    3. fill the gaps.

Last but not least, under regulation IVASS No 40/18, the local regulator issued specific rules dealing with distance insurance contracts distribution (eg, internet selling).

According to a report recently published by Swiss Re, emerging risks are considered the clash between digital technology and legacy hardware, the spread of 5G mobile networks, the increasingly limited flexibility of fiscal and monetary policy, genetic testing and its effects on the insurance industry, as well as the effects of climate change on public health.

In particular:

  • hardware in critical infrastructure sectors, including smart grids or pipelines and hospitals, is often outdated. As a result, insurers face increased risk accumulation and unexpected loss potential in the areas of property damage, physical injury, business interruption and cyber risk;
  • 5G will enable real-time wireless connectivity to any Internet of Things (IoT) device, such as stand-alone cars or factories with steered sensors. Current concerns about the potential adverse health effects of electromagnetic fields are likely to increase. In addition, hackers can also take advantage of the speed and volume of 5G to acquire (or steal) more data faster. The main concerns are possible breaches of privacy and security, as well as espionage;
  • another economic downturn will require a fiscal response. The reinsurance sector could benefit if policy changes brought growth and financial stability. However, increased uncertainty, leading to increased volatility in financial markets and falling asset valuations, is a potential risk factor;
  • the cost of genetic testing has decreased significantly and with consumer direct testing (DTC) kits, genetic testing is now increasingly available and accessible for individual use. They have been widely adopted by public health systems and individuals. This has significant implications for life insurers, both in terms of data management and regulatory constraints; and
  • the most pronounced risks from climate change affecting human health stem from heat waves, floods, droughts, fires and vector-borne diseases. Millions of lives and health services could be at risk. Without action, mortality rates and health costs could increase, with significant consequences for health care, workers' compensation and life insurance.

According to the recent reports on the insurance sector, these past years results have shown a predominance of environmental risks (climate change, natural resources) and technology changes (eg, the Internet of Things or IoT), Artificial Intelligence (AI) and cyber risk, in addition to financial uncertainty.

In relation to the environmental risk, given that the climate change trend is unbroken in the last five warmest years since 2010, there are chances of occurrence of intense heat waves to increase within the next ten years.

The same is true for storm surges and high-water levels on the coasts, as the well-known events in Venice in November 2019 have shown.

Alongside environmental risks, cyber risks and risks connected to the sharing economy and sustainable mobility are also playing more and more a major role. Indeed, the massive use of big data and cloud computing, increases exposure to cyber risks and therefore demand new solutions. At the same time, sustainable mobility solution, while introducing many significant and positive improvements contribute to the creation of new types of risks.

Private sector companies can also contribute in limiting the impact of these risks. According to researchers, regulating construction in flood zones is one of the best examples of how companies and public authorities can work together for change.

In relation to cyber risks, the cybercrime or information war may affect the broad range of stakeholders – individuals, States and companies.

Moreover, this multifaceted risk category touches on several different issues, from advances in artificial intelligence to the development of robotics and the rising number of connected objects (Internet of Things, IoT).

The Italian Institute for the Supervision of Insurance (IVASS) has issued regulations requesting insurers to strengthen their IT systems’ security, data quality and resilience to cyber risk. Moreover, the Regulator has submitted a questionnaire to monitor the initiative taken by insurance companies.

The Bank of Italy and IVASS set up, in 2017, a Group for cyber risk co-ordination (ie, Gcsc), in order to ensure their own IT security and the security of the financial system as a whole.

Insurance companies are responding to the increasing request for cyber risk insurance coverage in Italy (as well as in other Countries) with the implementation of new policy wordings to satisfy the growing market needs and in line with the features of the local legal environment.

In relation to financial risks, the financial system, after the last recession, is still in recovery mode. Financial regulation and macro-prudential policies are key to limit risks in the financial system.

One of the main recent legal development occurred in Italy is the implementation of the IDD Directive which led to the issuance of IVASS Regulations No 39, 40 and 41/2018 and the amendment of the CPI with regards to the entire discipline applicable to intermediaries.

Another notable regulatory development occurred on 25 July 2019, when IVASS issued a FAQ statement aimed at answering a material question over the validity of W&I (Warranties & Indemnity) policies, which are starting to be widely used in the context of M&A deals. IVASS confirmed the general viability of W&I policies, as long as, for seller-side policies, they cover the risk arising from the seller’s indemnity obligations in the event of a breach of the specific representations and warranties given by the seller to the buyer in the context of an extraordinary corporate transaction, and for buyer-side policies, they are based on limited and identified commitments not deriving from valuations, refer to risks which can be adequately assessed on an actuarial basis and provide indemnity not corresponding to the consideration for the extraordinary corporate transaction.

With regards to the relevant recent case law, particular attention deserves the decision of the Italian Court of Cassation of 24 September 2018, No 22437. The new, somehow articulated decision of the Sezioni Unite of the Court of Cassation seems to eventually clarify the existing doubts as to the validity of claims made clause, establishing the following principle: third-party liability insurance policies on claims made basis, covering the risk of insureds’ losses following a claim, are generally valid and legitimately derogate from the loss occurrence principle set by Article 1917 CC. Indeed, the fact that the policy operates on the basis of a third-party request for damages first communicated to insurers does not affect the ultimate purpose of insurance contracts. The Judgment does clearly represent an important – hopefully conclusive – step forward to confirm the general validity and admissibility under Italian law of claims made clauses, which had been put in serious doubt.

The Supreme Court does however take also into consideration and confirms the concerns expressed by the previous rulings in relation to the possible criticalities that claims made clauses may involve, such as those leading in practice to “coverage gaps”.

In those cases, according to the Supreme Court, the insured protection and the remedies at his disposal have to be found in either pre-contractual liability claims for damages towards insurers or intermediaries and/or in the (full or partial) invalidity of the insurance policy for lack of the contract’s actual purpose, through an evaluation of the contract, aiming at verifying whether the insurance contract meets its practical function/is adequate for the objective pursued by the parties.

In the medical sector, the Law No 24, dated 8 March 2017 (so-called Legge Gelli), sets the framework for medical malpractice liability and related compulsory insurance coverage. In particular, the Gelli Law provides for mandatory insurance coverage of health facilities and professionals and for the direct claim of damaged parties against insurers. Professionals working in such institutions must hold professional insurance in order to allow for possible recovery actions by the entity.

A few months after the implementation of the Gelli Law, the new competition Law No 124, dated 4 August 2017, entered into force. This law introduced compulsory coverages also for professionals (other than doctors) registered in National Professional Orders (such as lawyers, architects, etc) for their third-party liability. 

The two mentioned laws seem to highlight a trend in the current legislation, whereby those compulsory coverages seem to be the response of the legislator to the explosion of third-party liability claims (and related disputes). However, the Italian market (except for car liability insurance) has never been particularly used to compulsory coverages and the effect of that on the insurers’ side (due to the fact that – for the time being – it seems that there is not a duty of the insurer to grant coverage if so requested) and on the insurance market (in terms of increase of policies underwritten, of claim raised and of rise of premiums) is still unclear.

In August 2019, the draft decree that should regulate coverage minimum requirements and general conditions of insurance policies underwritten by public or private healthcare and social-health facilities, and by healthcare professionals, was circulated in implementation of Article 10, paragraph 6, of the Gelli Law, but it has still not been issued.

Nctm Studio Legale

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MI 20121
Italy

+39 02 725 511

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info@nctm.it www.nctm.it
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Law and Practice

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Nctm Studio Legale is a leading independent Italian law firm in terms of dimensions, quantity and relevance of transactions followed, with more than 250 professionals, 62 partners and five offices, both in Italy and abroad (Milan, Rome, Brussels, London and Shanghai). Nctm provides its assistance, nationally and internationally, in legal and tax matters and on all areas of business law. The practice areas and the departments are fully committed, through multidisciplinary team-working, to meeting the clients’ needs. The firm's insurance and reinsurance practice is one of the most successful in the country, with extensive experience in advising international and domestic insurers, reinsurers and other industry participants on Italian insurance and reinsurance law with regard to both contentious and non-contentious matters. The team is committed to providing high quality service, working closely in partnership with clients, using experience to aid the achievement of their business goals in Italy.

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