Norway is neither a pure civil law nor a common law system; rather, it falls somewhere in between the two systems (as do the other Scandinavian countries). Having said that, the most important source of law is legislation – and the insurance market, in particular, is rather heavily regulated. There are, however, non-statutory areas of law, which rely heavily on case law. When applying statutory law, the Norwegian courts will place great emphasis on preparatory works and case law, as well as other relevant sources of law. In the case of the insurance sector, the courts will take into consideration court decisions, preparatory works and decisions from the Norwegian Financial Services Complaints Board (Finansklagenemnda, or FinKN).
Relevant (Re)insurance Legislation
As previously noted, the insurance market in Norway is rather heavily regulated. The primary legislation governing the insurance and reinsurance market in Norway is the Act on Financial Institutions and Financial Groups 2015 (the “Financial Institutions Act”) and the regulations related to the Act – for example, Regulation No 1502 on Financial Institutions and Financial Groups, dated 9 December 2016 (the “Financial Institution Regulation”).
The Norwegian Act on Insurance Activity 2005 (the “Insurance Activity Act”) outlines the requirements for insurance companies that conduct insurance activities according to the Financial Institutions Act.
The Norwegian Act relating to Insurance Contracts 1989 (the “Insurance Contracts Act”, or ICA) sets out the rights and obligations of the insurer and the insured concerning the writing of insurance contracts in Norway. The ICA was updated with new amendments on 1 July 2022, thereby introducing new and stricter pre-contractual regulation on the insurers. The Insurance Contracts Act does not apply for reinsurance.
Norwegian law also contains the Act on Choice of Law in Insurance 1992, which applies to the choice of law in direct insurance contracts.
In addition to the foregoing, the Norwegian Distribution Act ‒ new in 2022 ‒ applies to all brokers and other parties that sell insurance commercially.
Regulatory Bodies and Sanctions
The regulatory framework for insurance and reinsurance is placed within the authority of the Norwegian Ministry of Finance, while the Financial Supervisory Authority of Norway (FSA) is responsible for supervision and regulation. The FSA is an independent government agency that is subject to laws and regulations provided by the Norwegian Parliament and the Norwegian government through the Norwegian Ministry of Finance. The FSA is founded on international standards for financial supervision and regulation.
The FSA and the Norwegian Ministry of Finance are authorised to impose sanctions (eg, corrective orders, fines or withdrawal of licences) in cases of breaches of the regulatory framework.
Legislation and Guidance
The Financial Institutions Act regulates the insurance market, including the licence application process, operating requirements, capital requirements, and the solvency capital requirement. The Financial Institutions Act also includes requirements concerning corporate bodies and functions.
As Norway is a member of the European Economic Area (the EEA), the insurers and reinsurers incorporated in other EEA states who provide insurance or reinsurance services in Norway through branches are – with some exceptions – governed by both the Norwegian regulatory framework and the regulatory requirements in their home state.
However, only a few of the requirements of the Financial Institutions Act and the Insurance Activities Act apply to insurers and reinsurers that conduct activities in Norway on a cross-border basis (eg, obligations to disclose information on sales). Such foreign insurers and reinsurers are otherwise exclusively regulated by the licence and potential requirements applicable in the home state.
In order to write insurance and reinsurance business in Norway, a licence must be obtained. An application for a licence to provide insurance or reinsurance services must be filed with the FSA, in accordance with the procedure outlined in the Financial Institutions Act.
The insurance or reinsurance company must obtain a licence that reflects the specific type of insurance services it will offer. The applicable requirements vary depending on whether the insurance company is to provide life insurance or not.
An example of the different requirements for different insurances is the required start-up capital. If an insurer intends to provide life insurance or liability insurance for aircraft, motor vehicles, ships or other liability insurances, a start-up capital of EUR3.7 million is required. In respect of other insurance undertakings, a start-up capital of EUR2.5 million is required.
However, there are also some requirements that apply to all types of insurance, such as the following.
The FSA will consider whether the application might entail follow-up questions. The Ministry of Finance or the FSA will process the application within six months, either itself or through a delegation.
The FSA also has the authority to set certain conditions for a licence – for example, that the business shall be operated in a specific manner or within certain limits. Any conditions for a licence must be in accordance with the purpose of the Financial Enterprises Act.
Insurers that are tax residents in Norway – or are performing business activities that take place or are managed from Norway (ie, permanent establishment) – are subject to Norwegian corporate taxation. Regarding the payment of insurance premiums, these will be considered as income for such insurance companies and thus subject to taxation. An exception to this is life insurance premiums, which in most cases will not be considered taxable. Whether life insurance premiums are subject to taxation must be assessed on a case-by-case basis.
There is an absolute requirement under Norwegian law that all insurance and reinsurance companies obtain a licence to provide insurance services.
Insurers or reinsurers who seek establishment in Norway must apply for a licence, as per the procedure set out in Chapter 3 of the Financial Enterprises Act. Reference is made to the aforementioned licensing process in 2.2 The Writing of Insurance and Reinsurance.
The question as to whether a foreign insurer may conduct business in Norway is highly dependent on where the insurer is based – more specifically, whether it is based within the EEA, the EU, or elsewhere.
If an insurer is authorised to provide insurance services in an EEA member state, it will be permitted to carry out insurance services in Norway through either a branch or on a cross-border basis. It is important to note that the insurance company must inform the relevant regulatory authority in the EEA country.
An insurance company established within the EU may passport its rights to offer insurance in Norway on a cross-border basis.
It should be noted that insurers from outside of the EEA will not be able to provide insurance directly in Norway, unless a Norwegian subsidiary is established. This subsidiary must also hold an insurance licence for the particular insurance service that it provides to the market.
The opportunity for insurance companies that are neither domiciled within the EU nor the EEA to provide insurance is much more limited and they will not be allowed unless invited to do so.
Insurers from the United Kingdom
The United Kingdom left the EU on 31 January 2020, whereby a transition period commenced. During this transition period, the United Kingdom was treated as though it were still a member of the EU or EEA and, thus, there were very few practical changes in Norway's relationship with the United Kingdom. The transition period was extended several times but expired on 1 January 2023. Consequently, as of 1 January 2023, UK insurance companies are no longer able to passport their rights to offer insurance in Norway on a cross-border basis.
The situation is slightly different for reinsurance companies. Reinsurers established in a non-EU country may provide reinsurance in Norway without any need to meet any licence and registration requirements in Norway. Reinsurers established in an EU-country need to have passported their rights to offer insurance on a cross-border basis in Norway. It is not a requirement under Norwegian law for foreign insurers to write reinsurance with a domestic insurer.
Although fronting is not explicitly prohibited under Norwegian law, it is not frequently used. There is also limited guidance concerning the requirements for such fronting, given that the Norwegian industry has remained fairly domestic.
The M&A market in Norway has been fairly quiet in relation to insurance companies.
However, two substantial mergers have occurred. In 2019, two insurance companies (Sparebank 1 and DNB) merged to create Fremtind Forsikring. On 1 June 2021, the Tryg Group – together with the Canadian company Intact – purchased the British RSA. RSA is a large insurance group that owns, among others, Codan and Trygg-Hansa in Scandinavia. The acquisition made Tryg Group the largest non-life insurance company in Scandinavia and the third largest insurance company measured in market shares in Norway (just ahead of Fremtind Forsikring).
The Norwegian Insurance Mediation Act applies to all brokers and other parties that sell insurance commercially. It is an absolute requirement under the Act that all insurance intermediaries obtain a licence from the FSA to sell insurance in Norway commercially. On 1 January 2022 the new Norwegian Insurance Distribution Act (IDA) came into force, replacing the older Insurance Mediation Act of 2005. The new legislation was introduced to ensure compliance with the Directive (EU) 2016/97 of the European Parliament and of the Council of 20 January 2016 on insurance distribution (the “EU Insurance Distribution Directive”, or IDD).
The new IDA contains stricter requirements for insurance intermediaries. In accordance with the new legislation banks, mortgage firms and investment firms cannot be registered as “ancillary insurance intermediaries”. These entities will now have to apply to the FSA and be registered as regular insurance intermediaries. Such entities have been given one year to comply with the new requirements.
According to the IDA, the management is required to have a general knowledge of insurance brokerage. The new IDA has also introduced a requirement that intermediaries must be able to prove that they undergo 15 hours of education relevant to their field of practice annually. This requirement will be enforced from 31 December 2023.
The company is also required to have sufficient liability insurance against claims for damages that it may incur. An insurance brokerage company must run the business, follow good brokerage practice, and not act in a way that creates doubt about its position as an independent intermediary. In order to ensure that the customers interests are safeguarded, the insurance intermediary must not use remuneration schemes, sales targets or other financial incentives that may influence their employees to recommended certain products. The insurance brokerage company must also provide the documentation necessary for an insurance contract to be concluded. The FSA may also set out additional requirements.
There are certain exceptions when it comes to the applicability of the IDA. One practical example is that freight-forwarders who offer goods insurance that covers damage to and loss of goods during transport and storage assignments performed by the freight-forwarder as an additional service will normally not be covered by the exemption.
In Norway, the active distributors include insurance brokers, agents and bancassurance.
The ICA provides several provisions regarding both liability insurance and personal insurance that are mandatory, and thus cannot be deviated from to the disfavour of the insured.
On 1 July 2022 new amendments to the ICA were implemented, as part of Norway’s implementation of the EU Insurance Distribution Directive. The new regulation has imposed stricter regulations on insurers when giving advice and recommendations as part of underwriting insurance. If an insurer is providing a “personal recommendation”, as defined in the IDD, the insured must also receive a written explanation of why the specific product best meets the needs of the insured.
As regards duty of disclosure of information and the insurance companies’ obligation to seek information, the distinction between these two obligations is described here.
In connection with the conclusion (or renewal) of an insurance contract, the insurance company can request information on matters that may be relevant to its assessment of the risk. The policyholder must provide correct and complete answers to the insurance company’s questions.
The policyholder must also, on their own initiative, provide information about special circumstances that are understood to be of significant importance for the insurance company’s assessment of the risk. If the policyholder becomes aware that they have provided incorrect or incomplete information about the risk, the policyholder shall report this to the company without undue delay.
With regard to personal insurance, the insurance company must inform the policyholder about the duty of disclosure outlined in the ICA. Before the insurance company agrees to cover the insurance, the policyholder and the insured must answer the questions that the company asks in order to assess the risk, and the policyholder and the insured must provide correct and complete answers to the company’s questions. At the request of the company, the policyholder and the insured shall provide information on special matters that are understood to be of significant importance for the company’s assessment of the risk.
Mandatory Nature of the ICA
In respect of commercial liability insurance, the parties to the insurance contract are free to determine the terms of the contract. This applies when the insured enterprise has two of the following criteria:
The exception also applies when the insured’s business is mainly based in a foreign country, or in the event that the insurance pertains to vessels or aircraft, or if the insurance concerns goods under international transportation.
The failure to comply with duties of disclosure in the negotiations of an insurance contract is also covered by the ICA. For liability and personal insurance, the following applies.
If the insured has fraudulently neglected the duty to provide information, and if an insurance event has occurred, the company is without liability towards the insured. If the insured has otherwise neglected their duty to provide information without good reason, the insurance company’s liability to the policyholder may be reduced or waived.
If the company becomes aware that the information it has received about the risk is incorrect or incomplete at any significant point, it may terminate the insurance with 14 days’ notice. If the policyholder has acted fraudulently, the company may nevertheless terminate this and other insurance agreements it has with the policyholder with immediate effect.
If the policyholder or the insured has fraudulently neglected the duty to provide information, and if an insurance event has occurred, the company is without liability. If the policyholder or the insured has otherwise neglected their duty to provide information, and the person in question does not have good reason for doing so, the company’s liability can be reduced or waived.
If the company becomes aware during the insurance period that the duty to provide information has been neglected, and it is not just a minor matter to charge the policyholder or the insured, it can terminate the insurance with 14 days’ notice. If the policyholder has acted fraudulently, the company may nonetheless terminate this and any other insurance agreements it has with the policyholder with immediate effect. However, if it can be assumed that the company ‒ based on knowledge of the correct circumstances ‒ had charged a higher premium or otherwise covered the insurance on other terms, the policyholder may demand to continue the insurance relationship on such terms before the expiry of the notice period.
It should be noted that the ICA does not apply in respect of reinsurance contracts. Consequently, the Norwegian Contracts Act 1918 applies; in particular, Section 30 states that fraudulent misrepresentation will render a contract null and void.
As noted in 5.1 Distribution of Insurance and Reinsurance Products, the IDA regulates all insurance mediation in Norway and consequently applies to all parties performing insurance or reinsurance mediation. Depending on the scope of the mediation provided, an intermediary may be involved in the negotiations of the insurance contract on either the insured’s behalf or the insurer’s behalf. In addition to the IDA, the insurance intermediary must comply with the ICA. The key duties of the intermediary before entering into an insurance policy, for instance, are regulated by the ICA and its applicable amendments as of July 2022. These regulations include an obligation for the intermediary to obtain customer information and carry out an assessment of the individual needs of the insured before entering into an insurance agreement.
The new IDA of 1 January 2022 also introduced a new legal standard. Any intermediary must act with “good business practice”. The standard is incorporated into the law in order to ensure that the insurance distributors are held to a legal standard, whereby they must show that they are acting in the customers’ best interests.
The core principles of good business practice as an insurance distributor can be summarised as follows:
Repeated or gross breach of the duty of good brokering practice can result in fines or imprisonment for up to one year.
There are no specific requirements or distinguishing features of an insurance contract under Norwegian law. Insurance contracts are governed by the ICA, whereby the insurance company is obliged to draw up an insurance policy when an insurance agreement has been made and the conditions for that insurance have been decided.
In accordance with the newly introduced regulation in the ICA, a standard “insurance product information document” (IPID) will need to be given to an insured when underwriting non-life insurance. This must be done before a policy is issued. Additionally, the insurer must provide the insured with a number of specific details prior to issuing a policy.
This policy should be in writing and confirm that an agreement has been made, as well as referring to the conditions of that insurance. The policy shall highlight the following points:
If the company has neglected its duty to provide the above-mentioned information, it can only invoke the relevant provision if the policyholder or insured was nonetheless familiar with the condition.
For something to be insured, there must be a legal interest.
If a contract is deemed to be an insurance contract, the ICA will also apply. If the ICA is mandatorily applicable, or if not excluded or otherwise deviated from in the insurance agreement, the ICA will also impose a number of obligations on the insured (as well as on the insurance company).
As a starting point, the insurance contract is a contractual relationship between a policyholder on the one hand and an insurance company on the other. It is the policyholder who enters into the insurance contract with the company and pays the relevant premium, and who would normally benefit from the insurance through the protection provided by the agreement.
The regulation of third-party status and rights under an insurance contract can be laid down either in law or in the agreement.
In respect of non-life insurance, this issue is mainly solved by two different sets of rules. The main set applies to co-insurance, which provides those other than the policyholder with interest related to the subject of insurance and the opportunity to take advantage of it. Primarily, co-insurance is used in property damage insurance. However, co-insurance may also be used in liability and operational interest insurance. The second set of rules is linked exclusively to liability insurance, aiming to insure the injured party’s legal position under the insurance taken out by the policyholder.
In personal insurance, the main issue concerns who is entitled to the company’s benefits in the event of an insured event.
As for collective insurance (including both non-life insurance and personal insurance), third parties may also have rights under an insurance policy.
The involvement of several beneficiaries in a contract does not impact the disclosure obligations.
As the ICA is mandatorily applicable for consumers, the contracting parties in a commercial setting (see 6.1 Obligations of the Insured and Insurer) will have a greater degree of contracting freedom. On a higher level, one can say that a consumer will have less onerous obligations in respect of disclosure and other obligations than a company taking out insurance. Moreover, the insurance company has more onerous obligations to inform the consumer rather than a corporation when entering into an insurance contract. However, it should be noted that the industry generally considers the legal framework well balanced.
As mentioned in 6.2 Failure to Comply with Obligations of an Insurance Contract, it is noted that the ICA does not apply to reinsurance contracts. Thus, the parties have an even greater degree of contracting freedom. A reinsurance contract will be subject to the Norwegian Contracts Act and Norwegian contract law.
The use of alternative risk transfer (ART) is still not a common alternative to insurance in Norway. There is no law that is directly applicable to ART transactions.
There is currently no information available on this subject.
The general rules under Norwegian law on the interpretation and completion of agreements, as established through case law, apply to insurance contracts.
However, the negotiation and conclusion of an insurance contract is not performed in the same way as a normal contract. As stated in 6.4 Legal Requirements and Distinguishing Features of an Insurance Contract, there is no requirement that the parties enter into a written contract of insurance, but the insurer will issue an insurance policy that provides the terms and conditions of the insurance. Consequently, the rules that generally apply to the interpretation of unilaterally set standard terms will be of particular importance for insurance contracts.
Under Norwegian law, an objective principle of interpretation is applied, and it is therefore important when interpreting insurance contracts and insurance terms to find the objectively justifiable and reasonable content of the agreement that has been entered into. The Norwegian courts will look for what objectively appears to be the natural understanding of the terms, not the different view of it that one of the parties may have had.
Conversations, communication and negotiations prior to the conclusion of an agreement can, in many instances, be used to clarify a joint understanding between the parties of the content of a contract that has been negotiated. However, when interpreting insurance contracts, these items will be less relevant and do not normally play any major role. This is due to the fact that the insurance is taken out on the basis of a standardised and unilaterally stipulated insurance term, which gives little room for actual negotiations. Exceptions to this may occur, however – mainly within the business insurance and in life insurance.
Although most contracts are subject to freedom of contract, it is also worth noting that the ICA directly governs the insurance contract and is mandatorily applicable in many situations (see 6.1 Obligations of the Insured and Insurer). Therefore, the ICA will more actively be a contributing part of the interpretation or revision of an insurance contract, compared to most commercial contracts for the sale of a service.
In contrast to the way in which insurance contracts are negotiated, reinsurance contracts will be subject to more concrete negotiations. Consequently, the interpretation of these contracts will be focused more on the general practice of interpreting mutually negotiated contracts than on what has been described earlier. Further, it should also be noted that the ICA does not apply to reinsurance contracts, credit or other surety insurances.
Under Norwegian law, warranties are considered similar to all other contractual terms. See 8.1 Interpretation of Insurance Contracts and Use of Extraneous Evidence.
Although there are conditions for an insurer to be liable, such conditions will not be referred to as “condition precedents”. These are contractual terms treated as normal terms of a contract, which must be complied with. By way of an example, there is a requirement under the ICA that the insured notify the insurance company within one year of the insured receiving knowledge of the circumstances that justify the claim.
The ordinary courts may hear disputes on coverage. It should be noted that there are no special courts for insurance cases in Norway. This applies to all types of insurance agreements, including insurance agreements with a consumer as well as agreements for reinsurance. As the courts in Norway have a general jurisdiction, all insurance proceedings will be subject to the Norwegian Disputes Act.
It should be noted that the new amendments to the ICA introduced new rules on the burden of proof. The insurance company will have the burden of proving that it has complied with statutory and regulatory duties owed to the insured.
According to the Norwegian Disputes Act, for disputes regarding monetary claims, the first instance will be the conciliation council. If agreed by the parties to the insurance agreement, a dispute regarding cover may also be settled by way of arbitration. However, only if the dispute is above NOK200,000 and both parties are represented by lawyers will the case proceed to the first instance.
A dispute regarding cover may also be referred to arbitration. This is rather common within marine insurance matters and reinsurance disputes.
In the first instance, disputes that arise between an insurer and a consumer regarding insurance coverage will be brought before the Norwegian Financial Services Complaints Board (FinKN). FinKN is a private complaints board. It does not have the authority to give binding judgements; however, its guidance is often followed by the parties. A condition for being able to pursue a claim against the insurance company with FinKN is that the company must be a member of the complaint organisation.
The limitation periods for notice of an insurance claim and commencement of proceedings are provided for in the ICA and must be followed in order for the claimant to receive payment from the insurer.
The insured loses the right to compensation if the claim is not reported to the company within one year of the point at which the insured became aware of the circumstances justifying the claim.
In addition to the duty to notify the insurer, there is also a general time bar for insurance claims of three years. Time starts to run at the expiry of the calendar year when the insured received the requisite knowledge of the circumstances that justify the insurance claim. The insurance claim becomes time-barred no later than ten years after the end of the calendar year in which the insured event occurred.
In the case of personal insurance, there are special limitation periods for endowment insurance (ten years, no more than 20), other claims for compensation or insurance sums (three years, no more than ten), accident or sickness insurance and pension or annuity insurance (ten years, with three years for overdue instalments).
It should be noted that commercial insurance contracts may provide a time limit for reporting claims that may be shorter than in the insurance contract. An example of this can be found in paragraphs 5–23 in the Nordic Marine Insurance Plan of 2013 Version 2019, which requires that the notice shall have occurred within six months of the insured receiving knowledge of the circumstances that justify the claim.
Norway, through the Lugano Convention, is a party to the Brussels instruments on jurisdiction. Section 3 of the Lugano Convention contains the rules of jurisdiction for insurance matters. In brief, Section 3 offers the insurance customer the benefit of added jurisdictions; in addition to claiming at the insurers’ domicile, the insured can also commence proceedings at their own domicile (in addition to where the insurance event took place).
As regards the choice of law, Norway has implemented the Act on Choice of Law in Insurance, which provides mandatory application of Norwegian law in certain categories on insurance (ie, life insurance). The choice of law can be agreed in other areas of insurance, unless mandatory law provides otherwise. If no choice of law is agreed, the choice of law is to be decided on the basis of a closest-connection test.
Unlike in many other countries, the district courts have jurisdiction over all cases. Hence, there is no distinction between ordinary courts or administrative courts, or between civil or criminal courts. Consequently, there are no special courts that handle insurance matters.
The courts in Norway have three tiers and are as follows:
The first instance for disputes above a certain monetary size (ie, where the claim is above NOK200,000 and both parties have been represented by a lawyer) is the district court. If the dispute is less than NOK200,000 and only one side or neither side is represented by a lawyer, the case will go to a local conciliation board first.
Litigation is initiated when a party submits an application for a summons to a district court that has jurisdiction over the dispute. Before such an application, a letter of demand should first be submitted. An application should, as a minimum, contain the following:
The summons shall provide a basis for a prudent treatment of the case by the parties and the court. Claims and factual grounds must be stated in such a way that the defendant can take a position on the claims and prepare the case. If the application fulfils the requirements, the district court will issue a writ of summons and serve the respondent with the summons. The respondent must thereafter submit their reply.
The Norwegian courts will strive to find an amicable settlement to the dispute if possible.
After the conclusion of preparatory proceedings, in which the parties exchange several written pleadings, a hearing will be held. The main rule is that hearings are held as oral hearings; however, in some cases these can be conducted in writing. A shift to more written proceedings has been experienced during the COVID-19 outbreak. Following the hearing, the court will issue a decision.
A decision from the district court may be appealed if the court’s factual or legal grounds for its decision are insufficient or due to a procedural error. The court of appeal may reject an appeal if it clearly cannot succeed. Although the majority of cases are allowed a new hearing by the court of appeal, a much more narrow group of cases will be allowed into the Supreme Court.
On an annual basis, the Supreme Court hears approximately 100 cases. The Supreme Court is the final instance in Norway and the case must have high precedential value or significant public importance ‒ or else there must be other strong reasons ‒ in order for it to be tried by the Supreme Court.
Norwegian court judgments and arbitral awards will be easily enforced in Norway. Furthermore, Norway is also a party to the Lugano Convention, meaning that it also ensures the enforcement of judgments in the EU and EEA.
Norway is also a member state of the Convention on the Recognition and Enforcement of Foreign Arbitral Awards 1958 (the “New York Convention”). Consequently, the enforcement of foreign arbitral awards is ensured.
There is no requirement under Norwegian law that an agreement for arbitration must be in writing. Arbitration agreements will be just as binding on the parties, regardless of the form the parties select when entering into an agreement. However, it is easier to prove the content of the arbitration agreement if it is in written form in the event of a dispute.
Furthermore, it follows directly from the Norwegian Arbitration Act of 2004 that the courts shall reject legal actions relating to arbitration if a party requests rejection at the same time as the party enters into material questions of the dispute at the latest. This will often be when a party responds to a writ of summons. The court shall bring the case if it finds that an arbitration agreement is invalid or cannot be enforced for other reasons. In other words, there is a condition under Norwegian law that a party must decide to object. The court in question does not have the right to make a decision to reject ex officio. The question of whether or not an arbitration clause is enforceable will be based on substantive contract law.
See 9.4 The Enforcement of Judgments.
The Norwegian courts may, during the course of legal proceedings, propose that the parties conduct court mediation. This is recommended by the courts if they consider the case to be suitable.
A court mediation is a voluntary ADR mechanism, meaning that the court cannot force the parties to mediate any dispute. However, it is generally recommended that parties try court mediation, if the case is suitable for this. Opposing an attempt at an amicable solution can result in negative consequences for the person in question when deciding on legal costs if the dispute later escalates to court proceedings.
Court mediation is conducted with a judge as the mediator. Historically, this ADR mechanism has had a high success rate.
If the mediation is unsuccessful, the case will proceed to a hearing. The judge hearing the case will not have been involved in the mediation.
Also, and as mentioned in 9.1 Insurance Disputes over Coverage, the FinKN is also an ADR mechanism that can be applied for insurance disputes.
An insurance policy will frequently have separate provisions regarding the insurance company’s obligation to make a payment of a claim. If the insurance policy is silent (or if it refers to a consumer), the ICA does provide that the insurance company shall pay compensation as soon as the company has had a reasonable time to clarify the liability and calculate the compensation. If it is clear at an earlier time that the company must at least pay a part, the company must pay the corresponding amount in advance.
The main rule under Norwegian law is that interests are recoverable in the event of a claim. The ICA also provides the insured with a right to set forth a claim for overdue payments. At the end of 2021, the applicable annual rate was 8%. This rate is subject to adjustments two times a year, in accordance with the general interest level.
Furthermore, a claimant may also be able to claim for damages for losses or damages incurred by the insured if caused by the insurer’s late payment. However, this does require that the insured can show that there is a loss, causation, foreseeability and negligence.
There are no punitive damages available under Norwegian law.
Under Norwegian law, an insurer’s right of subrogation will not be dependent on a separate clause providing that right. Having said that, such clauses are not uncommon. It is a general principle that an insurer will obtain a right of subrogation upon payment of an indemnity. Consequently, the insurer will step into the insured’s legal position and proceed with a potential claim against the tortfeasor.
In recent years, there has been an increased focus on insurtech, and several of the large insurance companies are focusing on developing their technology. However, to date, there seems to be a minimal market within insurtech. This may be because the Norwegian insurance market is fairly well developed and because of the start-up requirements of an insurance company. See the start-up capital requirement for different types of insurances in 2.2 The Writing of Insurance and Reinsurance.
There is currently no information available on this subject.
An increasing number of Norwegian companies have been targeted by fraudsters using digital tools. The PwC Cybercrime Survey from 2021 shows that 58% of the respondents are more worried about the cybersecurity threat in 2021 compared with the situation in 2020, and that two out of ten respondents planned on investing 26%–50% more on cybersecurity in the following year. As pointed out by PwC, it is not only concerns that are increasing; the number of attacks of Norwegian companies are also on the rise. The report shows that Norwegian companies, to a large extent, experience being exposed to targeted burglary attempts. This reflects a changing threat picture in which attackers are becoming more and more sophisticated. As many as seven out of ten respondents answered that they had experienced a targeted attack on their particular business.
As stated in the Capgemini World Insurance Report from 2021, it appears that there is still a rather significant gap in the insurance market generally, as well as in the Norwegian insurance market. The supply of cover from the insurance industry still retains a traditional world view.
During the COVID-19 pandemic, Norwegian courts gave priority to cases that were considered most important, such as criminal cases or cases involving mental health or children. Norwegian courts have nonetheless initiated numerous measures to limit delays and other effects of the pandemic – in particular, by introducing the extensive use of remote hearings and remote examination of witnesses in other cases. Also, the courts have increased the number of cases that are decided based on written proceedings and have appointed interim judges to prevent further delays and limit the caseload. For the time being, some delays must still be expected.
To date, COVID-19 seems to have had a limited impact on insurance or reinsurance contracts. However, it may take some time before any material changes are experienced.
Although Norway is not a part of the EU, it is obliged to implement certain EU directives and regulations under the EEA Agreement to which Norway is a party.
Insurance is viewed as EEA-relevant and, consequently, the majority of EU directives and regulations concerning this sector will be implemented into Norwegian law. It is worth mentioning that these directives and regulations will not directly come into effect in Norway or provide Norwegian citizens with rights unless they are implemented into Norwegian law. During the past few years, there has been a surge of new laws and amendments that have increased the insurers’ and the insurance intermediates’ obligations. Consequently, the increased complexity in the regulatory framework is a continued focus area in Norway.
Increased Focus on ESG
There is no doubt that the focus on ESG has increased drastically in recent years. There is an increased obligation for ESG reporting and there is more to come – for example, with the coming into force of the EU Taxonomy Regulation. The EU Taxonomy Regulation is a milestone in the sustainable finance market, providing a classification tool aimed at investors, companies and financial institutions (including insurance companies). Although the Taxonomy Regulation is for the EU – of which Norway is not a member – it is worth noting that the EU is Norway’s biggest trading partner. Thus, there is little doubt that the Taxonomy Regulation will also have a great impact on the Norwegian market.
Throughout 2022 there have been significant developments in Norwegian legislation and case law that have relevance both for insurers and consumers. These changes have led to further clarity regarding the rights and obligations of the parties to an insurance contract. Inter alia, there have been developments aimed at improving consumer protection within the framework of Norwegian insurance contracts.
This article reviews and elaborates on some of these developments.
Implementation of New Insurance Legislation in Norwegian Law
On 1 January and 1 July 2022 respectively, the new Insurance Distribution Act and certain amendments to the Insurance Contracts Act came into force. The goal of these legislative changes was to implement the EU’s Insurance Distribution Directive and Solvency II Directive into Norwegian law. In addition to harmonisation, a central goal of the Insurance Distribution Directive is to reinforce and safeguard the interests of policyholders ‒ namely, the consumers.
The purpose of the Insurance Distribution Directive is, among other things, to harmonise the rules on insurance and to increase predictability and protection for insurance customers. The Insurance Distribution Act sought to implement the main provisions of the Insurance Distribution Directive, thereby further integrating the Norwegian insurance market with the common insurance market within the European Economic Area (EEA). The amendments to the Insurance Contract Act similarly sought to strengthen the protection of customer interests by making the rules more comprehensible.
The new Insurance Distribution Act also provided for stricter regulation of remuneration schemes for employees and external consultants. The legislation restricts the use of remuneration schemes, sales targets or other incentives to ensure that the broker does not advise the customer on the basis of personal financial incentives. This is just one example of how the legislation focuses on customer protection, and how it applies both to insurance providers and insurance brokers.
In order to keep control of the various brokering agreements, the Insurance Distribution Act established further regulation on the registering and notification of insurance distribution agreements.
Registration of distribution agreements under the Insurance Distribution Act
The Insurance Distribution Act established a duty for all companies engaged in insurance distribution to register with the Financial Supervisory Authority (Finanstilsynet, or FSA) of Norway.
Further to this, the FSA clarified that when the intermediary applies to be registered with the FSA, the application must be accompanied by a confirmation from the insurance companies that the conditions for registration have been met. This is the case when entering into all new agreements on insurance distribution and not only in connection with the agent’s application for registration.
In the event of termination of the agreement between the intermediary and the company, the insurance company must notify the FSA, which can be done by submitting a form to the FSA.
As noted, the above-mentioned requirement applies to all insurance companies and insurance distributors, including foreign companies that are registered in Norway. The FSA is seeking to have a continuous overview of the various insurance distribution agreements that are established between intermediaries and the providers, and to maintain updated registries.
Changes to the Insurance Contracts Act
On 1 July 2022, the new amendments to the Insurance Contracts Act came into force. The most noticeable change was the structuring of the Act, which is now arranged chronologically and resembles the timeline of an insurance relationship.
As regards the material side, stricter duties were introduced on the insurer to inform and map the insurer’s needs while guiding the individual customer. A prohibition on discrimination was also implemented.
The opportunity to derogate from the terms of the Insurance Contracts Act at the disadvantage of the insured has also been changed. This is now possible in the following cases:
The term “major risks” will be further defined in the regulations in order to harmonise the definition with that contained in the EU Solvency II Directive. This will probably create greater clarity around the right to derogate from the terms of the Insurance Contracts Act in comparison with the former version of the Act. That being said, there is a risk that the delimitation regulation will be difficult for consumers to access, as the Solvency II Directive is a comprehensive and detailed set of rules.
The mandatory access to direct action against the insurer in the event of the insured’s insolvency is maintained in line with the former version of the Insurance Contracts Act. This is a cornerstone provision of Norwegian insurance law and, as such, not something the legislators wanted to tamper with at this stage.
The above-mentioned changes have not yet manifested in disputes; however, the insurance providers are most likely seeing the effects of the stricter regulations when writing insurance contracts.
Nordic Marine Insurance Plan Version 2023 Introduced
On 3 October 2022, the Nordic Marine Insurance Plan Version 2023 (the “Nordic Plan”) was published, thereby updating the 2019 version. The updated version entered into force on 1 January 2023.
The Nordic Plan is a comprehensive marine insurance regime, widely used by the international shipping community. It provides the parties with balanced terms, drafted by a committee consisting of all interested parties in a shipping venture. Both shipowners and charterers frequently underwrite insurance under the terms of the Nordic Plan.
The 2023 version adopted several amendments, including significant changes relating to sustainability, sanctions, extended time limits, and a comprehensive review of the loss of hire rules.
Loss of income
In accordance with Chapter 16 of the Nordic Plan the shipowner can insure loss of income following physical damage to a vessel. In the revised Nordic Plan, the revision committee intended to outline that the loss of hire insurance covers the assured’s loss of income, as opposed to income attributed to the vessel. This was confirmed by the Hamburg Cruise judgment (LA-2018-35513), in which the court of appeal concluded that the assured could claim the agreed daily amount even though the assured had continued the employment with a substitute vessel. The Nordic Plan therefore clarified that it is the assured’s actual loss of income that is covered.
Recent geopolitical developments also gave rise to some amendments. The Nordic Plan has incorporated exclusions that protect the insurer from an obligation to make payments that could be subject to sanctions. This means that an otherwise covered claim or payment to a third party is relinquished if there are sanctions applicable to the relevant payment. The outbreak of the war in Ukraine necessitated certain amendments in this respect.
Clause 2-17 regulates sanction limitations and exclusions. Previous versions stated that the insurer was not obliged to pay or provide any benefit that was restricted by sanctions imposed by the EU, UK, US, France, Russia, China, or any other state where the insurer has a registered office. Following the amendments, the provision has removed the reference to France, China and Russia. France and China were removed to align the provision with the English market. The reference to Russia was problematic given the risk of counter-sanctions from Russia during the ongoing war. The revision committee therefore sought to remove any uncertainty for the parties by making clear that counter-sanctions from Russia will not limit the insurer’s obligation to provide cover for the assured.
The amendments has also shown that there is an increased focus on sustainability. This is reflected in Clause 12-12, which regulates the choice of repair yard following a casualty. The amendment introduced an extra allowance, whereby the shipowner can receive a higher compensation by choosing a repair yard that is more expensive but requires shorter transport. The amendment serves as an incentive for the assured to lower emissions by choosing repair alternatives that require shorter voyages.
New Case Law Within Insurance
Court of Justice of the European Union decision on the scope of the Insurance Distribution Directive
The Norwegian Insurance Distribution Act was introduced to harmonise Norwegian legislation with the EU Insurance Distribution Directive. In the absence of Norwegian case law on the new legislation, jurisprudence from the ECJ is relevant when considering the scope of the Insurance Distribution Directive and, in turn, the scope of the Norwegian legislation.
On 29 September 2022, the ECJ rendered a decision (case C 633/20) that has emphasised the broad scope of the Insurance Distribution Directive. The case concerned a German consumer bringing a claim against TC Medical Air Ambulance Agency GmbH (TC). TC held a group insurance policy that covered both illness and accidents abroad, as well as repatriation costs. TC did not provide the cover themselves but, rather, sold membership of the group policy to consumers via door-to-door sales through advertising agencies. The consumer paid a membership fee to TC, which was in turn used by TC to pay the premium to the insurers.
The question was what status TC had under the Insurance Distribution Directive, and whether TC was acting as an insurance distributor. If so, TC lacked the necessary licences to carry out the activity of insurance mediation. The court held that, given the circumstances, TC was considered to be engaged in “insurance distribution”.
Under the Insurance Distribution Directive an entity who takes up or pursues the activity of insurance distribution in exchange for remuneration is an insurance intermediary. The court further noted that remuneration is where the company has an economic interest of its own, distinct from the interests of the customer who obtains insurance under the policy. The court found that TC was pursuing its own economic interests in the undertaking, thereby meeting the aforementioned requirement.
The court reiterated that the directive, inter alia, aims to ensure equal treatment between all categories of insurance intermediaries and seeks to enhance customer protection in the field of insurance. By including persons operating in the insurance market on the basis of the economic model that TC was operating under, these objectives were met.
The above-mentioned judgment shows that the Insurance Distribution Directive provides a strict regime for insurance distributors and safeguards consumer interests. Should a similar issue arise in a Norwegian court, the judgment will be relevant when interpreting the scope of the Insurance Distribution Act.
On 7 September 2022, the Norwegian Appeals Court issued a judgment (LB-2022-66782) concerning an insurance dispute over whether a claim was within the terms of the insurance. The claim was lodged against the liability insurers of a construction company in the aftermath of a construction failure.
The background of the case involved a Norwegian couple who were building a house in the Bahamas. The house was being built by a Norwegian contractor and the woodwork to be used was from a Norwegian producer.
The load-bearing structures of the house consisted of a specific type of wood and, after the construction was completed in Norway, it was shipped to the Bahamas. When delivered in the Bahamas, it was revealed that the construction could not be used. The reason was that the type of wood was not suitable for the climate and had not undergone the necessary drying process prior to assembly. As a result the wood had dried and the measurements were no longer correct. The couple sued the liability insurers of the construction company and the claim in question was lodged under a Norwegian insurance contract.
The question at hand was where the damage had legally occurred. The insurance company rejected liability, referring to their insurance terms whereby the insurer was only responsible for liability resulting from damage that occurs in Norway. The question before the court was whether the damage had occurred in Norway or in the Bahamas.
The court found that the damage had occurred in Norway. The construction had been assembled in Norway by a Norwegian contractor. The fact that the damage had materialised in the Bahamas was not considered decisive. The problem with the materials (ie, lack of preparation of the wood) was already an issue when the structure was assembled. This was, according to the court, the crux of the matter. Based on this, the liability insurer was held liable.
The judgment shows that ‒ under an insurance agreement – even if the damage has materialised abroad, it can still be considered to have contractually occurred in Norway.
Both the new Insurance Distribution Act and the new Insurance Contracts Act have been in force for about one year and six months respectively. The changes are welcome, as they align Norwegian legislation with the EU regulations. It also shows that there is an increased focus on customer protection, both nationally and throughout the EU. Predictability and clarity is essential for the consumer, in order to ensure sufficient insurance cover for their interests.
As with any new regulations, the content and scope will be determined through case law. Cases relating to the amendments have yet to appear before the Norwegian courts. The above-mentioned ECJ judgment will be relevant for the Norwegian interpretation, and is a clear signal that the Insurance Distribution Directive has been given a wide scope of applicability. The authors therefore have reason to believe that the Norwegian legislation will also be applied broadly.
Based on what has been discussed here, it is likely that the focus on consumer protection will increase, as the insurers have to abide by the stricter regulation that was introduced in 2022.