The sources of insurance and reinsurance law in Colombia are:

• The Code of Commerce (C. Com) (Articles 1036 to 1162) regulates insurance, and reinsurance contracts and provides rules for specific business lines.
• The Financial System Organic Statute (EOSF) provides the regulatory framework for insurance market participants (insurance and reinsurance companies and intermediaries).
• The Unique Decree of the Financial System, Decree 2555 of 2010 (D. 2555), develops the regulatory framework provided in the EOSF and specifically regulates prudential, corporate, and operational aspects of insurance market participants.
• Other important sources are the Basic Legal Circular of the Financial Superintendence of Colombia (SFC), and External Circular 029 of 2014 (CBJ).

Over the 33 years since the promulgation of the new constitution, Colombian law has been increasingly shaped by case law, with judicial precedent becoming a more significant source of legal authority. In particular, decisions of the Constitutional Court are generally binding when determining the constitutionality of legislation and when safeguarding fundamental rights (through the Acción de Tutela mechanism). In civil and administrative matters, judicial decisions must be followed when they are recognised as Doctrina Probable.

The Colombian President must regulate and supervise insurance and reinsurance activity because Article 335 of the Colombian Constitution establishes that these activities are of public interest. That is why, in terms of regulation, the President undertakes the regulation of these activities through the Ministry of Finance (Ministerio de Hacienda y Crédito Público) with the support of the Financial Regulation Agency (Unidad de Regulación Financiera), which is an administrative agency that researches and drafts the decrees. The decrees issued by the Ministry of Finance, which the President signs, serve to develop in greater detail the laws enacted by Congress, which define the legal framework for the insurance and reinsurance industry.

Regarding the supervision of these activities, the President assigns such function to the Financial Superintendence of Colombia (Superintendencia Financiera de Colombia, SFC).

In summary, the legal framework is contained in the Financial System Organic Statute (EOSF), and the regulator’s decrees are all included in D.2555. The instructions the SFC gives to the entities under its surveillance are contained in the Basic Legal Circular (Circular Básica Jurídica, CE 029 de 2014, CBJ) and the Basic Financial Circular (Circular Básica Contable y Financiera, CE 100 de 1993).

Colombia is a member of the International Association of Insurance Supervisors. Accordingly, Colombian regulation follows all their guidelines, specifically regarding prudential supervision, market conduct, corporate governance, and risk management.

The legal framework governing insurance contracts and their detailed regulation is established in Articles 1036 to 1162 of the Code of Commerce (C.Com), with any modifications being the responsibility of Congress.

Articles 61 to 65 of Law 1328 of 2009 provide that insurance companies domiciled in Colombia and under the supervision of the SFC are entitled to underwrite insurance in Colombia. In exceptional cases, foreign insurers offering international and commercial marine and aviation insurance, including insurance for merchandise in international transit, and insurers offering satellite insurance, are allowed to underwrite insurance in Colombia from abroad, on a cross-border basis, provided they are registered in the Registry of Foreign Reinsurers and Insurance Intermediaries of Marine and Aviation Insurance (RAIMAT), which is maintained by the SFC. In the same sense, foreign insurers offering agro insurance can underwrite insurance in Colombia from abroad if registered in the Registry of Foreign Agro Insurers and Agro Insurance Intermediaries (RAISAX), which is also maintained by the SFC.

Domiciled insurers must have the legal form of a stock company and obtain prior authorisation from the SFC before commencing operations. This approval is granted following verification of key prudential requirements, including minimum capital, provisions, solvency, directors’ and officers’ fit-and-proper mandates, and risk management policies. Foreign investors are permitted to own 100% of the capital of a Colombian insurance company. In general cases, foreign insurers may also receive authorisation to establish a branch in Colombia; however, these branches must comply with the same prudential requirements as local insurers operating as stock companies. As of today, no foreign insurer has established a branch in Colombia.

Colombian residents are authorised to purchase insurance services abroad according to Law 1328 of 2009 unless for:

• compulsory insurance;
• insurance policies in which a public entity is the policyholder, the insured or the beneficiary;
• insurance services linked to the social security regime; and
• any other insurance service that requires the consumption of other compulsory services before the policy is issued.

Colombian residents purchasing insurance from abroad must report these transactions in Colombia for taxation purposes according to Article 476-1 of the Colombia Tax Statute.

The reinsurance market in Colombia is broadly accessible, with foreign reinsurers playing a dominant role by accepting risks from Colombian cedents abroad. Foreign reinsurers may underwrite reinsurance for Colombian cedents in all business lines on a cross-border basis, provided they are registered in the Registry of Foreign Reinsurers and Reinsurance Intermediaries (REACOEX), maintained by the SFC. As foreign reinsurers are not directly supervised by the SFC, placing reinsurance with an unregistered reinsurer does not result in penalties for the reinsurer itself. However, the Colombian insurance company acting as the cedent is significantly affected. In such cases, the cedent cannot reduce its provisions for the specific risk based on the reinsurance placement and must retain 100% of the risk, potentially leading to regulatory insolvency.

Similar to foreign insurers, foreign reinsurers can apply to the SFC for authorisation to establish branches in Colombia, provided they meet the same prudential requirements as domestic reinsurers. Foreign reinsurers can also promote their services in Colombia after registering with REACOEX. Alternatively, they can establish a commercial presence by licensing a representative office.

Market access conditions for reinsurers do not impose restrictions based on the structure of reinsurance agreements. This means that Colombian regulations do not differentiate between quota share treaties, working excess of loss arrangements, facultative (FAC) reinsurance, or treaty reinsurance. Similarly, no specific regulations govern retrocession agreements.

The requirements for foreign insurers to obtain registration in RAIMAT or RAISAX, as well as for foreign reinsurers to be listed in REACOEX, are detailed in Chapters II, IV, and V of Title I, Part I of the CBJ.

Article 420 of the Colombian Tax Law (Estatuto Tributario, ET) provides that the price of every service rendered in Colombia must include VAT (Impuesto sobre las Ventas, IVA), unless the service is excluded from this tax regime. Accordingly, insurance premiums must include the IVA, which is set at 19% according to Article 468 of the ET. In exceptional cases, life and pension insurance policy premiums are excluded from the application of this tax.

Law 1607 of 2012 included a section under Article 468 of the ET establishing a special 5% IVA rate for agro and health insurance policy premiums.

Article 476-1 of the ET establishes that the premium of insurance services purchased from foreign insurers acting in the Colombian territory on a cross-border basis must include the IVA when the tax regulation of the country of origin of the insurer does not include such tax. If the insurer’s home jurisdiction does have a comparable tax but at a different rate, the tax payable in Colombia is the difference between the tax already paid abroad and the amount that would be due in Colombia.

Colombia’s approach to overseas insurers and reinsurers operating within the country or with Colombian residents largely aligns with the market access conditions prevalent in other regional nations. Colombian insurance regulation operates on the principle that only authorised and domiciled insurers may conduct insurance business within Colombia.

However, there are exceptions. Foreign insurers offering international commercial marine and aviation insurance (including insurance for goods in international transit) and those providing satellite insurance are permitted to underwrite insurance in Colombia on a cross-border basis, provided they are registered in RAIMAT, which is maintained by the SFC. Similarly, foreign insurers offering agricultural insurance can operate cross-border in Colombia if registered in RAISAX, which is also maintained by the SFC.

As stipulated by Article 39 of the EOSF, which incorporates provisions from Law 1328 of 2009, foreign insurers not registered in RAIMAT or RAISAX are prohibited from soliciting or promoting their services in Colombia or to Colombian residents. Consequently, Colombian residents are permitted to purchase insurance from overseas insurers (except for compulsory insurance, social security-related insurance, and insurance related to public entities), provided they travel to the insurer’s country of origin to do so.

The reinsurance market in Colombia is broadly accessible, with foreign reinsurers playing a dominant role by accepting risks from Colombian cedents abroad. Foreign reinsurers may underwrite reinsurance for Colombian cedents in all business lines on a cross-border basis, provided they are registered in the Registry of Foreign Reinsurers and Reinsurance Intermediaries (REACOEX), maintained by the SFC. As foreign reinsurers are not directly supervised by the SFC, placing reinsurance with an unregistered reinsurer does not result in penalties for the reinsurer itself. However, the Colombian insurance company acting as the cedent is significantly affected. In such cases, the cedent cannot reduce its provisions for the specific risk based on the reinsurance placement and must retain 100% of the risk, potentially leading to regulatory insolvency.

Foreign reinsurers can promote their business within Colombia after registering in REACOEX and can establish a commercial presence by licensing a representative office.

Brexit has not resulted in any changes to these market access conditions, as the regulations apply uniformly regardless of the foreign reinsurer’s country of origin.

Fronting is permitted in Colombia and there are no regulatory requirements for the cedant to retain a specific amount or percentage of the insured risk.

In Colombia, any merger or acquisition activity involving insurance companies requires prior authorisation from the SFC. Specifically, Article 55 of the EOSF stipulates that mergers of insurance companies must receive prior approval from the SFC. Furthermore, under Article 88 of the EOSF, acquisitions of 10% or more of an insurance company’s shares also require prior authorisation. This 10% threshold also applies to indirect acquisitions, where the beneficiary of the direct acquirer will ultimately hold 10% or more of the target insurance company’s shares.

It is worth noting that foreign investors are permitted to own 100% of the shares of a Colombian-domiciled insurance company; there are no restrictions on foreign investment in this regard.

Currently, and as far as can be foreseen, the only factor affecting mergers and acquisitions in this sector is the time taken to obtain the necessary authorisations from the SFC. There are a number of M&A transactions within the insurance market currently awaiting SFC authorisation, and we are also seeing new insurers incorporating in the Colombian market.

Colombian regulation establishes insurance service distribution channels. Insurers can offer insurance policies directly using their own offices according to Article 92 of the EOSF or distribute their services through insurance intermediaries (brokers, agencies, and agents), network contracts with other financial institutions, and non-banking correspondents.

Insurance brokers are supervised by the SFC and, in general terms, must act on behalf of the policyholder. Insurance agents and agencies are not supervised. Consequently, the insurance company authorising them to distribute their products is responsible for ensuring their compliance with the applicable regulations, as outlined in the CBJ. Insurance agencies and agents represent the insurance company.

Under the provisions of Law 389 of 1997 and Article 2.31.2.2.2.5 of D.2555, insurance companies and insurance brokers may use the networks of credit institutions, financial services companies, stock exchange brokerage firms, independent securities brokers, investment management companies, and centralised securities depository management companies. For this purpose, they must comply with the conditions outlined in D.2555 and the CBJ, specifically regarding the wording of the network usage agreement (contrato de uso de red). This agreement must contain specific provisions and receive prior approval from the SFC. The insurance products offered through these networks must be straightforward, standardised, easily understood, and suitable for mass distribution. These business lines are:

• compulsory traffic accident insurance (SOAT);
• automobile insurance;
• funeral insurance;
• personal accident insurance;
• unemployment insurance;
• educational insurance;
• individual life insurance;
• voluntary pension insurance;
• health insurance;
• civil liability insurance;
• fire insurance;
• earthquake insurance;
• theft insurance;
• agricultural insurance;
• home insurance; and
• group life insurance.

The SFC also has powers to define other business lines that can be offered through the network in the CBJ.

Article 2.36.9.1.1 of D.2555 regulates insurers’ ability to offer their services through non-banking correspondents (corresponsales no bancarios). Non-banking correspondents are entities not supervised by the SFC or any other authority but which can be connected to the insurer through secure technological networks. They can operate from physical locations, use mobile platforms, or provide services digitally. The contract with the non-banking correspondent must follow the provisions of Art 2.36.9.1.11 of D.2555, which provides for robust cyber and technological risk management and operational duties for both parties, as well as strict obligations regarding the information given to the consumer. These contracts must be available to the SFC, although no prior authorisation is required. The business lines that these correspondents can offer must comply with the same characteristics of the services provided through network usage contracts. However, the list is restricted to the following, according to Section 1.2.1.7 of Chapter I of Title II of Part I of the CBJ:

• compulsory traffic accident insurance;
• funeral insurance;
• unemployment insurance;
• individual life insurance;
• personal accident insurance;
• agricultural insurance;
• civil liability insurance;
• household insurance;
• group life insurance;
• motor insurance;
• earthquake insurance;
• surety bonds;
• transport insurance;
• business interruption;
• low voltage insurance; and
• credit insurance.

Colombian law requires the insured to disclose all material information regarding the insurable risk. Article 1058 of the C.Com establishes that the insured must disclose all the facts and circumstances that determine the insurable risk according to the questionnaire that the insurer provides.

Recent case law has declared that in specific cases such as health and life insurance, if, at the moment of the execution of the agreement, the insurer has some facts that may lead them to think that the risk declaration is inaccurate, they must request further information or even undertake specific examinations to assess the risk properly. If the insurer fails to take these additional steps, some judges have interpreted this as a waiver of their right to challenge the policy on the grounds of misrepresentation or non-disclosure.

To date, Colombian law has not differentiated between consumer insurance and commercial insurance. Law 1480 of 2011, the Colombian Consumer Statute, establishes that the insurance contract is a consumer contract. However, in very specific cases, case law has recognised certain insurance policies as commercial contracts rather than consumer agreements. This distinction has been made where the insured: (i) purchases the policy to cover a risk related to their business; (ii) acquires the policy through an insurance broker; and (iii) seeks to protect the insurable interest of a corporation.

The consequences of withholding (non-disclosure) or misrepresenting information apply if the insured fails to fulfil their disclosure obligations during insurance contract negotiations. If this withholding or misrepresentation concerns facts or circumstances that, had the insurer known them, would have prevented them from entering into the contract or would have led them to stipulate more onerous terms, the insurance contract is considered relatively null.

Regardless of whether a specific questionnaire was used, withholding or misrepresenting information has the same effect if the policyholder has, through negligence, concealed facts or circumstances that objectively worsen the risk.

However, if the inaccuracy or withholding is due to an innocent error on the part of the policyholder, the contract is not rendered null and void. In the event of a claim, though, the insurer is only obligated to pay a proportion of the insured benefit. This proportion is calculated based on the ratio between the premium stipulated in the contract and the premium that would have been appropriate given the true state of the risk.

This does not apply if the insurer, before the contract’s conclusion, knew or should have known the facts or circumstances underlying the inaccurate declaration. Nor does it apply if, after the contract is concluded, the insurer agrees to correct, or expressly or tacitly accepts, these inaccuracies.

The SFC can impose sanctions on insurers who fail to disclose all the terms and conditions of an insurance contract. Even if information is missing, the insurance contract itself must be interpreted in favour of the insured. The insured can also pursue legal action via a consumer protection claim (acción de protección al consumidor financiero) to compel the insurer to provide the missing information.

Whether an intermediary is involved in negotiating an insurance contract and who they represent depends on their specific role. If the intermediary is an insurance broker, they act on behalf of the insured. However, if the intermediary is an agent or an agency, they are considered to be acting on behalf of the insurer, as specified in Article 2.30.1.1.4 of Decree 2555.

The legal requirements of an insurance contract are provided in Article 1045 of the C.Com, which provides that an insurance contract exists when there is a risk, a premium, a conditional obligation of the insurer, and an insurable interest. Its distinguishing features are established in Article 1036 of the C.Com: Insurance is a consensual, bilateral, onerous, aleatory, and successive performance contract. This means that:

• The contract does not necessarily need to be in writing because the insurance policy is just evidence of the contract.
• The contract is based on mutual consent between two parties: the policyholder and the insurer.
• Both parties undertake reciprocal obligations.
• The occurrence of the insured risk is independent of the will of either party.
• The obligations under the contract are performed over a defined period rather than immediately.

Section 1 of Article 1045 of the C.Com requires the insured to have an insurable interest in the risk, which may be economic or moral and can be either actual or future.

Article 1047 of the C.Com specifies the essential elements that an insurance policy must contain, including:

• the name of the insurer;
• the name of the policyholder;
• the name of the insured and the beneficiary if they are different from the policyholder;
• the capacity in which the policyholder is acting;
• the precise identification of the insured object or person;
• the term of the contract, with an indication of the dates and times of commencement and expiry, or the manner of determining both;
• the sum insured or the manner of detailing it;
• the premium or the manner of calculating it and the form of its payment;
• the covered risks;
• the date on which it is drawn up and the signature of the insurer; and
• the other particular conditions agreed upon by the contracting parties.

If the contract conditions are not expressly agreed upon, they will default to those set out in the policy or annex that the insurer has deposited with the SFC for the same business line, coverage, contract type, and risk category.

In the case of life insurance policies and first-party property and casualty insurance policies, the beneficiary must be included in the policy for this beneficiary to have the right to the insurance. Accordingly, tenants, subcontractors or mortgagors can be insureds and beneficiaries when they have an insurable interest and are included in the policy. Third-party liability insurance policies do not require the beneficiary to be revealed because this beneficiary is only determined when the loss arises, being the victim of the event caused by the insured.

In the case of life insurance, when the beneficiary is not included or, for some reason, cannot receive the compensation, the beneficiary is determined according to successor law.

According to Law 1328 of 2009, the beneficiary is considered a financial consumer and thus has the same information rights as the policyholder and the insured. Regarding life insurance policies and third-party liability insurance coverage inserted in motor insurance policies, Law 1328 of 2009 established the insurance registry (Registro Único de Seguros, RUS), which allows potential beneficiaries to check for the existence of a relevant policy.

Regarding consumer contracts and reinsurance contracts, it is worth mentioning that according to Law 1480 of 2011, the insurance contract is, in general terms, a consumer contract. Recent case law has provided some cases in which the insurance contract can be construed as a commercial contract in exceptional conditions.

On the contrary, the reinsurance contract is not considered a consumer contract in Law 1480 of 2011, nor in the C.Com. In this regard, Article 1134 of the C.Com establishes that the insurer and the reinsurer agree to the reinsurance contract. Case law has determined that as long as these parties are professionals in their businesses, none are financial consumers. Hence, this contract is a commercial contract in which parties act freely and with the utmost good faith.

Colombian regulation has no provisions regarding alternative risk transfer (ART) transactions such as industry loss warranty contracts and insurance-linked securities. Accordingly, regulators do not recognise such transactions as insurance or reinsurance agreements.

However, self-insurance schemes have been recognised as ART specifically for public entities. Article 107 of Law 42 of 1993 requires public officers to either insure official goods and assets or use a self-insurance fund to cover their property risk. It is also common practice for large corporations to establish captive reinsurers in jurisdictions such as Bermuda, Barbados, and the Cayman Islands, among others. These captives then manage the reinsurance placement of their insurance programme or the retrocession of their insured portfolio’s reinsurance scheme. Colombian law places no restrictions on the formation of such captives.

In Colombia, ART transactions written in other jurisdictions are not treated as reinsurance contracts. Article 1134 of the C.Com establishes that reinsurance is an agreement between an insurer and a reinsurer, in which the latter bears the same risk as the risk of the reinsured insurance. Consequently, if the parties to such an agreement are not insurers and reinsurers, the contract does not qualify as reinsurance under Colombian law.

Foreign ART transactions are not subject to regulation in Colombia. However, domestic insurance companies are not prohibited from using or investing in such transactions, provided they do so with funds other than those allocated to technical provisions.

According to Law 1480 of 2011, insurance contracts in Colombia are considered consumer contracts. As a result, they are classified as adhesion contracts, where one party – the insurer – determines the terms, and the other party – the insured – simply accepts them. The interpretation rules for contracts are set out in Articles 1618 to 1624 of the Civil Code (C.C.). Specifically, Article 1624 states that any ambiguous clauses in adhesion contracts must be construed against the party that drafted them. Consequently, insurance contracts are interpreted based on the literal wording of their terms, and in cases of ambiguity, the interpretation must favour the insured. Likewise, Article 34 of Law 1480 of 2011 confirms that in consumer contracts, ambiguous clauses should be construed in favour of the consumer.

Recent case law has provided guidelines for distinguishing between consumer insurance contracts and commercial insurance contracts. In cases where an insurance contract is considered commercial rather than consumer-led, general contract interpretation rules apply, following this order:

• the parties’ intention;
• the literal meaning of the contract;
• the interpretation that gives the contract effect;
• the nature of the contract;
• a systematic interpretation of all clauses;
• consideration of specific cases within the contract; and
• in the event of ambiguous clauses, interpretation in favour of the party bearing the obligation.

Since an insurance contract is consensual, its existence does not depend on a specific document. This means that various types of evidence may be used to establish the existence and terms of the contract, not just a single document. The policy itself serves as evidence of the contract, but negotiations and the circumstances under which the contract was executed may also be examined to determine its specific terms.

Under Colombian law, warranties are strict obligations that the insured must comply with, regardless of their materiality to the risk. These warranties are promises made by the insured to either perform or refrain from performing a specific act, fulfil a particular condition, or confirm or deny the existence of a certain fact. Article 1061 of the C.Com requires that a warranty must be explicitly included in the policy or an ancillary document. The wording should leave no doubt about the insured’s intention to uphold the warranty.

If the insured breaches a warranty, the insurer has the right to void the entire insurance contract. This holds true even if the warranty relates to an event after the conclusion of the agreement, and the insurer can terminate the contract as soon as the breach occurs.

Colombian law does not specifically define conditions precedent, nor has Colombian case law provided a clear framework for their interpretation. In practice, insurers sometimes include the term “condition precedent” in policy wording, but judges often struggle to determine whether such provisions should be treated as warranties. However, since warranties must be explicitly stated in the policy or an ancillary document in an unequivocal manner, conditions precedent should not automatically be considered warranties.

As a result, the term “condition precedent” in an insurance policy may be deemed ambiguous under Colombian law. If this is the case, it will be interpreted against the insurer.

In Colombia, disputes over insurance coverage are usually handled by the courts. This is because the use of arbitration in insurance contracts, which are considered consumer contracts, is legally ambiguous. In general terms, the insured and the beneficiary are considered financial consumers and, thus, have the right to exercise the consumer protection action (acción de protección del consumidor financiero) against the insurer that denies coverage. In these cases, Article 57 of Law 1480 of 2011 empowers the SFC to resolve disputes between supervised financial institutions and financial consumers. While this action specifically protects consumer rights, insured parties also retain the right to pursue standard contractual actions against insurers through the ordinary courts.

Another avenue available to consumers is the Financial Ombudsman (Defensor del Consumidor Financiero). The insurance company must hire an independent lawyer to protect the insured’s interests. It must have conciliation certificates to undertake this kind of alternative dispute resolution mechanism. Articles 13 to 21 of Law 1328 of 2009 address the duties and responsibilities of the Financial Ombudsman.

Disputes concerning reinsurance agreements are predominantly resolved through arbitration, as this is the standard dispute resolution method for these types of contracts. The SFC has no jurisdiction to act as a judge, arbitration panel, or centre in these disputes.

The limitation period for starting proceedings concerning an insurance claim is two years from the moment the insured becomes, or reasonably should have become, aware of the loss. According to Article 94 of the General Procedure Law (CGP), this period can be extended if, within those initial two years, the insured makes a claim against the insurer specifically referencing Article 94 of the CGP. There is a special regime for beneficiaries under the insurance contract who, at the moment of the loss, were not legally able to make a claim or be aware of the loss. In such cases, the limitation period is five years from the moment of the occurrence of the loss.

Only under third-party liability insurance policies, such as general liability insurance policies, D&O insurance policies, E&O insurance policies, or professional indemnity insurance, can an unnamed beneficiary or other third party enforce an insurance contract.

In Colombia, the regulation of international insurance contracts and the applicable law is primarily governed by Article 869 of the Commercial Code. This article addresses the law applicable to contracts executed abroad to be performed in Colombia. The text of Article 869 is as follows: “Contracts entered into abroad that are to be executed in Colombia shall be governed by the provisions of this Code.”

This provision implies that insurance contracts concluded outside Colombia but intended to be performed within its territory are subject to Colombian commercial law. Therefore, even if the parties choose a foreign law to govern their contract, Colombian law may prevail if the contract is executed within Colombia.

It is important to note that, while parties to an insurance contract may agree on the applicable law, such agreements must not contravene Colombian public policy. Therefore, specific mandatory provisions of Colombian law may apply regardless of the chosen law, primarily when the contract will be performed in Colombia.

If the contract is entered into in Colombia and the parties do not agree on a specific applicable law, Colombian law must also apply because Colombia is a signatory to the Montevideo Convention on International Private Contracts of 1889. Article 36 of this Convention stipulates that the law of the country where the insurance contract is concluded is the applicable law.

Colombian commercial law does not prohibit parties in an international contract from agreeing on a specific jurisdiction for resolving disputes, provided such agreements do not contravene public policy regulations. This also applies to insurance contracts. Law 1328 of 2009 does not prohibit insurance contracts involving Colombian residents and foreign insurers from specifying a jurisdiction other than Colombia, provided they do not impact public order rights.

Parties to a reinsurance contract can also agree on the applicable law. Colombian regulation does not necessarily require local insurance companies to enter into reinsurance agreements with foreign reinsurers, including the use of Colombian law as the applicable law to this contract. Market practices usually provide for Colombian law as the applicable law when the cedent is in Colombia.

Reinsurance contracts enjoy greater flexibility regarding jurisdiction and applicable law as they usually involve sophisticated commercial parties. They also commonly include an arbitration clause. These contracts commonly allow the parties to agree on jurisdiction and applicable law. They often opt for foreign jurisdictions, such as New York or London. Still, in recent years, after Colombia incorporated a complete legal framework for international arbitration in Law 1563 of 2012, it has become common for reinsurance agreements to include Colombia as the jurisdiction to resolve disputes.

In Colombia, the General Proceedings Code (Código General del Proceso, CGP) outlines the structure of the verbal process (proceso verbal) in civil proceedings, aiming for efficiency and prompt resolution. This is the most common process used to resolve conflicts in commercial contracts. The critical stages of this process are:

• Filing and Admission of the Complaint: The plaintiff submits a complaint meeting the requirements specified in Articles 82 and following the CGP. Upon admission, the court serves the defendant and grants a 20-day response period.
• Initial Hearing: Scheduled after the response period, this hearing involves: (i) conciliation attempts, in which the judge encourages parties to reach an amicable settlement; (ii) questioning of the parties, during which the judge may ask the parties to clarify certain facts; (iii) defining the subject of the dispute; and (iv) ordering the collection of evidence. If no further evidence is needed, the judge may issue a judgment during this hearing.
• Evidence Collection: If additional evidence is required, the judge schedules an evidentiary hearing to gather testimonies, expert opinions, and other pertinent evidence.
• Final Hearing and Judgment: After evidence collection, a final hearing is held where (i) parties present closing arguments; (ii) the judge delivers the final judgment; and (iii) the dispute is resolved.

This streamlined verbal process emphasises orality, concentration, and immediacy, with the goal of resolving disputes efficiently. Specific procedures may vary depending on the nature and complexity of the case.

The primary remedy against a first-instance judgment in the verbal process is an appeal, allowing the losing party to request a review by a higher court. This appeal must typically be filed within three days of the decision’s notification. The superior court will then review both the legal and factual aspects of the case.

In exceptional circumstances, an extraordinary remedy is available for certain final judgments issued by higher courts in civil and commercial matters. This remedy, however, is not automatically applicable to all cases; it is reserved for those meeting specific criteria, generally involving cases of significant legal or economic importance. The cassation recourse (recurso extraordinario de casación) allows the Supreme Court of Justice to review the decision based on legal errors, ensuring consistent interpretation and application of the law. This process focuses on reviewing the legal grounds rather than re-evaluating the facts of the case.

The key requirements for a cassation appeal are: (i) eligibility, meaning only judgments meeting a defined economic threshold or those with particular legal relevance qualify; and (ii) valid grounds, meaning the plaintiff must demonstrate that the lower court’s ruling involved a substantial legal misinterpretation or procedural violation to justify this extraordinary recourse. This remedy aims to unify legal doctrine and correct serious judicial errors, rather than serving as a third level of appeal, thereby preserving legal certainty and coherence within Colombia’s judicial system.

Financial consumers, such as policyholders, insured parties, and beneficiaries under an insurance contract, can also utilise the consumer protection action, which empowers the SFC to resolve disputes by acting as a judge. Law 1480 of 2011, also known as the Consumer Protection Statute, grants the SFC jurisdictional authority to resolve disputes between financial consumers and the financial institutions it supervises. The SFC can mediate and resolve disputes involving violations of consumer rights in the financial sector. The SFC’s decisions are binding on the financial institutions, providing a direct and efficient remedy for consumers without needing to pursue ordinary judicial proceedings. The SFC’s process is designed to be accessible and efficient, enabling financial consumers to seek protection and resolution in a streamlined manner.

The CGP’s verbal summary process and Law 1480’s jurisdictional provisions for the SFC demonstrate Colombia’s commitment to accessible and efficient legal pathways, particularly for consumers and minor disputes.

The verbal summary process is a streamlined legal proceeding designed for straightforward cases requiring faster resolution than the standard verbal process. A single hearing addresses conciliation, evidence admission, and arguments, allowing the judge to issue a judgment immediately or shortly thereafter. This process is used for cases involving low-value claims or more straightforward disputes, such as minor contractual issues, where a rapid judgment is beneficial. If the value of the case exceeds a specific threshold, the SFC’s decision can be appealed to a Circuit Judge (Juez Civil del Circuito), who will then follow the other remedies available in the verbal proceeding.

Colombia allows for the recognition and enforcement of foreign judgments. Under Articles 605 to 607 of Colombia’s CGP, the recognition and enforcement of foreign judgments are governed by specific criteria that ensure the compatibility of international decisions with Colombian law.

Foreign judgments require a process called exequatur to be recognised and enforced in Colombia. This is a judicial procedure where the Supreme Court of Justice assesses whether the foreign decision meets Colombian legal standards. The requirements for recognition are the following:

• Jurisdiction: According to Colombian law principles, the foreign court must have had jurisdiction over the matter.
• Due Process: The judgment must have been issued in a process respecting due process rights, including adequate notice and opportunity to be heard.
• No Conflict with Public Policy: The judgment should not contradict Colombian public policy or fundamental principles.
• Finality: The foreign judgment must be final, meaning it cannot be appealed in the country where it was issued.

The exequatur process’s procedural steps include submitting the foreign judgment, supporting documents, and notifications to interested parties, enabling them to present objections if applicable.

Once the Supreme Court grants exequatur, the foreign judgment has the same effect as a Colombian judgment and can be enforced through local judicial mechanisms. The CGP’s provisions balance respect for international judicial decisions with protections to maintain the integrity of Colombia’s legal principles.

Arbitration clauses in commercial insurance contracts are enforceable in Colombia, although the situation has evolved over time. While Law 1480 of 2011 initially classified insurance contracts as consumer contracts, leading to arbitration clauses being considered abusive, Law 1563 of 2012, the Colombian Arbitration Statute, subsequently allowed for their inclusion in consumer contracts, subject to specific regulatory mechanisms. Decree 1829 of 2013 attempted to regulate this through the “option contract” mechanism, but this section of the decree was annulled by the Council of State in 2022.

Despite this, the Supreme Court recently ruled that arbitration clauses are not abusive in insurance contracts (even though they are considered consumer contracts) in the following cases:

• when the insured purchases the policy for business purposes;
• when the consumer is a corporation; and
• when the insurance policy was purchased with the support of an insurance broker.

In such cases, insurance companies can enforce arbitration clauses when policyholders, insured parties, or beneficiaries attempt to have them declared null and void before a judge.

In contrast, reinsurance agreements are considered commercial contracts under Colombian law, and there are no restrictions on the parties agreeing to and enforcing arbitration clauses within these agreements.

If a party domiciled in Colombia receives an award in an arbitration, it can be enforced in Colombia if it is recognised under Colombian law. This means that awards made in other jurisdictions can be enforced in Colombia after verification that Colombian law recognises them. Recognition requirements are those of the New York Convention, to which Colombia is a party.

Under Law 1563 of 2012 (Colombian Arbitration Statute), the recognition and enforcement of foreign arbitral awards are addressed in Articles 111 to 116. This law adopts the principles of the New York Convention on the Recognition and Enforcement of Foreign Arbitral Awards, ensuring consistency with international arbitration standards.

Accordingly, foreign arbitral awards are subject to the exequatur process for recognition and enforcement in Colombia, overseen by the Colombian judiciary. The foreign award must be final, binding, and issued by a tribunal with proper jurisdiction.

Recognition may be denied on grounds related to lack of proper notice, procedural irregularities, or if the award conflicts with Colombian public policy. These grounds align with those in the New York Convention, underscoring Colombia’s commitment to international arbitration standards.

If necessary, the party seeking enforcement must present a duly authenticated copy of the award and the arbitration agreement, along with certified translations. Once exequatur is granted, the foreign award is enforceable in Colombia as if it were a domestic judgment.

Alternative dispute resolution, such as mediation, plays a minor role in resolving insurance disputes in Colombia. The same applies to consumer contracts or reinsurance contracts. As mentioned above, insurance companies must hire the services of a Financial Consumer Ombudsman, who must be a lawyer with conciliation powers to mediate among the parties in conflict. However, this alternative dispute resolution mechanism, established by Law 1328 of 2009, has been infrequently used by insured parties.

In the case of reinsurance, conflicts are usually resolved directly by the parties or by arbitration panels.

Insurers in Colombia are subject to penalties if they unduly delay the settlement of claims. The obligation to pay late payment interest (intereses moratorios) on delayed insurance claim payments is established under Law 389 of 1997. Specifically, as amended by this law, Article 1080 of the Colombian Commercial Code mandates that insurers must pay late interest if they fail to fulfil their obligation to repay within the specified period. This period is one month from the date the beneficiary submits a complete claim, providing evidence of both the occurrence of the loss and its value.

This legal provision ensures that insurers are held accountable for timely claim settlements, imposing interest charges as a deterrent to delays and safeguarding the rights of insured parties.

Article 1096 of the Colombian Commercial Code grants insurers the right of subrogation once they have indemnified the insured for a covered loss. The article states that the insurer is subrogated up to the amount of the indemnity paid, meaning the insurer assumes the insured’s rights against third parties responsible for the damage. This enables the insurer to recover the indemnity amount from those who caused the loss, preserving the principle that the insured should not receive double compensation.

The Colombian Supreme Court of Justice has upheld and elaborated on this right of subrogation in various rulings. The Court has emphasised that subrogation is an equitable remedy that prevents unjust enrichment by ensuring that the insured cannot claim the indemnity and compensation from the responsible party. The Court has also clarified procedural and substantive aspects of subrogation, affirming that the insurer’s right is limited to the amount repaid and that subrogation cannot exceed this sum (SC4527-2020, 9 December 2020). This means that the insurer cannot claim more than what it compensated, preserving the principle of indemnity.

The Colombian Supreme Court of Justice has consistently reinforced that subrogation is intended to prevent double recovery by the insured (SC3273-2020, 7 September 2020). If the insured has already received compensation from a third party responsible for the loss, the insurer’s right to subrogation may be limited accordingly to avoid overcompensation. Also, the Supreme Court has recognised that subrogation does not allow insurers to exercise rights that are strictly personal to the insured (SC-3891 of 2020). For example, rights arising from moral damages or emotional harm, which are personal to the insured, cannot be pursued by the insurer through subrogation.

The Supreme Court has acknowledged that the subrogation right cannot be modified by the parties to the insurance contract or waived because it is a public policy and is mandatory in insurance law (SC-2879 of 2022 and SC331-2024).

Colombia’s insurance sector is experiencing significant transformation through the integration of technology, leading to the emergence of various insurtech initiatives. Key developments include:

• Establishment of the Asociación Insurtech Colombia (AIC): Founded in 2023, the AIC aims to integrate the insurance sector to drive innovation and market development. It fosters collaborative efforts to transform and facilitate access to insurance for Colombian businesses and families.
• Growth of Insurtech Start-ups: According to a market analysis by Beinsure, the Insurtech ecosystem in Colombia has expanded by 24% and now hosts 67 insurtech start-ups. This growth is attributed to a low mortality rate of 8% among these start-ups, and strong ecosystem collaboration.
• Strategic Partnerships: Although insurtech developments mostly involve selling insurance policies, some insurance companies have partnered with technology enterprises to optimise product development processes, ensuring more precise pricing and better service delivery. Others have launched their own insurtech ventures to strengthen their presence in the digital marketplace. These initiatives offer innovative and personalised solutions to meet evolving customer demand.

Collaborations between traditional insurers and insurtech start-ups in Colombia encompass developing new insurance products, distributing insurance services, and optimising processes. In terms of product development, insurance companies have made joint efforts to create tailored insurance products leveraging data analytics and artificial intelligence. Digital platforms enhance customer reach and streamline policy issuance, and technology has also improved underwriting, claims processing, and customer service.

These collaborations have led to the development of products such as usage-based insurance, microinsurance, and on-demand policies, which cater to diverse customer needs and promote financial inclusion.

Overall, integrating technology in Colombia’s insurance sector fosters innovation, enhances customer experiences, and expands market reach through strategic partnerships and the development of new products.

TheSFC has actively addressed the rise of insurtech by implementing several measures to foster innovation while ensuring consumer protection and financial stability. Colombia has adopted a sector-specific regulatory approach for fintech and insurtech, avoiding a single “fintech law”. This strategy allows for tailored regulations across various segments, including insurance technology, facilitating innovation without compromising oversight.

To facilitate innovation, the SFC established the InnovaSFC group to promote technological advancements in the financial and insurance sectors. This initiative supports entities in developing innovative models and adapting to technological changes.

Through the Regulatory SandBox, the SFC provided a controlled environment for testing innovative financial and insurance products and services. This framework enabled insurance companies to experiment with new models under regulatory supervision, ensuring compliance and consumer protection.

The issuance of Decree 1297 of 2022 of the Ministry of Finance and Circular Externa, 004 of 2024 of the SFC, outlined guidelines for implementing open finance and the commercialisation of technology and infrastructure by regulated entities. This circular promotes data sharing and collaboration between traditional insurers and insurtech firms, fostering innovation and competition.

Although these measures reflect Colombian regulation and the SFC’s proactive stance in balancing the promotion of technological innovation within the insurance sector, Colombian regulation focuses on maintaining robust regulatory oversight to protect consumers and ensure market stability. This focus can present challenges for insurtech developments, particularly when addressing AML requirements and KYC obligations.

The Colombian insurance market is confronting several emerging risks, including cyber threats, new catastrophe risks, advancements in artificial intelligence (AI) and automation, and increased longevity.

The rise in digitalisation has increased exposure to cyberattacks, data breaches, and operational disruptions. The SFC has issued guidelines mandating financial institutions, including insurers, to establish robust cybersecurity frameworks. These frameworks include risk assessments, incident response plans, and continuous monitoring to safeguard sensitive information and maintain operational integrity. External Circular 007 of 2018 addressed these matters, requiring all the companies under its surveillance to implement robust cyber risk protocols and handbooks.

Climate change has intensified natural disasters such as floods, landslides, and droughts, posing significant risks to insured assets. The SFC collaborates with the World Bank Group to conduct climate stress tests, assessing the financial system’s resilience to environmental shocks. These tests highlighted the need to support the development of insurance products that enhance financial inclusion and protect vulnerable populations from climate-related events. A key development in Colombian law to encourage these products was the enactment of Law 2294 of 2022, which established a robust framework for developing parametric insurance in Colombia.

Integrating AI and automation introduces risks related to algorithmic biases, operational errors, and ethical considerations. The SFC encourages the adoption of AI while emphasising the importance of transparency, accountability, and ethical standards. It has issued guidelines on the responsible use of AI, ensuring that automated systems do not compromise consumer rights or market stability. It is expected that Colombian financial regulation on AI and technological developments will follow the European Union guidelines, providing a set of principles defining acceptable and unacceptable practices.

Longer life expectancies can strain life and health insurance products, affecting pricing, reserves, and the sustainability of pension systems. Colombian law requires insurers to incorporate updated mortality and longevity tables in their actuarial models. It also monitors the adequacy of reserves and solvency margins to ensure that insurers can meet long-term obligations. The Colombian Congress enacted a pension law reform (Law 2381 of 2024) that imposed new risks for pension-linked insurance, such as annuities, and policies covering death and disability risks for members of private pension funds. Currently, this law is being revised by the Constitutional Court.

Beyond legislative and regulatory responses to emerging risks in the insurance market, private sector and product developments remain limited but are steadily expanding. One notable advancement is the increasing adoption of parametric insurance, which offers a new approach to identifying at-risk populations, particularly in the context of climate change. This involves pinpointing specific climate benchmarks that could affect these populations and, through collaboration with relevant agencies, providing parametric insurance that triggers payouts when those benchmarks are met, thus mitigating losses.

Cyber insurance has become a standard offering in Colombia, reflecting the growing prevalence of cyber risks and the increasing automation of economic activities. However, the market still lacks extensive experience in managing cyber-attack-related claims. In most cases, policyholders report incidents under the policy’s preventive coverage rather than triggering an indemnity, highlighting the need for further market maturity in this area.

In the realm of alternative risk transfer (ART), large economic groups in Colombia frequently own captive insurers, typically registered in jurisdictions such as Bermuda, Delaware, and Barbados. These captives primarily serve to transfer catastrophic property risks, particularly when traditional market rates and tariffs are prohibitively high.

On 15 October 2024, the Ministries of Finance and Commerce issued decrees 1272 and 1271, respectively. These decrees mark a significant shift in Colombia’s insurance regulatory landscape, fostering alignment with international standards to improve financial resilience, comparability, and risk transparency in the insurance sector.

Decree 1272 of 2024 of the Ministry of Finance modifies Decree 2555 of 2010. It aims to strengthen Colombia’s prudential regime for technical insurance reserves by adopting international risk-based standards. The goal is to improve insurers’ estimation and management of their liabilities, ensure that technical reserves align closely with actual risks, and provide greater financial transparency for policyholders.

The Ministry of Finance initiated this change as part of the 2021 roadmap for modernising the insurance sector, published by the Financial Regulation and Studies Unit (URF). This roadmap highlighted the need for convergence with IFRS 17 standards, focusing on a prudent, risk-based approach to insurance regulation aligned with international best practices. By adopting aspects of Solvency II, Colombia aims to strengthen its insurance market’s resilience, improve risk management, and enhance the credibility of financial statements for both local and international stakeholders.

Regarding the guidelines from the SFC, new instructions for actuaries have been established following Circular Externa 017 of 2024. These include new obligations related to the certification of insurance contingencies.

Recent legal developments affecting the insurance market also include modifications to the Colombian pension system under Law 2381 of 2024. This law introduces a Multi-Pillar System comprising three distinct pillars, separate from the social protection benefits extended to certain populations. The first pillar is a public pay-as-you-go system managed by Colpensiones, the state-run pension fund, which covers contributions up to three times the minimum wage. The second pillar consists of individual savings accounts managed by private pension funds for contributions exceeding three times the minimum wage. The third pillar involves voluntary savings to supplement retirement income.

As Colpensiones assumes a larger share of pension contributions – given that most affiliates and pensioners earn less than three times the minimum wage – the demand for private annuity products within the compulsory regime may decline, affecting insurers that offer these products. Furthermore, the reform centralises disability and survivor pensions under Colpensiones, reducing the role of private insurers in providing these coverages within the compulsory regime. However, in the realm of private and voluntary pension insurance, the market may experience new and more sophisticated demand. Higher-wage earners, who will no longer be required to contribute to the compulsory system on 100% of their income, may use their remaining income to purchase voluntary and private life and pension insurance products. This presents a challenge and an opportunity for insurers to innovate in annuities and life insurance products.

Meanwhile, Congress is currently reviewing a Health Law Bill introduced by the government to reform Colombia’s healthcare system. The proposed reform seeks to eliminate the existing Health Promotion Entities (EPS) and replace them with Health and Life Managers. These new entities would co-ordinate healthcare services but would not directly manage financial resources, shifting control over healthcare funds to the public sector. The bill also proposes the creation of Primary Health Care Centres (CAPS) to provide essential healthcare services and manage referrals to specialised care, with the aim of improving accessibility and efficiency. Additionally, the reform would centralise all healthcare funding under the state-run Administrator of the Resources of the General System of Social Security in Health (ADRES), which would be responsible for making direct payments to healthcare providers to ensure transparency and accountability. Importantly, the reform does not address voluntary or private health insurance products, nor does it impose restrictions on their availability in Colombia. If the bill is passed, private health insurers operating in the country may find new opportunities to expand their services.

Finally, regarding life insurance policies, the Colombian Congress is currently reviewing Senate Bill No 201 of 2023, which seeks to establish and guarantee the “right to be forgotten” for cancer survivors. This legislative initiative aims to prevent discrimination against individuals who have overcome cancer, particularly in their access to financial products such as insurance and credit. The bill’s key provisions include:

• prohibiting financial institutions from denying services or imposing unfavourable conditions on cancer survivors solely based on their medical history;
• amending specific articles of the Commercial Code to ensure that past cancer diagnoses do not lead to contract penalties or nullifications;
• establishing that individuals who have been in remission for eight years are not required to disclose their cancer history when applying for financial products; for those diagnosed as minors, this period is reduced to four years; and
• mandating the creation of regulatory frameworks to monitor compliance and address potential cases of discrimination.

This bill presents a challenge for life insurance policies, as it limits the health risk assessment of potential insured parties. The risk selection process is also constrained, as denying coverage based on cancer history preceding the timeframes specified in the bill would likely be considered illegal.