The Principality of Liechtenstein is a civil law country. Due to its geographical location in the heart of Europe and its particularly small size, the principality’s legal system is widely influenced by its neighbouring countries, Switzerland and EU member state Austria, and particularly the latter in the area of insurance law. Austrian and European case law therefore play a significant role in insurance law in Liechtenstein. The main sources of insurance and reinsurance law in the Principality are as follows.

• National statutory provisions
• The Insurance Supervision Act (VersAG) and its corresponding supplemental Insurance Supervision Ordinance (VersAV) govern the legal framework for supervisory activities by state authorities.
• The Insurance Contract Act (VersVG) sets out the legal framework for the conclusion of insurance contracts.
• The Civil Code (ABGB) establishes the general civil law framework that covers insurance and reinsurance contracts.
• The Insurance Distribution Act (VersVertG) and its corresponding supplemental Insurance Distribution Ordinance (VersVertV) determine the legal framework for the distribution of insurance and reinsurance products.
• The International Insurance Contract Law Act (IVersVG) sets out which law applies to cross-border insurance contracts.
• International provisions
• The agreement between the Principality of Liechtenstein and Switzerland on direct insurance and insurance intermediation – this mutually recognises the supervision system and introduces a passporting/notification process comparable to the system within the EEA. As a result, Liechtenstein offers the unique opportunity to insurers and insurance intermediaries to provide cross-border services to the EEA and to Switzerland without the need to obtain additional licences.
• EU directives and regulations – the Principality of Liechtenstein is not an EU member but is part of the European Economic Area (EEA), together with Iceland and Norway. This means that EU directives and regulations do not apply to Liechtenstein directly. Instead, they follow a special process of incorporation and implementation. However, due to its EEA membership, directives and regulations are an important source of insurance law in Liechtenstein.

The Insurance Supervision Act (VersAG), with its corresponding Insurance Supervision Ordinance (VersAV) and the Financial Market Supervision Act (FMAG), make up the core statutory provisions for supervisory activities in Liechtenstein.

The VersAG regulates direct insurance and reinsurers, as well as non-life and life insurers, with the consequence that the same rules apply. However, there are special provisions for certain types of insurers. Special provisions apply to the consolidated supervision of insurance groups and insurance conglomerates (Article 194 et seq of the VersAG). Consolidated group supervision applies in addition to individual supervision by the Liechtenstein Financial Market Authority (Finanzmarktaufsicht Liechtenstein, FMA) of Liechtenstein insurers (or other regulated Liechtenstein entities).

(Re-)insurers as well as insurance intermediaries must be licensed by the FMA before they can conduct insurance business. The FMA supervises all activities of Liechtenstein (re-)insurance and insurance intermediaries and, in this context, also ensures proper supervision of the cross-border activities of Liechtenstein (re-)insurance intermediaries in the EEA and Switzerland. The FMA carries out its activities on the basis of the FMAG and the VersAG.

The FMA ensures the stability of the Liechtenstein financial market, the protection of clients, the prevention of abuse, and the implementation of and compliance with recognised international standards. For this reason, it takes a strict approach to ensure that insurers comply with the applicable laws and supervisory rules. In principle, however, and based on to our experience, the FMA cooperates with the regulated companies.

The international cooperation of the FMA is naturally strongly influenced by Liechtenstein’s membership in the EEA, and Liechtenstein is also closely involved in the European supervisory structure. The FMA has observer status in all three European financial supervisory authorities: the European Banking Authority (EBA), the European Insurance and Occupational Pensions Authority (EIOPA), and the European Securities and Markets Authority (ESMA). The FMA is also a member of the most important global supervisory bodies. These include the International Organisation of Securities Commissions (IOSCO), the International Association of Insurance Supervisors (IAIS), and the International Organisation of Occupational Pensions Supervisors (IOPS).

In principle, the insurer and reinsurer, within the scope of application of the VersAG, must obtain an insurance licence from the FMA before engaging in any regulated activities regardless of the policyholder’s objective – ie, writing insurance and/or reinsurance business (Article 11 paragraph 1 of the VersAG). The main licence requirements are set out in Articles 12 and 13 of the VersAG. The VersAG differentiates between direct insurance activities and reinsurance activities. Excess layer insurance is not a further category of insurance activities under the VersAG.

According to Articles 12 and 13 of the VersAG, the main criteria for obtaining a (re-)insurance licence are the complete transmission of a licence application and a business plan.

The following list provides an overview of essential declarations and documents that must be included in the licence application.

• The statutes of the company. The company must be established in the legal form of a public limited company, a European company (SE), a cooperative or a European cooperative society (SCE) (Article 14 paragraph 1 of the VersAG)). Only registered shares are permitted for public limited companies.
• The organisation and local scope of activity of the company and, if applicable, the group or financial conglomerates to which the company belongs.
• The opening financial statements of the most recent three business years of the shareholders and, if applicable, a consolidated report.
• Evidence that eligible basic own funds are available to cover the absolute floor of the Minimum Capital Requirement; pursuant to Article 51 paragraph 2 of the VersAG, the Minimum Capital Requirement must not fall below the following amounts:
• EUR2.5 million or the equivalent in Swiss francs for non-life insurance companies, including captive insurance companies;
• EUR3.7 million or the equivalent in Swiss francs for non-life insurance companies, including captive insurance companies, if all or several of the risks listed in one of classes ten to 15 in Annex 1, letter A, are to be covered;
• EUR3.7 million or the equivalent in Swiss francs for life insurance companies, including captive direct insurance companies; and
• EUR3.6 million or the equivalent in Swiss francs for reinsurers, with the exception of captive reinsurers, for which a minimum capital requirement of at least EUR1.2 million or the equivalent in Swiss francs applies.
• Evidence that the company will be able to hold eligible own funds to cover the Solvency Capital Requirement.
• Evidence that the company will be able to hold eligible basic own funds to cover the Minimum Capital Requirement.
• The identity and amount of investment of the shareholder(s), whether direct or indirect, whether natural or legal persons who have qualifying holdings in that undertaking or who can influence the company by other means, such as strong linkages.

Article 3 of the VersAG provides relief in terms of certain requirements to operate a so-called “small” insurer, and the extent to which the VersAG applies to small insurers is governed by Article 4. 

The Swiss Federal Stamp Duty Act also applies in Liechtenstein. As a result, stamp duty on premium payments (insurance premium tax (IPT)) is levied on insurance policies that are part of the domestic portfolio of a domestic (Liechtenstein or Swiss) insurer or that a domestic policyholder has taken out with a foreign insurer that is not subject to supervision in Switzerland or Liechtenstein. IPT is payable either by the domestic insurer or, if there is no domestic insurer involved, by the domestic policyholder, who will then have to declare and pay the stamp duty. The IPT amounts to 5% on the cash premium (2.5% on the cash premium for life insurance), and the levy claim arises with payment of the premium.

Premium payments for certain personal insurance policies, such as life insurance policies with periodic premium payments, as well as for certain health, accident, disability and unemployment insurance policies, are exempt from the levy.

Reinsurance is tax exempt. Reinsurance premium payments therefore do not attract IPT.

Liechtenstein, aligned with Swiss VAT rules, treats insurance services as VAT-exempt. The IPT thus functions as the primary indirect tax on insurance activity.

Overall, the regime distinguishes clearly between direct insurance, subject to IPT unless exempt, and reinsurance, which remains outside the scope of premium taxation.

The domestic activities (in Liechtenstein) of foreign insurers are explicitly regulated by the Insurance Supervision Act (Article 112 et seq of the VersAG) and are therefore also subject to regulatory requirements and supervision.

Direct insurers domiciled in another EEA Member State may establish a branch in the Principality of Liechtenstein according to the passporting/notification system within the EEA. Third-country insurers require a licence under the VersAG in order to take up insurance activities in Liechtenstein.

Third-country insurers must obtain a permit in accordance with the VersAG to commence insurance activities in Liechtenstein. A third-country insurer may only be granted a licence to take up insurance activities in Liechtenstein if it meets the requirements set forth in Article 117 of the VersAG.

Liechtenstein and Switzerland mutually recognise the supervision system and introduced a passporting/notification system comparable with the system within the EEA. As a result, Liechtenstein offers the unique opportunity to insurance companies and insurance intermediaries to provide cross-border services to the EEA and Switzerland without having to obtain additional licences. The mutual recognition does not cover (pure) reinsurance, as this business is, in any case, exempt from authorisation requirements between the two jurisdictions.

Foreign-incorporated insurers that carry out reinsurance business only in Switzerland are not subject to Swiss regulation. Consequently, Liechtenstein reinsurers may operate in Switzerland without authorisation. The same applies for reinsurance business from Switzerland to Liechtenstein: insurers that only carry out reinsurance business in Liechtenstein are exempt from supervision there, provided that they are subject to equivalent supervision in their home country.

Operating an insurance or insurance intermediary activity without a licence constitutes a misdemeanour under Article 257 of the VersAG and Article 82 of the VersVertG. Anyone who conducts insurance business in Liechtenstein without the appropriate permission of the FMA may be punished by the District Court with imprisonment or a fine. The FMA is entitled to publish information on the application of the final penalty.

“Fronting” refers to an arrangement where a licensed, admitted insurer issues (underwrites) an insurance policy in its own name but immediately cedes the entire risk (or most of it) to another insurer or captive/reinsurer. The fronting insurer must be licensed and authorised in the jurisdiction where the policy is issued. If the ultimate risk-bearer (reinsurer/captive) is not licensed locally, the arrangement relies on the fronting insurer’s licence – which then brings the usual obligations (solvency, reporting, governance) under, for example, supervisory law in Liechtenstein. As long as these obligations are met, fronting is feasible.

Given with the size of the country, transaction activity has been noticeably high recently. Several insurance groups have restructured, consolidated and realigned their group operations. Further, several private equity investors have been active buyers of insurers and reinsurers, including, in particular, businesses in run-off (and these buyers have become increasingly accepted by FMA as qualified or controlling investors in insurers).

Anyone who takes up or pursues the distribution of insurance and reinsurance products in Liechtenstein or from Liechtenstein is subject to licensing requirements under the Insurance Distribution Act (VersVertG). The VersVertG covers the activities of insurance brokers – who act in the interests of the customer and are not tied to a specific insurer – and agents – who act on behalf of or are bound to one or more insurers – as well as the direct distribution of insurance products by insurer. Brokers may not conduct business for insurers that are not licensed to conduct business in Liechtenstein. The requirements for approval of distribution activities are regulated in Article 6 et seq of the VersVertG.

Activity as a tip provider – where the provider simply gives information to the insurer with regard to potential clients and vice versa but does not otherwise interfere with or facilitate the conclusion of the contract – is not licensable under the VersVertG.

Exemptions from licensing requirements are available for intermediaries that distribute products as an ancillary activity, if certain conditions (such as the complementary nature of the insurance with the services provided by the firm and a maximum premium for the insurance product) are met.

Annex 4 of the VersAG sets forth a detailed catalogue of information that insurers are required to disclose to the policyholder prior to the conclusion of the insurance contract and throughout the duration of the contractual relationship. This information must be provided irrespective of whether the policyholder qualifies as a consumer or otherwise. The information is either included in the application form issued by the insurer or given to the applicant before the application form is submitted. The applicant has the opportunity to review and study all general terms and conditions before making a commitment. If these information requirements are not met, the policyholder is not bound by the application and can cancel the contract within four weeks of receiving the insurance policy and information on the right of cancellation.

In return, the applicant must inform the insurer in writing, by means of a questionnaire or other written request, of all facts relevant to the assessment of the risk insofar as they are known or become known to them at the time of the conclusionof the contract. The insured party must not intentionally or negligently conceal material facts about the risk (breach of the duty of disclosure) when concluding the contract. If it does so, the insurance company may demand adjustment of the contract or cancel it within four weeks of discovery of the breach. If the insured event has already occurred, the liability does not apply if the event is attributable to the concealed or misrepresented risk.

The insurance company has a duty to provide information in accordance with Article 3 of the Insurance Contract Act (VersVG). The general and special insurance conditions and the necessary information must either be included in the insurance contract or made available to the applicant in another way before the insurance application is submitted. Article 3 paragraph 2 of the VersVG provides that, if this requirement is not met, the applicant is not bound by the application. After conclusion of the contract, the policyholder may withdraw from the contract if the duty to provide information has been violated. The right of withdrawal expires at the latest four weeks after receipt of the policy, with information on the right of withdrawal included. Article 65 of the VersVG provides a second right of withdrawal in the life insurance sector. To fulfil its legal obligation, the insurer is required to carry out notification on both rights of withdrawal.

In return, the applicant must inform the insurer in writing, by means of a questionnaire or other written request, of all facts relevant to the assessment of the risk insofar as they are known or become known to them at the time of the conclusionof the contract. According to Article 6 to 8 of VersVG, the insured party must not intentionally or negligently conceal material facts about the risk (breach of the duty of disclosure) when concluding the contract. If it does so, the insurance company may demand adjustment of the contract or cancel it within four weeks of discovery of the breach. If the insured event has already occurred, the liability does not apply if the event is attributable to the concealed or misrepresented risk.

Insurance intermediaries are subject to supervision by the FMA and require its approval before engaging in insurance distribution. They must conduct business according to the provisions of the Insurance Distribution Act (VersVertG). Insurance intermediaries are required to provide their customers with the information set forth in Article 37 (2) of the VersVertG.

Intermediaries must disclose to the customer whether they work exclusively for certain insurers (only selling their products), which would them make agents, or whether they conduct a “balanced and personal investigation” of the market as an independent intermediary, making them brokers.

An insurance contract is a legally binding continuing obligation contract between the insurer and the policyholder in which the insurer undertakes to provide financial protection against various risks (the risk of an uncertain event occurring) in return for the payment of premiums. Accordingly, the essential feature of an insurance contract from a civil and regulatory perspective is the assumption of a risk by the insurer.

The insurance contract typically outlines the terms and conditions of the insurance coverage, including its scope, duration and the amount of the premiums. The insurer is obliged to provide the policyholder with a contract document (the policy or, in the case of a contract amendment, an addendum), which sets out the rights and obligations of the parties. It must also provide the policyholder, at their request, with a copy of the declarations contained in the application documents or otherwise made by the applicant and on the basis of which the insurance contract was concluded.

An insurance contract an contain multiple insured parties or beneficiaries. A collective insurance contract is generally described as a legally uniform contract that insures several persons or several independent objects. It might be an indication of the existence of a collective insurance contract if, for example, the insured party is different from the policyholder.

Liechtenstein’s Insurance Contract Act (VersVG) explicitly allows a policyholder to designate another person/third party as a beneficiary. The third-party beneficiary can be entitled to the entire insurance benefit, or just a portion of it. This means that parties who are not themselves the insured parties (eg, tenants, subcontractors, or mortgagees) can be designated as beneficiaries if named by the policyholder. Under Liechtenstein law, when an insurance contract is concluded for the benefit of a third party:

• the beneficiary can be designated without the insurer’s consent;
• upon occurrence of the insured event, the beneficiary acquires an independent right against the insurer (not just a mediated claim through the policyholder); and
• the policyholder usually retains the right to revoke or change the beneficiary unless an irrevocable designation is expressly agreed.

Under Liechtenstein law, there is a clear distinction between direct insurance contracts for consumers and reinsurance contracts, which are executed with reinsurers. Consumer insurance contracts are governed by VersVG and include specific protections such as disclosure obligations, information duties, and possible withdrawal rights. Consumer policies are covered by the Consumer Protection Act (Konsumentenschutzgesetz, KSchG) which grants different rights for the policyholders, such as various rights of withdrawal from an insurance contract.

For example, Article 4 of the KSchG entitles consumers to withdraw within 14 days after the contract has been concluded. Article 5 of the KSchG allows consumers to withdraw in the event of misapprehension. The KschG also sets down a list of contract components considered to be unfair, and which are inadmissible for policyholders. Concerning clauses in pre-formulated terms and conditions, Sections 864a and 879 (3) of the ABGB must be observed. The use of unfair terms in pre-formulated terms and conditions of consumer contracts is dealt with in Article 8 of the Act against Unfair Competition (Gesetz gegen den unlauteren Wettbewerb, UWG) and Article 8 of the KSchG.

In contrast, reinsurance contracts, which involve an insurer transferring risk to a reinsurer, are not subject to the VersVG; instead, they are governed primarily by general contract law and regulatory rules. Consequently, the consumer protection provisions that apply to standard insurance contracts do not apply to reinsurance agreements, which are typically negotiated between professional entities and allow for greater contractual flexibility.

Alternative Risk Transfer (ART) primarily encompasses the transfer of insurance risks to capital market investors through securitisation, including, for example, the issuance of insurance-linked securities (ILS) such as catastrophe bonds (cat bonds) or industry loss warranties (ILWs). ART transactions are generally permitted in Liechtenstein.

ART transactions can constitute either reinsurance or direct insurance, depending entirely on who assumes the risk and how the parties structure the transaction. There is no single classification that applies to all ART structures. They are subject to Liechtenstein’s insurance supervisory regime.

To transfer risk, the insurer or reinsurer and a special purpose vehicle (SPV) generally enter into an agreement established specifically for this purpose. The insurance or reinsurer transfers its risk to the SPV and the SPV undertakes to pay an agreed amount upon the occurrence of a specified trigger. The SPV then issues bonds in the capital market, the term, interest, and repayment of which are linked to the occurrence of that trigger.

Liechtenstein does not automatically classify an ART contract written abroad as “reinsurance” simply because the issuing jurisdiction calls it such. The decisive question for Liechtenstein regulatory and solvency purposes is: does the arrangement, in substance, transfer insurance risk from a (re)insurer?

• if the answer is yes, Liechtenstein treats the ART contract as reinsurance for supervisory, accounting, and solvency purposes.
• if no, the ART contract is not treated as reinsurance and is instead classified under the appropriate regulatory regime (financial instrument, derivative, securitisation, investment product, etc).

The place of domicile or the qualification of the counterparty as a (regulated) reinsurer abroad is not decisive.

Under Liechtenstein law, the general principles governing the interpretation of contracts apply equally to insurance contracts. No distinction is drawn between the interpretation of consumer contracts and that of commercial contracts. As a primary rule, the common intention of the parties at the time of contract formation prevails insofar as such intention can be established. Where no actual concurrence of intention can be determined, the contract or the relevant provision must be interpreted according to its ordinary meaning, having regard to the purpose of the agreement.

However, interpretation is not confined to the literal wording where this would fail to reflect the parties’ true intentions. The contract may be construed contra verba where necessary to give effect to the parties’ actual intent, ascertained within the recognised framework of contractual interpretation. Where a clear meaning nevertheless cannot be derived, the declaration of intent must be interpreted in accordance with the principles of good faith and honest commercial practice (supplementary interpretation).

Pursuant to Section 914 of the ABGB, contractual gaps in an otherwise validly concluded agreement may be filled by the courts, provided such gaps were left by the parties, typically unintentionally. The courts assess how the parties would reasonably have regulated the matter had they been aware of the omission, taking into account customary practice and the presumed intention of the parties. Supplementary interpretation under Section 914 of the ABGB does not, however, extend to the essentialia negotii of the contract. Where ambiguities persist, Section 915 ABGB provides that unclear provisions are to be interpreted to the detriment of the party who formulated them – in practice generally the insurer.

Liechtenstein law does not recognise “warranties” as a distinct category of insurance term in the common law sense (ie, strict conditions precedent whose breach automatically discharges the insurer from liability). Therefore, a clause is not treated as a “warranty” simply because it is labelled as such, and there is no special statutory definition of “warranty” in insurance contracts.

Any clause that imposes a duty on the policyholder – such as risk-increasing restrictions, obligations to notify, safety obligations, or pre-contractual disclosure duties – is interpreted using the general principles of contract interpretation under the ABGB, in particular Sections 914 et seq of the ABGB.

Warranties are generally treated like other contractual clauses, but ambiguities are typically construed against the party drafting them, similar to the “contra proferentem” principle. If a warranty is breached – eg, the insurer fails to provide the promised additional coverage – the insured party can assert rights under the contract, potentially including claims for performance or damages.

In Liechtenstein, parties to an insurance contract may agree that the liability of the insurer is subject to the condition that the policyholder has complied with certain specific obligations – ie, obligations or circumstances that must be fulfilled before the insurer’s liability arises. Typical examples include timely risk notification, compliance with safety measures, or payment of the premium. Conditions precedent in an insurance contract do not require explicit designation as such, but they must be clearly and unambiguously drafted.

If a condition precedent is breached, the insurer generally may deny coverage to the extent that the condition was essential for the occurrence of the insurer’s obligation. Minor or ambiguous breaches are often interpreted in favour of the insured party, particularly in consumer insurance contracts. Clear drafting and proper documentation of compliance are therefore critical to ensure enforceability and avoid disputes.

In Liechtenstein, disputes over insurance coverage are primarily governed by the Insurance Contract Act (VersVG). It sets out the rights and obligations between insurers and policyholders. If no mutual agreement can be reached, coverage disputes are generally resolved before the ordinary civil courts.

According to Article 38 of the VersVG, claims arising from an insurance contract expire five years after the insurer’s obligation to pay arises (eg, occurrence of the insured event). This five-year period applies to contractual performance claims, such as claims for insurance benefits. Consumer contracts involve individual policyholders and are subject to specific protective rules under the VersVG. Reinsurance contracts, by contrast, are negotiated between professional market participants and are governed by general civil law principles, without the application of consumer protection rules.

According to Article 74 (1) of the VersVG, the policyholder is entitled to designate a third party as beneficiary without the consent of the insurance company. Any beneficiary is entitled to assert the insurance claim directly against the insurance company, once the insured event has occurred.

Under Liechtenstein law, insurance disputes concerning jurisdiction and choice of law are generally governed by the contract, but with important exceptions for consumers: policyholders in consumer insurance contracts may sue at their place of residence, even if the contract designates a different forum, limiting exclusive forum clauses favouring the insurer. Parties may freely choose the applicable law, provided mandatory provisions are not overridden; in consumer contracts, statutory protections of the home jurisdiction cannot be circumvented.

International conventions such as the Hague Convention on Choice of Court Agreements (2005) and the Lugano Convention are applicable in cross-border disputes, particularly for recognition and enforcement of foreign judgments. Reinsurance and commercial insurance contracts between professional parties are primarily governed by the contract terms and general private law principles.

In Liechtenstein, insurance law litigation begins with filing a claim before the competent court. The litigation process involves each party mutually exchanging their standpoint via written statements. Evidence is taken during oral court meetings. The litigation process terminates with a verdict in first instance. In civil matters, the judicial system in Liechtenstein is structured across three levels: cases are initially heard by the Princely Court of Justice followed by appeals to the Princely Court of Appeal, and, ultimately, the Princely Supreme Court. Liechtenstein does not maintain specialised courts, while the Constitutional Court functions as an extraordinary appellate body. All courts are located in Vaduz.

Domestic final judgments can be enforced in Liechtenstein directly, whereas foreign judgments require recognition and enforcement by a Liechtenstein court. The Liechtenstein Enforcement Act (EO) regulates the execution of court judgments, arbitral awards, and provisional measures. Under Article 52 EO, foreign judgments are enforceable in Liechtenstein only if such enforcement is permitted by applicable treaties or mutual agreement, and provided that the fundamental principles of Liechtenstein law were observed during the foreign proceedings. Due to the absence of a vast network of international agreements, final judgments issued against a Liechtenstein domiciled party in a foreign court (other than in Austria or Switzerland) are not automatically recognised or enforceable in Liechtenstein. By contrast, foreign arbitral awards are recognised, and enforcement in Liechtenstein is possible under the 1958 New York Convention, which entered into force in Liechtenstein on 5 October 2011.

A choice of forum is permitted if expressly agreed between the parties. This agreement must be presented to the court and only has legal effect if it relates to a specific dispute or disputes arising from a defined legal relationship (eg, an insurance contract). However, for insurance-related disputes, if the policyholder resides in Liechtenstein or the insured interest is located in Liechtenstein, any reference to a foreign court is null and void. In these cases, the courts in Vaduz have exclusive jurisdiction. Compliance with this rule is observed ex officio, including in enforcement or insolvency proceedings.

An arbitration agreement may be established either as a standalone contract or as a clause within a broader agreement. It can cover any monetary claim that falls under the jurisdiction of the ordinary courts, meaning that, in principle, all commercial disputes can be resolved through arbitration. The parties are free to specify the applicable legal framework and the rules of law that the arbitral tribunal should apply, as well as the procedural principles governing the arbitration. Additionally, the parties may agree to adopt specific procedural regulations, such as the Liechtenstein Arbitration Rules, for the conduct of the proceedings.

In Liechtenstein, an arbitral award issued within the country is treated as an enforceable title, allowing the prevailing party to seek enforcement directly through the competent court without the need for prior judicial recognition.

Regarding the enforcement of foreign arbitral awards, the New York Convention on Recognition and Enforcement of Foreign Arbitral Awards (NYC) applies, and makes foreign arbitral awards enforceable in Liechtenstein under the contractual regime. Foreign arbitral awards have to be recognised in principle.

The requesting party must submit to the Liechtenstein court the duly authenticated signature of the award and the signature of the arbitration agreement, together with the application for recognition or enforcement (Article IV, paragraph 1 of the NYC).

Under the principle of freedom of contract, contractual parties are free to agree to settle disputes out of court. Alternative dispute resolution methods, such as arbitration or mediation, are well established in Liechtenstein.

Liechtenstein law does not provide specific statutory penalties for late payment of claims. However, policyholders may claim damages under general obligations law and courts may award default interest. Usually, consumer contract default remedies are interpreted in favour of the policyholder, while contractual late-payment penalties are generally enforceable, if clearly drafted.

After making an insurance payment, insurers have the right of subrogation. This means that the insurer assumes the rights of the policyholder and can assert all rights or claims that the policyholder has against a third party responsible for the damage. This allows the insurer to reclaim the amount it has paid from the liable party.

The scope of this right is limited to the actual amount paid under the insurance contract, so the insurer cannot claim more than the compensation it provided. The policyholder is generally required to cooperate, and must not settle with the third party in a way that prejudices the insurers subrogation rights.

Contractual agreements or statutory provisions may restrict subrogation, and the insurer must assert its rights within the applicable limitation period, typically five years from the date it becomes aware of the claim. These rules ensure that insurers can recover funds while respecting the rights and obligations of the policyholder and any contractual limitations.

In the Principality of Liechtenstein, the domestic market is small. Liechtenstein has a small population and limited domestic “retail demand”, so insurers’ efforts will need to target cross-border/high-net-worth/niche clients.

“Insurtech” has proven to be key to facilitating retail activities, and refers to the use of modern technology in the insurance business. Examples are digital brokers, online sales and data-driven underwriting. Insurtech been a particularly important driver of innovation, with new actors entering or preparing to enter the market, as well as established market participants breaking new ground. We expect AI to accelerate the speed of these developments. Market participants benefit from the regulator’s proactive and open approach, as well as from the FMA’s considerable experience in this field.

The FMA has set up an own department a dedicated “FinTech Unit/Regulatory Laboratory” to help both traditional financial firms and new fintech/insurtech companies to launch and operate, suggesting a regulatory environment geared toward innovation and flexibility.

Additionally, it is worth mentioning that Liechtenstein supports innovation via what is called the “innovation framework” – including legal forms, friendly corporate-law options (foundations, protected-cell companies, “venture cooperative” LVC), and institutional support (innovation clubs, regulatory sandbox-type environment). By doing so Liechtenstein lowers the barriers to establishing financial (including insurance) innovation ventures.

Cyber-Attacks and ICT/Third-Party Operational Risk

Due to the use of AI, cyber-attacks have gradually become more powerful, more scaled, more sophisticated, more precise, faster, and therefore harder for cybersecurity to detect or block.

Cyber-attacks can therefore be included in emerging risks for the insurance market, with the financial sector – Liechtenstein’s most important business sector – being a key target. Incidents can damage business continuity and cause mass claims (eg, for business interruption). Beyond cyber-attacks, other ICT-related incidents can compromise the security of network and information systems, adversely affecting the availability, authenticity, integrity, or confidentiality of data. The Crowdstrike Falcon case in summer 2024 highlighted how events such as faulty updates can also lead to extensive disruptions and restrictions. ICT-related incidents can pose threats to individual companies and jeopardise the stability of the entire financial system. Trends such as decentralised work arrangements, digital business models and the adoption of cloud computing further exacerbate these risks.

Against this backdrop, management of ICT third-party risk is increasingly critical. The implementation of the Digital Operational Resilience Act (DORA) in the Principality of Liechtenstein in 2025 highlights the growing significance of these issues. DORA not only encompasses comprehensive regulations for ICT risk management, handling of ICT-related incidents, testing digital operational resilience and managing ICT third-party risk, but also expands the regulator’s supervisory tools. The FMA is now equipped with sharper supervisory powers – ie, the ability to demand reporting, run audits, impose sanctions or corrective measures and require contingency planning – which helps safeguard the stability and integrity of the financial sector against cyberthreats and ICT disruptions.

From the perspective of the insurer, new policy types have been developed in respect of emerging risks, such as policies to cover computer and network hacking risks, data or identity theft or loss of reputation. That said, Liechtenstein insurance products still show substantial room for development in this area.

The Liechtenstein FMA has made Value for Money (VfM) a core supervisory priority for insurers, embedding it into its Product Oversight and Governance (POG) framework. Products with weak customer value, excessive costs, or unfair commission structures will face increased scrutiny and possible intervention. A new POG Guidance (FMA-M 2025/3), effective from 2026, will align Liechtenstein practice with European standards and place strong emphasis on customer benefit, target market definition, cost-benefit balance, and ongoing product monitoring, particularly for unit-linked life insurance.

Insurers must demonstrate transparent pricing, proportionate costs, justified commissions, robust product testing, scenario analysis, and lifecycle monitoring, including handling of cancellations, conflicts of interest, and distributor incentives.

The FMA expects proactive internal VfM assessments, data-driven monitoring of customer outcomes, and effective, proportionate governance rather than purely formal compliance.

For insurers operating in Liechtenstein, this means deeper integration of VfM and POG into governance, customer-centric product design, continuous performance monitoring, and timely corrective action where products fail to deliver fair value.