In Portugal, the main sources of insurance and reinsurance law are the following.

• The Insurance and Reinsurance Activity Law (the “Insurance Activity Law”), approved by Law No 147/2015, dated 9 September 2015, which transposed into the Portuguese legal order Directive 2009/138/EC of the European Parliament and of the Council of 25 November 2009 on taking up and pursuing the business of insurance and reinsurance (the “Solvency II Directive”). The Insurance Activity Law establishes the conditions for taking up and pursuing insurance and reinsurance business.
• The Insurance Contract Law, approved by Decree-Law No 72/2008, dated 16 April 2008, which establishes the main rules applicable to insurance contracts.
• The Insurance Distribution Law, approved by Law No 7/2019, dated 16 January 2019, which transposed into the Portuguese legal order Directive 2016/97/EU of the European Parliament and of the Council of 20 January 2016 on insurance distribution. The Insurance Distribution Law establishes the conditions for taking up and pursuing insurance and reinsurance distribution.

The above-mentioned diplomas are supplemented by other laws or decree-laws with a specific scope aiming to regulate certain types of insurance or distribution channels (namely, PRIIPs (packaged retail investment products) national law, approved by Law No 35/2018, dated 20 July 2018) or with a general scope (namely, the Standard Contractual Clauses Law, approved by Decree-Law No 446/85, dated 25 October 1985, and the Consumer Protection Law, approved by Law No 24/96, dated 31 July 1996). They are also supplemented by several regulations and circular letters issued by the Portuguese Regulatory Authority.

The Portuguese jurisdiction is based on a civil law system, meaning that legal rules are codified under a set of legal statutes created by the legislature, rather than being based on judicial decisions, as happens in a common law system. Court decisions are only relevant for the purposes of interpretation; they are not legally binding.

The competent authority for the prudential and regulatory supervision of insurance and reinsurance business, insurance distribution and pension funds is Autoridade de Supervisão de Seguros e Fundos de Pensões (ASF). The ASF’s mission is to ensure the proper functioning of the insurance and pension funds market by promoting the stability and financial soundness of the entities under its supervision. It is also the ASF’s role to ensure high standards of conduct on the part of all the supervised entities aiming to protect policyholders, insureds, subscribers, beneficiaries and any interested parties.

Besides supervision of regulated entities, the ASF’s duties include taking part in the macro-prudential oversight of the financial system and in the European System of Financial Supervisors, providing technical support to parliament and the government in matters related to the activities under its supervision and promoting financial literacy in the sector.

The ASF’s powers are set out in the following main rules:

• Law No 67/2013, dated 28 August 2013, which establishes the framework law of the public supervisory authorities;
• the ASF’s statutes, approved by Decree-Law No 1/2015, dated 6 January 2015;
• the Insurance Activity Law;
• the Insurance Distribution Law; and
• the legal framework applicable to crimes in the insurance and pension funds sector and to administrative offences that are the responsibility of the ASF, approved by Law No 147/2015, dated 9 September 2015.

Under the Insurance Activity Law, insurance and reinsurance business in Portugal can only be carried out by the following entities:

• Portuguese-based insurers and reinsurers authorised by the ASF;
• Portuguese-based mutual insurance and reinsurance undertakings authorised by the ASF;
• branches of insurers and reinsurers established in other EU member states acting in Portugal under freedom of establishment (FoE), provided certain provisions are met;
• branches of insurers and reinsurers established in a third country authorised by the ASF;
• public insurers and reinsurers set up in accordance with Portuguese laws, provided that such undertakings have insurance or reinsurance operations as their object, under conditions equivalent to those under which undertakings governed by private law operate;
• insurers and reinsurers in the legal form of a European company in accordance with the applicable legislation; and
• insurers and reinsurers established in other EU member states acting in Portugal under freedom of services (FoS), provided certain provisions are met.

General Requirements Applicable to Portuguese-Based Insurers and Reinsurers

Insurers

Insurers must have as their exclusive corporate purpose insurance activity and operations arising directly therefrom, excluding any other commercial business. The taking-up of direct insurance business is subject to prior authorisation from the ASF, which is granted for a particular class of insurance, covering the entire class, unless the applicant wishes to cover only some of the risks pertaining to that class.

Portuguese law does not allow companies to pursue activity simultaneously in life insurance and non-life insurance, with one exception: the authorisation for life insurance may comprise accidents and sickness (classes of non-life insurance). Other than that, authorisation cannot simultaneously encompass life and non-life insurance.

The minimum share capital is as follows:

• EUR2.5 million for non-life insurers to conduct business in sickness, legal expenses or assistance;
• EUR7.5 million in the event the undertaking conducts business in more than one of the classes referred to in the preceding bullet or in any other class or classes of non-life insurance;
• EUR7.5 million in the event the undertaking conducts life insurance business; and
• EUR15 million in the event the undertaking conducts business simultaneously in life insurance and one or more classes of non-life insurance, where authorised.

Reinsurers

Reinsurers must have as their exclusive corporate purpose reinsurance activity and related operations, including the management of shares held in other companies within the financial sector. The taking-up of reinsurance business is subject to prior authorisation from the ASF, which is granted for non-life reinsurance activity, life reinsurance activity or both.

The minimum share capital is as follows:

• EUR7.5 million in the event the undertaking conducts non-life reinsurance or life reinsurance business; and
• EUR15 million in the event the undertaking conducts both kinds of reinsurance activity.

Requirements applicable to both insurers and reinsurers

Insurers and reinsurers must be incorporated in the legal form of a public limited liability company (sociedade anónima) with nominative shares and subject to registration at the Commercial Registry Office, tax authorities and social security. The share capital must be totally subscribed and paid up at the incorporation. The shareholders, members of the board and key-functions staff are subject to fit and proper criteria.

The authorisation granted by the ASF permits insurers and reinsurers to pursue business in Portugal, also covering the right of establishment and the freedom to provide services in other EU member states – provided the notification procedure between supervisors is duly complied with.

The ASF must grant authorisation within six months of receiving the application or, where applicable, after receiving any additional information from the applicant – but never after 12 months from the date the application was initially filed. The authorisation will expire in the event the undertaking is not incorporated within six months or does not start its activity within 12 months from the date the authorisation was granted.

Consumer Insurance, SME Insurance and Corporate Insurance

Large risk versus mass risk

The Portuguese insurance legal framework is based on two main concepts: mass-risk insurance and large-risk insurance. The distinction between these two types of insurance arises from the Insurance Activity Law.

Large-risk insurance comprises the following risks.

• Risks classified under the following classes:
1. Railway Rolling Stock;
2. Aircraft;
3. Ships;
4. Goods in Transit;
5. Aircraft Liability; and
6. Liability for Ships.
• Risks classified under Credit and Suretyship classes where the policyholder is engaged professionally in an industrial or commercial activity, or in one liberal profession, and risks relate to such activity.
• Risks classified under Land Vehicles, Fire and Natural Forces, Other Damage to Property, Motor Vehicle Liability, General Liability and Miscellaneous Financial Loss classes, insofar as the policyholder exceeds at least two of the following criteria:
1. a total balance sheet of EUR6.6 million;
2. a net turnover of EUR13.6 million;
3. an average number of 250 employees during the financial year; or
4. if the policyholder belongs to a group of undertakings for which consolidated accounts are drawn up, the foregoing criteria must be applied on the basis of the consolidated accounts.

Mass-risk insurance encompasses all insurances that do not fall under the scope of large-risk insurance. Mass-risk insurance is subject to stricter legal rules with a view to consumer protection.

Consumers versus professionals

The Insurance Contract Law does not provide for an autonomous category or definition of “consumer insurance” versus “professional insurance”. Instead, it bases the protection of consumers on the imposition of stricter legal provisions with regard to mass-risk insurance.

As a rule, insurance contracts are governed under contractual freedom. However, mass-risk insurance is subject to several limitations that aim to protect the consumer, who – depending on the circumstances – may act in the capacity of policyholder, insured or beneficiary. The protection granted by the law is not based on the personal or professional purpose of the policyholder, it is based on the classification of the risk (mass-risk versus large-risk).

In this regard, the Insurance Contract Law establishes that certain rules are mandatory as regards mass-risk insurance. Said rules are divided into:

• absolutely mandatory rules (rules that cannot be waived by the parties); and
• relatively mandatory rules (rules that allow the parties to provide for different solutions other than those established by law, provided said solutions benefit the policyholder, the insured or the beneficiary, where applicable).

Legal restrictions

Furthermore, the Insurance Contract Law settles that the following risks cannot be guaranteed under Portuguese law, under penalty of the insurance being null and void:

• criminal, administrative or disciplinary liability;
• kidnapping, sequestration and other crimes against personal freedom (save for civil compensation);
• possession or transportation of narcotics or drugs, the consumption of which is forbidden; and
• the death of children under 14 years old or of those who are incapable of governing themselves owing to mental incapacity or other cause (save for civil compensation).

Portuguese law subjects the premiums of insurance contracts covering risks situated in Portuguese territory (or regarding which Portugal is the member state of the commitment) to the indirect taxes and parafiscal charges foreseen in Portuguese law, regardless of the law applicable to the contract.

Policyholders

Life insurance

• Tax to the Medical Emergency Institute (Instituto Nacional de Emergência Médica, or INEM) ‒ 2.5% on premiums concerning life insurance in case of death (as well as supplementary covers).
• Stamp duty ‒ exempted.
• VAT ‒ exempted.

Non-life insurance

• Tax to INEM ‒ 2.5% on premiums regarding sickness, accidents, land vehicles and motor vehicle liability.
• Stamp duty (different rates apply):
1. suretyship – 3%;
2. accidents and health – 5%;
3. credit – 5%;
4. agriculture and livestock – 5%;
5. goods in transit – 5%;
6. ships and aircraft – 5%; and
7. other non-life risk classes – 9%.
• VAT ‒ exempted.
• Other specific taxes depending on the risk class (motor insurance guarantee fund, tax on green cards, civil protection, etc).

Personal income tax (PIT)

Income corresponding to the positive difference between the amounts paid as redemption of a life insurance contract and the premiums paid is subject to PIT as investment income. Taxable income is subject to a 28% final rate, however, the policyholder may benefit from reduced taxation provided certain legal criteria are met.

Insurers

Premiums received by Portuguese-based insurers are deemed as taxable income and are subject to corporate income tax (CIT) general rules at rates of up to 29.5%. Additionally, tax on insurance premiums must be paid at the following rate to the ASF (the “ASF Tax”) by Portuguese-based insurers and overseas-based undertakings acting in Portugal:

• life insurance ‒ 0.078% on registered earnings; and
• non-life insurance ‒ 0.242% on registered earnings.

EU Undertakings

An authorisation granted to an insurer or reinsurer to conduct insurance business by a supervisory authority from another EU member state shall be valid in Portugal (an “EU passport”), covering freedom of establishment (FoE) (through a branch) or freedom of services (FoS), where applicable.

Insurers

Any insurer that wishes to act in Portugal under FoS or FoE must first notify the supervisory authorities of its home member state about such intention; they will thereafter communicate this information to the ASF. Within two months of receiving the information, the ASF will communicate to the supervisory authorities of the home member state the “general good” provisions that must be complied with when acting in Portugal.

The insurer may start business:

• under FoS, from the date on which it is informed by the supervisory authority of the home member state about the communication provided to the ASF; or
• as a branch, from the date on which the supervisory authority of the home member state received said communication from the ASF, or on expiry of the above-mentioned two-month period (provided the branch is registered with the companies register, tax authorities and social security).

General good provisions

The pursuit of insurance business in Portugal under an EU passport is subject to compliance with several rules considered to be of “general good”, as determined by the ASF, which include (but are not limited to) the following.

• Payment of the indirect taxes and rates established in Portuguese law with regard to premiums of insurance contracts covering risks situated in Portuguese territory or where Portugal is the member state of the commitment, regardless of the law applicable to the contract.
• Compliance with several rules arising from the Insurance Contract Law regarding pre-contractual information and mandatory provisions.
• Prohibition of underwriting certain risks forbidden under the Portuguese legal framework.
• Compliance with market conduct provisions ‒ namely, in terms of client handling policies, advertising, complaints management, the complaints book, the client ombudsman, and a website dedicated to the Portuguese market.
• Reporting of periodic information to the ASF.
• General compliance with mandatory provisions ‒ namely, concerning insurance distribution, standard contractual clauses (rules regarding abusive clauses and font size), and advertising.

Insurances that are compulsory within the Portuguese legal system are additionally subject to the following.

• Must be ruled by Portuguese law.
• The general terms and conditions of the policy (and any amendments thereto) must be registered with the ASF before the beginning of business (or one month thereafter).
• A claims representative residing in Portugal must be appointed.

Per type of insurance:

• life insurances, capital redemption operations and personal accident insurances – compliance with the central register established by Decree-Law No 384/2007, dated 19 November 2007;
• unit-linked life insurances – ex ante notification of the key information document to the ASF, under PRIIPs Framework and Law No 35/2018, dated 20 July 2018;
• motor vehicle insurance – registration at the Portuguese Green Card Bureau, contribution to the national motor guarantee fund, and periodic reporting on insured vehicles and claims; and
• work accidents – compliance with mandatory legal and regulatory provisions applicable to this type of insurance and contribution to the national work accidents fund.

Reinsurers

• Acting under FoS ‒ without prejudice to any applicable local rules of the home member state, the pursuit of reinsurance business in Portugal under freedom of services does not require notification to the ASF.
• Acting through a branch ‒ the taking-up and pursuit of reinsurance business in Portugal through a branch is subject to notification to the supervisory authorities of the home member state, which will thereafter communicate this information to the ASF.

Third Countries’ (Non-EEA) Undertakings

As a rule, the taking-up and pursuit of insurance and reinsurance business in Portugal by an undertaking with a head office established outside the EEA (“non-EEA undertakings”) requires the establishment of a branch and prior authorisation from the ASF. The authorisation will depend on the following conditions being met by the undertaking.

• Is entitled to pursue insurance or reinsurance business under its national law for more than five years.
• Has as its exclusive corporate purpose, insurance or reinsurance business.
• Undertakes to set up at the branch accounts that are specific to the business pursued locally and to keep all the records regarding the business transacted.
• Appoints a general representative (natural or legal person), who must fill in the criteria laid down in the Insurance Activity Law and get approval from the ASF.
• Holds assets in Portugal of an amount equal to at least half of the absolute floor prescribed in respect of the applicable minimum capital requirement and deposits a quarter of that absolute floor as security.
• Undertakes to cover the solvency capital requirement and the minimum capital requirement in accordance with the applicable requirements.
• In the event it intends to cover motor vehicle liability other than the carrier’s liability, appoints in each member state a claims representative responsible for handling and settling claims in the victim’s country with regard to claims occurring in a member state other than the one in which the victim resides.
• Submits an operations scheme in accordance with the Insurance Activity Law’s requirements.
• Fulfils the governance requirements laid down in the Insurance Activity Law.

The branch will be authorised to pursue the risk classes and modalities for which the undertaking is authorised in the state where it is established. Life insurance and non-life insurance cannot be pursued simultaneously, unless the undertaking is authorised to such effect and each activity is managed separately.

The application to the ASF must comply with the criteria laid down in the Insurance Activity Law. The undertaking must file a reasoned report as to why it intends to establish a branch in Portugal, including information about its international business, financial statements and accounts regarding the past three tax years, and a certificate from the home country supervisor attesting that the undertaking is duly incorporated and operates in accordance with the applicable law. The ASF may require additional information or ask the applicant to correct any insufficiencies.

The ASF will grant (or decline) authorisation within six months after receiving the application or, where applicable, after receiving any additional information from the applicant – although never more than 12 months after the date the application was initially filed. The lack of notification from the ASF within the relevant deadlines will be deemed a tacit denial. The authorisation will expire in the event the branch is not incorporated within six months or does not start its activity within 12 months following the date the authorisation was granted.

Exemption regarding reinsurance

Undertakings from third countries that carry on reinsurance business in Portugal without a branch may benefit from an authorisation exemption, as long as the European Commission decides that the solvency regime in said third country is equivalent to that laid down in the Solvency II Directive.

Insurers with a head office in Switzerland

The establishment of branches of insurers with a head office in Switzerland that intend to pursue non-life insurance business is subject to authorisation from the ASF and compliance with a special regime under the Insurance Activity Law.

Brexit

Insurers based in the UK stopped benefiting from the EU passport from 31 December 2020 and became third-country undertakings. In order to be able to take up and pursue business in Portugal, they are required to establish a branch therein, in accordance with the requirements laid down in the Insurance Activity Law.

Nonetheless, policies (covering risks situated in Portugal or regarding which Portugal is the member state of the commitment) that were concluded with a UK-based undertaking under a licence to conduct insurance business in Portugal before the end of the transitional period provided for in the Brexit Agreement remain valid until the policy’s termination date, without prejudice to early termination under general terms. Undertakings must report annually to the ASF by email ‒ up to 31 March ‒ updated information on said policies until run-off, in accordance with the template provided under Decree-Law No 106/2020, dated 23 December 2020.

Fronting is permitted. Portuguese law does not stipulate many rules regarding reinsurance, leaving the contents of the reinsurance agreement and the portion/identification of the risks that are transferred to the reinsurer at the parties’ will, depending on the specific arrangements between them. For all matters not specifically stated under the reinsurance agreement, the Insurance Contract Law will subsidiarily apply insofar as it does not conflict with any agreed arrangements.

The reinsurance agreement should be formalised by means of a written document between and signed by the parties. Unless otherwise stated, the reinsurer does not have any relationship with customers.

Mergers

The merger of insurers or reinsurers may be authorised by the ASF, provided that the conditions applicable to the taking-up and pursuit of the business under the Insurance Activity Law continue to be fulfilled. Several of the provisions regarding incorporation of insurers or reinsurers apply.

Qualifying Holdings

Any person who intends either to acquire, directly or indirectly, a qualifying holding in an insurer or reinsurer or to further increase such qualifying holding ‒ as a result of which the proportion of the voting rights or of the capital held will reach or exceed the thresholds of 20%, one-third or 50%, or the company concerned becomes its subsidiary ‒ must notify the ASF of said acquisition project in advance. Notification also applies when the qualifying holding is below the mentioned thresholds, but the acquisition is likely to enable the acquirer to exercise a significant influence over the management of the company. The ASF may decide to oppose the acquisition project if the acquirer fails to guarantee sound and prudent management of the company.

The reduction/disposal of a qualifying holding of a stake to below the above-mentioned thresholds is likewise subject to prior notification to the ASF.

The Insurance Activity Law does not impose limitations regarding foreign ownership/investment, provided there is compliance with the provisions laid down therein.

The Insurance Distribution Directive (IDD) was transposed into the Portuguese legal order by the Insurance Distribution Law without substantial divergences.

Portuguese-Based Intermediaries

Pursuing insurance distribution business is subject to prior authorisation from the ASF, except for activities that are carried out under an exemption.

The Insurance Distribution Law provides for the following types of insurance intermediaries:

• ancillary insurance intermediaries;
• insurance agents; and
• insurance brokers.

The requirements applicable to insurance intermediaries can be summarised as follows.

Ancillary insurance intermediary

• acts for and on behalf of one or more insurers pursuant to a distribution contract executed between the parties;
• conducts insurance distribution on an ancillary basis to its professional activity;
• cannot distribute insurance products covering life insurance or liability risks, unless said cover complements the good or service the intermediary provides as its principal professional activity;
• cannot distribute IBIPs;
• subject to professional qualification and professional indemnity insurance, but with lower requirements than agents and brokers;
• registration application at the ASF must be filed by an insurer; and
• the ASF will grant authorisation within 60 days of receiving the application or, where applicable, after receiving any additional information from the applicant.

Agent

• acts for and on behalf of one or more insurers, pursuant to a distribution contract executed between the parties;
• conducts insurance distribution as its main professional activity;
• must have a minimum share capital of EUR5,000;
• subject to professional qualification and professional indemnity insurance;
• must have at least one establishment open to the public;
• registration application at the ASF must be filed by an insurer; and
• the ASF will grant authorisation within 60 days of receiving the application or, where applicable, after receiving any additional information from the applicant.

Broker

• acts on behalf of customers;
• must have financial services as its exclusive corporate purpose;
• must have a minimum share capital of EUR50,000;
• subject to professional qualification and professional indemnity insurance;
• must submit an activity programme to the ASF for three years;
• must have organised accounting;
• must have a risk analyst in the event it pursues non-life branches;
• must have at least one establishment open to the public;
• subject to portfolio diversification according to specific rules;
• registration application at the ASF is filed by the broker itself; and
• the ASF will grant authorisation within 90 days of receiving the application or, where applicable, after receiving any additional information from the applicant.

Bancassurance

Banks are not subject to a special framework, apart from the fact that they cannot be registered as ancillary insurance intermediaries, further to the IDD. Banks are usually registered as agents. The bancassurance channel has significant weight in the Portuguese market.

EU-Based Intermediaries

Any EU-based insurance intermediary that wishes to act in Portugal under FoS or FoE must firstly notify the supervisory authorities of its home member state of its intention. These authorities will then communicate this information to the ASF.

The ASF will communicate to the supervisory authorities of the home member state the general good provisions to be complied with when acting in Portugal. Alternatively, the ASF will direct said authorities to the hyperlink where said information is available.

The intermediary may start business:

• under FoS, from the date on which it is informed by the supervisory authority of the home member state about the communication provided to the ASF; or
• as a branch, from the date on which the supervisory authority of the home member state receives said communication from the ASF or within one month if no communication is received (provided the branch is registered in the Companies Register and with the tax authorities and social security).

General good provisions

The pursuit of insurance distribution activities in Portugal under an EU passport is subject to compliance with several rules considered of general good, as determined by the ASF and disclosed on its website.

Policyholder/Insured

The Insurance Contract Law has adopted a system based on the policyholder/insured’s risk disclosure statement. The policyholder and/or insured is/are obliged to disclose accurately, before the conclusion of any policy, all the facts that they are aware of and that are likely to have an impact on the risk assessment by the insurer (risk disclosure obligation). Said obligation will apply regardless of whether the insurer asks them to fill in a questionnaire in which such circumstances are specifically addressed. This obligation remains applicable throughout the life of the policy.

This system implies an effort from the policyholder/insured to recall all circumstances that may affect the risk (facts that a normal person would reasonably consider relevant to the risk assessment).

Insurer

In turn, the Insurance Contract Law sets out some limits to this risk disclosure obligation. Firstly, it states that insurers must explain to policyholders/insureds the scope and consequences of such obligation before the conclusion of the policy, as the insurer may be liable for the damage arising from the breach of this duty otherwise. Notwithstanding the risk disclosure obligation from the policyholder/insured, the insurer should proactively seek relevant information that will allow it to carry out a proper risk assessment.

In addition, in the event the insurer asks the client to fill in a questionnaire, the insurer should:

• ensure that the questions allow for accurate and complete answers;
• review the answers provided by the client to avoid any inconsistencies; and
• ask for any clarification or additional information in the event the answers are incomplete, inaccurate or contradictory.

Unless there is wilful deception by the policyholder/insured, if the insurer accepts to underwrite the risk based on the statements provided by the policyholder/insured, the insurer cannot rely on incomplete or inaccurate answers, inconsistencies or other circumstances known to the insurer to refuse the risk.

Consumers Versus Professionals

As a rule, the risk disclosure obligation applies to any policyholder/insured, regardless of their acting capacity.

Policyholder/Insured

The Insurance Contract Law provides for different solutions depending on the nature of the breach to comply with the risk disclosure statement.

In the case of an intentional breach from the policyholder/insured, the insurer may terminate the policy in a communication to the policyholder. If no claim has occurred, the communication must be sent within three months of the date on which the insurer became aware of the breach. The insurer is entitled to premiums:

• due until the end of the three-month period, unless a deliberate action or gross negligence on the part of the insurer is discovered; or
• due until the end of the policy in the event of intentional breach by the policyholder/insured aiming to obtain an illicit advantage.

In the case of a negligent breach, the insurer may ‒ in communication with the policyholder ‒ within three months of when the insurer became aware:

• propose amendments to the policy, establishing a deadline of no less than 14 days for the policyholder to approve or, if allowed, to provide a counter-offer; or
• terminate the policy, if the insurer can prove that it never enters into policies covering the risks relating to the facts omitted or inaccurately stated.

The policy will terminate within 30 days of the insurer’s notice or, if the insured fails to respond to the amendment proposed by the insurer, within 20 days. Premiums will be returned on a pro rata temporis basis.

Insurer

In the event the insurer fails to provide the policyholder/insured with:

• information about the risk disclosure obligation before the conclusion of the policy, it may be liable to the policyholder/insured for the damages arising therefrom;
• mandatory pre-contractual information (eg, coverage, exclusions or premiums), the policyholder will be entitled to terminate the policy (and to receive premium reimbursement) within 30 days of receipt of the policy, unless the lack of information has not affected the policyholder’s decision to conclude the policy or a claim was triggered by a third party (the lack of pre-contractual information may also give rise to the insurer’s liability under general terms); or
• delivery of the policy, the policyholder will be entitled to terminate the policy and receive premium reimbursement.

Ancillary insurance intermediaries and agents act on behalf of and for the account of insurers (or other insurance intermediaries), whereas brokers act independently of the insurers and in representation of their clients.

Nevertheless, although the provision of advice (personalised recommendation) is not mandatory under the Portuguese Insurance Distribution Law, all intermediaries must act in accordance with the customers’ best interests, providing information about the insurance contract that best suits each customer’s needs and also about their rights and obligations arising from the conclusion of insurance policies. Intermediaries must also explain to customers the reasons why they are providing information or advising on a given product (except when it comes to large-risk insurance).

Besides the foregoing, brokers are additionally subject to portfolio diversification rules and impartiality when suggesting a given product to the customer, basing their activity on the analysis of a sufficiently large number of diversified contracts available on the market.

The Insurance Contract Law does not provide for a definition of “insurance contract” but establishes its main features.

By means of an insurance contract:

• the policyholder (natural or legal person, in due capacity) transfers to the insurer a given risk, which must be an existing future (or unknown) risk – the contract will be null and void as regards risks that have ceased before the conclusion of the contract or that do not come to take place; and
• in turn, the insurer undertakes to provide the insured with an agreed compensation in case the aleatory event provided for in the contract occurs (claim).

Except in those cases legally provided for, the coverage of risks depends on prior payment of the insurance premium (no premium, no risk).

The insured must have an insurable interest worthy of legal protection related to the risk that is being covered throughout the life of the contract, under penalty of the contract being null and void or terminated ex lege. The contents of the insurable interest will depend on the type of insurance. The following general rules apply.

• Property and casualty – the insurable interest must concern the preservation and integrity of the object, right or assets.
• Life insurance – the insured who is not the beneficiary must consent to their life being covered, except where the policy is intended to comply with any legal provision or collective labour regulations.
• Personal accident – when the policyholder is the beneficiary but not the insured, the latter must consent to their physical integrity being covered, provided they are individually identified in the contract.

In terms of format, the Insurance Contract Law states that the validity of a contract is not subject to any special format. However, regarding mass-risk insurance, the insurer must write down the policy, date it and sign it. As a rule, the policyholder’s signature is not legally required.

Depending on the type of insurance and cover, Portuguese law allows some flexibility when it comes to beneficiaries.

• The beneficiary can be the policyholder or anyone named by the policyholder (or by the insured, in collective insurance).
• The beneficiary does not need to be an insured.
• It is possible to designate irrevocable beneficiaries (eg, a bank in credit protection insurance).
• The designation of the beneficiary can be made within the insurance policy, by means of a written statement sent to the insurer after the policy’s execution, or through a Will.
• Multiple beneficiaries are allowed.

The beneficiary clause can be revoked or changed at any time during the life of the policy (up to the moment the beneficiary is entitled to the benefit) ‒ unless the person who is entitled to designate the beneficiary has expressly waived such right or, in the case of survival insurance, the beneficiary subscribes to the policy or accepts the benefit provided under the policy.

Different rules shall apply to compulsory insurance.

The insurance policy must contain enough information to allow the identification of the beneficiary (name, address and civil and tax identification numbers) when referring to a nominated beneficiary. The law also allows for generic beneficiary clauses (eg, heirs of, or the children of).

In the event the policyholder and the insured are not the same person, the insurer must provide information on the consequences arising from the lack of beneficiary designation or inaccurate/insufficient information regarding the beneficiary’s identification.

Moreover, the following rules apply to insurers.

• In the event the premium is not paid within the due date and the policy establishes an irrevocable benefit in favour of a third party, the insurer must notify said third party within 30 days of the due date to inform them that they may pay the premium (in replacement of the policyholder), should the third party wish to do so.
• In the event of the demonstrated impossibility of contacting the policyholder or insured (if they are not the same person) over the course of a year, the insurer must inform the beneficiary of such fact ‒ provided the policyholder/insured person has expressly authorised this – within 30 days of the last communication made by the insurer to the policyholder/insured, where applicable.
• There is an obligation to inform the beneficiary of the existence of the insurance policy and their right to receive the benefit, within 30 days of the insurer becoming aware of the insured’s death.

In the event the policyholder or the insured person (should they not be the same person) does not contact the insurer to claim the benefit over the course of one year following the end of term of the policy, the insurer has an obligation to inform the beneficiary of such fact ‒ provided the policyholder/insured person has expressly authorised it ‒ within 30 days after one year from the end of the term of the policy.

Mass-risk insurance is subject to stricter rules aiming to protect consumers. The Insurance Contract Law lists several rules considered mandatory with regard to mass-risk insurance, classified into:

• absolutely mandatory rules, which cannot be waived by the parties (eg, format of the policy, insurable interest, rules regarding risk, means to pay the premium, and consequences in the event the premium is not paid); and
• relatively mandatory rules, which allow different solutions other than those established by law ‒ provided said solutions benefit the policyholder, the insured or the beneficiary, where applicable (eg, provision of pre-contractual information, risk disclosure obligation and consequences, and policy contents).

Reinsurance contracts are, in general, governed by contractual freedom. Portuguese law establishes few rules regarding reinsurance (see 3.2 Fronting).

Insurers may resort to reinsurance and alternative risk mitigation techniques for the purposes of risk mitigation within their risk management and internal control systems.

Should the insurer decide to use them, it must have a written policy in place in accordance with the ASF’s guidelines on this matter, comprising processes necessary to identify, monitor and manage on a continuous basis the use of reinsurance or alternative risk mitigation techniques according to the insurer’s appropriate risk tolerance limits and risk profile, also including rules to be applied in selecting reinsurance counterparties and risk mitigation counterparties.

There are no restrictions specifically applicable to reinsurance and alternative risk mitigation techniques underwritten in other jurisdictions.

The fundamental principle governing the Insurance Contract Law is the freedom of contract, whereby the parties are free to negotiate and define the terms and conditions of the insurance policy. This principle is likewise enshrined in the Portuguese Civil Code (CC) and applies generally to all contractual insurance relationships.

However, there are some exceptions to this principle, namely in what regards consumer contracts and compulsory insurance.

In the case of insurance contracts concluded with consumers in which the policyholder lacks any real negotiation power regarding the contractual terms, besides mandatory rules under Insurance Contract Law (see 6.6 Consumer Contracts or Reinsurance Contracts), the rules provided for in the Standard Contractual Clauses Law shall apply: in addition to prohibiting certain types of clauses, considered unfair under certain terms (eg, insurer’s unilateral right to amend or cancel the policy), the Standard Contractual Clauses Law provides that the clauses of an insurance policy should be interpreted pursuant to the general rules of civil law, while duly considering the context in which the policy was construed and accepted by the parties, in particular, the most vulnerable party.

In the case of compulsory insurance, there are some types of cover that are subject to clauses pre-approved by the legislator or the ASF (eg, motor vehicle liability insurance). These clauses are presumed to be more favourable and protective of the policyholder/insured.

Interpretation of insurance contracts is undertaken in accordance with the provisions of the CC, which require that contracts be construed from the standpoint of an “average person” (that is, an individual without specialised or technical knowledge of the subject matter) when hypothetically placed in the position of each party to the insurance contract.

Moreover, mandatory pre-contractual information supplied by the insurer, policy terms and conditions and any information provided by the policyholder/insured at policy subscription are all elements bearing significant relevance in what refers to the interpretation of an insurance contract.

With regard to mass-risk insurance, it is not common to include representations and warranties clauses in insurance policies in the same terms as said clauses are included in other types of contracts. Typically, mass-risk insurance shall include risk disclosure statements from the policyholder/insured (see 6.1 Obligations of the Insured and Insurer). Failure to comply with said risk disclosure statements shall have the legal consequences provided for in the law (see 6.2 Failure to Comply With Obligations of an Insurance Contract).

However, with regard to large-risk insurance, depending on the coverage and the insured capital (which can be substantial), representations and warranties clauses may be appropriate in the context of the insurance relationship. Breach of warranties by either party shall be considered a breach of contract and may imply declination of cover by the insurer.

All terms and conditions that may give rise to an exclusion or limitation of the insurer’s liability must be expressly set out in the pre-contractual information and incorporated into the policy’s general terms and conditions.

The limitation of the insurer’s liability can be restricted either by the scope of coverage (clear listing of the risks covered by the insurer), obligations imposed on the policyholder/insured (eg, obligation to pay the premium, duties of conduct, and obligation to maintain the insured property’s safe) and/or policy exclusions (specific situations not covered by the insurer, as listed in the policy). Depending on the type of coverage, the risk will be covered by the policy if it is not expressly excluded by the insurer (eg, all risks policies).

In the event of a breach of a condition precedent, the insurer may refuse to cover the risk and decline any claims under the policy.

Disputes over coverage under an insurance policy are typically addressed, in the first stage, directly to the insurer. If the insurer does not settle the issue or takes too long to do so, the interested party may appeal to the insurer’s customer ombudsman, who acts as a second level of the insurer to complain to. If the interested party’s issue is still not resolved, they may appeal to the ASF, alternative dispute resolution mechanisms and, ultimately, the courts of law.

The limitation period for interested parties to start a court proceeding against the insurer is five years after the date on which the claimant became aware of their rights (with a maximum limitation of 20 years starting from the date the event occurred).

Unnamed beneficiaries and any injured third parties may enforce an insurance contract provided they prove the legitimacy of their interest.

As a general rule, the Insurance Contract Law provides for freedom of choice for the parties with regard to the law applicable to the contract, provided that the choice of applicable law falls within jurisdictions whose applicability corresponds to a serious interest of the parties or is connected with any of the elements of the policy that are relevant in the field of private international law.

The exception concerns compulsory insurance under Portuguese law (eg, motor vehicle liability insurance and work accident insurance). In such cases, Portuguese law shall mandatorily apply.

The parties are also free to choose the jurisdiction in which to solve disputes concerning an insurance policy. The exception in this case regards consumer contracts, in which case the Portuguese Civil Procedure Code’s general rules shall apply.

In case of cross-border insurance, the provisions set out in Regulation (EC) No 593/2008 of 17 June 2008 (Rome I Regulation on the law applicable to contractual obligations) and Regulation (EU) No 1215/2012 of the European Parliament and of the Council of 12 December 2012 (on jurisdiction and the recognition and enforcement of judgments in civil and commercial matters) shall apply, without prejudice to the rules set forth in the Portuguese Civil Procedure Code, which determine jurisdiction of Portuguese courts of law.

The litigation process for resolving disputes arising from an insurance contract usually follows the standard procedural framework, as outlined below.

• Filing of the claim – the claimant initiates the proceeding by submitting a statement of claim before the competent court.
• Response by the defendant – upon service of the claim, the defendant is afforded a period to submit a statement of defence.
• Preliminary hearing – the court subsequently summons the parties to a preliminary hearing, during which an attempt is made to facilitate an amicable settlement. Failing such agreement, the proceedings continue, and the court schedules a date for the final hearing.
• Final hearing – at the final hearing, each party presents its witnesses, experts, and any other admissible evidence, which is examined and discussed. Thereafter, the parties deliver their closing arguments, following which the judge concludes the session. No statutory deadline is imposed on the court for the issuance of its judgment.
• Appeal – in certain circumstances, and provided that the applicable legal requirements are satisfied, the parties may lodge an appeal before a higher court.

The enforcement of judgments issued by a court in disputes relating to the performance and/or interpretation of an insurance contract is carried out pursuant to the same procedural rules that govern the enforcement of judgments in other civil matters.

The recognition of judgments issued by courts of law in the EU is ruled by Regulation (EU) No 1215/2012 of the European Parliament and of the Council of 12 December 2012.

Foreign judgments may be enforced within the Portuguese jurisdiction, provided that the court in which the proceedings were conducted has complied with the fundamental rules and principles of the Portuguese Constitution, both with respect to the procedural safeguards observed and the substantive judgment rendered, including the legal provisions applied.

Arbitration clauses are admissible in insurance contracts and they are enforceable.

Any disputes arising from the validity, interpretation, performance and breach of insurance contracts may be settled by arbitration, including in cases where the issue concerns compulsory insurance within the Portuguese legal system or the application of mandatory provisions under the Insurance Contract Law.

Arbitration regarding insurance contracts shall follow the general rules of Portuguese arbitration law.

Under the Portuguese Civil Procedure Code, an arbitration award has the same value as a court-of-law judgment.

Arbitration awards issued in other jurisdictions can also be enforced by Portuguese courts if certain legal requirements are met.

Portugal is a party to several international treaties and conventions, specifically with Portuguese-speaking countries and the Macau Special Administrative Region of the People’s Republic of China (due to historic special connection). It is also a party to the Convention on the Recognition and Enforcement of Foreign Arbitral Awards 1958 (the “New York Convention”).

Alternative dispute resolution (ADR) mechanisms may prove highly effective in resolving insurance-related disputes – particularly in the context of consumer insurance contracts – as they enable consumers to obtain a resolution sooner and at a lower cost than through judicial proceedings.

There are several ADR entities located in various areas of Portugal that resolve consumer disputes through mediation, conciliation and arbitration procedures, free of charge or at reduced costs. In particular, there is an entity specialised in arbitration and mediation concerning insurance contract disputes named CIMPAS – Centro de Informação, Mediação, Provedoria e Arbitragem de Seguros.

If an insurer fails to respond to a claim in a timely manner or makes payment after the due date, it shall be liable for any damages incurred by the insured and/or the beneficiary as a result of such delay. In the event of late payment, interest is likewise payable at the applicable legal rate in force at the time the payment is made.

When an insurer pays a claim on behalf of the insured, it becomes subrogated, to the extent of the amount paid, in the rights of the person who received payment, including the right to pursue a claim against the insured or third party responsible for the claim. The policyholder/insured shall be liable for any act or omission that prejudices said subrogation up to the limit of the compensation paid by the insurer.

Subrogation clauses are very common in non-life insurance, in particular liability insurance policies.

Insurtech plays an important role in the insurance sector. Several insurers have been establishing partnerships with technology companies aiming to improve their processes and business models and become more competitive.

Telematics insurance is increasingly gaining importance. Telematics is used to collect information about the insured’s habits. It allows insurers to better identify behaviours that might be relevant in case of a claim. In return, the policyholder/insured is offered rewards or cost savings on their policy for “good behaviour”. Whether by means of telematics devices or mobile apps, where the policyholder/insured provides personal information to the insurer about preferences or habits, telematics insurances are getting stronger ‒ specifically, in car and health insurances. Telematics insurance enables insurers to offer lower prices and tailor-made products.

Insurers are also resorting to AI to automate several operations and administrative tasks ‒ namely, in underwriting, pricing and claims functions. This speeds up operations, reduces costs and offers new valued products.

The ASF is very active when it comes to insurtech issues, being aware of the market trends and participating in several insurtech initiatives and events. In terms of regulatory response, the ASF issued rules applicable to insurers and pension fund management entities establishing requirements on security and governance of information and communication technologies and on outsourcing to cloud service providers.

The ASF also supports new technologies. Insurance distance selling, whether online or by phone, is an established and well accepted practice in the Portuguese market.

In Portugal, the emerging risks that presently affect the insurance market are as follows.

Cybersecurity

The high connectivity of companies and populations across generations ‒ combined with working remotely (people connecting to their company from outside) ‒ has increased the risk of cyber-attacks, which could potentially lead to more data theft or blocking. The market for cyber-insurance is expanding in Portugal. Insurers have been progressively adapting their offers and presenting a wider choice to companies.

In terms of regulatory response, the ASF created a systematic reporting obligation regarding cyber-risks and cyber-incidents aimed at collecting data for the purposes of creating a historical aggregated record and for assessing the impact of cyber-risks within the scope of insurance activity.

Catastrophes and Climate Change

Statistics show that the number and severity of natural catastrophes have been increasing throughout the years. One of the concerns of the insurance sector relates to reducing the “protection gap”, which results from the difference between the economic losses arising from natural catastrophes and the compensation paid by the insurer under the insurance policies in force. To reduce this gap, the industry collaborates with several entities in order to increase the offer of insurance products with a sustainability-related profile and to make this type of insurance more competitive and available to a wider part of the market.

Demographic Ageing and Social and Health Care

These themes raise some concerns in terms of risk mutualisation. They are not a new topic and the sector is already aware that the offer of products will have to be adapted so as to gradually become an effective alternative to the public social protection system – while still maintaining affordable pricing – for several population sectors, age groups and layers that typically do not buy insurance.

See 11.1 Emerging Risks Affecting the Insurance Market.

In terms of other regulatory developments from the ASF in 2025, the following details are worth highlighting.

• Recommendation to insurers to make a clear distinction between health insurance and health plans – Recommendations No 1/2025 of 8 April 2025.
• Reporting of information regarding PEPPs – Regulatory Standard No 2/2025-R of 8 April 2025.
• Reporting of serious ICT-related incidents and significant cyber threats – Circular No 3/2025 of 8 April 2025.
• Amendments to Regulatory Standard No 13/2020-R regarding insurance intermediaries, aimed at simplifying the regulatory requirements applicable to ancillary insurance intermediaries – Regulatory Standard No 4/2025-R of 27 May 2025.
• Approval of “standard terms” regarding health insurance – Circular No 6/2025 of 3 June 2025.
• New disclosure duties applicable to pension funds – Regulatory Standard No 7/2025-R of 26 August 2025.
• Recommendation on gender diversity in insurance companies and pension fund management entities – Recommendations No 4/2025 of 9 December 2025.