REPUBLIC OF LITHUANIA
LAW ON INSURANCE
18 September 2003 No IX-1737
(As last amended on 21 December 2021 – No XIV-804)
Vilnius
CHAPTER I
GENERAL PROVISIONS
Article 1. Purpose of the Law
1. The purpose of this Law shall be to regulate insurance and reinsurance activities and distribution of insurance and reinsurance products for making the insurance system sound, efficient, safe and stable.
2. This Law shall specify persons who have the right to engage in insurance and reinsurance activities and distribution of insurance and reinsurance products in the Republic of Lithuania; determine the main principles of state regulation of these activities; and regulate these activities. This Law shall also regulate the specific features of pre-contractual relations between parties to insurance contracts; terms and conditions of insurance contracts; relations arising from and relating to insurance contracts; as well as other relations referred to in this Law.
3. The provisions of this Law shall not apply to:
1) state social insurance relations;
2) relations regulated by the Republic of Lithuania Law on Insurance of Deposits and Liabilities to Investors;
3) reinsurance activities carried out or fully ensured by the State acting as a reinsurer in the public interest in extreme cases, including cases in which the State has to assume this role due to the situation on the market where it is impossible to obtain adequate commercial insurance cover;
4) other legal relations which are not attributable to licensed insurance activities under the description of the groups that belong to the branch of life insurance and non-life insurance and are approved by the insurance supervisory authority.
4. Other laws shall set out specific features of establishment, licensing, operation, termination, bankruptcy and state supervision of entities entitled to engage in accumulation of a portion of the state social insurance contribution.
5. Other laws may set out specific features of activities of certain insurance or reinsurance undertakings.
6. Other laws of the Republic of Lithuania shall regulate the pension accumulation set out in Article 7(2)(5) of this Law.
7. Repealed as of 13/01/2019.
8. Provisions of other laws shall apply to the relations regulated by this Law to the extent this Law does not provide otherwise. The provisions of this law shall apply to relations arising from compulsory insurance against civil liability for the use of motor vehicles to the extent these relations are not regulated by the Law of the Republic of Lithuania on Compulsory Insurance against Civil Liability in Respect of the Use of Motor Vehicles.
9. The provisions of this Law shall implement the legal acts of the European Union listed in the Annex to this Law.
10. Under this Law, the procedure under the legal acts regulating the protection of personal data shall apply for processing of personal data.
Article 2. Definitions
1. ‘Insured person’ means a natural person specified in a life and health insurance contract under which, should an insured event occur in the life of this person, the insurer must pay an insurance benefit; a person specified in a contract of insurance against civil liability whose property interests arising from civil liability are covered by insurance; or a person specified in a property insurance contract whose property interests are insured.
11.‘Remuneration for the activities of distribution of insurance products’ (hereinafter: ‘remuneration’) means commissions, payments or other remuneration offered or paid for the activities of distribution of insurance products, including any kind of economic advantage or other financial or non-financial advantage or incentive.
2. ‘Home state’:
1) for provision of non-life insurance services, the state of the European Economic Area in which the head office of the insurance undertaking covering the risk is situated;
2) for provision of life insurance services, the state of the European Economic Area in which the head office of the insurance undertaking that has assumed the obligations is situated;
3) for provision of re-insurance services, the state of the European Economic Area in which the head office of the reinsurance undertaking is situated;
4) for distribution of insurance or reinsurance products, the state of the European Economic Area in which the insurance or reinsurance intermediary has its registered office or head office, if the intermediary is a legal person, or the state of the European Economic Area in which the intermediary resides, if the intermediary is a natural person.
3. ‘Insurance against civil liability’ means insurance of property interests of a person arising from possible civil liability for the damage caused to injured third parties and/or their property where the amount of the insurance benefit paid by the insurer depends on the amount of indemnity payable by the insured person for damage to injured third parties not exceeding the sum insured if it is specified in the insurance contract.
4. ‘Participating undertaking’ means:
1) a parent undertaking;
2) an undertaking participating in another undertaking in the manner specified in Article 2(5);
3) an undertaking non-affiliated to any other undertaking(s) in the manner specified in Articles 2(62) and 2(63) of this Law, yet managed jointly under the agreements concluded with this (these) undertaking(s) or under the provisions of the memorandum of association or articles of association;
4) an undertaking that is not affiliated to any other undertaking(s) in the manner specified in Articles 2(62) and 2(63), yet has mostly the same members as the other undertaking(s) in its administration, management or supervisory bodies during a financial year until the drawing up of consolidated financial accounts.
5. ‘Participation’ means exercising, directly or indirectly, of 20% or more of all the voting rights at the meeting of the highest management body of an undertaking, holding of 20% or more of the share capital (member share, etc.) of an undertaking, as well as any other real and long-term possibility to exercise influence over the decisions on the activities of the undertaking in the capacity of a shareholder, participant, or holder of any other rights related to the share capital (member share, etc.). For supervision of a group of insurance and/or reinsurance undertakings, participation shall also constitute holding, directly or indirectly, of the voting rights or capital due to which, in the opinion of the insurance supervisory authority, a dominant influence over that undertaking is exercised.
6. ‘Large insurance risk’ means insurance risk meeting the criteria specified in Article 10 of this Law.
7. ‘Policyholder’ means a person who has applied to the insurer for the conclusion of an insurance contract, received a proposal from the insurer to conclude an insurance contract, or concluded an insurance contract with the insurer.
8. ‘Insurer’ means a person who concludes or has concluded an insurance contract and who has the right to engage in insurance activities under the procedure set out by legal acts.
9. ‘Share of insurer’s profit’ means the share of insurer’s profit which is attributed to the policyholder and/or beneficiary under the capital accumulation life assurance contract and calculated and paid under the procedure set out in the insurance contract.
10. ‘Insurance cover’ means the insurer’s obligation to pay an insurance benefit upon occurrence of an insured event.
11. ‘Branch of an insurance or reinsurance undertaking’ means a structural division or representative office of an insurance or reinsurance undertaking established by the right of establishment and situated on the territory of a Member State of the European Economic Area other than the home state and fulfilling all or part of the functions of a legal person.
111. ‘Branch of an insurance or reinsurance intermediary’ means a structural division or representative office of the undertaking of an insurance or reinsurance intermediary established by the right of establishment, situated on the territory of a Member State of the European Economic Area other than the home state and fulfilling all or part of the functions of a legal person.
12. ‘Insurance premium’ means an amount of money specified in an insurance contract and paid by the policyholder to the insurer for the insurance cover under the terms of the insurance contract.
13. ‘Insurance undertaking’ means an undertaking which, under the procedures set out by this Law, has been granted an insurance business licence.
14. ‘Insurance interest’ means losses that the policyholder, the insured person or the beneficiary may incur upon occurrence of an insured event.
15. ‘Group of insurance and/or reinsurance undertakings’ means a group consisting of the participating undertaking, its subsidiaries and undertakings in which the participating undertaking or its subsidiaries have participating rights as well as undertakings linked to each other by a relationship set out in Article 2(4), or a group formed on the basis of contractual or other financial links established by those undertakings, including mutual insurance or similar associations, provided that the following conditions are met:
1) one of those undertakings effectively exercises, through centralised coordination, a dominant influence over the decisions, including financial decisions, of the other undertakings that are part of the group (the undertaking exercising centralised coordination shall be considered as the parent undertaking, and the other undertakings shall be considered as subsidiaries);
2) the establishment and termination of relations for the purposes set out in Section Four of Chapter II of this Law are subject to prior approval by the supervisory authority of the group of insurance and/or reinsurance undertakings.
16. ‘Transaction between undertakings of a group of insurance and/or reinsurance undertakings’ means a transaction within a group of insurance and/or reinsurance undertakings where an insurance or reinsurance undertaking relies directly or indirectly on other undertakings within the same group or on any natural or legal person linked to the undertakings within that group by close links, for the fulfilment of an obligation, whether or not contractual, and whether or not for payment.
17. ‘Supervisory authority of the group of insurance and/or reinsurance undertakings’ means a supervisory authority designated under the rules set out in Article 63 of this Law and responsible for supervision of the group of insurance and/or reinsurance undertakings.
18. ‘Insurance and/or reinsurance technical provisions’ means the insurer’s or reinsurer’s obligations arising from insurance and/or reinsurance contracts or relating to them and calculated under the procedure set out by legal acts.
19. ‘Insurance benefit’ means an amount of money or any other form of payment under the insurance contract which the insurer must pay to the policyholder or another person entitled to the insurance benefit upon occurrence of an insured event.
20. ‘Insurance holding company’ means a parent undertaking, other than a mixed-activity financial holding undertaking, the principle purpose of which is to acquire and hold participating rights in subsidiary undertakings, where those subsidiary undertakings are exclusively or mainly insurance or reinsurance undertakings, insurance or reinsurance undertakings of another state of the European Economic Area or insurance or reinsurance undertakings of a third country.
21. ‘Insurance period’ means the period from the beginning until the end of the insurance cover, which does not necessarily coincide with the period of validity of the insurance contract.
22. ‘Insurance policy’ means a document in printed or electronic format issued by the insurer at the policyholder’s choice and certifying the conclusion of an insurance contract.
23. ‘Insurance object’ means property interests related to a person’s life, health, property or civil liability.
24. ‘Insurance supervisory authority’ means an authority which supervises the insurance and reinsurance activities and distribution of insurance or reinsurance products. The Bank of Lithuania shall be the insurance supervisory authority in the Republic of Lithuania.
25. ‘College of insurance supervisory authorities’ means a permanent body of changing composition made up of insurance supervisory authorities of the states of the European Economic Area and aimed at creating favourable conditions for decision-making on and coordination of supervision of groups of insurance and/or reinsurance undertakings by members of the college, and promotion of cooperation.
251. ‘Insurance-based investment product’ means an investment product as defined in Regulation (EU) No 1286/2014 of the European Parliament and of the Council of 26 November 2014 on key information documents for packaged retail investment products and insurance-based investment products (PRIIPs). Insurance-based investment products shall exclude:
1) non-life insurance products of insurance classes specified in Article 7(3) of this Law;
2) life assurance contracts, where insurance benefits under the contract are paid solely in the event of death or loss of capacity for work as a result of injury, illness or disability;
3) pension products which have the primary purpose of ensuring an income for the investor after retirement, as set out in legal acts of the Republic of Lithuania, and which entitle the investor to certain benefits;
4) occupational pension products covered by the Law of the Republic of Lithuania on the Accumulation of Occupational Pensions;
5) certain pension products where the employer is required under legal acts of the Republic of Lithuania to pay contributions for them and neither the employer nor the employee may choose the pension product or the provider of the product.
252. ‘Distribution of insurance products’ means economic activities consisting of advising on access to insurance contracts, proposing to conclude insurance contracts or carrying out other preparatory work related to the conclusion of insurance contracts; as well as economic activities involving the conclusion of insurance contracts or assistance in the administration and performance of such contracts, in particular in the form of a claim for compensation, including the provision of information about one or more insurance contracts on the basis of criteria chosen by the policyholder online or by other means, and the establishment of a rank list of insurance products, including the comparison of prices and products, or the reductions of insurance contract price, when the policyholder may conclude an insurance contract online or by other means. The distribution of insurance products shall exclude the following:
1) provision of information on insurance which is made on a non-continuous basis in the course of another professional activities with the purpose other than to assist the recipient of information in concluding or performing an insurance contract;
2) activities limited to administration of insured events, determination of the amount of damage (loss) and claim as well as expert assessment of the claim for compensation;
3) activities limited to provision of data and information on potential policyholders to insurance intermediaries and insurance undertakings, where the information provider refrains from any additional steps to assist in concluding the insurance contract, or mere provision of potential policyholders with information on insurance products, insurance intermediary or the insurance undertaking, where the information provider refrains from any additional steps to assist in concluding the insurance contract.
253. ‘Distributor of insurance products’ means an insurance intermediary, intermediary of ancillary insurance activities or an insurer.
254. ‘Recommendation of the distributor of insurance products’ (hereinafter: ‘recommendation’) means a personal offer concerning an insurance contract made by the distributor of insurance products to the policyholder at his own request or on the initiative of the distributor of insurance products.
26. ‘Insurance risk’ means a possible danger threatening the insurance object.
27. ‘Sum insured’ means the sum of money which is specified in the insurance contract or calculated according to the method specified in the insurance contract and which the insurance benefit may not exceed, except for the cases specified in the insurance contract.
28. ‘Insurance rules’ means standard terms and conditions of an insurance contract drawn up by the insurer.
29. ‘Insurance intermediary’ means a person engaged in the activities of distribution of insurance products for remuneration; this excludes insurance or reinsurance undertakings, their employees and intermediaries in ancillary insurance activities. In the Republic of Lithuania, an insurance brokerage firm and an insurance agent shall constitute the insurance intermediary.
30. Repealed as of 01/10/2018.
31. ‘Insurance activities’ mean economic activities which consist of assuming the risk of another persons’ losses or protecting property interests of that person upon occurrence of insured events in any other way on the basis of an insurance contract by using the insurer’s assets covering the technical provisions and other assets of the insurer for the protection of the person’s property interests. For the purposes of this Law, insurance activities shall also include the activities set out in Article 7(2)(5) of this Law.
32. ‘Insurance risk’ means the risk of loss or risk related to adverse changes in the value of insurance liabilities due to inadequate pricing and provisioning assumptions.
33. ‘Insured event’ means an event specified in the insurance contract upon the occurrence of which the insurer must pay the insurance benefit.
34. ‘State of the European Economic Area’ means a Member State of the European Union, the Republic of Iceland, the Kingdom of Norway, and the Principality of Liechtenstein.
35. ‘State of the European Economic Area where an insurance risk is situated’ means a Member State of the European Economic Area where:
1) the property is located, for insurance contracts covering buildings, either individually or together with the property therein, if this property is insured under the same insurance contract;
2) a vehicle of any type covered by an insurance contract is registered. Under this subparagraph, for provision of compulsory insurance against civil liability in respect of the use of motor vehicles, the Member State of the European Economic Area where the risk is situated shall be considered to be the Member State of destination of a vehicle normally based in another state of the European Economic Area immediately upon acceptance of delivery by the purchaser, for a period of 30 days;
3) the policyholder has concluded an insurance contract for travel or holiday insurance risk for a period not exceeding four months, irrespective of the insurance class of these risks;
4) the policyholder’s domicile, his registered office, a branch or agency in respect whereof the insurance contract has been concluded is located, except for cases covered by Articles 2(35)(1–3) of this Law.
36. ‘State of the European Economic Area of provision of insurance services’, for the purposes of provision of insurance services, means a state of the European Economic Area where the risk is situated; or a state of the European Economic Area of commitment under a life assurance contract, if the insurance contract regarding that risk or commitment is concluded by an insurance undertaking of another state of the European Economic Area, a branch of an insurance undertaking established in a state other than this state of the European Economic Area, or a branch of an insurance undertaking of another state of the European Economic Area. For the provision of reinsurance services and insurance or reinsurance distribution services, the ‘State of the European Economic Area of provision of insurance services’ means a state of the European Economic Area other than the home country where reinsurance services are provided or insurance or reinsurance product distribution is carried out without establishing a branch.
37. ‘Financial supervision of insurance and reinsurance undertakings’ means supervision of insurance and reinsurance undertakings in terms of their activities, solvency, calculation of technical provisions and compliance with asset requirements. If an insurance undertaking is entitled to carry out assistance insurance activities, the insurance supervisory authority shall also carry out supervision of the technical resources of the insurance undertaking necessary for the assistance tools it has undertaken to provide.
38. ‘Financial institution’ shall have the meaning defined in the Republic of Lithuania Law on Financial Institutions. For the purposes of this Law, insurance undertakings, reinsurance undertakings, insurance holding companies and mixed-activity financial holding undertakings shall also be considered financial institutions’.
39. ‘Guarantee fund’ means the treasury of an association of insurers engaged in the activities of the insurance class specified in Article 7(3)(10) of this Law (except for insurance against civil liability of carriers) in the Republic of Lithuania or any analogous formation set out by legal acts of another state of the European Economic Area.
40. ‘Life assurance’ means the insurance of property interests related to life and/or capital accumulation of a natural person where upon occurrence of death of the insured person, another insured event or maturity of the insurance term established in the insurance contract, insurance benefits are paid in lump sum or in instalments.
41. Close link means a relationship between persons that exists in the form of control or participation. Where one person exercises control over two or more natural or legal persons, the latter persons shall also be regarded as having close links.
42. ‘Intervention measures’ means measures which are applied by the court or the Bank of Lithuania for preserving or restoring the financial standing of an insurance undertaking or a branch of a third country insurance undertaking, for protecting the interests of policyholders, insured persons, beneficiaries, injured third parties and other creditors or for implementing the objectives set out in Article 2.124 of the Civil Code of the Republic of Lithuania (hereinafter: ‘Civil Code’) and which due to their nature have an effect not only on the rights and duties of an insurance undertaking or a branch of a third country insurance undertaking, but also on other persons.
421. ‘Investment strategy management’ means decision-making on investment instruments under the investment strategy and other activities directly related to such decision-making. Investment strategy management shall exclude administration of life assurance contracts linked to investment funds (keeping of accounts, determination of the fair value of investment, distribution of investment, storage of data on completed operations, answering to questions from policyholders, insured persons and beneficiaries and other similar activities), marketing and other activities not directly related to decision-making on investment instruments under the investment strategy.
422. ‘Investment strategy’ means the totality of investment instruments chosen, on the proposal of the insurer, by the policyholder who concludes a life assurance contract linked to investment funds.
43. ‘State of the European Economic Area of the commitment under a life assurance contract’ means a state of the European Economic Area where the policyholder that has entered into a life assurance contract has his domicile or, where the policyholder is a legal person, a state of the European Economic Area where his establishment in respect of which the life assurance contract has been concluded is situated.
44. ‘Right of establishment’ means the right to establish in another state of the European Economic Area a branch of an insurance or reinsurance undertaking, a branch of an undertaking of insurance intermediaries, an undertaking of ancillary insurance intermediaries, or the right to establish in the Republic of Lithuania a branch of an insurance or reinsurance undertaking of another state of the European Economic Area, a branch of an undertaking of insurance or reinsurance intermediaries or an undertaking of ancillary insurance intermediaries of another state of the European Economic Area.
45. ‘Surrender value’ means the sum calculated by actuarial methods in view of the share of paid insurance premiums intended for capital accumulation, the interest accrued during the period of validity of the contract, the share of the insurer’s profit due to the policyholder under the insurance contract and other circumstances specified in the insurance contract.
46. ‘Persons acting in concert’ means two or more persons who, on the basis of a verbal or written agreement, concluded explicitly or implicitly, exercise or seek to exercise their rights granted by the proportion of the authorised capital and/or voting rights held in the insurance undertaking specified in Article 2 (60) of this Law.
47. ‘Another state of the European Economic Area’ means a state of the European Economic Area other than the Republic of Lithuania.
48. ‘Insurance undertaking of another state of the European Economic Area’ means an undertaking entitled to carry out insurance activities under the legal acts of another state of the European Economic Area.
49. ‘Reinsurance undertaking of another state of the European Economic Area’ means an undertaking entitled to carry out reinsurance activities under the legal acts of another state of the European Economic Area.
50. ‘Control’ means the relationship between a parent undertaking and a subsidiary, corresponding to the criteria set out in Article 2(62) and 2(63) of this Law, or a similar relationship between any natural or legal person and an undertaking. Control may be direct and indirect.
51. ‘Credit risk’ means the risk of loss or the risk of adverse change in the financial situation, where such risk results from the changes in solvency status of the issuers of securities, counterparties and all debtors and affects the insurance and reinsurance undertaking in the form of counterparty default risk, spread risk, or market risk concentration.
52. ‘Liquidity risk’ means the risk that an insurance or reinsurance undertaking will be unable to recover the invested funds and sell its assets in order to meet its financial obligations at maturity.
53. ‘Mixed-activity insurance holding company’ means a parent undertaking other than an insurance or reinsurance undertaking, an insurance or reinsurance undertaking of another state of the European Economic Area or a third country insurance or reinsurance undertaking, an insurance holding undertaking or a mixed-activity financial holding company, which includes at least one insurance undertaking or a reinsurance undertaking among its subsidiary undertakings.
54. ‘Mixed-activity financial holding company’ shall be understood as defined in the Republic of Lithuania Law on the Supplementary Supervision of Entities in a Financial Conglomerate (hereinafter: ‘Law on the Supplementary Supervision of Entities in a Financial Conglomerate’).
55. ‘National Insurers’ Bureau’ means an organisation established under Recommendation No 5 adopted on 25 January 1949 by the Road Transport Sub-committee of the Inland Transport Committee of the United Nations Economic Commission for Europe and uniting insurance undertakings authorised to conduct compulsory insurance against civil liability in respect of the use of motor vehicles in that state. In Lithuania, the Motor Insurers’ Bureau of the Republic of Lithuania shall be the national insurers' bureau.
56. ‘Beneficiary’ means the person entitled to the insurance benefit and specified in the insurance contract, appointed by the policyholder or, in cases specified in the insurance contract, appointed by the insured person.
57. ‘Irrevocable beneficiary’ means the beneficiary who may not be unilaterally revoked and replaced by the policyholder (or by the insured person in cases specified in the insurance contract) without the consent of the beneficiary.
58. ‘Injured third party’, in the context of provision of insurance against civil liability, means a person to whom the policyholder or the insured person has caused damage.
59. ‘Operational risk’ means the risk of loss arising from employees, systems, inadequate or failed internal processes, or external events.
60. ‘Qualifying holding of an insurance or reinsurance undertaking’ means a direct or indirect holding of a share in the authorised capital or of a share of voting rights of an insurance or reinsurance undertaking which represents at least 1/10 of the authorised capital, grants at least 1/10 of the voting rights at the general meeting of shareholders, or makes it possible to exercise a decisive influence over the management of the insurance or reinsurance undertaking. Calculation of a qualifying holding shall take account of the votes held by a person under the procedure established by the insurance supervisory authority.
61. ‘Retrocession’ means reinsurance of assumed or transferred reinsurance.
611. ‘Intermediary in ancillary insurance activities’ means a person other than a credit institution or an investment firm as defined in Article 4(1)(1–2) of Regulation (EU) No 575/2013 of the European Parliament and of the Council of 26 June 2013 on prudential requirements for credit institutions and investment firms and amending Regulation (EU) No 648/2012 who, for remuneration, performs the activities of distribution of insurance products as an ancillary professional activity and whose insurance products are ancillary to a good or a service without covering life assurance or civil liability insurance risk unless this insurance supplements a good or service under that person’s main professional activities.
62. ‘Subsidiary’ means an undertaking which meets at least one of the following criteria:
1) an undertaking where the majority of voting rights of shareholders or other participants belong to another undertaking;
2) an undertaking in which another undertaking, as a shareholder (participant), has the right to appoint and recall the majority of members of administration, management or the supervisory body;
3) an undertaking which, under the provisions of its memorandum of association, articles of association or contracts concluded with another undertaking, allows the latter to exercise a dominant influence over the former;
4) an undertaking in which another undertaking, on the basis of agreements concluded with shareholders or participants, controls the majority of the votes of the former undertaking’s shareholders or participants;
5) an undertaking over which, in the opinion of the insurance supervisory authority, another undertaking exerts a decisive influence;
6) an undertaking which, under the criteria set out in Articles 2(62)(1–5), is a subsidiary of a subsidiary. In this case, this undertaking shall be considered a subsidiary of the parent undertaking of which the subsidiary undertaking has a subsidiary.
63. ‘Parent undertaking’ means an undertaking which meets at least one of the following criteria:
1) an undertaking which holds the majority of shareholders’ or other participants’ votes in another undertaking;
2) an undertaking which, as a shareholder or participant of another undertaking, has the right to appoint and remove from office the majority of members of the administrative, management and supervisory staff of that undertaking;
3) an undertaking which may exercise a dominant influence over another undertaking as a result of the agreements concluded with the latter or because of the provisions of the memorandum of association or articles of association of the former undertaking;
4) an undertaking which controls the majority of the votes of the shareholders or participants of another undertaking under agreements concluded with the shareholders or participants of the latter;
5) for supervision of a group of insurance and/or reinsurance undertakings – an undertaking which, in the opinion of the insurance supervisory authority, exerts a decisive influence over another undertaking.
631. ‘Durable medium’ means an instrument enabling the policyholder, the insured person, the beneficiary or the injured third party to store information addressed to them personally in such a way as to make it available at a later date and, where necessary, be reproduced unchanged, offering such a possibility for a period appropriate for the purpose.
64. ‘Reinsurer’ means an insurance or reinsurance undertaking transferring a share of the risk it has assumed to another insurance or reinsurance undertaking.
65. ‘Reinsurer’ means an insurance or reinsurance undertaking taking over a certain share of the risk assumed by another insurance or reinsurance undertaking.
66. ‘Reinsurance undertaking’ means an undertaking which, according to the procedure set out by this Law, has been granted a reinsurance business licence.
661. ‘Distribution of reinsurance products’ means economic activities, including the activities carried out by a reinsurance undertaking without the assistance of a reinsurance intermediary, which consists in providing advice on the possibility of concluding reinsurance contracts, offering to conclude reinsurance contracts or carrying out other preparatory work related to the conclusion of reinsurance contracts, as well as economic activities resulting from the conclusion of reinsurance contracts or providing assistance in the administration and performance of such contracts, in particular in the event of a claim. The following shall not constitute distribution of reinsurance products:
1) provision of information on a non-permanent basis in the course of exercising another professional activity, where the information is provided for the purpose of helping the recipient to conclude or perform a reinsurance contract;
2) activities limited to administration of reinsured events, determination of damage (loss) and amount of the claim as well as expert assessment of claims for the reinsurance benefit;
3) activities limited to provision of data and information on potential policyholders to reinsurance intermediaries or reinsurance undertakings where the information provider refrains from any additional steps to assist in concluding a reinsurance contract, or activities limited to provision of information on reinsurance products, reinsurance intermediary, or reinsurance undertaking to potential policyholders where the information provider refrains from any additional steps to help conclude a reinsurance contract.
662. ‘Distributor of reinsurance products’ means a person carrying out the activities of distribution of reinsurance products for remuneration.
67. ‘Reinsurance intermediary’ means a person engaged in reinsurance distribution activities for remuneration, with the exception of a reinsurance undertaking or its employees. In the Republic of Lithuania, an insurance brokerage firm shall constitute the reinsurance intermediary.
68. Repealed as of 01/10/2018.
69. ‘Reinsurance activities’ mean:
1) economic activities whereby the risk transferred by the insurer or the reinsurer is assumed;
2) activities whereby an insurance or reinsurance undertaking, except for Lloyd’s Association, assumes the risk transferred by any member of Lloyd’s.
3) activities whereby the reinsurer provides insurance services to an entity authorised to engage in the activities of the accumulation of occupational pensions under the Law of the Republic of Lithuania on the Accumulation of Occupational Pensions.
70. ‘Tied insurance or reinsurance undertaking’ means an insurance or reinsurance undertaking, other than a subsidiary of an insurance or reinsurance undertaking and other than member of a group of insurance and/or reinsurance undertakings, the purpose of which is to provide insurance or reinsurance services exclusively to the parent undertaking or undertakings of the group to which that insurance or reinsurance undertaking belongs.
71. Repealed as of 01/10/2018.
72. ‘Regulated market’ means:
1) a market operating in the Republic of Lithuania and listed as a regulated market of the Republic of Lithuania;
2) a market operating in another Member State of the European Union and listed as a regulated market of that Member State of the European Union;
3) a market operating in a third country recognised by the home Member State of the insurance undertaking and meeting the requirements equivalent to those set out in the Republic of Lithuania Law on Markets in Financial Instruments, provided the financial instruments traded on that market are of a quality equivalent to that of the instruments traded on the regulated market or markets of the home Member State.
73. ‘Limited reinsurance’ means reinsurance where the maximum possible direct losses (understood as the maximum transferred economic risk determined by both the significance of the risk insured and the time chosen for the transfer of risk) exceed the insurance premium significantly but to a limited extent throughout the duration of the contract. In limited reinsurance, contractual provisions aim at gradually balancing the economic experience of the parties to the contract in order to achieve the desired transfer of risk and/or the value of money changes significantly over time.
74. ‘Market risk’ means the risk of losses or adverse changes in the financial situation resulting, directly or indirectly, from volatility and fluctuations in market price of assets, liabilities and financial instruments.
75. ‘Risk concentration’ means the concentration of risk that may result in losses posing a threat to the solvency and financial standing of an insurance or reinsurance undertaking.
76. ‘Risk-mitigation techniques’ mean the means by which an insurance or reinsurance undertaking may transfer all or part of the risk to another party.
77. ‘Special purpose undertaking’ means an undertaking which assumes the risk from insurance or reinsurance undertakings and seeks to ensure the discharge of assumed obligations through the issuance of debt securities or any other financing instrument, where the rights of the creditors providing the funding are exercised only upon performance of the undertaking’s obligations arising from reinsurance.
78. ‘Harmonised collective investment undertakings’ shall be interpreted as defined in the Republic of Lithuania Law on Collective Investment Undertakings.
79. ‘Affiliated undertaking’ means a subsidiary undertaking or an undertaking in which another undertaking participates as specified in Article 2(4).
80. ‘Health insurance’ means insurance of property interests related to the health of a natural person, including accident insurance and sickness insurance.
81. ‘Right to provide insurance or reinsurance services and services of distribution of insurance or reinsurance products’ means the right of an insurance or reinsurance undertaking to engage in insurance or reinsurance activities in another state of the European Economic Area without establishing a branch; the right of insurance or reinsurance intermediaries to engage in insurance or reinsurance product distribution activities in another state of the European Economic Area without establishing a branch; also the right of an insurance or reinsurance undertaking of another state of the European Economic Area to engage in insurance or reinsurance activities in the Republic of Lithuania without establishing a branch; and the right of insurance or reinsurance intermediaries of another state of the European Economic Area to engage in insurance or reinsurance product distribution activities in the Republic of Lithuania without establishing a branch.
82. ‘Third country’ means a state beyond the European Economic Area.
83. ‘Third country insurance undertaking’ means an undertaking registered in a third country and engaged in insurance activities, whose counterparts registered in the Republic of Lithuania or another state of the European Economic Area are required, by the nature of their activities, to obtain a licence as set out in this Law or an equivalent authorisation to engage in insurance activities.
84. ‘Third country reinsurance undertaking’ means an undertaking registered in a third country and engaged in reinsurance activities, whose counterparts registered in Lithuania or another state of the European Economic Area are required, by the nature of their activities, to obtain a licence as set out in this Law or an equivalent authorisation to engage in reinsurance activities.
85. ‘Property insurance’ means insurance of a person’s property interests where the amount of the insurance benefit depends on the amount of the loss, damage or other expenses incurred by that person, but does not exceed the amount insured.
86. ‘Outsourcing’ means activities carried out under an agreement between an insurance or reinsurance undertaking, of the one part, and a service provider, whether supervised or not, of the other, including fulfilment of the functions of an insurance or reinsurance undertaking, provision of services or other activities, which, in the absence of this agreement, would be performed by the insurance or reinsurance undertaking.
Article 3. Insurance Activities
1. Only the following entities shall have the right to engage in insurance activities in the Republic of Lithuania:
1) insurance undertakings established under the laws of the Republic of Lithuania: public limited liability companies, private limited liability companies and European companies (Societas Europaea) subject to obtaining a licence to engage in insurance activities under the procedure set out in this Law;
2) insurance undertakings of other states of the European Economic Area, exercising the right of establishment and/or the right to provide services;
3) branches of third country insurance undertakings established in the Republic of Lithuania which have obtained authorisation to engage in insurance activities as branches according to the procedure set out in this Law;
4) insurance undertakings of the member countries of the World Trade Organisation, considered as third countries, which have not established a branch, but have the right to carry out voluntary insurance activities of insurance classes listed in Articles 7(3)(5), 7(3)(6), 7(3)(11) and 7(3)(12) of this Law as well as activities of voluntary insurance of cargo transported by sea and inland waterways vessels and aircraft. The afore-mentioned activities shall mutatis mutandis be subject to the restrictions set out in Article 73(4) of this Law.
2. The entities referred to in Articles 3(1)(1–3) may not engage in any economic activities in the Republic of Lithuania other than insurance, reinsurance and related activities including administration of insured and reinsured events, distribution of insurance and reinsurance products, consulting on insurance and reinsurance, mediation in concluding pension accumulation agreements, training of insurance and reinsurance specialists, improvement of professional qualifications, lease of immovable property and valuation of the property to be insured.
3. The entities specified in Article 3(1)(1–3) engaged in the distribution of products of another insurance undertaking shall be subject to the requirements for insurance agents set out in this Law.
4. All other persons not specified in this Law shall be prohibited from engaging in insurance activities in the Republic of Lithuania, except for the cases established by the insurance supervisory authority (hereinafter: ‘supervisory authority’) where the insurance cover provided by an insurance undertaking, a branch of a third country insurance undertaking established in the Republic of Lithuania or a branch of an insurance undertaking of another state of the European Economic Area established in the Republic of Lithuania is not recognised due to compulsory insurance valid in a third country.
Article 4. Reinsurance Activities
1. Only the entities referred to in Article 3(1)(1–3) of this Law and the entities listed below shall have the right to engage in reinsurance activities in the Republic of Lithuania:
1) reinsurance undertakings established under the procedure set out in the laws of the Republic of Lithuania: public limited liability companies, private limited liability companies and European companies (Societas Europaea), which have obtained a licence to engage in reinsurance activities according to the procedure set out in this Law;
2) reinsurance undertakings of other states of the European Economic Area, regardless of whether they have established a branch in the Republic of Lithuania or not;
3) third country reinsurance undertakings, regardless of whether they have established a branch in the Republic of Lithuania or not.
2. The entities referred to in Articles 4(1)(1–3) may not engage in any economic activities in the Republic of Lithuania other than reinsurance and related activities including administration of reinsured events, reinsurance mediation, consulting on reinsurance, training of reinsurance specialists, improvement of professional qualifications, lease of immovable property and valuation of the property to be reinsured.
Article 5. Distribution of insurance and reinsurance products
1. Only the following entities shall have the right to engage in distribution of insurance products in the Republic of Lithuania:
1) entities referred to in Article 3(1) of this Law;
2) insurance agents, including insurance agents as natural persons and undertakings of insurance agents established in the Republic of Lithuania;
3) insurance brokerage firms established in the Republic of Lithuania:
4) ancillary insurance intermediaries;
5) insurance intermediaries of other states of European Economic Area which carry out the activities of distribution of insurance products in the Republic of Lithuania by exercising the right of establishment and/or the right to provide services;
6) branches of third country insurance intermediaries established in the Republic of Lithuania.
2. The right to carry out the activities of distribution of reinsurance products in the Republic of Lithuania shall only apply to the entities referred to in Articles 3(1)(1–3) and Article 4 of this Law and entities listed below:
1) insurance brokerage firms established in the Republic of Lithuania:
2) reinsurance intermediaries of other states of European Economic Area engaged in distribution of reinsurance products in the Republic of Lithuania, regardless of whether they have established a branch in the Republic of Lithuania or not;
3) third country reinsurance intermediaries which have not established a branch in the Republic of Lithuania, or branches of undertakings of insurance and/or reinsurance intermediaries of third countries established in the Republic of Lithuania.
3. Insurance undertakings or branches of third country insurance undertakings and insurance undertakings of other states of the European Economic Area exercising the right of establishment and/or the right to provide services shall be prohibited from using insurance or reinsurance product distribution services offered by persons who are not entitled to engage in distribution of insurance or reinsurance products.
Article 6. Agencies
The relevant rules set out in this Law for the provision of information regarding activities under the right of establishment, as well as rules on the activities and supervision of branches shall also apply to agencies or any other offices headed by the employees of an undertaking established by them or persons who have a permanent or long-term authorisation to act on behalf of the undertaking they represent, where:
1) the agency or office is established in another state of the European Economic Area by an insurance or reinsurance undertaking or an undertaking of insurance or reinsurance intermediaries of the Republic of Lithuania;
2) the agency or office in the Republic of Lithuania is established by an insurance undertaking, reinsurance undertaking or an undertaking of insurance or reinsurance intermediaries of another state of the European Economic Area.
Article 7. Types and classes of insurance
1. The types of insurance shall include life assurance and non-life insurance.
2. The life assurance type of insurance shall comprise the following insurance classes:
1) life assurance other than set out in Articles 7(1)(2–5);
2) marriage and birth insurance;
3) life assurance linked to investment funds;
4) tontines;
5) pension accumulation.
3. The non-life insurance type of insurance shall comprise the following insurance classes:
1) accident insurance;
2) insurance against diseases;
3) land motor vehicle insurance, except for railway rolling stock;
4) railway rolling stock insurance;
5) aircraft insurance;
6) sea and inland waterways vessel insurance;
7) cargo insurance;
8) property (except for that listed in Article 7(2)(3–7) insurance against fire and natural forces;
9) property insurance against other risks (except for those referred to in Article 7(2)(8) of this Law;
10) insurance against civil liability arising out of the use of land motor vehicles;
11) insurance against civil liability arising out of the use of aircraft;
12) insurance against civil liability arising out of the use of sea and inland waterway vessels;
13) general civil liability insurance;
14) credit insurance;
15) suretyship insurance;
16) financial loss insurance;
17) legal expenses insurance;
18) assistance insurance.
4. Where the licence to engage in insurance activities or the authorisation to engage in insurance activities issued to a branch of a third country insurance undertaking entitles to provide insurance coverage under:
1) insurance classes specified in Articles 7(3)(1–2), such activities shall be referred to as accident insurance and insurance against diseases (health insurance);
2) insurance class specified in Article 7(3)(1) covering passenger injury risk insurance and insurance classes specified in Article 7(3)(3), 7(3)(7), 7(3)(10), such activities shall be referred to as motor insurance;
3) insurance class specified in Article 7(3)(1) covering passenger injury risk insurance and the insurance classes specified in Article 7(3)(4), 7(3)(6), 7(3)(7) and 7(3)(12), such activities shall be referred to as marine and transport insurance;
4) insurance class specified in Article 7(3)(1) covering passenger injury risk insurance and the insurance classes specified in Article 7(3)(5), 7(3)(7) and 7(3)(11), such activities shall be referred to as aviation insurance;
5) insurance classes specified in Article 7(3)(8)–7(3)(9), such activities shall be referred to as property insurance against fire and other damage to or destruction of property;
6) insurance classes specified in Article 7(3)(10)–7(3)(13), such activities shall be referred to as civil liability insurance;
7) insurance classes specified in Article 7(3)(14)–7(3)(15), such activities shall be referred to as credit and suretyship insurance;
8) all insurance classes specified in Article 7(3), such activities shall be referred to as insurance against all risks under non-life insurance type of insurance.
5. The supervisory authority shall approve the description of insurance classes of life assurance and non-life insurance types of insurance which insurance undertakings and branches of third country insurance undertakings must observe.
Article 8. Separation of life assurance from non-life insurance activities in the Republic of Lithuania
1. None of the entities specified in Article 3(1)(1–3) of this Law shall have the right to engage in both life assurance and non-life insurance activities, with exceptions referred to in Article 8(2) and Article 221 of this Law and except for cases where the legislation of another state of the European Economic Area authorises an insurance undertaking of another state of the European Economic Area to engage in both life assurance and non-life insurance activities.
2. The entities referred to in Articles 3(10(1-3) of this Law engaged in life assurance activities shall also have the right to engage, under the procedure set out by legal acts, in non-life insurance type of insurance activities limited to the insurance classes specified in Articles 7(3)(1)–7(3)(2) of this Law.
3. The entities referred to in Articles 3(1)(1) and 3(1)(3) of this Law engaged in the activities limited to the insurance classes of the non-life insurance type of insurance specified in Articles 7(3)(1)–7(3)(2) of this Law shall be entitled to apply for the issuance of a licence to engage in life assurance activities.
4. Insurance undertakings and branches of third country insurance undertakings comply with the requirements approved by the supervisory authority for separate management of life assurance activities and non-life insurance activities under insurance classes listed in Article 7(3)(1)–7(3)(2) of this Law.
Article 9. Ancillary insurance risks of non-life insurance
1. An insurance undertaking which has a licence to engage in insurance activities or a branch of a third country insurance undertaking which has an authorisation to engage in insurance activities of a branch issued for performing insurance activities with the principal risk that comes under one or several insurance classes of non-life insurance shall have the right, without changing the licence or the authorisation for the insurance activities of the branch, to also conclude insurance contracts in respect of ancillary insurance risks under other insurance classes of the non-life insurance type, provided that all the following conditions are met:
1) ancillary insurance risk is related to the principal insurance risk;
2) ancillary insurance risk is related to the object covered against the principal insurance risk;
3) ancillary risk is covered by the same insurance contract as the principal insurance risk.
2. The risks of insurance classes listed in Articles 7(3)(14), 7(3)(15) and 7(3)(17) of this Law may not be regarded as ancillary to risks of other insurance classes, with the exception of the cases specified in Articles 9(3–4).
3. The insurance risk under the insurance class specified in Article 7(3)(17) of this Law may be considered as ancillary to the risks of the insurance class referred to in Article 7(3)(18) of this Law only where the conditions specified in paragraph 1 of this Article are fulfilled and where the principal risk is exclusively related to the provision of assistance to persons who encounter difficulties while travelling away from home or from their usual place of residence.
4. Insurance risk under the insurance class referred to in Article 7(3)(17) of this Law may also be considered as ancillary insurance risk only where the conditions specified in paragraph 1 of this Article are fulfilled and where this risk is related to disputes or risks arising out of or related to the use of sea vessels.
Article 10. Large insurance risk
1. Insurance risk shall be considered large where it belongs to the following insurance classes:
1) insurance classes specified in Articles 7(3)(4)–7.3.7 and 7(3)(11)–7(3)(12) of this Law;
2) insurance classes specified in Articles 7(3)(14–15) of this Law, where the policyholder is engaged in economic and commercial activities or is a self-employed professional and the insurance risks relate to these activities.
2. Insurance risk shall also be considered large where it belongs to the insurance classes referred to in Articles 7(3)(3), 7(3)(8)–7(3)(10), 7(3)(13), and 7(3)(16) of this Law and the policyholder performance exceeds at least two of the following figures:
1) the value of assets indicated in the balance sheet of the policyholder is equal to or exceeds EUR 6,200,000;
2) the net sales income of the policyholder during the financial reporting year totals or exceeds EUR 12,800,000;
3) the average annual number of listed employees of the policyholder during the financial reporting year totals or exceeds 250;
3. If the policyholder belongs to a group of undertakings the sets of consolidated financial statements whereof are drawn up in compliance with the requirements set out in the Republic of Lithuania Law on Consolidated Accounts of Groups of Undertakings or an equivalent legal act of another state of the European Economic Area, the figures referred to in Article 10(2) shall be determined on the basis of the size of the group of undertakings.
Article 11. Assessment of good repute, qualifications and experience
1. Assessment of the repute of a natural person and, where applicable, of a legal person shall take the following criteria into account:
1) pre-trial investigations conducted or in progress, suspicions or accusations of a criminal act, or conviction, irrespective of whether or not the conviction has expired or has been expunged;
2) administrative penalties or other sanctions imposed, irrespective of the time when they were imposed;
3) inspections by supervisory or other institutions carried out in relation to an infringement of legal acts;
4) disciplinary and service-related penalties and suspension or dismissal from an appointed or elected position, irrespective of the time when this was imposed;
5) refusal to issue an authorisation (licence) or other denial of the right to perform certain actions or to engage in a certain type of professional or other activities, including suspension or revocation of authorisation (licence) or other right to perform certain actions or engage in certain professional or other activities;
6) any failure to comply with the obligation to obtain the licences, authorisations, consents and approvals set out in legal acts; any failure to comply with the duty to provide complete and correct information to supervisory authorities in due time;
7) discharge of pecuniary or other obligations, including data on restructuring or bankruptcy proceedings carried out with respect to the person and actions brought against that person in civil cases;
8) data referred to in Articles 11(1)(1–7) of this Law on legal person whose manager the person has been or is at the moment or whose qualifying holding in the authorised capital and/or capital that person directly or indirectly controls or has controlled in the past.
2. A natural person and, where applicable, a legal person may not be considered to be of good repute in the following cases:
1) conviction of a serious, grave or premeditated crime under the Criminal Code of the Republic of Lithuania against property, property rights and property interests, economy and business practice, or the financial system, or corresponding criminal acts under criminal laws of other states, irrespective of whether the conviction has expired or has been expunged;
2) proved guilt of a criminal act other than the one specified in Article 11(20(1), the Criminal Code of the Republic of Lithuania or laws of other states, with less than three years having lapsed from serving the sentence, suspension of the sentence or release from serving the sentence;
3) suspension or dismissal from office or work, or loss of the right to engage in a certain type of activities for non-compliance with the requirements of good repute set out in laws or for infringements of legal acts regulating the financial market, with less than three years having elapsed since the date of dismissal from office or from work or loss of the right to engage in a certain type of activities;
4) abuse of psychotropic, narcotic, other psychoactive substances or alcohol;
5) recognition by the supervisory authority that other circumstances referred to in Article 11(1) are significant and allow to reasonably doubt the person's ability to ensure sound and prudent management of an undertaking or proper performance of other functions specified in this Law.
3. When assessing professional qualification and experience of a natural person, the entities set out in this Law must take into consideration the level and nature of education, improvement of qualification, nature and duration of professional activities or work experience and other factors that may affect qualification and experience. Assessment of a natural person's repute, qualification and experience shall follow the procedure set out by the legal acts adopted by the supervisory authority.
4. When assessing good repute, qualification and experience of persons, the supervisory authority shall, where appropriate, cooperate with the supervisory authorities of other states of the European Economic Area and exchange information on good repute, qualification and experience of the persons being assessed.
CHAPTER II
INSURANCE AND REINSURANCE UNDERTAKINGS
OF THE REPUBLIC OF LITHUANIA
SECTION ONE
LICENCE TO ENGAGE IN INSURANCE AND REINSURANCE ACTIVITIES
Article 12. Rights granted by the license to engage in insurance and reinsurance activities
1. An insurance and reinsurance undertaking shall have the right to engage in insurance and reinsurance activities only subject to a licence to engage in insurance or reinsurance activities issued by the supervisory authority (hereinafter: ‘business licence’).
2. A business licence shall be effective in all the other states of the European Economic Area, granting the right to engage in insurance or reinsurance activities through exercising the freedom of establishment and/or the right to provide services under the conditions set out in Section V of this Chapter.
3. A licence to engage in insurance activities shall be issued to engage in insurance activities of the entire insurance class or several insurance classes of life assurance or non-life insurance types of insurance, except for the cases when the applicant wishes to engage in insurance activities of only some of the risks belonging to the insurance class (classes).
4. The insurer engaged in compulsory insurance shall be obliged to enter into an insurance contract with the policyholder, except for the cases set out in the legal acts. A refusal to enter into an insurance contract by the insurer may be contested before the court.
5. A licence to engage in reinsurance activities shall be issued for reinsurance of the insurance contracts falling under insurance classes of life assurance and/or non-life insurance types of insurance.
6. A licence to engage in insurance activities shall grant the right to an insurance undertaking to engage in reinsurance activities.
7. Insurance undertakings may engage in reinsurance activities only in insurance classes in which they carry out insurance activities under the procedure set out in this Law.
8. A business licence shall be issued for an indefinite period of time.
Article 13. Legal form and registration of an insurance and reinsurance undertaking issued with a business licence
1. A business licence shall be issued to the following entities:
1) public limited liability companies, private limited liability companies or European companies (Societas Europaea) which are being established;
2) new public limited liability companies, private limited liability companies or European companies (Societas Europaea) which will operate following the reorganisation of legal persons and intend to engage in insurance or reinsurance activities;
3) public limited liability companies, private limited liability companies or European companies (Societas Europaea) which are changing their type of activities into insurance or reinsurance.
2. A business licence shall be issued only for a particular insurance undertaking and may not be transferred or assigned to another person.
3. An insurance or reinsurance undertaking being established may be registered in the Register of Legal Entities and where a business licence is issued to an undertaking other than the undertaking being established, appropriate amendments to the Register of Legal Entities may be made only after the business licence is issued.
4. Repealed as of 15/06/2020
5. The manager of the Register of Legal Entities must, within five working days, inform the supervisory authority about registration of the insurance or reinsurance undertaking in the Register of Legal Entities.
6. The documents of incorporation of an insurance or reinsurance undertaking shall become invalid upon failure to submit them to the Register of Legal Entities within nine months from the date of their execution.
Article 14. Business name of an insurance undertaking
1. The business name or the word combination denoting the legal form of an insurance undertaking must contain the word ‘draudimas’ (insurance). No other legal person, except for the persons engaged in insurance or reinsurance activities or insurance or reinsurance mediation activities under the procedure set out in this Law, shall have the right to use this word in its name, save for the exceptions set out by law.
2. No other legal person shall be entitled to use the word combination ‘draudimo įmonė’ (insurance undertaking) in its business name, except for the cases set out by law.
3. In view of the planned geographical territory of activities, the word ‘draudimas’ (insurance) may also appear in a language other than Lithuanian.
Article 15. Application for granting a business licence
1. Applicants must submit an application for a business licence to the supervisory authority.
2. The application shall be accompanied by the following documents:
1) articles of association and a memorandum of association of the undertaking;
2) a business plan of the insurance or reinsurance undertaking of the content and form set out by the supervisory authority;
3) documents evidencing that the undertaking’s eligible basic own funds to cover the minimum capital requirement are equal to or exceed the absolute floor of the minimum capital requirement set out in Article 40(4) of this Law. The funds of the organisational fund are excluded from calculation of the minimum capital. Applicants must provide the documents evidencing formation of the minimum capital in cash and data on the origin of such cash;
4) documents evidencing that the undertaking will continue to have eligible own funds available to cover the solvency capital requirement (financial documents, certificates issued by the bank, contracts, etc.);
5) documents evidencing that the undertaking will continue to have eligible basic own funds available to cover the minimum capital requirement (financial documents, certificates issued by the bank, contracts, etc.);
6) documents such as procedures, policies, strategy descriptions, etc. evidencing that the undertaking will be able to comply with the requirements for the management system set out in Section Two of this Chapter and other legal acts;
7) information in the form set out by the supervisory authority about the controlling persons of the insurance or reinsurance undertaking, the participating undertakings and other persons and shareholders with a qualifying holding. Applicants shall also submit information in the form set out by the supervisory authority about the supervisory and management bodies of the members of the controlling legal persons and the supervisory and management bodies of the participating undertakings;
8) information in the form set out by the supervisory authority about the chairman and other members of the supervisory board, chairman and other members of the board and the head of administration of the insurance or reinsurance undertaking;
9) documents certifying the accumulation in cash of the organisational fund of the insurance or reinsurance undertaking and the use and balance of such fund;
10) documents certifying the payment in cash for the shares of the insurance or reinsurance undertaking being established;
11) information about the origin of the organisational fund and the financial resources used to pay for the shares of the insurance or reinsurance undertaking being established or to generate its authorised capital;
12) outsourcing contracts concluded on behalf of the insurance or reinsurance undertaking whereby the essential or key functions or activities have been outsourced;
13) where the insurance undertaking intends to engage in activities of the insurance class listed in Article 7(3)(10) of this Law (except for insurance against civil liability of carriers), the documents evidencing that the insurance undertaking has its representatives with adequate authorisations appointed in each of the other states of the European Economic Area for settlement of claims (and the name, surname or business name and address of the representative shall be indicated).
3. Where the founder of an insurance or reinsurance undertaking is a legal person, the following documents must be submitted in addition:
1) a copy of the registration certificate or any other equivalent document of the founder as a legal person;
2) a set of audited financial statements of the founder as a legal person for the last financial year along with an auditor’s opinion. This provision shall not apply where the founder is neither a controlling nor a participating undertaking of the insurance undertaking being established.
4. Where a legal person or legal persons are reorganised into an insurance undertaking as a new legal person or where a public limited liability company, a private limited liability company or a European company (Societas Europaea) change the type of their activities into insurance or reinsurance activities, the documents listed in Article 2(10) need not be submitted; however, the following documents must be submitted in addition:
1) the terms and conditions of reorganisation and the decision on reorganisation or changing of the type of activities of the legal person;
2) for each legal person: a copy of the registration certificate or any other equivalent document, a description of their previous activities, and a set of audited financial statements for the last financial year along with an auditor’s opinion;
3) for each legal person: information in the form set out by the supervisory authority about the controlling persons, the participating undertakings and shareholders with a qualifying holding;
4) documents certifying that the financial resources of the insurance or reinsurance undertaking are equal to or exceed the organisational fund and the authorised capital as set out in this Law as well as the information about the origin of the financial resources;
5) for each legal person: proof of tax payment and data on debts to creditors.
5. Where an insurance or reinsurance undertaking of a third country is the founder of a subsidiary, the undertaking must, in addition, submit the following documents:
1) a licence to engage in insurance or reinsurance activities or any other equivalent document issued by the supervisory authority of the third country;
2) an authorisation for the establishment of the insurance or reinsurance undertaking in the Republic of Lithuania issued by the supervisory authority of the third country or information that the supervisory authority of the third country has no objections to the establishment of a subsidiary of the insurance or reinsurance undertaking in the Republic of Lithuania.
Article 16. Issue of a business licence
1. Within six months from the submission of the application and all the relevant documents for the issuance of a business licence, the supervisory authority shall adopt a decision concerning the issuance of a business licence and inform the applicant thereof in writing.
2. The supervisory authority shall refuse to issue a business licence where:
1) documents set out in this Law or requested following the procedure set out in this Law have not been submitted or where the submitted documents fail to meet the requirements of this Law and the legal acts of the supervisory authority;
2) repute of the founders and/or the controlling persons of the insurance or reinsurance undertaking, the participating persons or undertakings and persons directly or indirectly holding the shares of the insurance or reinsurance undertaking is not considered as good and/or their qualification is inappropriate for ensuring safe and sound prudential management of the insurance or reinsurance company and/or, in view of their performance, legislative provisions and other significant circumstances, their financial situation is neither stable nor sound;
3) members of the supervisory and management bodies of the insurance or reinsurance undertaking, other persons holding managerial positions and persons responsible for risk management, actuarial, compliance assessment and internal audit functions fail to meet the requirements set out in Article 22(5) of this Law;
4) the management system of the insurance or reinsurance company fails to satisfy the requirements under Section Two of his Chapter and other legal acts;
5) it may be assumed from the submitted business plan that the interests of the policyholders, insured persons, beneficiaries, and injured third parties will not be properly protected; evaluation of the business plan of the insurance or reinsurance undertaking offers reasonable grounds to assume that the obligations of the insurance or reinsurance undertaking arising from insurance contracts will not be met on a continuous basis; or the business plan of the insurance or reinsurance undertaking fails to meet the requirements under the legal acts;
6) the authorised capital has not been fully paid-up;
7) the organisational fund and the authorised capital of the insurance undertaking have been paid up in cash of illegal origin;
8) the structure of the insurance or reinsurance undertaking or a group of insurance and/or reinsurance undertakings (hereinafter: ‘the group’) to which the insurance or reinsurance undertaking belongs or its other close links with natural or legal persons make effective supervision impossible;
9) legal acts of a third country which are applicable to members of a group of undertakings to which the insurance or reinsurance undertaking belongs or to natural or legal persons having close links with the insurance or reinsurance undertaking, or difficulties in the implementation of these legal acts make effective supervision impossible;
10) the insurance or reinsurance undertaking is a successor to the rights and obligations of a legal person or legal persons the implementation of which would violate the provisions of Article 3(2) of this Law and/or would endanger the interests of the policyholders, insured persons, beneficiaries and injured third parties;
11) members of the supervisory and management bodies of the insurance or reinsurance undertaking, other persons holding managerial positions and persons responsible for risk management, actuarial, internal audit functions and compliance assessment hold positions which they are prohibited to hold under this Law and other laws;
12) the undertaking has fallen short of the requirements set out in Articles 15(2)(3)–15(2)(5) of this Law or the origin of the financial resources of the guarantee fund is illegal.
3. The supervisory authority shall have no right to refuse issuing a business licence on account of economic market needs.
4. When there is a suspicion that the authorised capital, organisational fund and/or minimum capital requirement may be paid up in cash of illegal origin, the supervisory authority must apply to the competent authorities for a conclusion about the origin of the financial resources. In this case, the time limits set out in Article 16(1) and Article 13(6) of this Law shall be suspended and shall be resumed upon receipt of the conclusion from the competent authorities.
5. The supervisory authority shall establish the form of the business licence.
6. The supervisory authority shall approve the rules for licensing of insurance and reinsurance activities.
Article 17. Consultation with other institutions and provision of information
1. Before issuing the licence to engage in insurance or reinsurance activities, the supervisory authority must consult the supervisory authority of another state of the European Economic Area about the circumstances significant for deciding on the issuance of the business licence in the following cases:
1) where the insurance or reinsurance undertaking is a subsidiary of an insurance or reinsurance undertaking of another state of the European Economic Area;
2) where the insurance or reinsurance undertaking is a subsidiary of the parent undertaking of an insurance or reinsurance undertaking of another state of the European Economic Area;
3) where the insurance or reinsurance undertaking is under the control of the same person who controls the insurance or reinsurance undertaking of another state of the European Economic Area.
2. Before issuing the business licence, the supervisory authority must consult the supervisory authority of another state of the European Economic Area supervising the relevant financial sector, where the insurance or reinsurance undertaking is:
1) a subsidiary of a credit institution or a financial brokerage firm of a state of the European Economic Area;
2) a subsidiary of the parent undertaking of a credit institution or a financial brokerage firm of a state of the European Economic Area;
3) under the control of the same person who controls the credit institution or the financial brokerage firm of another state of the European Economic Area.
3. In evaluating the good repute of the persons controlling the insurance or reinsurance undertaking as well as the good repute, professional qualifications and experience of the members of its supervisory and management bodies, other persons holding managerial positions and persons responsible for risk management, actuarial, compliance assessment and internal audit functions, the supervisory authority shall consult the institutions referred to in Articles 17(1) and 17(2) about the circumstances significant for the evaluation of good repute, professional qualifications and experience and must provide other institutions with the information about these persons significant for the performance of functions of the above-mentioned institutions.
4. Where, upon assessment of the business plan, it is established that a certain part of activities of an insurance or reinsurance undertaking will be carried out by using the right of establishment or the right to provide services in another state of the European Economic Area and that this part of the activities may be relevant to the market of that state of the European Economic Area, the supervisory authority must notify thereof the supervisory authority of that state of the European Economic Area and the European Insurance and Occupational Pensions Authority, before issuing a licence to an undertaking to engage in insurance or reinsurance activities. The amount of information provided in the notification should be sufficient to allow for an assessment of the situation.
Article 18. Information about changes
The insurance or reinsurance undertaking must inform the supervisory authority, under the licensing rules established by it, about any changes to the information provided in the documents submitted to the supervisory authority for issuance of the licence to engage in insurance or reinsurance activities.
Article 19. Updating a business licence
1. The insurance undertaking intending to engage in insurance activities of yet another insurance class or classes belonging to the same insurance type or to expand the current insurance activities to all the risks of the same insurance class must submit to the supervisory authority the business plan set out in Article 15(2)(2) of this Law; furthermore, it must submit documents evidencing that the insurance undertaking has eligible own funds to cover the solvency capital requirement and the minimum capital requirement set out in Articles 37 and 40 of this Law.
2. The insurance undertaking engaged in life assurance activities and intending to engage in activities under the insurance classes of the non-life insurance type set out in Articles 7(3)(1) and 7(3)(2) of this Law or the insurance undertaking engaged in activities of non-life assurance classes set out in Articles 7(3)(1) and 7(3)(2) of this Law and intending to engage in activities of the insurance classes of the life assurance type referred to in Article 7(2) of this Law must submit the supervisory authority documents evidencing that the insurance undertaking’s eligible basic own funds to cover the minimum capital requirement meet the absolute floor of the minimum capital requirement of life assurance undertakings and the absolute floor of the minimum capital requirement of non-life insurance undertakings as set out in Article 40(4)(5) of this Law and must undertake to further perform the afore-mentioned minimum financial obligations.
3. In the cases set out in Articles 19(1) and 19(2) of this Law and in cases where the insurance undertaking intends to discontinue the insurance of risks of the entire insurance class of part of the insurance class, the insurance undertaking must apply to the supervisory authority for updating the licence to engage in insurance activities under the procedure set out in the licensing rules approved by the supervisory authority.
4. The reinsurance undertaking intending to engage in reinsurance of the insurance contracts under the insurance classes of another insurance type or discontinue reinsurance of part of the risks must apply to the supervisory authority for updating the licence to engage in reinsurance activities under the procedure set out in the licensing rules approved by the supervisory authority.
5. The supervisory authority shall make a decision on updating the business licence within one month from the submission of all the documents set out in the licensing rules.
Article 20. Suspension and revocation of a business licence
1. Under grounds set out in Article 205(1) of this Law, the supervisory authority shall have the right to suspend a business license for as long as the grounds for the suspension exist.
2. The supervisory authority shall have the right to withdraw the business licence where:
1) the insurance or reinsurance undertaking has breached the conditions for insurance or reinsurance activities;
2) the insurance or reinsurance undertaking has breached the legal acts governing its activities;
3) the insurance or reinsurance undertaking has applied for revocation of the business licence;
4) the insurance or reinsurance undertaking fails to begin carrying out insurance activities or related activities within 12 months from the issuance of the business licence;
5) the insurance or reinsurance undertaking has not been engaged in activities for more than six months;
6) in the case referred to in Article 13(6) of this Law.
3. The supervisory authority shall also revoke the business licence if the insurance or reinsurance undertaking fails to comply with the minimum capital requirements and the supervisory authority believes that the short-term plan for restoration of the financial situation set out in Article 46 of this Law is inappropriate or the insurance and reinsurance company has failed to observe the approved short-term plan for restoration of the financial situation within 3 months from the moment of noticing the failure to meet the minimum capital requirement.
4. The supervisory authority shall notify the supervisory authorities of other states of the European Economic Area of its decision on revocation of the business licence.
5. Having revoked the business licence, the supervisory authority must take all possible measures set out in this Law to protect the interests of the policyholders, insured persons, beneficiaries and third injured parties and, having notified the supervisory authority of another state of the European Economic Area where an insurance risk is situated or the supervisory authority of the state of the European Economic Area of commitment, the supervisory authority shall have the right to seize the assets of the insurance or reinsurance undertaking or request that the supervisory authority of another state of the European Economic Area impose analogous restrictions on the assets of the insurance and reinsurance undertaking set out by the supervisory authority.
6. The decision to revoke the business licence must be thoroughly substantiated. The supervisory institution must immediately inform the insurance or reinsurance undertaking in writing about the adopted decision and the reasons for it.
7. At the request of the insurance or reinsurance undertaking submitted under the procedure set out in Article 19 of this Law, the supervisory authority shall be entitled to partially revoke the business licence.
SECTION TWO
MANAGEMENT OF INSURANCE AND REINSURANCE UNDERTAKINGS
Article 21. Bodies of an insurance or reinsurance undertaking
1. An insurance or reinsurance undertaking must have the following bodies: the General Meeting of Shareholders, the Board and the Company Manager.
2. An insurance or reinsurance undertaking may set up its Supervisory Board.
3. The management bodies of an insurance or reinsurance undertaking shall be the Board and the manager of the company.
4. The procedure for setting up and operation of the bodies of an insurance or reinsurance undertaking, the scope or their competence, functions and responsibilities shall be set out in the articles of association of the undertaking, the Civil Code, this Law and the Republic of Lithuania Law on Companies (hereinafter: ‘Law on Companies’), unless this Law provides for otherwise.
Article 22. General provisions on management
1. The management bodies of an insurance or reinsurance undertaking shall be responsible for compliance with the provisions of legal acts.
2. An effective system of governance which provides for safe and sound prudential management shall be implemented in an insurance or reinsurance undertaking. The afore-mentioned system shall at least include an adequate transparent organisational structure with a clear allocation and appropriate segregation of responsibilities and an effective system for ensuring the transmission of information. The system of governance shall be subject to regular internal review. The system of governance shall be proportionate to the nature, scale and complexity of the operations of the insurance or reinsurance undertaking. The system of governance of an insurance or reinsurance undertaking must include the following main functions: risk management, actuarial work, internal audit and compliance assessment.
3. Insurance and reinsurance undertakings shall have written policies in relation to at least risk management, internal control, internal audit and, where relevant, outsourcing. The descriptions of the afore-mentioned policy areas must be approved by the Supervisory Board or the Board of the insurance or reinsurance undertaking and be amended in view of any significant changes in the system or area concerned. The descriptions of the policies referred to in this paragraph shall be reviewed at least annually. An insurance or reinsurance undertaking must ensure implementation of the afore-mentioned policies.
4. Insurance and reinsurance undertakings shall be obliged to ensure business continuity; to this end a business continuity plan must be put in place in the undertaking and implementation of the plan must be ensured.
5. An insurance or reinsurance undertaking must ensure that the members of its supervisory and management bodies and other persons holding management positions or fulfilling other key functions in the undertaking always are honest and of good repute and their professional qualification, knowledge and experience are appropriate for ensuring safe and sound prudential management. An insurance and reinsurance undertaking shall notify the supervisory authority under the procedure set out by the supervisory authority of any changes in relation to the identity of the members of the supervisory and management bodies of the insurance undertaking and other persons holding management positions or fulfilling other key functions in the undertaking and provide all information necessary for assessing if the new persons appointed as managers of the undertaking are competent and appropriate. An insurance and reinsurance undertaking shall notify the supervisory authority if such persons have been replaced with other persons for no longer meeting the requirements set out in this paragraph.
6. Under the procedure set out by the supervisory authority, an insurance undertaking must examine complaints (applications) of the policyholders, insured persons, beneficiaries and injured third parties. An insurance undertaking must examine written complaints of policyholders, insured persons, beneficiaries and injured third parties and not later than within 15 working days from the receipt of the complaints submit a complete, reasoned and documented written reply on paper or on other durable medium, where this has been agreed upon by the policyholder, the insured person, the beneficiary, the injured third party and the insurance undertaking. In exceptional cases, when it is impossible to provide a reply within 15 working days for reasons beyond the control of the insurance undertaking, it must send a non-exhaustive reply indicating clearly the reasons for the delay and the time limit within which the policyholder, the insured person, the beneficiary and the injured third party will receive the final reply. In any case, the time limit for submitting the final reply may not exceed 35 working days from the date of receipt of the complaint. The insurance undertaking shall examine the complaints of policyholders, insured persons, beneficiaries and injured third parties free of charge.
7. An insurance or reinsurance undertaking or a branch of a third-country insurance or reinsurance undertaking must ensure and, at the request of the supervisory authority, prove that its employees whose obligations include the distribution of insurance or reinsurance products meet the requirements set out in Article 1581(1) of this Law and are not subject to the restriction under Article 1581(2) of this Law. An insurance or reinsurance undertaking or a branch of a third country insurance or reinsurance undertaking shall establish, implement and regularly, but at least once a year, review internal policies and internal procedures ensuring compliance with these requirements. In addition, an insurance or reinsurance undertaking or a branch of a third country insurance or reinsurance undertaking shall appoint a person responsible for the implementation of the established internal policies and procedures and indicate the name and surname of this person to the supervisory authority at its request.
Article 23. Acquisition and transfer of directly or indirectly held shares of an insurance or reinsurance undertaking
1. Any natural or legal person or persons acting in concert (hereinafter in this Article: ‘acquirer’) who decide to acquire, directly or indirectly, a qualifying holding, to increase such a qualifying holding to the size equal to 20 %, 30 % or 50 % or more of the authorised capital of the insurance or reinsurance undertaking, or to increase the number of voting rights held at the general shareholders’ meeting to the proportion equal to 20 %, 30 %, 50 % or more of all the voting rights, or where direct or indirect acquisition of shares turns the insurance or reinsurance undertaking into a subsidiary of the person who has acquired shares (hereinafter in this Article: ‘proposed acquisition’), must obtain an agreement from the supervisory authority to the proposed acquisition. The acquirer must notify the supervisory authority in writing about the proposed acquisition, indicate the size of the intended qualifying holding, and submit the documents and information set out in the list referred to in paragraph 3 of this Article.
2. Any natural or legal person who has taken the decision to dispose of a qualifying holding held directly or indirectly, reduce the size of the qualifying holding held directly or indirectly so that after the disposal the size of the qualifying holding would be less than 20 %, 30 % or 50 % of the authorised capital of the insurance or reinsurance undertaking or reduce the proportion of the voting rights at the general shareholders’ meeting to less than 20 %, 30 % or 50 % of all the voting rights, or where, after the disposal of directly or indirectly held shares, the insurance or reinsurance undertaking would cease to be a subsidiary of the person disposing of the shares, must notify the supervisory authority thereof in writing, indicating the size of the qualifying holding intended for disposal.
3. The supervisory authority shall draw up a list of documents and data to be submitted together with the notification of the proposed acquisition and required for the assessment of the acquirer and the proposed acquisition. The list may not contain documents and data which are not required for the assessment of the acquirer and the proposed acquisition under the criteria established in Article 23(8). The documents and data requested by the supervisory authority must be proportionate and relevant to the acquirer and the proposed acquisition.
4. Having received the notification, documents and data required under paragraph 1 of this Article necessary for the assessment of the acquirer and the proposed acquisition, as well as additional documents and information referred to in Article 23(6) required for the assessment, the supervisory authority shall immediately and not later than within two working days, confirm the receipt thereof and inform the acquirer in writing about the date of expiry of the assessment period.
5. The supervisory authority shall have a maximum of 60 working days (hereinafter in this Article: ‘assessment period’) for the assessment of the acquirer and the proposed acquisition as from the date of the written acknowledgement of receipt of the notification of the proposed acquisition and all documents and data set out in Article 23(3).
6. During the assessment period, and no later than on the fiftieth working day of the assessment period, the supervisory authority may, if necessary, request any further documents and data necessary to complete the assessment. Such request shall be made in writing and shall specify the additional documents and data needed. The calculation of the assessment period shall be interrupted for the period between the date of submission of the request to submit additional documents and data by the supervisory authority and the date of receipt of a response from the acquirer. The interruption of the calculation of the assessment period may not exceed 20 working days. Moreover, the supervisory authority shall have the right to request further completion or clarification of the documents and data at its own discretion, but this may not result in an interruption of the calculation of the assessment period.
7. The supervisory authority shall have the right to extend the interruption of the assessment period as indicated in Article 23(6) for a period not exceeding 30 working days where the acquirer is:
1) situated in or regulated by a third country;
2) a natural or legal person not subject to supervision under legal acts of the Republic of Lithuania or other states of the European Economic Area regulating the activities of credit institutions, insurance undertakings, reinsurance undertakings, financial brokerage firms or management companies of harmonised collective investment undertakings.
8. In assessing the submitted notification of the proposed acquisition, documents and data specified in Article 23(1) needed for the assessment of the acquirer and the proposed acquisition as well as the submitted additional documents and data, the supervisory authority shall, in order to ensure safe and sound prudential management of an insurance undertaking, the qualifying holding whereof is intended to be acquired, and having regard to the likely influence of the acquirer on the insurance or reinsurance undertaking, appraise the suitability of the acquirer and financial soundness of the proposed acquisition against all of the following criteria:
1) good repute of the acquirer;
2) good repute and experience of any persons who will direct the business of the insurance or reinsurance undertaking as a result of the proposed acquisition;
3) stability and soundness of the financial situation of the acquirer, in particular in relation to the type of business pursued and envisaged by the insurance or reinsurance undertaking in respect of which the acquisition is proposed;
4) ability of the insurance or reinsurance undertaking to ensure continuous compliance with the prudential requirements set out in this Law and other legal acts, in particular, presence in the group, of which the undertaking will become part, of a system that makes it possible to exercise effective supervision, effectively exchange information among the supervisory authority and supervisory authorities of other states of the European Economic Area and determine the allocation of responsibilities among the supervisory authority and supervisory authorities of other states of the European Economic Area;
5) existence of any grounds to suspect that, in connection with the proposed acquisition, the activities of money laundering or terrorist financing as defined by the Republic of Lithuania Law on Prevention of Money Laundering and Terrorist Financing (hereinafter: ‘Law on Prevention of Money Laundering and Terrorist Financing’) are being or have been carried out or attempted, or that the proposed acquisition could increase the risk thereof.
9. The supervisory authority shall have the right to oppose the proposed acquisition where:
1) the documents established by the supervisory authority or required under this Law and other legal acts of the Republic of Lithuania have not been submitted, or the documents submitted fail to meet the requirements set out in this Law and the legal acts of the supervisory authority.
2) the acquirer or proposed acquisition is assessed as unsuitable or financially unsound based on the criteria set out in Article 23(8).
10. If, having completed the assessment of the acquirer and proposed acquisition, the supervisory authority decides to oppose the proposed acquisition, it shall, within two working days and not exceeding the assessment period, inform the acquirer of this decision in writing, specifying the reasons for the decision. Moreover, the decision shall indicate all opinions or reservations received from the supervisory authorities of other states of the European Economic Area supervising the relevant financial sector, following consultation under Articles 23(14) and 23(15) of this Law. The supervisory authority shall have the right, at the request of the acquirer or on its own initiative, to publish information on its website about the reasons for taking the decision to oppose the proposed acquisition and to announce the actual decision.
11. If the supervisory authority decides against opposing the proposed acquisition before expiry of the assessment period, it must notify the acquirer in writing within two working days. Where the supervisory authority fails to declare its opposition to the proposed acquisition during the assessment period, the supervisory authority shall be deemed to agree to the proposed acquisition.
12. The supervisory institution may neither impose any prerequisites in respect of the size of the qualifying holding to be acquired nor examine the proposed acquisition in terms of the economic needs of the market.
13. Where two or more proposed acquisitions regarding the same insurance undertaking have been notified to the supervisory authority, the latter shall consider all the notifications under the same procedure by treating the acquirers in a non-discriminatory manner.
14. In carrying out the assessment, the supervisory authority must take into account the opinion of the supervisory authority of another state of the European Economic Area supervising the relevant financial sector, provided the proposed acquirer is one of the following:
1) an insurance or reinsurance undertaking of another state of the European Economic Area or a credit institution, or a financial brokerage firm or management company of harmonised collective investment undertakings of another state of the European Economic Area or of the Republic of Lithuania;
2) a parent undertaking of an insurance or reinsurance undertaking of another state of the European Economic Area or a credit institution, a financial brokerage firm or management company of harmonised collective investment undertakings of another state of the European Economic Area or of the Republic of Lithuania;
3) a natural or legal person controlling an insurance or reinsurance undertaking of another state of the European Economic Area; a credit institution, a financial brokerage firm or management company of harmonised collective investment undertakings of another state of the European Economic Area or the Republic of Lithuania; and where direct or indirect acquisition of a qualifying holding would make the insurance undertaking a subsidiary of this person or an undertaking controlled by this person.
15. The supervisory authority, in application for the opinion referred to in Article 23(14) of this Law, shall be entitled to request for all information relevant for the assessment of suitability of the acquirer and the financial soundness of the proposed acquisition. The supervisory authority shall, on its own initiative or upon request, provide information relevant for the assessment carried out by the supervisory authority of another state of the European Economic Area.
16. When deciding against opposing the proposed acquisition, the supervisory authority shall have the right to fix a time limit for concluding the proposed acquisition and extend it where appropriate.
17. Transactions under which persons directly or indirectly acquire shares of an insurance or reinsurance undertaking while failing to fulfil the obligation set out in Article 23(1) or ignoring the decision of the supervisory authority set out in Article 23(10) shall be null and void and the acquirers shall not acquire any voting rights. All claims relating to the consequences of such transactions, including the claims relating to the acquisition of voting rights, shall be heard under the procedure set out by laws of the Republic of Lithuania in court of the Republic of Lithuania whose jurisdiction covers the location of the registered office of the insurance undertaking.
18. Insurance or reinsurance undertakings must notify the supervisory authority under the procedure established by the latter of any replacement of persons directly or indirectly holding shares of the insurance undertakings.
19. When there is a suspicion that the directly or indirectly held shares of an insurance or reinsurance undertaking may have been paid up in cash of illegal origin, the supervisory authority must apply to the competent authorities seeking a conclusion about the origin of the financial resources. Upon the request of the supervisory authority, the competent authority, other state and municipal institutions and other persons must immediately supply the available information on the acquirer, its members, heads, financial situation, activities, discovered infringements of laws and other legal acts, conclusions of conducted verifications and examinations as well as other information required by the supervisory authority for carrying out an assessment of the acquirer and the proposed acquisition.
20. If one founder or several founders of the insurance or reinsurance undertaking decide to transfer the shares to other persons before obtaining a business licence, such transfer of directly or indirectly held shares of the undertaking shall be subject to the provisions of this Article and the time limit referred to in Article 16(1) of this Law shall be extended by the period set out in Article 23(5).
Article 24. Supervisory board
1. If a supervisory board is formed at an insurance or reinsurance undertaking, the insurance or reinsurance undertaking must, within 10 days after the election of members and the chairman of the supervisory board, provide information about these persons to the supervisory authority in the form established by the latter.
2. The supervisory board of an insurance or reinsurance undertaking shall, in addition to the functions set out by other laws or articles of association, appoint and recall the person responsible for implementation of the internal audit functions and draw up the methodology for the activities of that person. Where the supervisory board is not formed, these functions shall be performed by the board of the insurance or reinsurance undertaking.
Article 25. Board
1. Before members and the chairman of the board of an insurance or reinsurance undertaking are elected, the insurance or reinsurance undertaking must submit information to the supervisory authority in the form set out by the latter and obtain approval of the supervisory authority for the candidates applying for the said positions. The supervisory authority shall adopt a decision on the approval of the candidate within 30 working days from the date of receipt of information in the set out form.
2. In addition to other functions set out in laws or articles of associations, the board shall perform the following functions:
1) establish measures to achieve the strategic objectives of the insurance or reinsurance undertaking, the procedure for monitoring the measures and evaluating the results, ensure that the activities of the undertaking are based on a business plan;
2) establish a risk management strategy of the insurance or reinsurance undertaking;
3) establish the procedure for the conclusion of insurance contracts of insurance undertakings which shall also be applicable to insurance intermediaries, and pay particular attention to the disclosure to the policyholders of information essential in concluding an insurance contract, respect for and protection of interests of each policyholder, and ensure that terms and conditions of the insurance rules are in line with the legislative provisions;
4) establish the procedure for reporting on insured events and events which could be recognised as insured events and the procedure for accounting of the results of investigation of these reports as well as the rules for investigating insured events and events which could be recognised as insured events;
5) Repealed as of 15/06/2018;
6) having verified the repute, professional qualifications and experience, appoint and recall the manager, persons responsible for risk management, actuarial, compliance assessment functions and the persons holding management positions;
7) establish the procedure for provision of information of the insurance or reinsurance undertaking to the public and the supervisory authority and ensure correctness of the provided information.
3. Before the manager of the insurance or reinsurance undertaking is elected, the board must submit to the supervisory authority information in the form set out by the latter and obtain approval of the supervisory authority for the candidate applying for the position of the manager. The supervisory authority shall adopt the decision on the approval of the candidate applying for the position of the manager within 30 working days from the date of receipt of information in the set out form.
Article 26. Risk management
1. Insurance and reinsurance undertakings shall have in place an effective risk-management system comprising strategies, processes and reporting procedures necessary to identify, measure, monitor, manage and report, on a continuous basis, the risks, at an individual and at an aggregated level, to which they are or could be exposed, and their interdependencies.
2. That risk-management system shall be well integrated into the organisational structure and in the decision-making of an insurance or reinsurance undertaking. The members of the supervisory and management bodies and persons holding the management positions or fulfilling other key functions must be properly engaged in the risk management system.
3. The risk management system shall cover the risks referred to in Article 37(5) of this Law as well as the risks which are unaccounted for or merely partially accounted for in the calculation of the solvency capital requirement.
4. The risk-management system shall cover at least the following areas which must be covered in the risk management policy description:
1) underwriting and composition of technical provisions;
2) asset-liability management;
3) investment, in particular derivatives and similar commitments;
4) liquidity and concentration risk management;
5) operational risk management;
6) reinsurance and other risk-mitigation techniques.
5. An insurance or reinsurance undertaking which applies the matching adjustment of the risk-free interest rate curve (hereinafter: ‘matching adjustment’) or the volatility adjustment of the risk-free interest rate curve (hereinafter: ‘volatility adjustment’) which shall be calculated in accordance with the procedure for calculation of insurance and/or reinsurance (hereinafter: ‘technical provisions’) established by the supervisory authority, draws up a liquidity plan providing for the cash flows related to the assets and liabilities to which such adjustments are applied.
6. In management of assets and liabilities an insurance and reinsurance undertaking shall regularly, but at least once a year, carry out the following measures:
1) assessment of the sensitivity of technical provisions and eligible own funds to cover the solvency capital requirement and the minimum capital requirement to the assumptions underlying the risk-free interest rate curve extrapolation applied under the procedure for calculation of the technical provisions established by the supervisory authority;
2) in case of application of the matching adjustment, assessment of the sensitivity of technical provisions and eligible own funds to cover the solvency capital requirement and the minimum capital requirement to the assumptions underlying the calculation of the matching adjustment including calculation of the fundamental difference; the impact of the forced sales of assets on the eligible own funds to cover the solvency capital requirement and the minimum capital requirement; the sensitivity of the technical provisions and eligible own funds to cover the solvency capital requirement and the minimum capital requirement to the changes in the composition of the assigned portfolio of assets and the impact of reduction of the matching adjustment to zero;
3) in case of application of the volatility adjustment, assessment of the technical provisions and eligible own funds to cover the solvency capital requirement and the minimum capital requirement to the assumptions underlying the calculation of the volatility adjustment; the impact of the forced sales of assets on the eligible own funds to cover the solvency capital requirement and the minimum capital requirement and the impact of reduction of the volatility adjustment to the zero.
7. An insurance or reinsurance undertaking shall present the results of the assessments referred to in Article 26(6) to the supervisory authority in its annual report.
8. If the reduction of the matching adjustment or volatility adjustment to zero results in non-compliance with the solvency capital requirement, the insurance and reinsurance undertaking shall also submit to the supervisory authority results of the analysis of measures that could be applied in such circumstances with a view to restoring the level of eligible own funds to cover the solvency capital requirement and the minimum capital requirement or reduce the activities risk in order to satisfy the solvency capital requirement.
9. In case of application of the volatility adjustment, the written risk management policy must cover the policy of application of the criteria on the basis of which the volatility adjustment is applied.
10. An insurance or reinsurance undertaking which, in calculation of the technical provisions and the solvency capital requirement assessment, refers to the credit risk assessment results provided by the external credit assessment institution, i.e. a credit rating agency registered or certified under Regulation (EC) No 1060/2009 or the central bank, where this Regulation is not applicable, must avoid, in risk management, automatic application of external assessment results and, where the results of other assessments may be applied, verify if the external credit risk assessment results are appropriate.
11. The investment risk must be managed so that the undertaking satisfies the requirements set out in Article 42 of this Law, legal acts of the supervisory authority and other legal acts.
12. For insurance and reinsurance undertakings using the approved partial or full internal model, the risk-management function shall cover the following additional tasks:
1) design and implementation of the internal model;
2) testing and validation of the internal model;
3) documenting of the internal model and any subsequent changes made to it;
4) analysis of the performance of the internal model and drafting summary reports thereof;
5) notification of the administrative, management or supervisory body about the performance of the internal model, suggesting areas needing improvement, and up-dating that body on the status of efforts to improve the previously identified weaknesses.
13. The risk management system shall cover own-risk assessment and solvency assessment.
14. When assessing own risk and solvency, an insurance or reinsurance undertaking must do the following:
1) calculate the overall capital needs in view of the specific risk profile of the undertaking, approved risk tolerance limits and the strategy of the undertaking set out in the business plan;
2) establish if compliance with the requirements for solvency capital, minimum capital and technical provisions set out in the legal acts is ensured on a continuous basis;
3) establish if the risk profile of the undertaking concerned significantly deviates from the assumptions underlying the solvency capital requirement calculated under the standard formula, its partial or full internal model.
15. For the purposes of Article 26(14)(1) of this Law, an insurance or reinsurance undertaking shall have in place processes which are proportionate to the nature, scale and complexity of the risks inherent in its business and which enable it to properly identify and assess the risks it faces in the short and long term and to which it is or could be exposed. The insurance or reinsurance undertaking shall demonstrate the methods used in that assessment.
16. An insurance or reinsurance undertaking applying the matching adjustment, the volatility adjustment or the measures of the transitional period to risk-free interest rates or technical provisions shall carry out the assessment set out in Article 26(14)(2) with or without taking into account such adjustments or the measures of the transitional period.
17. In case of carrying out the assessment under Article 26(14)(3), when an internal model is used, an insurance or reinsurance undertaking shall recalibrate the internal risk parameters according to the requirements for calibration of the solvency capital requirement.
18. The own-risk and solvency assessment shall be an integral part of the business strategy. When making strategic decisions, an insurance or reinsurance undertaking must take into account the results of own risk assessment and solvency assessment.
19. An insurance or reinsurance undertaking shall perform the assessment referred to in Article 26(14) regularly and if any significant change in its risk profile is detected it must perform the assessment immediately. An insurance or reinsurance undertaking must inform the supervisory authority of the results of each own-risk and solvency assessment.
20. The own-risk and solvency assessment shall not serve to calculate the solvency capital requirement.
21. Risk management in an insurance or reinsurance undertaking shall be organised so as to properly implement the risk management system.
22. An insurance or reinsurance undertaking shall appoint a person responsible for implementation of the risk management function. The person’s functions, rights, obligations and responsibility shall be established in the internal legal acts of the insurance or reinsurance undertaking, or the (outsourcing) contract between the insurance or reinsurance undertaking and the service provider if a third party is contracted for fulfilment of such functions.
Article 27. Actuarial function
1. Insurance and reinsurance undertakings shall provide for an effective actuarial function covering the following:
1) coordination of the calculation of technical provisions;
2) ensuring the appropriateness of the methodologies and underlying models used as well as the assumptions made in the calculation of technical provisions;
3) assessment of the sufficiency and quality of the data used in the calculation of technical provisions;
4) comparison of best estimates against experience;
5) informing the board of the insurance or reinsurance undertaking of the reliability and adequacy of the calculation of technical provisions;
6) ensuring application of the appropriate methods of approximation if data of proper quality is not sufficient;
7) assessment of the overall underwriting policy;
8) assessment of the adequacy of reinsurance arrangements;
9) contribution to the effective implementation of the risk-management system, in particular with respect to the risk modelling underlying the calculation of the solvency capital and minimum capital requirements and contribution to the assessment of own risk and solvency of the insurance or reinsurance undertaking.
2. An insurance or reinsurance undertaking shall appoint a person responsible for implementation of the actuarial function. Assessment of the qualification and experience of the person implementing the actuarial function must take into account if the person to be appointed has knowledge of actuarial and financial mathematics, commensurate with the nature, scale and complexity of the risks inherent in the business of the insurance or reinsurance undertaking, and if the person is able to demonstrate the relevant professional experience. If a third party is involved for fulfilment of the actuarial function, the afore-mentioned requirements shall be applicable to the employee of the third party to whom fulfilment of the actuarial function of the insurance or reinsurance undertaking has been assigned.
3. Other rights, obligations and responsibility of the person fulfilling the actuarial function of an insurance undertaking shall be established in the internal legal acts of the insurance or reinsurance undertaking or the (outsourcing) contract between the insurance or reinsurance undertaking and the service provider if a third party is involved for fulfilment of such functions.
Article 28. Internal control and compliance assessment
1. Insurance or reinsurance undertakings shall implement an effective internal control system. The internal control system shall at least include administrative and accounting procedures, an internal control framework, appropriate reporting arrangements at all levels of the undertaking and a compliance assessment function.
2. The compliance assessment function shall include the following:
1) assessment of compliance with and implementation of legal acts, articles of association of the insurance or reinsurance undertaking, resolutions of the supervisory board and the board of the undertaking, orders of the head of the undertaking and other internal legal acts and provision of advice to the board on compliance with this Law and other legal acts adopted pursuant to Directive 2009/138/EC;
2) monitoring of amendments to legal acts, assessment of the possible impact thereof on the insurance or reinsurance undertaking, and identification and assessment of the compliance risk.
3. An insurance or reinsurance undertaking shall appoint a person responsible for implementation of the compliance assessment function. The functions, rights, obligations and responsibility of the person responsible for compliance assessment shall be established in the internal legal acts of the insurance or reinsurance undertaking or the (outsourcing) contract between the insurance or reinsurance undertaking and the service provider if the services of a third party are used for fulfilment of such functions.
Article 29. Internal audit
1. An insurance or reinsurance undertaking shall provide for an effective internal audit function. The internal audit function shall cover verification and assessment of the adequacy and effectiveness of the internal control system and other elements of the system of governance of the insurance or reinsurance undertaking.
2. An insurance or reinsurance undertaking shall appoint a person responsible for implementation of the internal audit function. The functions, rights, obligations and responsibility of the person responsible for internal audit shall be established in the internal legal acts of the insurance or reinsurance undertaking or the (outsourcing) contract between the insurance or reinsurance undertaking and the service provider if the services of a third party are used for fulfilment of such functions.
3. Any findings and recommendations of the internal audit shall be reported to the supervisory board or, in the cases and under the procedure established by the supervisory board, to the board. The supervisory board and, in the cases and under the procedure established by the supervisory board, the board shall determine what measures are to be taken with respect to each of the internal audit findings and recommendations and shall ensure that those measures are carried out. Where the supervisory board is not formed, the internal audit findings and recommendations shall be submitted to the board.
4. The person fulfilling the internal audit function shall be accountable only to the supervisory board of the insurance or reinsurance undertaking. The internal audit function shall be objective and independent from the operational functions.
Article 30. Outsourcing
1. An insurance or reinsurance undertaking cannot outsource essential or key functions or activities to any third party where this leads to any of the following:
1) materially impairing the quality of the system of governance of the undertaking concerned;
2) unduly increasing the operational risk;
3) impairing the ability of the supervisory authority to carry out supervision of the insurance or reinsurance undertaking;
4) infringement of the interests of the policyholders, the insured persons, and beneficiaries.
2. An insurance or reinsurance undertaking must ensure that the involved third persons cooperate with the supervisory authority of the insurance or reinsurance undertaking, the supervisory authority has effective access to the business premises of such persons, and the outsourcing contract provides the right for the insurance or reinsurance undertaking, the auditors and the supervisory authority thereof to obtain all the necessary information in relation to the activities carried out by them under the outsourcing contract. Before concluding or amending an outsourcing contract, an insurance or reinsurance undertaking shall notify the supervisory authority.
3. An insurance or reinsurance undertaking shall be liable for any breaches of the legal acts governing the activities of the insurance or reinsurance undertaking despite the concluded contracts transferring performance of any essential or important functions or activities.
4. The supervisory authority shall be entitled to request that the supervisory authority of another state of the European Economic Area inspect the person of the other state of the European Economic Area involved by the insurance or reinsurance undertaking. Having notified the supervisory authority of another state of the European Economic Area, the supervisory authority shall be entitled to carry out such verification by itself. Where the supervisory authority is not allowed to exercise the right to carry out the verification, the supervisory authority shall be entitled to apply to the European Insurance and Occupational Pensions Authority (EIOPA) for assistance under Article 19 of Regulation (EU) No 1094/2010 of the European Parliament and of the Council of 24 November 2010 establishing a European Supervisory Authority (European Insurance and Occupational Pensions Authority), amending Decision No 716/2009/EC and repealing Commission Decision 2009/79/EC.
5. Having notified the supervisory authority, the supervisory authority of another state of the European Economic Area shall be entitled to carry out, by itself or through an involved person, the verification of the person involved by the insurance or reinsurance undertaking of another state of the European Economic Area in the Republic of Lithuania.
6. Upon request from the supervisory authority of another state of the European Economic Area to inspect a person involved by the insurance or reinsurance undertaking of that state of the European Economic Area, the supervisory authority shall carry out the verification by itself or involve another person for carrying out such verification.
Article 31. Restrictions to prevent the conflict of interests
1. The manager of an insurance or reinsurance undertaking may not perform the functions of a member of the supervisory board and other functions assigned to the employees or structural units of the insurance or reinsurance undertaking, be a member of the supervisory board or the board of another insurance or reinsurance undertaking, or hold a managerial position in another insurance or reinsurance undertaking. The manager of an insurance or reinsurance undertaking shall have the right to be a member of the supervisory board and a member of the board of, and hold other managerial position at, an insurance or reinsurance undertaking of the same group of insurance undertakings.
2. A person fulfilling the internal audit function in an insurance or reinsurance undertaking may not be a member of the supervisory board or a member of the board of the insurance or reinsurance undertaking. A member of the board of the parent undertaking may be a member of the supervisory board of the insurance or reinsurance undertaking.
3. An audit firm with which an insurance or reinsurance undertaking has concluded an audit contract may not fulfil the internal audit function in the insurance or reinsurance undertaking.
4. The members of the bodies of an insurance or reinsurance undertaking shall also be subject to restrictions to prevent the conflict of interests set out in other laws of the Republic of Lithuania to the extent this Law fails to provide otherwise.
Article 311. Notification of violations in an insurance or reinsurance undertaking
An insurance or reinsurance undertaking must ensure that measures are in place allowing its staff to report internally through a dedicated independent and autonomous channel on potential or actual violation of this Law, its implementing regulations or Regulation (EU) No 1286/2014. In order to implement the measures to report potential or actual violations, an insurance or reinsurance undertaking may engage third parties. Requirements established in Articles 437(1)(2)–437(1)(4) of the Law of the Republic of Lithuania on the Bank of Lithuania shall apply to these measures.
SECTION THREE
FINANCE OF INSURANCE AND REINSURANCE UNDERTAKINGS
Article 32. Organisational fund
1. The founders or a legal person (persons) which is being reorganised into an insurance or reinsurance undertaking or which is changing its type of activities into the activities of an insurance undertaking must form an organisational fund of financial resources intended for covering the expenses of founding, reorganisation into an insurance undertaking or changing of type of activities.
2. The organisational fund must amount to the minimum of EUR 300,000.
3. The organisational fund must be formed of financial resources only.
4. The organisational fund may not be formed of borrowed financial resources and financial resources of illegal origin.
5. After incorporation of the insurance or reinsurance undertaking and registration of the amendments in relation to changes in the type of activities, the balance of the organisational fund shall be attributed to the mandatory reserve.
Article 33. Authorised capital
1. The authorised capital of an insurance or reinsurance undertaking may not amount to less than EUR 1,000,000.
2. The articles of association which are amended due to the increase or decrease of the authorised capital must be coordinated, following the procedure set out by the supervisory authority, with the supervisory authority before the insurance or reinsurance undertaking communicates information about the amendment to the Register of Legal Entities. The supervisory authority shall take a decision on the amendments to the articles of association within 20 working days of the submission of all the duly executed documents. The increase of the authorised capital may be registered according to the procedure set out by the law only when the shares have been fully paid-up.
3. An insurance or reinsurance undertaking may have only registered shares. The shares of an insurance or reinsurance undertaking must be paid-up only in cash.
4. The shares of an insurance or reinsurance undertaking may not be paid-up in borrowed cash nor in cash of illegal origin.
Article 34. Equity and loan capital
1. The composition of equity capital of an insurance or reinsurance undertaking shall be regulated by the Law on Companies; however, upon registration in the Register of Legal Entities of an insurance undertaking as well as amendments related to the change of the type of activities, the balance of the organisational fund shall be attributed to the mandatory reserve.
2. The loan capital of an insurance or reinsurance undertaking shall be composed of:
1) technical provisions;
2) reinsurers’ deposits;
3) other commitments;
4) accumulated expenses and receivables.
Article 35. Valuation of assets and liabilities
Unless otherwise set out in this Law and other legal acts, for the purposes of establishing the solvency of an undertaking, an insurance or reinsurance undertaking shall value assets and liabilities under the following rules:
1) assets shall be valued at the amount for which they could be exchanged between unrelated, knowledgeable and willing parties in a transaction;
2) liabilities shall be valued at the amount for which they could be transferred or settled between unrelated, knowledgeable and willing parties in a transaction. For the purposes set out in this paragraph, the financial situation of the insurance or reinsurance undertaking shall not be taken into account in valuation of the liabilities.
Article 36. Own funds
1. For the purposes of establishing the solvency of an undertaking, own funds of an insurance or reinsurance undertaking shall comprise basic own funds and ancillary own funds.
2. An insurance or reinsurance undertaking shall be entitled to include ancillary own funds only after obtaining a prior consent of the supervisory authority.
3. The elements of own funds shall be divided into three levels.
4. The composition of own funds of an insurance or reinsurance undertaking, peculiarities of classification according to levels, eligibility of own funds to cover the solvency capital requirement and minimum capital requirement and other requirements for own funds of an insurance or reinsurance undertaking shall be established by the supervisory authority.
Article 37. Solvency capital requirement
1. Insurance and reinsurance undertakings must hold eligible own funds covering the solvency capital requirement. The solvency capital requirement shall be calculated either under the standard formula under Article 38 of this Law or using an internal model, as set out in Article 39.
2. The solvency capital requirement shall be calculated taking into account the principle of business continuity.
3. The solvency capital requirement shall be calibrated so as to ensure that all quantifiable risks to which an insurance or reinsurance undertaking is exposed are taken into account. The solvency capital requirement shall cover existing business activities (taking into account only unexpected losses), as well as the new business activities expected to be carried over for the following 12 months.
4. The solvency capital requirement shall correspond to the value-at-risk of the basic own funds of an insurance or reinsurance undertaking subject to a confidence level of 99.5 % over a one-year period.
5. Calculation of the solvency capital requirement shall cover at least the following risks:
1) non-life insurance risk;
2) life insurance risk;
3) health insurance risk;
4) market risk;
5) credit risk;
6) operational risk.
6. Operational risk referred to in Article 37(5)(6) shall include legal risks. Risks arising from strategic decisions, as well as reputation risks shall be excluded from the definition of operational risk.
7. When calculating the solvency capital requirement, insurance and reinsurance undertakings must take account of the effect of risk-mitigation techniques only if credit risk and other risks arising from the use of such techniques are properly reflected in the calculation of the solvency capital requirement.
8. An insurance or reinsurance undertaking must calculate the solvency capital requirement at least once a year, permanently monitor and ensure covering of the solvency capital requirement with eligible own funds and notify the supervisory authority of the calculated solvency capital requirement and coverage thereof.
9. Life assurance undertakings engaged in the accumulation of occupational pensions shall calculate the solvency capital requirements under the procedure set out by the supervisory authority.
Article 38. Use of the standard formula
1. The supervisory authority shall establish the standard formula for the calculation of the solvency capital requirement and the procedure for the use of the said formula.
2. Subject to a reasoned request of an insurance or reinsurance undertaking, the supervisory authority shall be entitled to allow the insurance or reinsurance undertaking to replace life assurance, non-life insurance and health insurance risks within the standard formula by parameters specific to the undertaking concerned which must be calibrated according to the internal data of the respective undertaking or data specific to the activities of an undertaking that is using standardised methods. When granting approval, the supervisory authority shall verify the completeness, accuracy and appropriateness of the data used by the insurance or reinsurance undertaking.
3. If the risk profile of an insurance or reinsurance undertaking deviates significantly from the assumptions underlying calculations under the standard formula and use of the standard formula is inappropriate for the calculation of the solvency capital requirement of the insurance or reinsurance undertaking, the supervisory authority shall, by executing a reasoned decision, be entitled to oblige the insurance or reinsurance undertaking to partially or fully use the internal model or replace the parameters of life assurance, non-life insurance and health insurance risks by the parameters specific to the undertaking without prejudice to the provisions of Articles 37(3) and 37(4) of this Law.
Article 39. Use of the internal model
1. An insurance or reinsurance undertaking shall be entitled to provide the supervisory authority with a request to allow for partially or fully using the internal model for the calculation of the solvency capital requirement.
2. The board of the insurance or reinsurance undertaking must approve the request submitted to the supervisory authority to allow for partially or fully using the internal model for the calculation of the solvency capital requirement and ensure that the system allowing proper and continuous application of the internal model is in place in the insurance or reinsurance undertaking.
21. Under Article 35(1) of Regulation (EU) No 1094/2010, the supervisory institution shall inform the European Insurance and Occupational Pensions Authority of any requests to allow for partially or fully using or changing the internal model for the for calculation of the solvency capital requirement. The supervisory institution, in order to make a decision on the request, may refer to the European Insurance and Occupational Pensions Authority for assistance under Article 8(1)(b) of Regulation (EU) No 1094/2010.
3. Authorisations for partially or fully using or changing the internal model shall be issued under the legal acts of the supervisory authority. Authorisations to partially or fully use the internal model shall be issued within 6 months from the date of proper submission of the request and all the required documents.
4. The supervisory authority shall issue the authorisation only if the internal model meets the requirements set by the supervisory authority.
5. Even in case where the supervisory authority allowed using the internal model, at a reasoned request of the supervisory authority, the insurance or reinsurance undertaking must provide data on calculation of the solvency capital requirement under the standard formula.
6. After issue of the authorisation to use internal models by the supervisory authority, insurance and reinsurance undertakings shall not be entitled to revert to partial or full use of the standard formula for the calculation of the solvency capital requirement, except for the cases where the supervisory authority, taking into account a reasoned request of an insurance or reinsurance undertaking, allows reverting to the use of the standard formula.
7. If the internal model used by an insurance undertaking or reinsurance undertaking ceases to comply with the applicable requirements, the insurance or reinsurance undertaking shall immediately but not later than within 7 working days from the date of noticing non-compliance, either present to the supervisory authority a plan to restore compliance, or demonstrate that the effect of non-compliance is immaterial. In the event that an insurance or reinsurance undertaking fails to implement the submitted plan, the supervisory authority may require the insurance or reinsurance undertaking to revert to calculating the solvency capital requirement under the standard formula.
Article 40. Minimum capital requirement
1. Insurance and reinsurance undertakings must hold eligible basic own funds to cover the minimum capital requirement. The minimum capital requirement shall be calculated under the following principles:
1) the calculation shall be made in a clear and simple manner, and in such a way as to ensure that the calculation can be audited;
2) the minimum capital requirement shall correspond to an amount of eligible basic own funds which, if it was lower and if the insurance or reinsurance undertaking was allowed to continue its operations, would expose policyholders, the insured persons and beneficiaries to an unacceptable level of risk.
2. The minimum capital requirement shall be calculated using the linear function of the technical provisions, written premiums, capital-at-risk, deferred tax and administrative expenses or a sub-set of the said variables. The said variables shall be measured net of reinsurance. The linear function shall be calibrated to the value-at-risk of the basic own funds of an insurance or reinsurance undertaking subject to a confidence level of 85 % over a one-year period.
3. The minimum capital requirement shall neither fall below 25 % nor exceed 45 % of the solvency capital requirement of the insurance or reinsurance undertaking, calculated under the procedure established in this Law (for the purposes set out in this Article, the solvency capital shall be increased by the amount of the capital add-on calculated under the procedure set out in Article 48 of this Law). Where either of the limits referred to in this paragraph determines an undertaking’s minimum capital requirement, the insurance or reinsurance undertaking shall provide to the supervisory authority information allowing for a proper understanding of the reasons thereof.
4. The minimum capital requirement calculated under this Article must be not lower than the absolute floor which shall be equal to the following amounts:
1) EUR 2,500,000 for non-life insurance undertakings, including tied insurance undertakings;
2) EUR 3,700,000 for life assurance undertakings, including tied insurance undertakings;
3) EU 3,700,000 for insurance undertakings engaged in at least one of the insurance activities with insurance risks of the insurance classes set out in Articles 7(3)(10)–7(3)(15) of this Law.
4) EUR 3,600,000 for reinsurance undertakings, except for tied reinsurance undertakings, whose minimum capital shall be no less than EUR 1,200,000;
5) the sum of the amounts set out in Articles 40(5)(1) and 40(5)(2) (or Articles 40(5)(2) and 40(5)(3), respectively) for insurance undertakings referred to in Article 221 of this Law.
5. Insurance and reinsurance undertakings shall calculate the minimum capital requirement at least quarterly, monitor and ensure coverage of the minimum capital requirement by eligible basic own funds on an ongoing basis and notify the supervisory authority of the calculated minimum capital requirement and coverage thereof. If an insurance or reinsurance undertaking calculates the minimum capital requirement according to the provisions of Article 40(3), it shall be exempt from the calculation of the solvency capital requirement quarterly, but shall calculate the said requirement at least at the frequency set out in Article 37(8) of this Law.
Article 41. Technical provisions
1. An insurance or reinsurance undertaking must calculate technical provisions with regard to all its obligations under insurance and reinsurance contracts.
2. The value of technical provisions must correspond to the amount the insurance or reinsurance undertaking would have to pay if it were to transfer its rights and obligations under insurance and reinsurance contracts immediately to another insurance or reinsurance undertaking.
3. Technical provisions must be calculated in a prudent, reliable and objective manner and take into account the information provided by financial markets as well as generally available data on insurance risks.
4. An insurance or reinsurance undertaking must have internal processes and procedures in place to ensure the appropriateness, completeness and accuracy of the data used in the calculation of technical provisions of the insurance or reinsurance undertaking.
5. Upon request from the supervisory authority, insurance and reinsurance undertakings shall provide the supervisory authority with information on the appropriateness of their technical provisions, the applicability and relevance of the methods applied, and the appropriateness of the underlying statistical data used.
6. To the extent that the calculation of technical provisions of insurance and reinsurance undertakings fails to comply with the requirements of legal acts, the supervisory authority may require insurance and reinsurance undertakings to increase the amount of technical provisions so that they correspond to the level determined under the requirements of the legal acts.
7. For the purposes of establishing solvency, an insurance or reinsurance undertaking shall calculate the technical provisions under the procedure established by the supervisory authority.
8. Life assurance undertakings engaged in the accumulation of occupational pensions shall calculate the technical provisions for accumulation of occupational pensions under the procedure set out by the supervisory authority.
Article 42. Investment of an insurance or reinsurance undertaking
1. An insurance or reinsurance undertaking shall invest all its assets under the principles of prudence, as set out in Articles 42(2)–42(10).
2. With respect to all its assets as a whole, an insurance or reinsurance undertaking shall only invest them in investment targets whose risks the undertaking concerned can properly identify, measure, monitor, manage, control, report, and account for in the assessment of its risks and solvency needs under the requirements set out in Article 26(14)(1) of this Law.
3. An insurance or reinsurance undertaking shall invest all assets, in particular those covering the minimum capital requirement and the solvency capital requirement, in such a manner as to ensure the security, quality, liquidity, profitability and availability of the investment portfolio as a whole.
4. An insurance or reinsurance undertaking shall invest assets held to cover the technical provisions in a manner consistent with the nature and duration of the insurance and reinsurance liabilities.
5. An insurance or reinsurance undertaking shall invest assets in the best interest of all policyholders, insured persons and beneficiaries.
6. In case of a conflict of interest, insurance or reinsurance undertakings, or the entity which manages their asset portfolio, shall ensure that the investment is made in the best interest of policyholders, insured persons and beneficiaries.
7. An insurance or reinsurance undertaking shall be entitled to use derivative instruments with a view to reducing the investment risks or facilitating efficient investment portfolio management.
8. An insurance or reinsurance undertaking shall ensure that investment and assets that are not traded on regulated financial markets are kept to prudent levels.
9. An insurance or reinsurance undertaking shall properly diversify assets in such a way as to avoid excessive reliance on any particular asset, issuer, a group of undertakings, or a geographical area and excessive accumulation of risk in the portfolio as a whole.
10. An insurance or reinsurance undertaking must ensure that investment in securities issued by the same issuer, or by issuers belonging to the same group, shall not expose the insurance undertakings to excessive risk concentration.
11. The assets to cover obligations under life-assurance contracts linked to investment funds shall be invested under the principle of prudence and the rules set out in the legal acts of the supervisory authority.
12. An insurance undertaking must maintain a list of assets covering technical provisions following the procedure set out by the supervisory authority. The court, before applying interim protection measures, or other state institutions, before applying sanctions related to the assets set out in this list, must obtain an opinion of the supervisory authority on the potential consequences of the interim protection measures or sanctions for the financial situation of the insurance undertaking as well as the interests of the policyholders, insured persons, beneficiaries and injured third parties. The supervisory authority must provide its conclusion to the court within 24 hours.
Article 43. Identification and notification of a deteriorating financial situation of an insurance undertaking
Insurance and reinsurance undertakings shall have procedures in place to identify the deteriorating financial situation. Having determined that its financial situation has deteriorated, an insurance or reinsurance undertaking shall immediately notify the supervisory authority when such deterioration occurs.
Article 44. Non-compliance with the requirements for calculation of technical provisions
1. Where an insurance or reinsurance undertaking fails to comply with the requirements for calculation of technical provisions, the supervisory authority shall be entitled to seize the assets of the insurance or reinsurance undertaking after having communicated its intentions to the supervisory authority of another state of the European Economic Area where the risk is situated or the state of the European Economic Area of commitment. The notice of the supervisory authority to the supervisory authority of another state of the European Economic Area must specify the assets to be seized.
2. Exercise by the supervisory authority of the right referred to in Article 44(1) of this Law shall not preclude the supervisory authority from application of other sanctions set out by this Law.
Article 45. Non-compliance with the solvency capital requirement
1. Insurance and reinsurance undertakings shall immediately inform the supervisory authority as soon as they observe that the solvency capital requirement is no longer complied with, or where there is a risk of non-compliance in the following three months.
2. Within two months from the observation of non-compliance with the solvency capital requirement, the insurance or reinsurance undertaking concerned shall submit a well-grounded plan for restoration of the financial situation drawn up under the requirements established by the supervisory authority and coordinate it with the supervisory authority.
3. The supervisory authority shall require the insurance or reinsurance undertaking concerned to take the necessary measures to achieve, within six months from the observation of non-compliance with the solvency capital requirement, covering of the solvency capital requirement by eligible own funds of the undertaking or the reduction of the risk profile of the insurance or reinsurance undertaking to ensure compliance with the solvency capital requirement. The supervisory authority may, if appropriate, extend that time limit by three months.
4. Under exceptional adverse circumstances announced by the European Insurance and Occupational Pensions Authority, the supervisory authority, having consulted, if necessary, the European Systemic Risk Board and having taken into account all the relevant factors including the average duration of the technical provisions, shall be entitled to extend the time limit of 3 months referred to in Article 45(3) to up to 7 years to the affected undertaking which, alone or together with other affected undertakings, represents a significant share of the market; or where the undertaking (alone or with other undertakings) has a significant part of insurance or reinsurance classes significantly affected. The supervisory authority shall be entitled to request European Insurance and Occupational Pensions Authority to announce exceptional adverse circumstances where it is likely that the insurance or reinsurance undertaking (undertakings) that represent a significant share of the market or the insurance or reinsurance undertaking (undertakings) a significant part of insurance or reinsurance classes of which is affected may fail to comply with any of the requirements set out in Article 45(3). Exceptional adverse circumstances exist in cases of an unexpected, sharp and steep fall in financial markets, a persistent low interest rate environment or a high-impact catastrophic event that have a serious adverse effect on the financial situation of the insurance or reinsurance undertaking (undertakings). The European Insurance and Occupational Pensions Authority, in cooperation with the supervisory authority, shall regularly assess the situation and declare when exceptional adverse circumstances cease to exist. The insurance or reinsurance undertaking concerned shall, every three months, submit a progress report to the supervisory authority setting out the measures taken and the progress made to cover the solvency capital requirement by eligible own funds or to reduce the risk profile to ensure compliance with the solvency capital requirement.
5. The extension referred to in Article 45(4) of this Law shall be withdrawn where no significant progress in covering of the solvency capital requirement is noted within the period from the date of the observation of non-compliance of the solvency capital requirement to the date of the submission of the progress report.
6. In exceptional cases, where the supervisory authority is of the opinion that the financial situation of the insurance or reinsurance undertaking concerned will deteriorate further, the supervisory authority, upon a prior notification to the supervisory authority of another state of the European Economic Area where an insurance risk is situated or the state of the European Economic Area of commitment, shall have the right to seize the assets of the insurance or reinsurance undertaking or request that the supervisory authority of another state of the European Economic Area imposes analogous restrictions on the assets that belong to the insurance or reinsurance undertaking and that are specified by the supervisory authority.
7. Exercise of the right referred to in Article 45(6) by the supervisory authority shall not preclude the supervisory authority from application of other sanctions set out in this Law.
Article 46. Non-compliance with the minimum capital requirement
1. Insurance and reinsurance undertakings must inform the supervisory authority immediately where they observe that the minimum capital requirement is no longer complied with or where there is a risk of non-compliance in the following three months.
2. Within one month from the observation of non-compliance with the minimum capital requirement, the insurance or reinsurance undertaking concerned shall submit a short-term plan for restoration of the financial situation of the form set out by the supervisory authority and drawn up under the requirements established by the supervisory authority so that within three months of observation of non-compliance with the minimum capital requirement, the minimum capital requirement is covered by eligible own funds of the insurance or reinsurance undertaking or its risk profile is reduced with a view to ensuring compliance with the minimum capital requirement. The short-term plan for restoration of the financial situation shall be negotiated with the supervisory authority.
3. Having received the information specified in Article 46(1) of this Law, the supervisory authority, upon a prior notification to the supervisory authority of another state of the European Economic Area where an insurance risk is situated or the state of the European Economic Area of commitment, shall have the right to seize the assets of the insurance or reinsurance undertaking or request that the supervisory authority of the other state of the European Economic Area impose analogous restrictions on the assets of the insurance or reinsurance undertaking set out by the supervisory authority.
4. Exercise of the right referred to in Article 45(3) by the supervisory authority shall not preclude the supervisory authority from application of other sanctions set out by this Law.
Article 47. Rights of the supervisory authority in respect of insurance undertakings or reinsurance undertakings of other states of the European Economic Area
Upon the request of the supervisory authority of another state of the European Economic Area, the supervisory authority shall be entitled to seize the assets of the insurance or reinsurance undertaking of another state of the European Economic Area specified by the supervisory authority of another state of the European Economic Area and located in the Republic of Lithuania.
Article 48. Capital add-on
1. The supervisory authority may oblige an insurance or reinsurance undertaking to have a capital add-on in exceptional circumstances, i.e. where the supervisory authority while fulfilling its functions establishes that:
1) the risk profile of the insurance or reinsurance undertaking deviates significantly from the assumptions underlying the solvency capital requirement calculated using the standard formula, and the requirement to use an internal model (under Article 38(3) of this Law) is inappropriate or has been ineffective; or a partial or full internal model is still being developed;
2) the risk profile of the insurance or reinsurance undertaking deviates significantly from the assumptions underlying the solvency capital requirement calculated using an internal model or partial internal model because certain quantifiable risks are captured insufficiently and the adaptation of the model to better reflect the given risk profile has failed within a reasonable time frame;
3) the system of governance of an insurance or reinsurance undertaking deviates significantly from the requirements set out in the legal acts and those deviations prevent the insurance or reinsurance undertaking from being able to properly identify, measure, monitor, manage and report the risks that it is or could be exposed to and the application of other measures is in itself unlikely to improve the deficiencies sufficiently within a reasonable time frame;
4) the risk profile of the insurance or reinsurance undertaking deviates significantly from the assumptions underlying the matching adjustment, the volatility adjustment or the measure of the transitional period for risk-free interest rates or technical provisions where the insurance or reinsurance undertaking applies such adjustments or transitional measures under the procedure set out by the supervisory authority.
2. Under the circumstances specified in Articles 48(1)(1) and 48(1)(2) of this Law, the amount of the required capital add-on shall be calculated so as to ensure that the insurance or reinsurance undertaking complies with the requirements set out in Articles 37(3) and 37(4) of this Law.
3. Under the circumstances set out in Articles 48(1)(3) and 48(1)(4), the required capital add-on shall be proportionate to the material risks arising from the deficiencies which gave rise to the decision of the supervisory authority to set the add-on.
4. Under the circumstances set out in Articles 48(1)(2) and 48(1)(3), the supervisory authority must ensure that the insurance or reinsurance undertaking makes every effort to remedy the deficiencies that led to the imposition of the capital add-on.
5. The supervisory authority shall review the decision on the capital add-on at least once a year and must withdraw the decision when the insurance or reinsurance undertaking has remedied the deficiencies which led to its imposition.
6. The solvency capital requirement including the capital add-on imposed shall replace the inadequate solvency capital requirement.
7. (Repealed).
Article 49. Transfer of rights and obligations under insurance or reinsurance contracts
1. On the basis of a written agreement and upon obtaining an authorisation from the supervisory authority, an insurance or reinsurance undertaking shall be entitled to transfer its rights and obligations under insurance or reinsurance contracts (all contracts or any part thereof) to another insurance or reinsurance undertaking, an insurance or reinsurance undertaking of another state of the European Economic Area or a branch of a third country insurance or reinsurance undertaking established in the Republic of Lithuania or another state of the European Economic Area. Before issue of the authorisation, the supervisory authority shall apply to the respective supervisory authorities of other states of the European Economic Area in order to obtain the information specified in Articles 49(2), 49(3) and 49(4) of this Law.
2. An insurance or reinsurance undertaking shall have the right to transfer its rights and obligations under insurance or reinsurance contracts to an insurance or reinsurance undertaking of another state of the European Economic Area only where a supervisory authority of that state confirms that the accepting undertaking will comply with the solvency capital requirements after the transfer of the rights and obligations.
3. Where it is intended to transfer rights and obligations under the contracts of a branch of an insurance undertaking in another state of the European Economic Area, the supervisory authority must obtain an opinion from a supervisory authority of another state of the European Economic Area where the branch is located about the transfer of the rights and obligations.
4. An authorisation to transfer rights and obligations under insurance contracts may be issued provided that the supervisory authority of another state of the European Economic Area where an insurance risk is situated or the supervisory authority of another state of the European Economic Area of commitment has no objections thereto.
5. If information specified in Articles 49(2), 49(3) and 49(4) of this Law is not received within three months from the application of the supervisory authority, it shall be considered that the supervisory authority of another state of the European Economic Area has no objections to the transfer of rights and obligations under insurance contracts.
6. A written agreement on the transfer of rights and obligations must have a clause that the transfer of rights and obligations shall be deemed to have taken place not earlier than from the moment of publication of the authorisation for the transfer rights and obligations by the supervisory authority on the website of the supervisory authority.
7. The provisions of Articles 49(2), 49(3) and 49(4) of this Law shall also be applicable where the rights and obligations under insurance contracts are transferred in the process of reorganisation of an insurance undertaking.
8. Where rights and obligations are transferred under insurance contracts under Article 49(1) of this Law, the policyholder’s consent shall not be required. Such consent is also not necessary where the rights and obligations under insurance contracts subject to the law of the Republic of Lithuania are transferred by the insurance undertaking of another state of the European Economic Area where an insurance risk is situated or the state of the European Economic Area of commitment.
9. The provisions of this Article shall not be applicable where the transfer of rights and obligations of an insurance undertaking is based on individual insurance contracts and is carried out under the procedure set out in such contracts and following the provisions of legal acts concerning debt transfer or assignment of the claim.
10. Where the transfer of rights and obligations is based on insurance contracts, the obligations of reinsurers defined in those contracts shall be transferred under the procedure set out in the reinsurance contracts.
11. The mandatory transfer of the rights and obligations under insurance contracts shall be regulated in Articles 152 and 206 of this Law.
Article 50. Issue of an authorisation to transfer rights and obligations under insurance or reinsurance contracts
1. An insurance undertaking must announce about its intention to transfer rights and obligations under insurance contracts in at least two national newspapers and satisfy the announcement requirements established in the state of the European Economic Area where an insurance risk is situated or the state of the European Economic Area of commitment. The announcement about the intention to transfer the rights and obligations under insurance contracts must specify the time limit, equal to or exceeding two months, within which the policyholder shall have the right to object in writing against the intention of the insurance undertaking to transfer rights and obligations under insurance contracts. The provisions of this paragraph shall also be applicable where the rights and obligations under insurance contracts are transferred by an insurance undertaking of another state of the European Economic Area and where the Republic of Lithuania is the state of the European Economic Area where the insurance risk is situated or the state of the European Economic Area of commitment.
2. Where an insurance undertaking has failed to properly fulfil the requirement set out in Article 50(1) of this Law, the supervisory authority, under the procedure established by itself, shall have the right to request the insurance undertaking to announce once again about its intention to transfer rights and obligations under insurance contracts or additionally inform each policyholder of the said intention in writing.
3. Upon the expiry of the time limit set in Article 50(1) of this Law, the insurance undertaking which intends to transfer its rights and obligations under insurance contracts must apply to the supervisory authority for an authorisation to transfer the rights and obligations under insurance contracts.
4. The authorisation to transfer the rights and obligations under insurance or reinsurance contracts shall be issued within three months from the application following the procedure set by the supervisory authority if:
1) all the documents and information specified in the description of the procedure for issuing authorisations for the transfer of rights and obligations under insurance or reinsurance contracts set out by the supervisory authority have been submitted;
2) the accepting undertaking assumes all the rights and obligations arising from insurance or reinsurance contracts;
3) the accepting undertaking will comply with the solvency capital requirements after the transfer of the rights and obligations under insurance or reinsurance contracts;
4) the transfer of the rights and obligations under insurance contracts has no negative impact on the property interests of the policyholders, insured persons, beneficiaries and injured third parties of the insurance undertaking which transfers its rights and obligations under insurance contracts;
5) the supervisory authorities of other states of the European Economic Area indicated in Article 49(4) of this Law have no objections to the transfer of the rights and obligations under insurance contracts.
5. When issuing an authorisation for the transfer of rights and obligations, the supervisory authority must set a time limit within which the rights and obligations have to be transferred. The authorisation for the transfer of the rights and obligations under insurance contracts shall be published on the website of the supervisory authority.
6. Where policyholders object to the transfer of rights and obligations under insurance contracts, they shall have the right, within one month from the transfer of rights and obligations, to terminate the insurance contract on these grounds in accordance with the procedure set out in the insurance contract for termination of the insurance contract where the policyholder objects to the change of the insurer as a result of the transfer of rights and obligations.
7. The rights and obligations under insurance or reinsurance contracts shall be transferred together with the assets covering the technical provisions or with the actual plan for recovery of such assets; the plan must receive an approval from the supervisory authority under the procedure established by the supervisory authority.
8. The public announcement referred to in Article 50(1) of this Law must indicate the conditions following the date of fulfilment of which the rights and obligations under insurance contracts shall be deemed to be transferred. The said announcement shall be deemed to constitute a proper notification of the policyholders, insured persons, beneficiaries and injured third parties of transfer of the rights and obligations under Article 6.109 of the Civil Code.
Article 51. Provisions applicable to reinsurance
1. In pursuance of reduction of losses due to the assumed insurance risk, reduction of the capital requirement, more efficient use of capital held or extension of possibilities to assume other insurance risks, an insurance or reinsurance undertaking shall be entitled to transfer the assumed risk by concluding reinsurance or retrocession contracts with the persons specified in Article 4 of this Law.
2. An insurance or reinsurance undertaking shall be entitled to transfer the assumed risk to a special purpose undertaking. An authorisation to establish a special purpose undertaking in the Republic of Lithuania shall be issued by the supervisory authority.
3. Having regard to the assumed insurance risks, an insurance undertaking or a reinsurance undertaking must, at any time, have sufficient ceded reinsurance.
4. The mere fact that the reinsurance contract or retrocession contract is concluded with an insurance or reinsurance undertaking of another state of the European Economic Area, the financial situation of which is other than stable and sound, cannot constitute grounds for declaring such reinsurance or retrocession contract inappropriate.
5. An insurance or reinsurance undertaking which concludes finite reinsurance contracts or pursues finite reinsurance activities must ensure proper identification, measurement, monitoring, management, control and reporting of the risks arising from those contracts or activities.
6. The reinsurance contracts concluded with the undertakings, the head offices of which are situated in third countries, the solvency regime of which is equivalent to the solvency regime established in this Law, and the list of which is published on the website of the European Insurance and Occupational Pensions Authority, shall be considered as reinsurance contracts concluded with the undertakings issued with a licence under this Law.
Article 52. Accounting and financial statements
1. Insurance and reinsurance undertakings must maintain financial accounting records and draw up a set of interim financial statements and a set of annual financial statements pursuant to the laws of the Republic of Lithuania, resolutions of the supervisory authority, other legal acts, and the accounting policy chosen by the insurance or reinsurance undertaking.
2. The accounting system of activities of an insurance or reinsurance undertaking must be organised in such a way that:
1) financial statements show the real financial situation of the insurance undertaking and its performance results;
2) conditions are provided for safe and credible management and disposal of the assets of the insurance undertaking;
3) conditions are provided for an audit firm, any persons fulfilling the internal audit function or institutions authorised by law to inspect and evaluate the activities of the undertaking, the supervisory and management bodies of the undertaking, its other employees having powers to make decisions from which obligations of the insurance undertaking to other persons arise, and the financial situation of the undertaking.
3. An insurance or reinsurance undertaking must submit to the supervisory authority a set of annual financial statements approved by the general meeting of shareholders, a decision of profit allocation and an auditor’s report within four months from the end of the financial year.
4. The general meeting of shareholders of an insurance or reinsurance undertaking cannot consider and approve the set of annual financial statements and make a decision on profit allocation if the set of annual financial statements is not audited.
5. Under the established procedure, accuracy of information provided in the set of annual financial statements shall fall within the responsibility of the manager, members of the board, or members of the supervisory board of an insurance or reinsurance undertaking in view of the competence assigned by law to the manager, the board or the supervisory board.
6. The frequency of drawing up of the set of interim financial statements of an insurance or reinsurance undertaking and the procedure for submission and publication of sets of interim and annual financial statements shall be established by the supervisory authority.
Article 53. Audit
1. The set of annual financial statements of an insurance or reinsurance undertaking must be audited by an audit firm that has experience of auditing insurance undertakings, reinsurance undertakings or financial institutions.
2. Where auditors of an audit firm lack experience in auditing of insurance undertakings, reinsurance undertakings or financial institutions or where grounds exist for doubt about independence of an audit firm or an auditor appointed by it from the insurance undertaking or reinsurance undertaking being audited, at the request of the supervisory authority, the insurance or reinsurance undertaking must find another audit firm or appoint other auditors.
3. An audit firm shall have the following obligations when auditing sets of financial statements of an insurance or reinsurance undertaking:
1) an audit firm must inform the supervisory authority immediately about any major violations of this Law and other legal acts regulating financial activities of insurance or reinsurance undertakings, failure to comply with the solvency capital requirement or the minimum capital requirements, circumstances indicating that the insurance undertaking no longer meets the requirements necessary for the issuance of a business licence as well as the circumstances that cause or may cause a threat to solvency, financial stability and continuity of activities of the insurance undertaking or the interests of the policyholders, insured persons, beneficiaries and injured third parties;
2) an audit firm must immediately inform the supervisory authority in writing about any circumstances due to which the audit report fails to include the auditor’s opinion, the submitted auditor’s opinion is negative or qualified.
4. At the request of the supervisory authority, an audit firm must present explanations regarding its opinions about financial statements and other information specified in the auditor’s opinion.
5. The audit firm which performs an audit of an insurance or reinsurance holding company or a company controlled by an insurance or reinsurance undertaking must forthwith inform the supervisory authority about any circumstances indicated in Article 53(3) of this Law that transpire during the audit.
6. Fair disclosure of information by an audit firm to the supervisory authority about any circumstances indicated in this Article shall not be and may not constitute a breach of the obligation, set out by legal acts or a contract, of non-disclosure of information and shall not incur, nor may incur, any form of liability.
Article 54. Disclosure of information to the public and the supervisory authority
1. In fulfilment of the public disclosure requirements, an insurance or reinsurance undertaking shall draw up a report on solvency and financial situation and publish it under the requirements of the legal acts of the supervisory authority.
2. The supervisory authority shall set out the requirements concerning the nature, scope, and form of information that must be provided for fulfilment of the supervisory functions and the period for provision of such information.
SECTION FOUR
SUPERVISION OF A GROUP OF INSURANCE
AND/OR REINSURANCE UNDERTAKINGS
Article 55. Cases of application of group supervision
1. The provisions of this Section shall apply to the insurance undertakings, reinsurance undertakings and other undertakings specified in this Section. The undertakings subject to group supervision requirements shall also be subject to other requirements for the activities of insurance undertakings and reinsurance undertakings and supervision thereof, except for the cases set out in this Law and the legal acts of the supervisory authority.
2. The provisions concerning the supervisory authority of a group of insurance and/or reinsurance undertakings (hereinafter: ‘group supervisor’) shall apply to the supervisory authority where the latter is appointed a group supervisor under the procedure set out in Article 63 of this Law. Where the supervisory authority is not appointed as the group supervisor, the requirement for group supervision shall be applicable to that authority within her capacity as a respective supervisory authority involved in the activities of a college of insurance supervisory authorities (hereinafter: ‘college of the supervisory authorities’).
3. Group supervision shall apply to the following entities:
1) to insurance or reinsurance undertakings which are participating undertakings in at least one insurance undertaking, reinsurance undertaking, third country insurance undertaking or third country reinsurance undertaking;
2) to insurance or reinsurance undertakings, the parent undertaking of which is an insurance holding company or mixed-activity financial holding company which has its head office in a state of the European Economic Area;
3) taking into account the provisions of Article 56(6)(3) of this Law, to insurance or reinsurance undertakings, the parent undertaking of which is a mixed-activity insurance holding company, an insurance holding company, a mixed-activity financial holding company with a head office outside the European Economic Area, or a third country insurance or reinsurance undertaking.
4. In the cases referred to Articles 55(3)(1) and 55(3)(2) of this Law, where the participating insurance or reinsurance undertaking, the insurance holding company or mixed-activity financial holding company with a head office in a state of the European Economic Area, is a related undertaking of an undertaking subject to supervision or a mixed-activity holding company subject to supplementary supervision under the Law on the Supplementary Supervision of Entities in a Financial Conglomerate, the group supervisor may, after consulting the other supervisory authorities concerned, decide against carrying out, at the level of that participating insurance or reinsurance undertaking or that insurance holding company, the supervision of risk concentration and/or the supervision of intra-group transactions (hereinafter: ‘intra-group transaction’) referred to in Article 61 of this Law.
5. If a mixed-activity financial holding company is subject to equivalent provisions under this Law and the Law on the Supplementary Supervision of Entities in a Financial Conglomerate, the group supervisor may, after consulting other supervisory authorities concerned, decide to apply only the respective provisions of the Law on the Supplementary Supervision of Entities in a Financial Conglomerate to such a mixed-activity financial holding company.
6. If a mixed-activity financial holding company is subject to equivalent provisions under this Law and other legal acts of the Republic of Lithuania governing the activities of financial institutions, the group supervisor may, after consulting the respective consolidating supervisory authorities, decide to apply only the provisions applicable to the main financial sector established according to the Law on the Supplementary Supervision of Entities in a Financial Conglomerate to such a mixed-activity financial holding company.
7. The group supervisor shall notify the European Banking Authority and the European Insurance and Occupational Pensions Authority of the decisions taken according to Articles 55(5) and 55(6) of this Law.
Article 56. Scope of group supervision
1. Exercise of supervision by the supervisory authorities under Article 55 of this Law shall not imply that the supervisory authorities are required to play a supervisory role in relation to each third country insurance undertaking, third country reinsurance undertaking, insurance holding company, mixed-activity insurance holding company or mixed-activity insurance holding company; nevertheless, the supervisory authorities shall have the respective rights and obligations set out in this Section. The above provision shall not deprive the supervisory authority of the right to request that the members of the management and supervisory bodies and persons holding other management positions at insurance holding companies or mixed-activity financial holding companies are of good repute and their qualification is appropriate for ensuring sound and prudent management.
2. The group supervisor may decide against application of group supervision set out in Article 55 of this Law to undertakings where:
1) there are legal impediments to the receipt of the necessary information from a third country;
2) the undertaking is of negligible interest with respect to the objectives of group supervision;
3) the application of group supervision to the undertaking would be inappropriate or misleading with respect to the objectives of group supervision.
3. The provisions of Article 56(2)(2) of this Law shall not apply where, taken individually, several undertakings of the same group are negligible, but where, collectively, they are of non-negligible interest.
4. Where the group supervisor determines that an insurance or reinsurance undertaking should not be included in group supervision under Articles 56(2)(2) and 56(2)(3), it shall consult other supervisory authorities concerned before taking a decision.
5. Where the group supervisor fails to include an insurance or reinsurance undertaking in group supervision under Articles 56(2)(2) and 56(2)(3), the supervisory authorities of the state of the European Economic Area where that insurance or reinsurance undertaking is situated may ask the undertaking which is at the head of the group for any information which may facilitate their supervision of the insurance or reinsurance undertaking concerned.
6. The peculiarities of application of the requirements set out in this Section in the cases below shall be established by the legal acts of the supervisory authority where:
1) the participating insurance or reinsurance undertaking, insurance holding company or mixed-activity financial holding company referred to in Articles 55(3)(1) and 55(3)(2) of this Law is a subsidiary of the insurance or reinsurance undertaking, insurance holding company or mixed-activity financial holding company with the head office in a state of the European Economic Area;
2) the participating undertaking or insurance undertaking referred to Articles 55(3)(1) and 53(3)(2) of this Law or the insurance holding company or mixed-activity financial holding company with the head office in a state of the European Economic Area has no head offices in the same state of the European Economic Area as the parent undertaking referred to in Article 56(6)(1);
3) the parent undertaking of the insurance or reinsurance undertaking is other than an insurance undertaking, reinsurance undertaking or mixed-activity financial holding company of the European Economic Area and where the parent undertaking is a mixed-activity insurance holding company.
Article 57. Supervision of group solvency
1. The participating insurance or reinsurance undertakings referred to in Article 55(3)(1) of this Law must ensure that the group’s solvency capital requirement is calculated and covered by eligible own funds of the group under the requirements set out by the supervisory authority.
2. The insurance or reinsurance undertakings referred to in Article 55(3)(2) of this Law must ensure that the group’s solvency capital requirement is calculated and covered by eligible own funds of the group under the requirements set out by the supervisory authority.
3. Compliance with the requirements set out in Articles 57(1) and 57(2) of this Law shall be subject to supervisory review by the group supervisor under the provisions of Article 63 of this Law. Supervision of group solvency shall mutatis mutandis be subject to the provisions of Article 43 and Articles 45(1)–45(5) of this Law.
4. A participating insurance or reinsurance undertaking, insurance holding company, mixed-activity financial holding company or undertaking belonging to the group, which is specified by the group supervisor after having consulted with other supervisory authorities concerned and the group itself, shall be obliged to calculate the solvency capital requirement of the group at least once a year, monitor and ensure coverage of the group solvency capital requirement by eligible own funds on an ongoing basis and notify the supervisory authority of the calculated group solvency capital requirement and coverage thereof.
5. As soon as the group supervisor receives information that the group solvency capital requirement is no longer complied with or that there is a risk of non-compliance in the following three months, the group supervisor shall inform the other supervisory authorities within the college of supervisory authorities and the other supervisory authorities shall analyse the financial situation of the group.
Article 58. Group internal model
1. An insurance or reinsurance undertaking and its related undertakings or undertakings related to the insurance holding company or mixed-activity financial holding company may jointly file to a group supervisor an application for permission to calculate the consolidated group solvency capital requirement as well as the solvency capital requirement of insurance and reinsurance undertakings on the basis of an internal model.
2. Where the supervisory authority considers that the risk profile of an insurance or reinsurance undertaking deviates significantly from the assumptions underlying the internal model approved at the group level, it shall be entitled to request that the insurance or reinsurance undertaking rectify the situation within the time limit set by the supervisory authority. Where the request of the supervisory authority is not complied with or complied with improperly, the supervisory authority shall be entitled, following Article 48 of this Law, to impose a capital add-on whereby the solvency capital requirement calculated by the insurance or reinsurance undertaking on the basis of an internal model shall be increased. In exceptional circumstances, where such capital add-on would not be appropriate, the supervisory authority may require the insurance or reinsurance undertaking concerned to calculate its solvency capital requirement on the basis of the standard formula. The supervisory authority may impose a capital add-on to the solvency capital requirement of that insurance or reinsurance undertaking resulting from the application of the standard formula under the requirements set out in Articles 48(1)(1) and 48(1)(3) of this Law. The supervisory authority shall explain any decision referred to in this paragraph and the rationale behind to both the insurance or reinsurance undertaking and the group supervisor.
3. In its legal acts, the supervisory authority shall establish detailed procedure for implementation of the provisions of this Law and other requirements for application of the group’s internal model.
Article 59. Group capital add-on
1. In determining whether the consolidated group solvency capital requirement appropriately reflects the risk profile of the group, the group supervisor shall pay particular attention to:
1) whether the circumstances referred to in Article 48(1) of this Law exist;
2) whether a specific risk existing at the group level will be sufficiently covered by the standard formula or the internal model used, because this risk is difficult to quantify;
3) whether a capital add-on to the solvency capital requirement of the related insurance or reinsurance undertakings is imposed under Article 48 and Article 58(2) of this Law by the supervisory authorities concerned.
2. The group supervisor shall be entitled to impose a capital add-on to the consolidated group solvency capital requirement where the risk profile of the group is not adequately reflected.
3. Article 48 of this Law shall mutatis mutandis apply to imposition of group capital add-on.
Article 60. Supervision of group solvency for groups with centralised risk management
1. Supervision of group solvency for groups with centralised risk management shall apply to any insurance or reinsurance undertaking which is the subsidiary of an insurance or reinsurance undertaking, where all of the following requirements are satisfied:
1) the group supervisor has not included the subsidiary in the group of undertakings excluded from group supervision requirements under the provisions of Article 56(2) of this Law, but has included the subsidiary in the group of undertakings subject to group supervision requirements at the level of the parent undertaking;
2) the risk-management processes and internal control processes of the parent undertaking cover the subsidiary and the parent undertaking satisfies the supervisory authorities concerned regarding the sound and prudent management of the subsidiary;
3) the parent undertaking has been given permission referred to in Article 62(3) of this Law;
4) the parent undertaking has received permission from the group supervisor to publish a single report on solvency and financial situation at the group level;
5) the parent undertaking has applied for permission to the supervisory authority and received the permission to apply solvency supervision to the groups with centralised risk management in respect of the subsidiary or reinsurance undertaking.
2. The supervisory authority shall set out a detailed procedure for implementation of the provisions of this Law and other requirements for supervision of the solvency for groups with centralised risk management.
Article 61. Supervision of risk concentration and intra-group transactions
1. Supervision of the risk concentration at the group level and supervision of intra-group transactions shall be exercised by the group supervisor. Supervision of the risk concentration at the group level and supervision of intra-group transactions shall be exercised under the provisions of this Law and Articles 62–67 of this Law.
2. An insurance or reinsurance undertaking, an undertaking of an insurance holding company, an undertaking of a mixed-activity financial holding company or a group undertaking specified by the group supervisor after having consulted both the group and other supervisory authorities concerned shall notify the group supervisor of any significant risk concentration at the group level and intra-group transactions specified by the group supervisor.
3. In its legal acts, the supervisory authority shall set out detailed procedure for implementation of the provisions of this Article and other requirements for supervision of risk concentration and intra-group transactions.
Article 62. Supervision of the system of governance
1. The requirements set out in Section Two of this Chapter shall apply mutatis mutandis at the group level.
2. Without prejudice to Article 62(1), the risk management and internal control systems and reporting procedures must be implemented consistently in all the undertakings included in the scope of group supervision pursuant to Articles 55(3)(1) and 55(3)(2) of this Law so that those systems and reporting procedures can be controlled at the group level.
3. The group supervisor shall be entitled to allow that the participating insurance or reinsurance undertaking, the insurance holding company or the mixed-activities financial holding company in any assessment of its risk and solvency at the group level covers the level of any subsidiary in the group at the same time, and produces a single document covering all the assessments.
4. In its legal acts, the supervisory authority shall set out detailed procedure for implementation of the provisions of this Article and other requirements for supervision of the governance system.
Article 63. Group supervisor
1. A group supervisor responsible for coordination and exercise of group supervision shall be designated from among the supervisory authorities of the states of the European Economic Areas concerned.
2. Where the same supervisory authority supervises all insurance and reinsurance undertakings in a group, the task of a group supervisor shall be exercised by that supervisory authority.
3. In all other cases (except for the case referred to in Article 63(4)), the tasks of a group supervisor shall be exercised by the supervisory authority which has issued a business licence to an insurance or reinsurance undertaking that heads the group of undertakings. Where a group is headed by an undertaking other than an insurance or reinsurance undertaking, tasks of group supervisor shall be exercised by the following:
1) the supervisory authority which has issued a business licence to the insurance or reinsurance undertaking the parent undertaking of which is an insurance holding company or mixed-activity financial holding company;
2) the supervisory authority which has issued a business licence to the insurance or reinsurance undertaking the parent undertaking of which is an insurance holding company or mixed-activity financial holding company and which is located in the same state of the European Economic Area as the head office of the insurance holding company or mixed-activity financial holding company with subsidiary insurance or reinsurance undertakings in more than one state of the European Economic Area;
3) the supervisory authority which carries out supervision of the insurance or reinsurance undertaking with the largest balance sheet total if the group is headed by more than one insurance holding company or mixed-activity financial holding company which have their head offices and subsidiary insurance or reinsurance undertakings in different states of the European Economic Area;
4) the supervisory authority which has issued a business licence to the insurance or reinsurance undertaking with the largest balance sheet total, where several insurance or reinsurance undertakings which have their head offices in the states of the European Economic Area have the same insurance holding company or mixed-activity financial holding company as their parent undertaking and none of those insurance or reinsurance undertakings has its head office in a state of the European Economic Area where the insurance holding company or mixed-activity financial holding company has its head office;
5) the supervisory authority which issued a business licence to the insurance or reinsurance undertaking with the largest balance sheet total where the group is a group without a parent undertaking, or in any circumstances not referred to in Articles 63(3)(1)–63(3)(4).
4. By a joint decision of the supervisory authorities, taken not later than within three months from opening the discussion which shall be initiated by the supervisory authorities and which may be initiated not more than once per year, and in the light of the opinion of the group, a supervisory authority other than set out in Article 63(3) may be designated if application of the provisions of Article 63(3) would be inappropriate in view of the structure of the group and the scope of activities of the insurance and reinsurance undertakings in individual countries. The designated group supervisor shall notify the insurance or reinsurance undertaking which heads the group or the undertaking within the group determined according to the criteria set out in Article 63(3) of the joint decision of the supervisory authorities and the reasons thereof.
5. In the course of the discussion, before taking the joint decision of the supervisory authorities or before the expiry of the three-month period referred to in Article 63(4) which shall be deemed to be the conciliation period under Article 19(2) of Regulation (EU) No 1094/2010, the supervisory authority shall be entitled to apply to the European Insurance and Occupational Pensions Authority for the latter to approve the decision. The supervisory authority shall also notify other supervisory authorities of such application. In such case, the supervisory authorities may take a joint decision only after the European Insurance and Occupational Pensions Authority takes the decision which shall be binding upon them. The designated group supervisor shall notify the insurance or reinsurance undertaking which heads the group or the undertaking within the group designated according to the criteria set out in Article 63(3) and the college of supervisory authorities of the joint decision of the supervisory authorities and reasons thereof.
6. In the absence of a joint decision of the supervisory authorities, the task of the group supervisor shall be exercised by the supervisory authority identified under the criteria set out in Article 63(3).
7. The obligations assigned to the group supervisor shall be as follows:
1) coordination of the collection and dissemination of relevant or essential information for group business and emergency situations, including the dissemination of information which is of importance for the supervisory task of a supervisory authority;
2) supervisory review and assessment of the financial situation of the group;
3) assessment of compliance of the group with the rules on solvency and of risk concentration and intra-group transactions;
4) assessment of conformity of the system of governance of the group to the requirements set out in Article 62 of this Law and of adherence by members of the management or supervisory body of the group and the persons holding other management positions in the group to the requirements set out in Article 22(5) of this Law;
5) planning and coordination of regular and emergency supervision of the group activities by supervisory authorities through annual meetings or through other kinds of cooperation with the supervisory authorities concerned and taking into account the nature, scale and complexity of the risks inherent in the business of all undertakings that are part of the group;
6) other tasks assigned to the group supervisor in the legal acts.
8. The supervisory authority shall participate in the work of the college of supervisory authorities chaired by the group supervisor.
9. In carrying out group supervision, the supervisory authority shall cooperate and consult with and exchange the relevant information among the supervisory authorities that are members of the college of supervisory authorities and the institutions exercising supervision of credit institutions and financial brokerage firms.
10. In its legal acts, the supervisory authority shall set out a detailed procedure for implementation of the provisions of this Article and other requirements for cooperation and exchange of information among supervisory authorities.
Article 64. Access to information
1. All natural and legal persons included within the scope of group supervision and their related undertakings and participating undertakings shall be entitled to exchange any information which could be relevant for the purposes of group supervision. Exercise of the afore-mentioned right shall not be deemed to constitute a breach of the confidentiality and data protection requirements set out in the transactions, legal acts and internal documents of the undertakings.
2. The supervisory authority shall be entitled to request that any natural or legal person provides information which could be relevant for the purposes of group supervision.
3. The supervisory authority willing to obtain information which could be relevant for the purposes of group supervision shall be entitled to apply directly to the undertakings within the group only if such information is not provided within a reasonable time limit by the insurance or reinsurance undertaking subject to the group supervision requirements.
4. Following Commission Delegated Regulation (EU) 2015/35 of 10 October 2014 supplementing Directive 2009/138/EC of the European Parliament and of the Council on the taking-up and pursuit of the business of insurance and reinsurance (Solvency II), insurance and reinsurance undertakings, insurance holding companies and mixed-activity insurance holding companies shall annually make public the management and organisational structure of the group including all subsidiaries, related undertakings and major branches belonging to the group.
Article 65. Verification of information
1. The supervisory authority may carry out, either directly or through the intermediaries appointed for the purpose, on-site verification of the information referred to in Article 64 on the premises of any of the following:
1) the insurance or reinsurance undertaking subject to group supervision;
2) related undertakings of the insurance or reinsurance undertaking referred to in Article 65(1)(1);
3) parent undertakings of the insurance or reinsurance undertaking set out in Article 65(1)(1);
4) related undertakings of a parent undertaking of the insurance or reinsurance undertaking referred to in Article 65(1)(3).
2. Where the supervisory authority needs information held by the undertaking supervised or not supervised yet established in another state of the European Economic Area, the supervisory authority shall be entitled to request that the supervisory authority of that state of the European Economic Area carries out verification. The supervisory authority shall be entitled to participate in the verification or, upon consent of the supervisory authority of the other state of the European Economic Area, carry out such verification by itself. The supervisory authority shall be entitled to apply to the European Insurance and Occupational Pensions Authority for assistance under Article 19 of Regulation (EU) No 1094/2010 where, upon request of the supervisory authority, the supervisory authority of another state of the European Economic Area fails to begin the verification within 2 weeks from the date of receipt of the application or where the supervisory authority is prevented from exercising the right to carry out the verification or participate in the verification.
3. Having received a request to carry out the verification of the undertakings referred to in Article 65(1) from the supervisory authority of another state of the European Economic Area and having notified the group supervisor, the supervisory authority shall carry out the verification by itself, grant the right to carry out the verification to audit firms or experts or allow the authority which made the request to either carry out the verification or participate in the verification.
4. The European Insurance and Occupational Pensions Authority shall be entitled to exercise the right to participate in the verification where it is carried out by two or more supervisory authorities.
Article 66. Report on group solvency and financial situation
1. Participating insurance or reinsurance undertakings, insurance holding companies and mixed-activity financial holding companies shall disclose publicly, on an annual basis, a report on solvency and financial situation at the group level under the legal acts of the supervisory authority.
2. Subject to the agreement of the group supervisor, a participating insurance or reinsurance undertaking, an insurance holding company or a mixed-activity financial holding company shall provide a single report on its solvency and financial situation which shall comprise the information at the group level and the information for any of the insurance or reinsurance undertakings within the group to be disclosed under the legal acts of the supervisory authority. Before granting its consent, the group supervisor shall consult the college of supervisory authorities and duly take into account any views and reservations of the members of the college of supervisory authorities.
3. The supervisory authority shall establish the requirements for the report on group solvency and financial situation.
Article 67. Sanctions
1. Where the insurance or reinsurance undertakings in a group do not comply with the requirements set out in this Section, where their solvency is jeopardised or where the intra-group transactions or the risk concentrations pose a threat to the financial situation of the insurance or reinsurance undertakings, the following conditions shall apply:
1) the measures necessary for an insurance holding company or a mixed-activity financial holding company to rectify the situation as soon as possible shall be adopted by the group supervisor;
2) the measures necessary for an insurance or reinsurance undertaking to rectify the situation as soon as possible shall be adopted by the supervisory authority.
2. For cases referred to in Articles 67(1)(1) and 67(1)(2) of this Law where the group supervisor is other than the supervisory authority of the state of the European Economic Area where the head office of an insurance holding company, a mixed-activity financial holding company or an insurance or reinsurance company is situated, the group supervisor shall notify the supervisory authority of the state of the European Economic Area where the head office of the insurance holding company, the mixed-activity financial holding company or the insurance or reinsurance company is situated of the established violations so that the latter authority could take the necessary measures. The supervisory authority and the group supervisor shall coordinate the imposed sanctions with the respective supervisory authorities, if necessary.
3. The supervisory authority shall be entitled to impose sanctions on the insurance holding companies, mixed-activity holding companies and the persons in control of such companies under the procedure set out by this Law. The supervisory authority shall closely cooperate with the respective supervisory authorities with a view to ensuring the effectiveness of the sanctions, in particular, where the seat of the administration or the main establishment of the insurance holding company or mixed-activity financial holding company is not in its head office.
SECTION FIVE
ACTIVITIES OF INSURANCE OR REINSURANCE UNDERTAKINGS IN OTHER STATES OF THE EUROPEAN ECONOMIC AREA AND THIRD COUNTRIES
Article 68. Right of insurance undertakings to provide services in another state of the European Economic Area
1. An insurance undertaking which intends to provide services in another state of the European Economic Area must notify the supervisory authority, indicating the risks intended to be covered by insurance contracts and in case where the insurance undertaking intends to engage in the activities of insurance class set out in Article 7(3)(10) of this Law (except for insurance against civil liability of carriers), submit documents referred to in Article 68(2)(4) of this Law. The information and documents must be submitted in Lithuanian and/or English and the state language or one of the state languages of another state of the European Economic Area, where under the legal acts of another state of the European Economic Area all documents submitted to the supervisory authority of that state must be in the state language or one of the state languages of that state.
2. Within one month after receiving information set out in Article 68(1), provided that the conditions referred to in Article 68(3) are absent, the supervisory authority must forward the necessary information to the supervisory authority of the state of the European Economic Area where the insurance undertaking intends to provide services and notify the insurance undertaking of it on the same day. The necessary information shall be the following:
1) proof that the insurance undertaking meets the solvency capital and minimum capital requirements set out in the legal acts of the Republic of Lithuania;
2) a list of insurance classes in which the insurance undertaking has the right to engage;
3) information submitted by the insurance undertaking on insurance risks which are intended to be covered or the type of other obligations to be assumed;
4) for insurance undertakings that intend to engage in the activities of the insurance class referred to in Article 7(3)(10) of this Law (except for insurance against civil liability of carriers), documents certifying that the insurance undertaking is a member of the National Insurers’ Bureau and member of the guarantee reserve of that state of the European Economic Area and that the insurance undertaking has assigned a representative with appropriate powers for settlement of claims, as well as indication of the name, surname and address of the representative.
3. The supervisory authority shall have the right, within one month after receiving all the information set out in Article 68(1), to refuse to forward the information referred to in Article 68(2), and notify the insurance undertaking thereof in writing, only where the insurance undertaking fails to comply with the requirements set out in the legal acts of the Republic of Lithuania and/or the financial situation of the insurance undertaking is neither stable nor sound under the requirements set out in the legal acts of the Republic of Lithuania.
4. Upon receiving the information referred to in Article 68(2) from the supervisory authority and having fulfilled other conditions set out in the legal acts of another state of the European Economic Area, an insurance undertaking shall have the right to start providing services in another state of the European Economic Area.
5. An insurance undertaking must notify, not later than one month in advance, about any changes it plans to make in the information submitted pursuant to the provisions of Article 68(1). Provisions of Articles 68(1)–68(4) shall apply to submission of information by an insurance undertaking, forwarding of the submitted information to the supervisory authority of another state of the European Economic Area and refusal to forward the information. Refusal of the supervisory authority to forward information shall deprive the insurance undertaking of the right to make the planned changes.
Article 69. Establishment of a branch of an insurance undertaking in another state of the European Economic Area
1. An insurance undertaking which intends to establish a branch in another state of the European Economic Area must submit to the supervisory authority the following information and documents:
1) the name of another state of the European Economic Area where it intends to establish a branch;
2) a business plan of a form and content set out by the supervisory authority;
3) the address of the registered office of the branch where correspondence may be sent and received and a confirmation that any correspondence addressed to the head of the branch of the insurance undertaking may be sent to the indicated address;
4) documents attesting that the insurance undertaking has appointed a person of good repute, having adequate professional qualifications and experience in the field of insurance to act as the head of the branch, who is duly empowered to establish rights and obligations of the insurance undertaking which has established its branch in another state of the European Economic Area in respect of third parties and to represent the insurance undertaking in court and at other government and administration institutions of that state of the European Economic Area;
5) where an insurance undertaking intends to carry out, through a branch established in another state of the European Economic Area, insurance activities falling within the insurance class referred to in Article 7(3)(10) of this Law (except for insurance against civil liability of carriers), documents certifying that the insurance undertaking is a member of the National Insurers’ Bureau and member of the guarantee fund of that state of the European Economic Area.
2. Documents set out in Article 69(1) must be submitted in Lithuanian and/or English or in the state language or one of the state languages of another state of the European Economic Area, where, under the legal acts of another state of the European Economic Area, all documents submitted to the supervisory authority of that state must be submitted in the state language or one of the state languages of that state.
3. Within three months after receiving the documents and information set out in Article 69(1) and in the absence of the conditions referred to in Article 69(4), the supervisory authority must forward the documents and information received, notifying the insurance undertaking thereof in writing on the same day, to the supervisory authority of another state of the European Economic Area where the insurance undertaking intends to establish a branch, together with a proof that the insurance undertaking meets the solvency capital requirement and minimum capital requirement set out in the legal acts of the Republic of Lithuania.
4. The supervisory authority may, within three months after receiving all the documents and information set out in Article 69(1), refuse to forward the documents and information referred to in Article 69(1), notifying the insurance undertaking and the supervisory authority of another state of the European Economic Area thereof in writing, only where:
1) the structure of the bodies and the system of governance of the insurance undertaking fails to meet the requirements set out in the legal acts of the Republic of Lithuania and/or is inadequate for efficient management of the insurance undertaking;
2) the insurance undertaking fails to comply with the requirements set out in the legal acts of the Republic of Lithuania and/or the financial situation of the insurance undertaking is neither stable nor sound under the requirements set out in the legal acts of the Republic of Lithuania;
3) members of the supervisory and management bodies, persons holding other management positions and persons responsible for the risk management, actuarial, compliance assessment and internal audit functions of the insurance undertaking or the appointed manager of the branch being established fail to meet the criteria set out in the legal acts of the Republic of Lithuania;
4) it may be assumed from the submitted business plan that the interests of the policyholders, insured persons, beneficiaries, and injured third parties are not properly protected or there are reasonable grounds to believe that the commitments of the insurance undertaking arising from insurance contracts will not be fulfilled on a continuous basis.
5. The supervisory authority shall provide the insurance undertaking with information on the conditions applicable in compliance with the public order to the activities of branches of insurance undertakings of other states of the European Economic Areas received from the supervisory authority of another state of the European Economic Area. An insurance undertaking may establish a branch and launch its activities upon receiving from the supervisory authority of another state of the European Economic Area information on the conditions applicable in compliance with the public order for branch activities. Where such information is not received from the supervisory authority within two months from the date of receipt of information referred to in Article 69(3), an insurance undertaking may establish a branch and launch its activities upon the expiry of a two-month time limit.
6. The supervisory authority and the supervisory authority of another state of the European Economic Area where a branch has been established must be notified at least one month in advance of any planned changes to the information and amendments to the documents referred to in Articles 69(1)(2), 69(1)(3) and 69(1)(4). Submission of information by the insurance undertaking, forwarding of the submitted information to the supervisory authority of another state of the European Economic Area and refusal to forward information shall be subject to provisions of Articles 69(1)–69(5) of this Law; however, the three-month time limit set out in Articles 69(3) and 69(4) shall be replaced by a time limit of one month. Refusal of the supervisory authority to forward information shall deprive the insurance undertaking of the right to make the planned changes and amendments.
Article 691. Statistical information on the activities of insurance undertakings in other states of the European Economic Area
1. An insurance undertaking shall separately provide the supervisory authority with information on its activities carried out in other states of the European Economic Area by exercising the freedom of establishment and on activities carried out by exercising the right to provide services. The afore-mentioned information shall include the amounts of premiums, benefits and commissions under each class of insurance or reinsurance by individual states of the European Economic Area before deduction of the reinsurers’ share.
2. When providing information on the activities falling within the insurance class referred to in Article 7(3)(10) of this Law (except for insurance against civil liability of carriers) the insurance undertaking shall also notify the supervisory authority of the frequency of payment of insurance benefits and the average costs attributable to such insurance benefits.
Article 70. Branches of insurance or reinsurance undertakings in third countries
1. Branches of insurance undertakings engaged in non-life assurance activities in the Swiss Confederation shall be established and shall operate under the rules applicable to the establishment and activities of branches in other states of the European Economic Area to the extent the Agreement between the European Economic Community and the Swiss Confederation on Direct Insurance Other than Life Assurance does not provide otherwise.
2. Branches of an insurance or reinsurance undertaking in third countries shall be established under the procedure set out by the supervisory authority after obtaining an authorisation to establish a branch.
Article 71. Activities of reinsurance undertakings in other states of the European Economic Area
Having provided the information required by the supervisory authority, reinsurance undertakings shall be entitled to provide services and establish branches in other states of the European Economic Area.
Article 711. Provision of information and cooperation platforms
1. The supervisory authority must notify the European Insurance and Occupational Pensions Authority and the supervisory authority of the relevant state of the European Economic Area where the supervisory authority identifies a deterioration of the financial situation of an insurance or reinsurance undertaking or other risks arising from the activities of the insurance or reinsurance undertaking carried out in exercising the right of establishment or the right to provide services and likely to have cross-border effects.
2. The supervisory authority may refer to the European Insurance and Occupational Pensions Authority for assistance in the event of failure to reach an agreement with the supervisory authority of another state of the European Economic Area on the activities of an insurance or reinsurance undertaking in another state of the European Economic Area carried out in exercising the right of establishment or the right to provide services.
3. The information provided under paragraphs 1 and 2 of this Article must be sufficient to allow for an assessment of the situation.
4. The supervisory authority may, in cooperation with the supervisory authorities of other states of the European Economic Area, establish a cooperation platform in order to boost the exchange of information and to ensure enhanced cooperation where an insurance or reinsurance undertaking carries out or intends to carry out its activities under the right of establishment or the right to provide services.
5. Where a cooperation platform is set up by the European Insurance and Occupational Pensions Authority, at its request the supervisory authority must provide all the necessary information enabling the cooperation platform to function properly.
CHAPTER III
Activities of insurance and reinsurance undertakings of
other STATES OF THE European economic area in
the Republic of Lithuania
Article 72. Right to engage in activities in the Republic of Lithuania
Insurance or reinsurance undertakings of other states of the European Economic Area shall have the right to establish subsidiaries, provide services or establish branches in the Republic of Lithuania.
Article 73. Right of insurance undertakings of other states of the European Economic Area to provide services in the Republic of Lithuania
1. An insurance undertaking of another state of the European Economic Area shall have the right to start providing services in the Republic of Lithuania only upon the receipt by the supervisory authority of documents from the supervisory authority of that state submitted under the legal acts of that state of the European Economic Area and provided other conditions specified in this Article are met.
2. An insurance undertaking of another state of the European Economic Area, which intends to engage in activities of the insurance class set out in Article 7(3)(10) of this Law, except for insurance against civil liability of carriers, must also submit to the supervisory authority the following documents:
1) documents evidencing that the insurance undertaking of the other state of the European Economic Area is a member of the Motor Insurers’ Bureau of the Republic of Lithuania and participates in the guarantee fund of the Bureau;
2) documents evidencing that the insurance undertaking of the other state of the European Economic Area has assigned, in the Republic of Lithuania, a representative for settlement of claims empowered to represent the undertaking in court and at other government and administration institutions of the Republic of Lithuania as well as in relations with natural and legal persons, and indicate the name, surname and address of the representative;
3) documents proving that the assigned representative has the right to administer insured events, pay insurance benefits and confirm conclusion and validity of compulsory insurance contracts on behalf of the insurance undertaking of another state of the European Economic Area;
4) address, in the Republic of Lithuania, of the representative specified in Article 73(2)(3) of this Law.
3. Assignment and presence in the Republic of Lithuania of a representative set out in this Article shall not be considered to constitute establishment of a branch, representative office, or office of an insurance undertaking of another state of the European Economic Area in the Republic of Lithuania within the meaning of Article 6 of this Law; however, a branch of an insurance undertaking of another state of the European Economic Area (that may, but does not need to, coincide with the represented undertaking) may be assigned as a representative provided the branch is established in the Republic of Lithuania.
4. In cases other than provided for in this Article, insurance undertakings of other states of the European Economic Area authorised to provide services in the Republic of Lithuania shall not be entitled to assign a person subordinate to the instructions and control of the represented undertaking, residing, permanently or for a long period, in the Republic of Lithuania and authorised to establish the rights and obligations of the insurance undertaking of another state of the European Economic Area with regard to third parties.
Article 74. Branches of insurance undertakings of other states of the European Economic Area
1. Upon notification from the supervisory authority of another state of the European Economic Area that an insurance undertaking of a state of the European Economic Area intends to establish a branch in the Republic of Lithuania and following submission of information and documents of the insurance undertaking of another state of the European Economic Area which this authority must submit to the supervisory authority of the Republic of Lithuania under the legal acts of that state of the European Economic Area, the supervisory authority of the Republic of Lithuania must, within two months from the receipt of this information, notify the supervisory authority of that state of the European Economic Area of the requirements applicable to the activities of branches of insurance undertakings of other states of the European Economic Area in the Republic of Lithuania precluding breaches of public order. Where the supervisory authority fails to provide such information within this time limit, an insurance undertaking of another state of the European Economic Area shall have the right to establish a branch and start its activities in the Republic of Lithuania.
2. An insurance undertaking of another state of the European Economic Area intending to establish a branch in the Republic of Lithuania must, not later than one month in advance, notify the supervisory authority of that state of the European Economic Area, under the requirements of the legal acts of this state, of any planned changes to the information and amendments to documents submitted to the supervisory authority of that state in preparation for the establishment of a branch.
3. An insurance undertaking of another state of the European Economic Area shall have the right to engage in the activities falling within the insurance class provided for in Article 7(3)(10) of this Law, with the exception of insurance against civil liability of carriers, through a branch established in the Republic of Lithuania, only upon becoming a member of the Motor Insurers’ Bureau of the Republic of Lithuania and subject to taking part in the guarantee fund of the Bureau.
4. An authorised representative of the association of Lloyd’s insurers must be authorised to represent the respective members of the association before court, before other public authorities and in other disputes arising from or associated with the insurance contract and act to cause the establishment of rights and obligations for the respective members of the association. Policyholders, insured persons, beneficiaries and injured third parties shall have the same rights in respect of the said representative as they do in disputes with a regular insurance undertaking.
Article 741. Provision of information
1. The supervisory authority may notify the supervisory authority of the home state where there are grounds to believe that the activities carried out in the Republic of Lithuania by an insurance or reinsurance undertaking of another state of the European Economic Area in exercising the right of establishment or the right to provide services may violate consumer interests.
2. The supervisory authority may refer to the European Insurance and Occupational Pensions Authority for assistance in the event of failure to reach an agreement with the supervisory authority of the home country on the activities carried out in the Republic of Lithuania by an insurance or reinsurance undertaking of another state of the European Economic Area in exercising the right of establishment or the right to provide services.
3. The information provided under paragraphs 1 and 2 of this Article must be sufficient to allow for an assessment of the situation.
Article 75. Branches of insurance undertakings of the Swiss Confederation engaged in non-life insurance
Unless otherwise set out by the supervisory authority, the establishment and activities of branches of insurance undertakings of the Swiss Confederation engaged in non-life insurance activity in the Republic of Lithuania shall be subject to the same provisions as those applicable to the establishment and activities of branches of insurance undertakings of other states of the European Economic Area.
Article 76. Language
All documents shall be submitted to the supervisory authority in Lithuanian and/or English.
CHAPTER IV
ACTIVITIES OF INSURANCE OR REINSURANCE UNDERTAKINGS OF
THIRD COUNTRIES IN THE REPUBLIC OF LITHUANIA
Article 77. Right to engage in insurance and reinsurance activities
1. Third country insurance and reinsurance undertakings shall have the right to engage in insurance activities in the Republic of Lithuania only through a branch established in the Republic of Lithuania, with the exception of cases set out in Article 3(1)(4) of this Law.
2. Operation and supervision of branches of third country insurance or reinsurance undertakings shall be subject to the same requirements as those applicable to insurance undertakings of the Republic of Lithuania, in view of the exceptions specified in this Chapter and decisions of the supervisory authority as well as in view of the legal status and specific features of activities of the branch.
Article 78. Branch authorisation to engage in insurance or reinsurance activities
1. A branch of a third country insurance or reinsurance undertaking shall have the right to carry out insurance or reinsurance activities in the Republic of Lithuania subject to a branch authorisation to engage in insurance or reinsurance activities (hereinafter: ‘authorisation’) obtained from the supervisory authority and subsequent registration of the branch in the Register of Legal Entities. The data processor of the Register of Legal Entities must notify the supervisory authority about the registration of a branch of a third country insurance or reinsurance undertaking within five working days.
2. A branch authorisation to engage in insurance activities shall cover all insurance activities of an insurance class or a number of insurance classes falling within life assurance or non-life insurance types, except for the cases when the applicant wishes to engage in insurance activity concerning only a part of risks covered by the insurance class or classes.
3. A branch authorisation to engage in reinsurance activities shall be issued for reinsurance of the insurance contracts falling within the insurance classes under life assurance and/or non-life insurance types of insurance.
4. A branch authorisation to engage in activities shall be issued for an unlimited period of time and shall be valid only on the territory of the Republic of Lithuania.
5. A branch authorisation to engage in activities shall be issued only to a particular third country insurance or reinsurance undertaking and may not be transferred to other persons and entities.
6. An authorisation shall be issued for insurance or reinsurance activity of only one branch. Structural units of the branch shall be established and operate in the Republic of Lithuania under the procedure set out by the supervisory authority.
7. The supervisory authority shall set out the form and procedure of granting an authorisation for a branch of a third country insurance or reinsurance undertaking to engage in insurance and reinsurance activities.
Article 79. Application for authorisation to engage in insurance activities of a branch
1. A third country insurance or reinsurance undertaking must submit to the supervisory authority an application for a branch authorisation to engage in insurance activities in the Republic of Lithuania.
2. Along with an application for a branch authorisation to engage in insurance activities in the Republic of Lithuania, a third country insurance or reinsurance undertaking must submit the following documents:
1) a proof in writing from a supervisory authority of a third country that the insurance or reinsurance undertaking of that country has the right to engage in insurance or reinsurance activities in its country of registration;
2) an authorisation issued by a supervisory authority of the third country authorising the establishment of a branch in the Republic of Lithuania or a proof that the third country supervisory authority has no objections to the establishment of a branch in the Republic of Lithuania;
3) a written confirmation of the third country supervisory authority that the insurance or reinsurance undertaking of that third country has met, for the past three years, the third country legal requirements applied to insurance or reinsurance undertakings, with the indication of the insurance classes in which the third country insurance undertaking has the right to operate and insurance types in which the undertaking has the right to engage in while providing reinsurance services. Where the third country insurance or reinsurance undertaking has been operating for less than three years, the third country supervisory authority must provide proof concerning the entire period of activities of the insurance or reinsurance undertaking;
4) a written obligation of the third country insurance or reinsurance undertaking to meet the solvency capital and the minimum capital requirements established for the branch;
5) a written decision of a body of the third country insurance or reinsurance undertaking to establish a branch in the Republic of Lithuania, to approve the articles of association of the branch, and to appoint the head of the branch, as well as a written commitment of the said body that financial statements and other documents relating to the work of the branch shall be kept and managed at the office of the branch;
6) documents certifying that the third country insurance undertaking has appointed a person to head the branch who is of good repute, adequate professional qualifications and experience, and who is empowered to establish the rights and obligations for the third country insurance or reinsurance undertaking and to represent that insurance or reinsurance undertaking in courts of the Republic of Lithuania and other public and administrative authorities;
7) documents certifying that the third country insurance or reinsurance undertaking has appointed persons of good repute, adequate professional qualifications and experience to be in charge of risk management, actuarial functions, compliance assessment and internal audit at the branch;
8) documents evidencing that the system of management of the third country insurance or reinsurance undertaking meets the requirements set out in Section Two of Chapter II of this Law and other legal acts;
9) articles of association of the branch;
10) outsourcing contracts, if any;
11) information, provided in the form set out by the supervisory authority, about shareholders, other controlling persons, participating undertakings and persons as well as members of the supervisory and management bodies of the third country insurance or reinsurance undertaking;
12) a business plan, provided in the form set out by the supervisory authority, together with financial statements of the third country insurance or reinsurance undertaking for the past three years audited by an audit company. Where the third country insurance or reinsurance undertaking has been in operation for less than three years, it shall provide financial statements audited by an audit company for each completed financial year;
13) documents evidencing that the third country insurance or reinsurance undertaking has concluded a bank deposit contract, as set out in Article 87(1) of this Law, and documents evidencing that the third country insurance or reinsurance undertaking has assets in the Republic of Lithuania equal to or exceeding 1/2 of the minimum capital specified in Article 40(4) of this Law, in view of the planned activities. Furthermore, provision of information about the origin of all the said funds shall be obligatory;
14) undertakings engaged in activities falling within an insurance class under Article 7(3)(10) of this Law, except for insurance against civil liability of carriers, shall be obliged to submit documents evidencing that the insurance undertaking has assigned a representative empowered to deal with claims in each state of the European Economic Area; the documents shall bear an indication of the name, surname (business name) and address of the representative.
Article 80. Granting an authorisation to engage in insurance activities
1. The supervisory authority shall adopt a decision on granting an authorisation within six months after submission of an application and shall notify the applicant of the decision in writing.
2. The supervisory authority shall refuse to issue a branch authorisation to engage in insurance or reinsurance activities under the following circumstances:
1) the documents set out in this Law or requested under the procedure set out in this Law have not been submitted; or the submitted documents are inconsistent with the requirements of this Law of the Republic of Lithuania and the legal acts of the supervisory authority;
2) a third country insurance or reinsurance undertaking does not own assets in the Republic of Lithuania equivalent to or exceeding 1/2 of the amount (in Euro) specified in Article 40(4) of this Law, in view of the insurance activities in which it intends to operate;
3) members of the supervisory board or the board of a third country insurance or reinsurance undertaking (or members of equivalent bodies), the head of the undertaking, the head of the branch about to be established, persons in charge of risk management, actuarial function, compliance assessment and internal audit lack good repute, adequate professional qualifications and experience;
4) shareholders (member shareholders, etc.) and controlling persons of a third country insurance or reinsurance undertaking lack good repute, their financial situation and/or the financial situation of the insurance or reinsurance undertaking of the third country is neither good nor sound;
5) it may be assumed from the submitted business plan that the interests of the policyholders, insured persons, beneficiaries and injured third parties will not be properly protected; or there is good reason to believe that the commitments arising from insurance or reinsurance contracts of the branch of a foreign insurance or reinsurance undertaking will not be met on a continuous basis;
6) the origins of the deposit of the third country insurance or reinsurance undertaking and the minimum capital of its branch are not legal;
7) the head of the branch of the third country insurance or reinsurance undertaking concurrently holds a position which may give rise to a conflict of interest;
8) the supervisory authority has not entered into a cooperation agreement on exchange of information with the insurance or reinsurance supervisory authority of the third country; or the supervisory authority of the third country has not assumed, under the procedure set out by the supervisory authority, a unilateral obligation to provide information to the supervisory authority;
9) legal acts of the third country do not provide conditions for an ongoing and efficient supervision of the insurance or reinsurance undertaking of that country and protection of interests of the policyholders, insured persons, beneficiaries and injured third parties; or the supervisory authority of that country fails to perform efficient supervision of that insurance or reinsurance undertaking and fails to protect the interests of the policyholders, insured persons, beneficiaries, and injured third parties.
3. When issuing an authorisation for a branch of a third country insurance or reinsurance undertaking to engage in insurance or reinsurance activities , the supervisory authority shall be entitled to set conditions which the branch of the said undertaking must meet before starting its activities and/or set conditions or restrictions on insurance or reinsurance activities relating to certain risks of a certain insurance class for the branch of a third country insurance or reinsurance undertaking to comply with on an obligatory basis.
4. A branch of a third country insurance or reinsurance undertaking established in the Republic of Lithuania may engage only in the insurance or reinsurance activities of the insurance class it is authorised to engage in under its license (authorisation, etc.) for insurance or reinsurance activities and/or under the legislation of that third country. Where a third country insurance or reinsurance undertaking has the right to engage in activities of both life assurance and non-life insurance types of insurance at the same time, a branch of a third country insurance or reinsurance undertaking established in the Republic of Lithuania shall only have the right to engage in the activities of the insurance classes falling within the non-life insurance type.
5. Where there is a suspicion that the deposit of a third country insurance or reinsurance undertaking or the minimum capital of its branch may have been covered from financial resources of illegal origin, the supervisory authority must request the competent institutions to provide their conclusion on the origin of the said funds. In such cases, the time limit set out in Article 80(1) shall be suspended and shall be resumed upon receipt of the conclusion from the competent authorities.
Article 81. Providing information on amendments and making amendments to the authorisation
A branch of a third country insurance or reinsurance undertaking established in the Republic of Lithuania must notify the supervisory authority, following the procedure set out thereby, about any amendments to the information provided in the documents submitted to the supervisory authority for obtaining a branch authorisation to engage in insurance or reinsurance activities; the supervisory authority, in its turn, shall amend the branch authorisation to engage in activities when the information provided in the documents submitted for obtaining an authorisation is amended. The supervisory authority shall take its decision on amendments to the authorisation of a branch within one month of the receipt of information on the amendments.
Article 82. Suspension and revocation of an authorisation
1. The supervisory authority shall have the right to suspend the branch authorisation to engage in activities on the grounds set out in Article 205(1) of this Law.
2. The supervisory authority shall have the right to revoke the branch authorisation to engage in activities under the following conditions:
1) a third country insurance or reinsurance undertaking or its branch in the Republic of Lithuania has breached the conditions established for insurance or reinsurance activities;
2) a branch of a third country insurance or reinsurance undertaking has breached the legal acts regulating the activities of the branch;
3) a third county insurance or reinsurance undertaking has applied for revocation of a branch authorisation;
4) a branch of a third country insurance or reinsurance undertaking has failed to launch any insurance or reinsurance activities within 12 months following the issuance of the authorisation;
5) a branch of a third country insurance or reinsurance undertaking has not been engaged in insurance, reinsurance, or related activities for more than six months;
6) a third country insurance or reinsurance undertaking is either in liquidation or bankruptcy proceedings have been instituted against it;
7) the time limit set for the operation of the branch under its articles of association has expired;
8) the third country supervisory authority prohibits the third country insurance or reinsurance undertaking from carrying out its activities in the Republic of Lithuania;
9) circumstances set out in Article 89(9) of this Law arise;
10) the court adopts a decision to terminate the activities of the branch for violation of the laws of the Republic of Lithuania.
3. The supervisory authority shall also withdraw a branch authorisation to engage in insurance activities if the branch of a third country insurance or reinsurance undertaking fails to comply with the minimum capital requirement and the supervisory authority believes that the short-term plan for restoration of the financial situation provided under Article 46 of this Law is inappropriate, or a branch of a third country insurance or reinsurance undertaking has failed to implement the approved short-term plan for restoration of the financial situation within three months from the date of noticing the failure to meet the minimum capital requirement.
4. The supervisory authority shall notify the third country supervisory authority in question of the decision to revoke the branch authorisation to engage in activities.
5. The decision on the revocation of the branch authorisation to engage in activities must be thoroughly substantiated. The supervisory authority must notify the third country insurance or reinsurance undertaking about its decision and the underlying reasons.
6. Having revoked the branch authorisation to engage in activities, the supervisory authority shall take the measures set out in this Law in order to protect the interests of the policyholders, insured persons, beneficiaries and injured third parties and shall be entitled to seize the assets of the third country insurance or reinsurance undertaking assigned to the branch.
7. The supervisory authority shall cooperate and coordinate its steps with the institutions of other states of the European Economic Area wherein any branches of the third country insurance undertaking are established.
Article 83. Management of a branch
1. Before the appointment of a head of a branch, a third country insurance or reinsurance undertaking must provide to the supervisory authority information about the candidate in the form set out by the supervisory authority and obtain approval of the supervisory authority for the candidate to the position of the head of the branch. The supervisory authority shall take the decision on the candidate within 30 working days from the date of receipt of information in the established form.
2. The head of a branch of a third country insurance or reinsurance undertaking may not perform the duties of a member of other management bodies, hold other management positions, or be in charge of risk management, actuarial, internal audit and compliance assessment functions in the branch; the head of the branch also may not hold membership of the supervisory board or the board, be manager of another insurance undertaking, or work as an employee of administration of another insurance undertaking.
Article 84. Business plan
The activities of a branch of a third country insurance or reinsurance undertaking must be based on a business plan.
Article 85. Reinsurance activities of a branch
A branch of a third country insurance or reinsurance undertaking established in the Republic of Lithuania shall have the right to engage, under the procedure set out in the laws of the Republic of Lithuania, in reinsurance of risks of the insurance class within which its activities fall, provided that the third country insurance undertaking has the right to engage in reinsurance of the risks of an analogous insurance class.
Article 86. Finance of a branch
1. The calculation of the value of the technical provisions of a branch of a third country insurance or reinsurance undertaking shall only take account of the activities carried out by the branch.
2. Only the activities carried out by the branch shall be taken into account for the purposes of calculation of the solvency capital requirement and the minimum capital requirement of a branch of a third country insurance or reinsurance undertaking providing life assurance and non-life insurance services.
3. Depending on the type of activity performed or intended to be performed, at least 1/2 of the amount specified in Article 40(4) of this Law must be covered by eligible own funds assigned to a branch of a third country insurance or reinsurance undertaking under the requirements set out by the supervisory authority. For the purposes of this paragraph, assigned own funds shall include the deposit specified in Article 87 of this Law.
4. The eligible own funds meeting the minimum capital requirement to cover the solvency capital requirement must be held or invested in the Republic of Lithuania and the remainder must be held or invested in other states of the European Economic Area.
Article 87. Deposit
1. A third country insurance or reinsurance undertaking having established a branch in the Republic of Lithuania must, for the entire period of operation of the branch, enter into a demand deposit contract with a credit institution established in the Republic of Lithuania or with a branch of a credit institution, for an amount of money equal to or exceeding 1/4 of the amount specified in Article 40(4) of this Law, in view of the activities in which the established branch intends to engage.
2. Funds provided for in Article 87(1) of this Law may be used only under the procedure set out by the supervisory authority and only in order to discharge the obligations of the branch arising from insurance or reinsurance contracts.
3. The bank deposit contract set out in Article 87(1) of this Law must have a clause providing that a third country insurance or reinsurance undertaking or a branch thereof shall have the right to make use of the deposit funds only upon submitting a written consent of the supervisory authority.
Article 88. Transfer of rights and obligations under insurance or reinsurance contracts
1. A branch of a third country insurance or reinsurance undertaking shall have the right to transfer the rights and obligations under all or part of insurance or reinsurance contracts to an insurance or reinsurance undertaking in the Republic of Lithuania or a branch of a third country insurance or reinsurance undertaking established in the Republic of Lithuania, provided the information available to the supervisory authority or the competent supervisory authority of the chosen state of the European Economic Area specified under the procedure set out in Article 89 of this Law allows to assume that the entity taking over the rights and obligations shall meet the solvency capital requirements after the transfer of the rights and obligations.
2. A branch of a third country insurance or reinsurance undertaking shall have the right to transfer the rights and obligations arising from all or part of insurance or reinsurance contracts to an insurance or reinsurance undertaking of another state of the European Economic Area, provided that the supervisory authority of that state confirms that, after the transfer of the rights and obligations, the entity taking over the rights and obligations shall meet the solvency capital requirements.
3. A branch of a third country insurance or reinsurance undertaking shall have the right to transfer the rights and obligations arising from all or part of insurance or reinsurance contracts to a branch of a third country insurance or reinsurance undertaking established in another state of the European Economic Area, provided the chosen supervisory authority of that state, specified under the procedure set out in Article 89 of this Law, certifies that, after the transfer, the entity taking over the rights and obligations will meet the solvency capital requirements, that the legal acts of that state permit for such transfers of rights and obligations, and that the state in question does not object to the transfer of rights and obligations.
4. The supervisory authority shall issue an authorisation for the transfer of the rights and obligations arising from insurance or reinsurance contracts in cases specified in Articles 88(1)–88(3) of this Law provided the conditions specified in Articles 50(4)(1)–50(4)(4) of this Law are met and a consent is obtained from the supervisory authority of another state of the European Economic Area in which the insurance risk is situated or from the supervisory authority of another state of the European Economic Area of the commitment under life assurance contract.
5. Where a consent or approval provided for in this Article is not received within three months after the submission of information to the supervisory authority of another state of the European Economic Area, it shall be deemed that the supervisory authority of the state in question does not object to the transfer of rights and obligations.
6. Transfer of rights and obligations shall also be subject to other requirements set out in Articles 49 and 50 of this Law to the extent this Article does not provide otherwise.
7. Articles 153 and 206 of this Law shall govern the mandatory transfer of the rights and obligations arising from insurance contracts.
Article 89. Privileges applicable to establishment of branches in several states of the European Economic Area
1. A third country insurance or reinsurance undertaking intending to obtain or already possessing an authorisations for running a branch in more than one state of the European Economic Area shall have the right to apply to the supervisory authority for the general application of the following privileges:
1) calculation of the solvency capital requirement with due consideration of the operation of branches of the insurance or reinsurance undertaking in the Republic of Lithuania and other states of the European Economic Area (only the activities carried out by all the branches of third country insurance or reinsurance undertakings established in the states of the European Economic Area shall be taken into account);
2) keeping of a deposit of a third country insurance or reinsurance undertaking in only one state of the European Economic Area, in which the branch of the insurance or reinsurance undertaking is engaged in insurance or reinsurance activities;
3) holding of the assets representing the minimum capital requirement to cover the solvency capital requirement in one of the states of the European Economic Area where a branch of the insurance or reinsurance undertaking is doing business.
2. The application for applying privileges shall be accompanied by documents certifying that analogous applications have been submitted or are being submitted to the supervisory authorities of all other states of the European Economic Area in which the third country insurance or reinsurance undertaking intends to carry out or is already carrying out activities through the established branches. The application must indicate the chosen supervisory authority of the state of the European Economic Area which, in future, will supervise solvency in view of the activities carried out by the undertaking in the states of the European Economic Area. The application shall also specify the reasons for choosing this particular supervisory authority. The deposit specified in Article 87 of this Law must be held in the chosen state of the European Economic Area.
3. Privileges apply only subject to agreement to apply the privileges reached by all the supervisory authorities of the states of the European Economic Area to which an application for privileges must be submitted.
4. Privileges shall come into effect after the chosen supervisory authority informs the supervisory authority and the supervisory authorities of other states of the European Economic Area that the chosen supervisory authority will supervise solvency in view of the insurance activity carried out by the branches in the Republic of Lithuania and other states of the European Economic Area; in cases where the supervisory authority has been selected as the chosen supervisory authority, privileges shall come into effect when it informs the appropriate supervisory authorities of other states of the European Economic Area.
5. The supervisory authority must provide information necessary for the supervision of solvency to the supervisory authority of another state of the European Economic Area chosen by a third country insurance or reinsurance undertaking.
6. Having regard to the privileges revoked by other supervisory authorities, the supervisory authority shall revoke privileges when it receives a request for said revocation from at least one supervisory authority.
7. Sets of financial statements and other reports of branches of third country insurance or reinsurance undertakings shall be submitted to the chosen insurance authority of the state of the European Economic Area following the procedure set out in the legal acts of that state.
8. Having revoked an authorisation for operation of a privileged branch of a third country insurance or reinsurance undertaking, the supervisory authority, where it is the chosen supervisory authority, must notify of the revocation the supervisory authorities of other states of the European Economic Area in which the third country insurance or reinsurance undertaking has branches.
9. Upon receiving information that the chosen supervisory authority of another state has adopted a decision to revoke the authorisation for a privileged branch of a third country insurance or reinsurance undertaking, the supervisory authority shall have the right to also apply sanctions to the branch of the third country insurance or reinsurance undertaking established in the Republic of Lithuania. Where the chosen supervisory authority of another state of the European Economic Area decides to revoke the authorisation due to the failure of the branch to meet the solvency capital requirements calculated based on data for all the branches of the third country insurance or reinsurance undertaking in the states of the European Economic Area, the supervisory authority shall revoke the authorisation.
10. In supervising the solvency of a branch of a third country insurance or reinsurance undertaking in the Republic of Lithuania, the chosen supervisory authority of another state of the European Economic Area specified in Article 89(2) shall have the same rights as the supervisory authority.
CHAPTER V
INSURANCE CONTRACT AND CO-INSURANCE
SECTION ONE
GENERAL PROVISIONS
Article 90. Application of provisions of this Chapter
1. Pre-contractual relations between the parties, the terms and conditions of the insurance contract and the relations arising from and related to the insurance contract shall be subject to provisions of the Civil Code and of this Chapter.
2. The provisions of this Chapter shall apply to reinsurance only where this is expressly set out in this Chapter.
3. The provisions of Section One of this Chapter shall apply to all insurance contracts, unless otherwise set out in other sections or this section of this Law.
4. The provisions of Sections One, Two and Three of this Chapter regulating relations arising from insurance contracts shall apply to large risk insurance contracts to the extent the parties to the contract have not agreed otherwise, except for the provision of Article 111 of this Law, the non-application of which may not be agreed upon.
Article 901. Obligation to provide the best conditions and act in the best interests of the policyholders, insured persons, beneficiaries and injured third parties
1. The distributor of insurance products shall always act honestly, fairly and professionally when providing distribution services of insurance products to policyholders, insured persons, beneficiaries or injured third parties, to best meet their needs and best interests.
2. Distributors of insurance products are prohibited from making any arrangements by way of remuneration, sales targets, performance results or other arrangements that could provide an incentive to their employees, whose duties include the distribution of insurance products, to recommend a particular insurance product or service to the policyholder, insured person, beneficiary or injured third party where the distributor of insurance products could offer a different insurance product or service which would better meet the needs of the policyholder, insured person, beneficiary or injured third party.
Article 902. Duty to avoid conflicts of interest
1. An insurer and insurance intermediary distributing insurance-based investment products must apply and implement organizational and administrative measures aimed at preventing conflicts of interest that could adversely affect the interests of the policyholders, insured persons and beneficiaries. These measures shall be proportionate to the activities carried out by the insurer or insurance intermediary, to the services of distribution of insurance products, and to the category of persons providing those services (insurer or insurance intermediary).
2. The insurer and insurance intermediary must avoid conflicts of interest and take all the necessary steps to identify, in connection with distribution of insurance-based investment products, any conflicts of interest which may arise between the said insurance intermediaries or insurers, including their managers and employees, or persons directly or indirectly subordinate to them, on the one hand, and their policyholders, insured persons, and beneficiaries, on the other, or conflicts among policyholders, insured persons, and beneficiaries.
3. Where the measures taken by the insurer or insurance intermediary under paragraph 1 of this Article are insufficient to prevent damage to the interests of policyholders, insured persons and beneficiaries, the insurer or insurance intermediary shall clearly disclose to the policyholders, insured persons and beneficiaries the nature or reasons of the conflict of interest before the launch of insurance services or distribution services of insurance products. This information must be sufficiently detailed insofar as it is relevant for the type of activity of the policyholder, insured person or beneficiary to enable the policyholder, insured person, or beneficiary to make an informed decision on the provision of distribution services of insurance products giving rise to a conflict of interest. The information set out in this paragraph must be provided on a durable medium.
Article 903. Incentives
1. The insurer or insurance intermediary shall be deemed to violate the obligations set out in Article 901(1) and Article 902 of this Law where, while distributing insurance-based investment products or providing ancillary services, the insurer or insurance intermediary pays remuneration to third parties other than policyholders, insured persons or beneficiaries, or receives remuneration from third parties other than policyholders, insured persons or beneficiaries, unless the remuneration meets the following conditions:
1) has no adverse effect on the quality of insurance services provided, and
2) has no adverse effect on compliance by the insurer or the insurance intermediary with the obligation set out in Article 901(1) of this Law.
2. Detailed information on the nature of the remuneration specified in paragraph 1 of this Article must be disclosed to every policyholder in a comprehensible, accurate and clear manner prior to the launch of the distribution services of insurance products. The insurer or insurance intermediary must also inform the policyholder of any transfer of payments or benefits, where payments or benefits are transferred to the policyholder, insured person or beneficiary. In any case, information on the insurer’s payments or benefits to the insurance intermediary and/or the insurer’s employee shall be disclosed to the policyholder under the conditions set out in this paragraph.
3. Paragraph 1 of this Article shall not apply to payments or benefits which either enable the distribution of or are necessary for the distribution of insurance-based investment products, including custody of assets, settlement of transactions and currency exchange fees, as well as expenses related to the supervision of the insurer or insurance intermediary, where, by their nature, these payments or benefits do not obstruct compliance by the insurer or insurance intermediary with the obligation set out in Article 901(1) of this Law.
Article 904. Obligation to provide the best conditions for management of investment strategies of the client
1. In performing the function of management of the investment strategy, the insurer shall effectively manage the investment strategies in order to achieve the best result for the policyholder, insured person or beneficiary. The insurer is prohibited from charging a fee for management of an investment strategy where this service is not provided.
2. In fulfilling the obligation under Article 904(1) of this Law, the insurer shall establish and implement an investment strategy management policy providing the best conditions for management of the investment strategies chosen by policyholders, insured persons or beneficiaries.
3. The insurer must ensure that the established investment strategy management policy and all substantial changes thereto are either announced on the insurer’s internet website or communicated personally to policyholders.
4. The insurer must constantly monitor and analyse the effectiveness of the investment strategy management policy and, if deficiencies are identified, rectify them immediately. The insurer must review the investment strategy management policy at least once a year and also each time a change occurs that may affect the insurer’s ability to achieve the best result for policyholders, insured persons, or beneficiaries.
5. The insurer must be able to provide proof, at any time, that the investment strategy chosen by the policyholder was managed in compliance with the investment management policy.
Article 91. Classification of insurance contracts
1. Insurance contracts may be classified into life assurance and non-life insurance contracts. Non-life insurance contracts shall include property insurance contracts, civil liability contracts and health insurance contracts.
2. Based on the nature of insurance benefits, insurance contracts shall be classified into indemnity and sum insurance contracts.
3. Sum insurance contracts shall consist of life assurance contracts and health insurance contracts under which the insurer commits to pay out, upon occurrence of an insured event, a benefit equal to the sum insured or part of it.
4. Indemnity insurance contracts shall consist of property insurance contracts, civil liability contracts and health insurance contracts under which the insurer commits to pay out, upon occurrence of an insured event, a benefit equal to the amount of the loss incurred.
Article 92. Insurance rules
1. Insurance rules must include the following information:
1) cases where insurance contracts may be concluded upon a written application of the policyholder;
2) insured events;
3) non-insured events upon occurrence of which the insurer has no obligation to pay any insurance benefits;
4) insurance object;
5) procedure for the calculation of sums insured, where they are to be calculated; procedure for the calculation of rates of insurance premiums, procedure for payment of premiums as well as sanctions for breaches of the procedure;
6) conditions for double insurance, underinsurance and supplementary insurance under indemnity insurance contracts;
7) rights and obligations of insurers, policyholders, beneficiaries and injured third parties;
8) loss assessment procedure;
9) procedure and deadlines for calculation and payment of insurance benefits;
10) conditions for revision and termination of an insurance contract, including the procedure for termination of an insurance contract where the policyholder objects to the insurer’s intention to transfer the rights and obligations under the insurance contract to another insurer or other insurers;
11) procedure for settlement between the parties to the contract after the termination of an insurance contract, including the procedure for settlement with the policyholder who has terminated the insurance contract because of objection to the insurer’s intention to transfer the rights and obligations under the insurance contract to another insurer or other insurers;
12) procedure for transfer of the insurer’s rights and obligations under the insurance contract to another insurer;
13) procedure for resolution of disputes between the policyholder and the insurer;
14) procedure for information exchange between parties to the contract.
2. Insurance rules must be announced on the website of the insurance undertaking.
3. At the request of the supervisory authority, the insurer must amend the insurance rules insofar as they conflict with the legislative provisions or breach consumer rights and interests. At the request of the supervisory authority, the insurer must conclude all future insurance contracts under the amended insurance rules.
4. Before launching compulsory insurance services, the insurer must submit, at the request of the supervisory authority, the compulsory insurance rules to the supervisory authority, except for the cases where conditions for the provision of compulsory insurance are set out in legislation. The supervisory authority shall verify whether the submitted compulsory insurance rules meet the legal requirements and the interests of policyholders, insured persons, beneficiaries and injured third parties, including consumers.
Article 93. Information for the policyholder
1. All information, including advertising, submitted by the insurance distributor or reinsurance distributor to current or potential policyholders, insured persons, beneficiaries or injured third parties must be fair, clear and non-misleading. The distributor of insurance or reinsurance products, an insurance or reinsurance undertaking of another state of the European Economic Area, or a branch of an insurance or reinsurance undertaking of a third state may advertise their services by all available means of communication under the rules governing the form and content of advertising approved by the supervisory authority and aimed at protecting the interests of policyholders, insured persons, beneficiaries and injured third parties. Advertising must be clearly identifiable as such. A distributor of insurance or reinsurance products shall disclose the information specified in Regulation (EU) 2019/2088 and Articles 5, 6 and 7 of Regulation (EU) 2020/852.
2. Prior to the conclusion of a non-life insurance contract, with the exception of cases where an insurance contract concluded covers a large insurance risk, as set out in Article 10 of this Law, the insurer or the insurance intermediary must provide the policyholder with the following details in writing:
1) information specified in Article 6.993(8) of the Civil Code;
2) information on the jurisdiction applicable to the insurance contract, namely, the jurisdiction proposed by the insurer, where the parties to the contract are free to choose the applicable jurisdiction;
3) information on whether any recommendations are provided on insurance products on offer;
4) information on the nature of remuneration received by the insurer’s employees in relation to the insurance contract, where the insurer is in charge of distribution of insurance products;
5) information on the nature of remuneration received by the insurance intermediary, where an insurance intermediary is in charge of distribution of insurance products. Where the policyholder pays the insurance intermediary for distribution of the insurance products directly, the policyholder must be informed of the size of that remuneration; where the size of remuneration cannot be determined, the policyholder shall be provided with the information on the method of its calculation;
6) insurance product information document prepared by the insurer.
3. Within the entire period of validity of the contract, the insurer must notify the policyholder of a non-life insurance contract immediately of any changes to the information specified in Articles 93(2)(1) and 93(2)(2) of this Law. If, after conclusion of the contract, the policyholder makes any payments under an insurance contract, other than insurance premiums and anticipated payments, the insurer or insurance intermediary shall also disclose the information set out in Article 93(2)(4) about each such payment.
4. Upon conclusion of an insurance contract, the policyholder must receive an insurance policy and a copy of an individual insurance contract, where the latter is concluded.
5. If, subsequent to conclusion of an insurance contract, the policyholder requests the insurer for copies of the insurance rules, the individual insurance contract, the insurance policy, the policyholder’s written application to conclude an insurance contract, and copies of other documents confirming the conclusion of the insurance contract, the insurer must make copies of the required documents available to the policyholder for an agreed fee not exceeding the cost of making copies of documents (provided the fee is specified in the insurance contract).
6. Where this Chapter provides for negotiations on individual clauses of the insurance contract, the insurer must inform the policyholder about the proposed clause and its impact. The individually negotiated clause shall be valid only where the policyholder expresses written acknowledgement and consent to include the clause into the insurance contract.
7. The supervisory authority shall set out the requirements for the insurance product information document and for provision of other information under Articles 93(2) and 93(3) of this Law insofar as the EU legislation does not provide otherwise.
Article 931. Requirements for the provision of information
1. In cases where information is provided in writing under this Chapter and in the cases specified in Article 1582 of this Law, information shall be provided in the following ways:
1) printed on paper;
2) written in a comprehensible, clear and precise manner;
3) written in the state language or any other language, provided that this has been agreed upon by the parties to the contract and meets the provisions of the Law of the Republic of Lithuania on the State Language;
4) free of charge.
2. For providing information, an internet website or a durable medium other than paper may be used instead of paper, given all the requirements under Articles 931(3) and 931(4) of this Law are met. Where information is provided via an internet website or a durable medium other than paper, the policyholder, insured person, beneficiary or injured third party shall be entitled to ask for and receive the information printed on paper free of charge.
3. Information may be provided on a durable medium other than paper if all of the following conditions are met:
1) proof can be supplied that the policyholder, insured person, beneficiary or injured third party has regular access to the Internet. Such proof shall constitute provision of an e-mail address by the policyholder, insured person, beneficiary or injured third party to the distributor of insurance products before the start of provision of insurance product distribution services;
2) the policyholder, insured person, beneficiary or injured third party has been offered to choose the way information would be presented to them and they have opted for the provision of information on a durable medium other than paper.
4. Information may be provided on an internet website, where such information is either addressed in person to the policyholder, insured person, beneficiary or injured third party, or where all of the following requirements are met:
1) proof can be supplied that the policyholder, insured person, beneficiary or injured third party has regular access to the internet. Such proof shall constitute provision of an e-mail address by the policyholder, insured person, beneficiary or injured third party to the distributor of insurance products before the start of provision of insurance product distribution services;
2) the policyholder, insured person, beneficiary or injured third party consents to the provision of that information via the internet website;
3) the policyholder, insured person, beneficiary or injured third party is notified by electronic means of the address of the internet website and provided with a link to the website where the information may be accessed;
4) the information on the internet website is available for a period of time the policyholder, insured person, beneficiary or injured third party may reasonably need to access it for familiarization purposes.
5. Distribution of insurance products under contracts concluded by means of distance communication shall also be subject to laws regulating the provision of financial services under contracts concluded by means of distance communication. Where the policyholder, insured person, beneficiary, or injured third party chooses, under Article 931(3) of this Law, to obtain preliminary information on a durable medium other than paper, they shall receive the information under Articles 931(1) and 931(2) of this Law immediately upon conclusion of an insurance contract.
Article 94. Insurable interest
A precondition for concluding an indemnity insurance contract is a legitimate insurance interest which applies to the policyholder or the insured person and which may be calculated in monetary terms.
Article 95. Insurance risk and processing of personal data
1. Before conclusion of an insurance contract, the insurer shall be entitled to assess the insurance risk under the procedure set out in Article 6.994 of the Civil Code.
2. In calculating insurance premiums and insurance benefits, the insurer shall not be entitled to consider the gender of the insured person as a factor having an impact on insurance risk.
3. In calculating insurance premiums and insurance benefits, the insurer shall not be entitled to consider factors related to pregnancy and maternity as factors having an impact on insurance risk.
4. In conclusion and performance of an insurance contract, the insurer and the insurance intermediary shall be entitled to process personal data of the insured person, beneficiary and payer of insurance premiums without their consent, except for personal data that falls into special categories.
Article 96. Failure to pay the insurance premium
1. If the policyholder fails to pay the insurance premium or its part within the time limit set out in the insurance contract (except for the cases where coming into effect of the contract is conditioned on the full or partial payment of the insurance premium), the insurer must inform the policyholder thereof in writing and specify that, unless the premium or its part is paid up within 30 days from the date of sending the notification to the policyholder, the insurance cover under the life assurance contract shall be suspended and may be renewed only after the policyholder pays the premium or its part and that, in the case of a non-life insurance contract, the insurance cover shall expire (except for the cases where suspension of the insurance cover is foreseen in the insurance contract). The insurance contract may provide for time limits exceeding those specified in this paragraph.
2. If an insured event occurs while the insurance cover is suspended, the insurer shall have no obligation to pay the insurance benefit. If, in the case of insurance against civil liability, submission of a claim for compensation of damage is considered to be an insured event under the insurance contract, the insurer may refuse to pay the insurance benefit where the action resulting in damage occurs during the period of suspension of the insurance cover, even if the claim for compensation is submitted after the suspension of the insurance cover.
3. If the suspension of insurance cover under a life assurance contract lasts for more than six months due to the failure to pay the insurance premium, the insurer shall be entitled to terminate the insurance contract unilaterally.
Article 97. Right to claim the insurance benefit
The right to claim the insurance benefit shall belong to the policyholder and, in cases set out in this Law and/or the insurance contract, also to the beneficiary or injured third party. If the beneficiary or injured third party requests payment of the insurance benefit, the insurer shall be entitled to use all the pleadings accumulated against the policyholder.
Article 98. Payment of the insurance benefit
1. The policyholder, beneficiary and/or any injured third party must provide the insurer with all the documents and information available concerning the circumstances and consequences of the insured event, which are essential for the determination of the amount of the insurance benefit. At the request of the insurer and under the procedure set out by laws and other legal acts, the persons specified in this paragraph must also provide documents concerning the circumstances and consequences of the insured event essential to the insurer for the determination of the amount of the insurance benefit. The insurance contract must specify the documents that must be provided to the insurer.
2. The insurer must put every reasonable effort into investigation of the circumstances in order to establish the fact and consequences of the insured event and to calculate the amount of the insurance benefit. The insurance benefit must be paid not later than within 30 days from the day of receipt of all the information needed for the determination of the fact, circumstances and consequences of the insured event as well as for the calculation of the amount of the insurance benefit. If the insurance contract sets out regular payment of insurance benefits, the provision of this paragraph that insurance benefit must be paid not later than within 30 days from the day of receipt of all the relevant information is applicable to the first regular insurance benefit. If the event is a non-insured event, the insurance undertaking must refuse to pay an insurance benefit within 30 days from the date of receipt of all the information needed for establishing the fact, circumstances and consequences of the event. For life assurance services related to capital accumulation, where the insurance benefit is paid upon expiry of the deadline under the insurance contract, the insurance benefit must be paid not later than within 7 working days from the expiry of the said deadline; where the insurance contracts provides that, in order to pay out the insurance benefit, a written application of the policyholder or beneficiary must be submitted or other terms and conditions of the insurance contract must be met, the insurance benefit shall be paid not later than within 7 working days from the date of submission of the application or fulfilment of other conditions set out in the insurance contract. Where an application is submitted before the expiry of the deadline set out in the insurance contract, the insurance benefit must be paid out not later than within 7 working days from the expiry of the deadline set out in the insurance contract.
3. The insurer shall not be entitled to make the following steps:
1) pay the insurance benefit or refuse to pay the insurance benefit without checking whether the insured event actually occurred;
2) refuse to pay the insurance benefit without having verified all the information available.
4. At the insurer’s request, natural and legal persons must submit all the information available to them about the circumstances and consequences of the insured event and of the event that may be recognised as an insured event. If state authorities investigate into the circumstances of an insured event or an event that may be recognised as an insured event, these authorities must, at the request of the insurer, inform the insurer in writing, free of charge, of the facts and findings established during the investigation.
5. When investigating the circumstances of an insured event and an event which may be recognised as an insured event under life assurance contracts, health insurance contracts, or civil liability insurance contracts, the insurer shall be entitled to receive and process data on health, medical treatment services provided, diseases diagnosed, traumas suffered and reasons of death of the insured person and the injured third party available to healthcare authorities or other state or municipal institutions as well as data from registers, information systems or other data files.
6. If the insurer and the policyholder have a dispute over the amount of the insurance benefit payable for an insured event and calculation of an exact amount of damage takes more than three months, the insurer must pay out the amount of the insurance benefit undisputed by the parties at the request of the policyholder.
7. The insurer must submit proof of the circumstances releasing the insurer from the obligation of payment of the insurance benefit or entitling the insurer to cut the insurance benefit.
8. When the insurer refuses to pay out the insurance benefit or reduces the insurance benefit owing to violation of the insurance contract by the policyholder, the insurer must take account of the policyholder’s fault, the gravity of breach of the insurance contract, its causal relation with the insured event and the amount of damage resulting from the breach. When the insurer refuses to pay the insurance benefit or reduces the insurance benefit, the insurer must provide a detailed and reasoned explanation of the reasons for this decision to the policyholder, beneficiary, or injured third party.
9. Where the insurance benefit has not been paid, every 30 days from the report about the insured event, the insurer must provide to the policyholder, beneficiary or injured third party a detailed account in writing about the progress of investigation into the insured event; this shall not apply to the cases where data or information is lacking only from the policyholder, beneficiary or injured third party and where the policyholder, beneficiary or injured third party has already been notified of the documents or information they must submit for the purposes of investigation into the insured event.
10. In compliance with the data protection laws and requirements of other legal acts, the insurer must notify the beneficiary and, at the request of the policyholder, inform the policyholder of payment of an insurance benefit in writing upon payment of the insurance benefit.
Article 99. Automatic extension of the period of validity of an insurance contract
1. The period of validity of an insurance contract may be extended automatically upon its expiry for a maximum period of one year subject to terms and conditions under the insurance contract, unless a party to the insurance contract objects to the extension.
2. In the case set out in Article 99(1) of this Law, the objection must be expressed by a party to the contract in writing at least one month before the expiry of the period of validity of the insurance contract; where the contract is concluded for less than three months, the objection must be expressed in writing within any other reasonable term agreed between the parties.
3. There is no limit to the number of automatic extensions of insurance contracts. Conditions for an automatic extension of the period of validity of the insurance contract must be negotiated individually during the conclusion of the insurance contract.
Article 100. Settlement with the policyholder upon termination of an insurance contract
Terms and conditions for settlement between the insurer and the policyholder upon termination of the insurance contract must take account of the fault for breach of the contract conditions by parties, the insurer’s administrative costs relating to the conclusion and performance of the contract, the size of insurance premiums paid for the period during which insurance cover was not provided, the size of unpaid insurance premiums for the insurance cover provided, and other important circumstances.
Article 101. Obligations of beneficiaries, insured persons and injured third parties
1. An insurance contract may establish obligations of the insured person as well as obligations of the beneficiary and injured third party to be complied with when exercising the right to the insurance benefit.
2. The exercise of the insurer’s rights does not entitle the insurer to invoke non-performance of obligations under the insurance contract by the beneficiary, insured person and injured third party if they are unaware of conclusion of the contract and their contractual obligations or if they are unable to perform such obligations.
3. The exercise of the insurer’s rights shall entitle the insurer to invoke the failure of the policyholder to perform the obligation of duly informing the beneficiary, insured person or injured third party about the concluded contract and the contractual obligations of the beneficiary, insured person or injured third party.
Article 102. Settlement of disputes between consumers and the insurer
Disputes between consumers and the insurer shall be settled under the procedure set out in the Law of the Republic of Lithuania on the Bank of Lithuania.
SECTION TWO
PROPERTY INSURANCE
Article 103. Policyholder, insured person and beneficiary
Policyholders may conclude insurance contracts in respect of their own property interests or interests of another person who, upon conclusion of the insurance contract, becomes the insured person. In property insurance, only the person whose property interests have been insured may be considered as the beneficiary.
Article 104. Value of property
Where the value of property is not specified in the insurance contract, it shall be deemed to equal the market value of that property at the moment of conclusion of the insurance contract.
Article 105. Insurance benefit
The amount of the insurance benefit shall be equal to the amount of damage incurred and/or other expenses (insurable interest) borne by the policyholder, insured person or beneficiary due to an insured event, unless it has been agreed between the parties that the insurer must compensate only part of the damage (other expenses).
Article 106. Gross negligence
An insurance contract may include clauses under which the insurer is released from the obligation to pay the insurance benefit if the insured event occurs due to gross negligence on the part of the policyholder or insured person. Such clauses must be negotiated individually.
SECTION THREE
INSURANCE AGAINST CIVIL LIABILITY
Article 107. Insured person
Policyholders may conclude insurance contracts in respect of their own property interests related to civil liability or the interests of another person who, upon conclusion of an insurance contract, becomes the insured person.
Article 108. Insured event
Unless the third party liability insurance contract provides otherwise, the insured event shall mean civil liability incurred by the policyholder or the insured person for the consequences of the action (acts or omissions) committed by the policyholder or the insured person during the period of validity of the insurance contract, even if such consequences occur after the contract expires.
Article 109. Expenses compensated by the insurer
1. Unless the insurance contract provides otherwise, the insurer must compensate for reasonable expenses incurred by the policyholder or the insured person borne while rebutting the claim of the injured third party for compensation of damage. The expenses shall be compensated even if the claim for compensation of damage later transpires to have been unfounded.
2. The insurer shall be under no obligation to compensate for the expenses set out in Article 109(1) and shall have the right to require reimbursement of the compensated expenses if the policyholder or the insured person have caused damage to the injured third party intentionally.
Article 110. Payment of the insurance benefit
1. The insurer shall pay the insurance benefit to the injured third party; where the policyholder or the insured person compensates for the damage caused to the injured third party, the insurer shall pay the insurance benefit to the policyholder or the insured person.
2. Where the sum insured is worth less than the joint damage caused to all injured third parties, the insurance benefit shall be distributed among the injured third parties in proportion to the damage caused to them.
Article 111. Right of direct claim
The injured third party shall have the right to request an insurance benefit directly from the insurer covering the civil liability of the person liable for the damage.
Article 112. Consequences of payment of an insurance benefit
Where an insurance benefit paid by the insurer to cover the damage equals the sum insured, the insurer’s obligation shall remain in force until the expiry of the period of validity of the insurance contract for the total sum insured without deduction of the benefits paid out; an exception applies to cases where, under the insurance contract, the insurer’s obligation remains in place only for the remaining amount of the sum insured.
Article 113. Insurer’s right to reclaim from the policyholder or insured person the amounts paid
1. Where an insured event occurs, as specified in Article 6.1014(3) of the Civil Code, due to the policyholder’s (or the insured person’s) intent, the insurer, upon payment of the benefit, shall have the right to reclaim the paid amount from the policyholder or the insured person.
2. In the cases specified in the civil liability insurance contract, where the insured event occurs due to gross negligence of the policyholder or the insured person, the insurer, upon payment of the benefit, shall have the right to reclaim the paid amount, in full or in part, from the policyholder or the insured person. This clause of the insurance contract must be negotiated individually.
Article 114. Transfer of an object
1. Where a civil liability insurance contract covers civil liability which may arise when managing, using or having in possession an object with individual features, the insurance contract shall expire upon the change of the owner of the object, unless the contract provides otherwise.
2. Where a civil liability insurance contract specifies several objects with individual features, the insurance cover of property interests relating to that object shall expire upon the change of the owner of one of these objects.
SECTION FOUR
LIFE ASSURANCE
Article 115. Conclusion of a life assurance contract
1. Policyholders may conclude life assurance contracts in respect of their own property interests or property interests of any other persons.
2. A life assurance contract shall be considered concluded for the benefit of the person whose life is covered by insurance (the insured person), unless the contract provides for another beneficiary.
3. A life assurance contract may be concluded for the benefit of a person other than the insured person only subject to a written consent of the insured person. Where the insured person is aged under 18, or has been recognised as legally incapable or of limited legal capacity, the insurance contract may be concluded only for the benefit of the insured person, except for the cases where all of the following conditions are met:
1) the insured person is aged under 18;
2) the beneficiary to be appointed is a close relative of the insured person;
3) the beneficiary is appointed provided the insured person survives until the expiry of the time limit set out in the contract.
4. Transfer of the commitment of the annuity payer set out in Article 6.448(1) of the Civil Code shall be possible where the annuity payer concludes an insurance contract with the insurer and pays the premium equal to the amount of the annuity.
5. Under an insurance contract specified in Article 6.289(2) of the Civil Code, the legal person under liquidation shall pay the agreed premium to the insurer, while the insurer shall commit to pay regular insurance benefits to the beneficiary, i.e. the person in respect of whom the legal person under liquidation has an obligation to compensate for the damage incurred as a result of injury or loss of life of the natural person.
Article 1151. Deduction of insurance contract fees to cover the insurer’s acquisitions and other costs related to the conclusion of insurance contracts
1. Where an insurance contract is associated with capital accumulation and where insurance contract fees are intended to cover the insurer’s acquisitions and other costs related to the conclusion of an insurance contract, the insurer must make sure that these fees are deducted in equal instalments from the paid insurance premiums within a period of at least 3 years from the conclusion of the insurance contract or within the entire period of validity of the insurance contract, if the insurance contract is valid for less than 3 years.
2. Article 1151(1) shall apply to insurance contracts under which insurance premiums are paid regularly and shall not apply where the premiums paid by the policyholder are single lump sum premiums.
Article 116. Information to the policyholder of a life assurance contract
1. Prior to the conclusion of a life assurance contract, the insurer or the insurance intermediary must provide the policyholder in writing with the information specified in Articles 93(2)(1)–93(2)(5) of this Law and, in addition, inform the policyholder in writing about the following:
1) any possible clauses under the insurance contract concerning the insured sums and benefits the policyholder is free to choose when concluding the insurance contract and the size of premiums for each of the options;
2) possible period of validity of the life assurance contract;
3) terms and conditions of the life assurance contract as well as ways of termination of the life assurance contract, including the policyholder’s right to terminate a life assurance contract on concessionary terms under the procedure set out in Article 124 of this Law;
4) forms of, procedure for and duration of payment of insurance premiums;
5) the procedure for and forms of calculation of insurance benefits and the procedure for their payment;
6) the interest rate, the principles of calculation of the insurer’s profit share belonging to the policyholders, the methods of distribution of that profit share, the procedure for calculation of the surrender value and approximate size of the surrender value for contracts linked to capital accumulation;
7) essential information about taxation procedures applicable to life assurance contracts;
8) a link to the insurer’s solvency statement and financial performance report facilitating the policyholder’s unhindered access to this information;
9) all fees of the insurance contract, expressed in absolute monetary terms, provided under the procedure set out by the supervisory authority, for life assurance contracts linked to capital accumulation.
2. During the period of validity of a life assurance contract, the insurer must immediately notify the policyholder of the life assurance contract in writing of the following details:
1) any changes in the insurer’s name, legal status or address of the registered office and any changes in the particulars relating to the branch, where the life assurance contract has been concluded by a branch of the insurer;
2) any changes to the information specified in Article 116(1), where the insurance rules or the law applicable to the life assurance contract are amended.
3. Each year, the insurer must, within the time limits set out in the life assurance contract, notify the policyholder in writing, under the procedure set out by the supervisory authority, about the insurer’s profit share, surrender value, and applicable fees under the life assurance contract, where the contract is linked to capital accumulation.
4. The information provided must be clear and comprehensible.
5. The information shall be provided in Lithuanian or, at the request of the policyholder and upon agreement with the insurer, in any other language.
6. The supervisory authority shall set out other requirements for provision of information to the policyholders under life assurance contracts.
Article 117. Insurance risk
1. In assessing the insurance risk, the insurer shall be entitled to take account of the age, health condition, profession of the insured person and other objective criteria affecting the insurance risk; the insurer shall also ensure that the calculation of insurance premiums and insurance benefits is based on the same principles for all persons in a group exposed to the same level of risk.
2. The insurer shall be prohibited from requesting, in any form, that the policyholder, the insured person and other persons provide the insurer with data of genetic testing.
3. In executing the rights provided to the insurer under law or under the life assurance contract, the insurer shall not invoke the following grounds:
1) failure by the policyholder to meet the obligation under Article 6.993 of the Civil Code due to negligence, where more than 10 years have passed since the conclusion of the life assurance contract;
2) failure of the policyholder to meet the obligation under Article 6.1010 of the Civil Code due to negligence, where more than 10 years have passed since the increase of the insurance risk.
4. The time limits specified in Article 116(3) shall also apply to life assurance contracts that cover additional health insurance risk.
5. In exercising its rights under a life assurance contract, the insurer shall not be entitled to unilaterally increase the insurance premium during the period of validity of the insurance contract where the insurance risk increases due to the policyholder’s or the insured person’s age and/or disease, with the exception of cases where the policyholder or the insured person cause their disease deliberately.
6. Under individually negotiated clauses of insurance contracts, the insurer shall have the right to change the amount of the specified insurance premium unilaterally only where the change is associated with the following developments:
1) change of the interest rates on domestic and international markets;
2) changes in statistical data about insured events and insurance benefits.
7. The amount of an insurance premium may be changed unilaterally on the grounds specified in Article 117(6) only where this change is not essential. Determination of whether the change is essential must take into account whether, through the essential change, the policyholder (beneficiary) gains or is deprived of the possibility to gain what they expected from the insurance contract.
8. Prior to changing the insurance premium, the policyholder must be provided with detailed information in writing about the change of the premium and the reasons for the change and offered an opportunity to terminate the insurance contract.
Article 118. Benefit upon death of the insured person
Where the policyholder or the insured person has not appointed a beneficiary under the life assurance contract, the benefits payable upon the death of the insured person shall be inherited under the procedure set out by laws.
Article 119. Appointment and replacement of the beneficiary
1. The policyholder shall have the right to appoint one or several beneficiaries who, upon occurrence of an insured event, shall be entitled to the entire insurance benefit or its part. The policyholder must notify the insurer about the appointed beneficiary in writing.
2. The policyholder shall be entitled to appoint an irrevocable beneficiary. The policyholder must inform the person concerned in writing about the appointment of that person as an irrevocable beneficiary.
3. Where the policyholder has appointed several beneficiaries without specifying the individual benefit amounts payable to each beneficiary, the beneficiaries shall have equal rights to the benefit upon occurrence of an insured event.
4. The policyholder shall be entitled to replace or revoke the beneficiary by notifying the insurer of this in writing.
5. For appointing a beneficiary or replacing the beneficiary with another beneficiary other than the insured person, a written consent of the insured person must be obtained, except for the cases where all of the following conditions are met:
1) the insured person is aged under 18;
2) the beneficiary to be appointed is a close relative of the insured person;
3) the beneficiary is appointed in the event where the insured person survives until the expiry of the time limit set out in the contract.
6. The irrevocable beneficiary may be replaced or revoked only subject to a written consent of the irrevocable beneficiary.
7. The beneficiary shall be considered appointed, replaced or revoked if, prior to occurrence of an insured event, the insurer has received from the policyholder a written notification of the appointment, replacement or revocation of the beneficiary and the conditions under Articles 119(4)–119(6) of this Law have been met.
8. The policyholder shall be entitled to appoint, replace or revoke a beneficiary by means of a will. Such appointment, replacement or revocation of a beneficiary shall be deemed to be appropriate if the insurer has been informed thereof in writing by the policyholder or, upon the death of the policyholder, by the inheritors of the policyholder (before or after the death of the policyholder) and the consents specified in Articles 119(5) and 119(6) of this Law have been obtained (if necessary).
9. In the cases and under the procedure set out in the life assurance contract, the right to appoint, replace and revoke the beneficiary shall also be vested in the insured person. In this case, the appointment, replacement or revocation of the beneficiary shall mutatis mutandis be subject to the provisions of this Article.
10. Where the beneficiary has been appointed, replaced or revoked disregarding the provisions of this Article, the appointment, replacement or revocation of the beneficiary shall become invalid, save for the case set out in Article 6.191(4) of the Civil Code for revocation of the beneficiary, where the beneficiary is irrevocable.
11. Upon the occurrence of an insured event, the right to claim an insurance benefit shall exclusively belong to the beneficiary appointed under the procedure set out in this Article.
Article 120. Exemptions from application of the provisions of the Civil Code
The provisions of the Civil Code on insurance in excess of the insurance value (Article 6.1001), on insurance against a range of different risks (Article 6.1002) and on the transfer to the insurer of the policyholder’s rights to compensation for damage (Article 6.1015) shall not apply to life assurance contracts.
Article 121. Insurance benefit
1. The insurance benefit under a life assurance contract shall be paid with no regard to the policyholder’s or beneficiary’s income received from other sources.
2. The insurer shall be entitled to deduce from the benefit the amount of the premiums unpaid during the period of suspension of the insurance cover and the amount of income which would have been received from investment of such premiums.
Article 122. Policyholder’s right to refuse payment of premiums
1. Where the minimum amount, if specified in the insurance contract, is accumulated during the period of validity of a life assurance contract linked to capital accumulation, the policyholder shall be entitled to decline further payment of the insurance premium. In this case, the life assurance contract shall be valid for the remaining period of validity of the contract and benefits under the life assurance contract shall be adjusted under the procedure set out in the contract, with due regard to the accumulated minimum amount.
2. The policyholder’s right under Article 122(1) shall be exercised under the procedure set out in the life assurance contract.
Article 123. Insurer’s right to terminate the insurance contract
The insurer shall have the right to terminate the life assurance contract unilaterally only in the event of a material breach of the terms and conditions of the contract and in the case set out in Article 6.1009(1) of the Civil Code.
Article 124. Termination of an insurance contract on concessionary terms
1. The policyholder as a natural person is entitled to terminate a life assurance contract unilaterally with the period of validity equal to or exceeding six months by notifying the insurer thereof in writing within 30 days from the moment the policyholder was informed about the concluded contract.
2. Upon termination of a life assurance contract under Article 124(1), the insurer must reimburse to the policyholder the total insurance premium which has been paid by the policyholder, with the exception of the case set out in Article 124(3).
3. Upon termination by the policyholder of a life assurance contract linked to investment funds under Article 124(1), the insurer shall have the right to reimburse the amount of insurance premiums paid by the policyholder, recalculated based on the investment performance. This clause of the insurance contract must be negotiated individually.
4. Upon termination of a life assurance contract by the policyholder under this Article, no obligations may arise for the policyholder and the insurer from the insurance contract.
Article 125. Payment of a premium after termination of an insurance contract
The insurance contract may specify terms and conditions for the renewal of a life assurance contract linked to capital accumulation terminated by the insurer on account of the failure of the policyholder to pay the premium, where the policyholder, within six months from the termination of the life assurance contract, reimburses the surrender value paid by the insurer.
Article 126. Payment of surrender value
1. Where a life assurance contract linked to capital accumulation is terminated or otherwise expires prematurely, or where the insurer exercises the right granted under law or under the insurance contract and refuses to pay or reduce the benefit, the amount paid to the policyholder must equal or exceed the surrender value.
2. Where, upon invalidation of a life assurance contract, restitution is due for the benefit of the policyholder, the insurer must reimburse the surrender value to the policyholder if it exceeds the premiums paid by the policyholder.
3. For the purpose of calculation of the surrender value, the accumulated capital of the policyholder may not be reduced by other fees or costs uncovered by the insurer, with the exception of the contract termination fee, the amount of which shall either correspond to the direct costs of the termination of the insurance contract or shall be equal to 2 % of the value of the accumulated capital and, in any case, may not exceed EUR 50.
4. The procedure for the calculation and payment of the surrender value as well as approximate amounts of the surrender value must be specified in the life assurance contract.
Article 127. Transfer of property rights arising from insurance contracts
1. Under the procedure set out in a life assurance contract, the policyholder and the beneficiary may transfer the property rights arising from the life assurance contract to other persons.
2. Upon the transfer of the rights arising from the life assurance contract, appointment of the beneficiary shall become invalid, save for the case where the beneficiary is irrevocable.
Article 128. Pledge of property rights arising from insurance contracts
1. In order to ensure that an obligation is met, the policyholder may pledge the following property rights arising from a life assurance contract and linked to capital accumulation: the right to the insurance benefit and the right to the surrender value. The policyholder may pledge the right to surrender value only subject to consent of the irrevocable beneficiary.
2. The beneficiary may pledge the right to the insurance benefit only upon occurrence of an insured event.
3. The insurer must be informed in writing about the pledge of the property rights arising from the life assurance contract.
4. The claim of the pledgee may be satisfied from the insurance benefit only upon the occurrence of an insured event. The insurer must satisfy the claim of the pledgee from the insurance benefit only upon expiry of the time limit specified in Article 98(2) of this Law.
5. The pledgee shall have priority against the beneficiary for the satisfaction of the claim, save for the case where the beneficiary is irrevocable. Where the irrevocable beneficiary has been appointed after the pledge of the property rights arising from the insurance contract, the pledgee shall have priority against the irrevocable beneficiary for the satisfaction of claims.
6. After the insurer has satisfied the claim of the pledgee, the surrender value or the insurance benefit shall be reduced by the amount equal to the share of the pledgee’s claim satisfied by the insurer.
SECTION FIVE
HEALTH INSURANCE
Article 129. Insured person
1. The policyholder may conclude a health insurance contract for the coverage of the property interests associated with the health of the policyholder or another person who, upon conclusion of the contract, shall become the insured person.
2. Where health insurance is a loss insurance, only the insured person may constitute the beneficiary; in the event of a death of the beneficiary, the appointed beneficiary shall become the beneficiary.
Article 130. Application of other provisions of this Law
1. Provisions of Articles 117(1), 117(2), 118, 119 and 123 of this Law shall mutatis mutandis apply to a health insurance contract.
2. Where a health insurance contract is a sum insurance contract, provisions of Articles 115, 120 and 121 of this Law shall also apply mutatis mutandis to such a contract; however, the provisions of the Civil Code on underinsurance/partial insurance (Article 6.999) and supplementary insurance (Article 6.1000) shall not apply.
Article 131. Insurance risk
1. In executing the rights granted under law or under the health insurance contract, the insurer may not invoke the following facts:
1) failure by the policyholder to meet the obligation set out in Article 6.993 of the Civil Code due to negligence, if more than five years have passed since the conclusion of the insurance contract;
2) failure by the policyholder to meet the obligation set out in Article 6.1010 of the Civil Code due to negligence, if more than five years have passed since the risk increase.
2. In exercising the rights under the life assurance contract, during the period of validity of the insurance contract, the insurer shall not have the right to unilaterally increase the insurance premium where the insurance risk increases due to the policyholder’s or the insured person’s age and disease, with the exception of cases where the policyholder or the insured person causes the disease deliberately.
SECTION SIX
CO-INSURANCE
Article 132. Participation in co-insurance
1. Mutual rights and obligations of the insurers participating in co-insurance shall be set out in the contract. The contract must include the following data:
1) the insurer appointed as the principal insurer;
2) the fee of the principal insurer for the administration of co-insurance contracts, unless otherwise agreed;
3) the share of the insurance risk, in percent, assumed by each insurer;
4) the procedure for distribution of insurance premiums received under the co-insurance contract;
5) the procedure used by the principal insurer for providing information on the co-insurance contract to other insurers;
6) one of the ways specified in Article 132(5) of this Law used for payment of the insurance benefit;
7) the procedure for settlement between the insurers and the principal insurer, where payment of the insurance benefit follows the procedure under Article 132(5)(1) of this Law;
8) the procedure and conditions for the insurer’s withdrawal from co-insurance.
2. The principal insurer shall exercise all the rights and fulfil all the duties of the insurer, unless this Law provides otherwise.
3. An insurance contract shall be concluded under the terms and conditions drafted by the principal insurer.
4. The insurance policy issued by the principal insurer, in addition to the insurance policy particulars set out in Article 6.991(1) of the Civil Code, must contain the following information:
1) the name and address of the registered office of the principal insurer;
2) the names and addresses of registered offices of other insurers participating in co-insurance;
3) the share of insurance risk, in percent, assumed by each insurer;
4) one of the ways of payment of the insurance benefit specified in Article 132(5) of this Law;
5) signatures of all the insurers, if their mutual contract provides that, apart from the principal insurer, the insurance policy shall be signed also by all the other insurers; and seals, where the obligation to possess a seal is set out in the insurer’s documents of incorporation.
5. The insurance benefit under the co-insurance contract shall be paid in one of the following ways, which must be specified in the insurance contract:
1) the principal insurer pays the insurance benefit on behalf of both the principal insurer and other insurers engaged in co-insurance;
2) each insurer engaged in co-insurance pays the amount of insurance benefit in proportion to the share of insurance risk assumed.
6. The policyholder, beneficiary or any injured third party must apply to the principal insurer for the payment of the insurance benefit where the insurance contract sets out that the principal insurer pays the insurance benefit on its own behalf and on behalf of other insurers engaged in co-insurance.
7. For insurance contracts under which each insurer engaged in co-insurance pays the amount of the insurance benefit in proportion to the assumed share of insurance risk, after the principal insurer acknowledges the fact of an insured event, determines the amount of the insurance benefit to be paid, and decides to pay it out, in full or in part, the policyholder, beneficiary or any injured party must apply to each insurer engaged in co-insurance for the payment of the insurance benefit in view of the share of insurance risk assumed by the said insurer. In the event of a dispute between the policyholder, beneficiary or injured third party, of the one part, and one of the insurers, of the other, regarding the payment of a share of the insurance benefit, the said insurer shall be the defendant in court.
8. The decision of the principal insurer establishing the fact of either existence or non-existence of an insured event, determining the amount of the insurance benefit and setting out to pay the insurance benefit shall be binding on the insurers participating in co-insurance.
Article 133. Co-insurance in the states of the European Economic Area
1. Co-insurance in the states of the European Economic Area where domestic insurance undertakings and insurance undertakings of other states of the European Economic Area are engaged shall be subject to the provisions of this Article without being subject to the provisions of Article 132 of this Law, provided co-insurance in the states of the European Economic Area satisfies all of the following criteria:
1) a co-insurance contract is concluded for covering the risks of insurance classes specified in Articles 7(3)(3) – 7(3)(16) of this Law;
2) a co-insurance contract is concluded only for covering large insurance risks which, by reason of their nature or size, call for the participation of several insurers for their coverage;
3) insurance risk is covered by a single insurance contract for the period specified in the contract at an overall premium set out in the contract and the insurance risk is covered by two or more insurers, each of whom assumes a share of insurance risk and one of whom is established as the principal insurer;
4) insurance risk is situated within a state or states of the European Economic Area;
5) the principal insurer meets the requirements set out in this Article and, under the status defined in the contract concluded between the insurers, the principal insurer in contractual relations is considered to be in charge of covering the whole insurance risk;
6) the registered office or a branch of at least one of the insurers is located in a state of the European Economic Area other than that of the principal insurer;
7) the principal insurer fully assumes the rights and obligations of the principal insurer and is entitled to determine the terms and conditions of the insurance contract and the amount of the insurance premium.
2. The requirements under Articles 68 or 73 of this Law apply only to the principal insurer.
3. The provisions of the legal acts of the Republic of Lithuania shall be binding on the calculation of technical provisions, the prudential regime, and the provision of statistical data and other information by insurance undertakings of the Republic of Lithuania and branches of third country insurance undertakings established in the Republic of Lithuania and taking part in co-insurance in the states of the European Economic Area. The insurance undertakings participating in co-insurance in states of the European Economic Area must record statistical data on the respective states where these undertakings operate and on the scope of the co-insurance operations in which they participate.
4. Assessment of the contracts of co-insurance in states of the European Economic Area during the application of liquidation proceedings shall be subject to the provisions of Article 13 of this Law.
5. The supervisory authority shall exchange information and cooperate with the European Commission (hereinafter: ‘the Commission’) and supervisory authorities of other states of the European Economic Area for the purpose of examining any difficulties which might arise in implementing the provisions of this Article, compliance with the provisions of this Article and any misuse of these provisions where the principal insurer fails to assume all the rights and obligations of the principal insurer or the insurance risks do not require the participation of two or more insurers for their coverage.
SECTION SEVEN
LAW APPLICABLE TO COMPULSORY INSURANCE CONTRACTS
Article 134. Law applicable to compulsory insurance contracts
1. A compulsory insurance contract shall be subject to the law of the state of the European Economic Area that provides for the obligation to conclude the insurance contract.
2. Where the laws of the Republic of Lithuania provide for the obligation to conclude an insurance contract, this obligation shall be deemed improperly discharged if the concluded insurance contract fails to comply with the provisions of the legal acts of the Republic of Lithuania applicable to such insurance.
3. For provision of compulsory insurance services where the law of the state of the European Economic Area in which insurance risk is situated conflicts with the law of the state that provides for the obligation to conclude an insurance contract, the law of the latter state shall apply.
4. Where an insurance contract is concluded for covering insurance risks situated in more than one state of the European Economic Area and at least one of them provides for compulsory insurance, for the purpose of paragraph 2 of this Article, the insurance contract shall be deemed to consist of several insurance contracts each of which is related to only one state.
5. Where a state of the European Economic Area provides for compulsory insurance and the insurer is obliged to notify the supervisory authorities about the expiry of the insurance cover, the expiry of the insurance cover shall have legal effects for third parties only under the circumstances specified in the legal acts of that state of the European Economic Area.
CHAPTER VI
INTERVENTION MEASURES, TERMINATION,
REORGANISATION AND BANKRUPTCY
SECTION ONE
INTERVENTION MEASURES
Article 135. Application of provisions of this Section
1. This Section shall govern the application of intervention measures to the following entities:
1) insurance undertakings of the Republic of Lithuania and their branches established in the states of the European Economic Area;
2) branches of third country insurance undertakings established in the Republic of Lithuania.
2. The measures specified in points 1 to 8 of Article 2.131(1) of the Civil Code that are applied by the court shall be considered as intervention measures provided that they meet the criteria specified in Article 2(42) of this Law.
3. The sanctions by the supervisory authority provided for in Article 201(2)(7) and Article 204(11) of this Law and other sanctions by the supervisory authority, which, in the context of their application, have been indicated as intervention measures by the supervisory authority in view of their likely effect, shall be considered as intervention measures.
Article 136. Intervention measures
1. Only the court or the supervisory authority shall have the right to adopt a decision concerning the application of intervention measures.
2. Intervention measures shall be subject to the law of the Republic of Lithuania.
3. The application of intervention measures shall not restrict the possibility of initiating liquidation proceedings against insurance undertakings of the Republic of Lithuania.
Article 137. Information about intervention measures
1. The supervisory authority, upon receipt of the experts’ report and recommendations specified in Article 2.130(2) of the Civil Code, must submit to the court a conclusion regarding the intervention measures which the court intends to apply. Having adopted a decision to apply intervention measures, the court must immediately notify the supervisory authority of the adopted decision and its coming into effect.
2. The supervisory authority must immediately inform the supervisory authorities of the other states of the European Economic Area about the decision of the court or of the supervisory authority itself to apply intervention measures and about its entry into effect, indicating the possible effects of the measures on natural or legal persons of another state of the European Economic Area. Where possible, the supervisory authority must inform thereof the supervisory authorities of the other states of the European Economic Area before the adoption of the decision to apply intervention measures.
3. Upon adopting a decision to impose intervention measures, the court or the supervisory authority must immediately publish the operative part of the decision on the website of the supervisory authority.
4. The supervisory authority must immediately publish the operative part of its own or the court’s decision to impose intervention measures in the Official Journal of the European Union.
5. Publication referred to in paragraphs 3 and 4 of this Article must specify the institution which has adopted the decision to impose intervention measures, the applicable law and the appointed temporary members of the management body of the insurance undertaking.
6. Intervention measures shall be applied and shall have legal consequences irrespective of whether or not the information about them has been published under the procedure set out in paragraphs 3 and 4 of this Article.
7. The provisions of paragraphs 3, 4 and 5 of this Article relating to the publication of information on intervention measures shall not apply where the intervention measures only affect the rights of shareholders of an insurance undertaking or the rights of the employees of an insurance undertaking or a branch of a third country insurance undertaking. The supervisory authority shall have the right to commit an insurance undertaking or a branch of a third country insurance undertaking to notify these persons of the intervention measures.
SECTION TWO
TERMINATION, REORGANISATION AND BANKRUPTCY OF INSURANCE AND REINSURANCE UNDERTAKINGS AND TERMINATION OF ACTIVITIES OF BRANCHES OF THIRD COUNTRY INSURANCE OR REINSURANCE UNDERTAKINGS
Article 138. Termination, reorganisation and bankruptcy of insurance or reinsurance undertakings
1. Reorganisation of an insurance or reinsurance undertaking by a decision of the general meeting of shareholders and transfer of the undertaking as a set of assets shall be possible upon the authorisation of the supervisory authority, issued under the procedure set out by the supervisory authority. Where the insurance or reinsurance undertaking is reorganised by a court decision, the court, prior to the adoption of the said decision, must obtain the conclusion of the supervisory authority.
2. The supervisory authority shall have the right to oblige the insurance undertaking to notify the interested parties of the reorganisation, restructuring and change of the type of activity, or transfer of the undertaking as a set of assets and, having regard to the provisions of Article 147 of this Law, the supervisory authority shall be entitled to set out the procedure for the provision of such information.
3. Where an insurance or reinsurance undertaking is reorganised, the supervisory authority shall be notified under the procedure laid down in Article 18 of this Law.
Article 139. Obligations arising from insurance or reinsurance contracts of an insurance or reinsurance undertaking in liquidation
Where an insurance or reinsurance undertaking is liquidated, obligations arising from insurance or reinsurance contracts which were concluded under the freedom of establishment or the right to provide services shall be fulfilled in the same manner as the obligations arising from other insurance or reinsurance contracts of that insurance or reinsurance undertaking irrespective of the nationality, habitual residence or registered office of the policyholders, insured persons, beneficiaries or injured third parties.
Article 140. Voluntary liquidation of an insurance or reinsurance undertaking
1. The general meeting of shareholders of an insurance or reinsurance undertaking shall have the right to take a decision to liquidate the insurance or reinsurance undertaking only after the insurance or reinsurance undertaking has transferred its rights and obligations under insurance contracts under the procedure set out in this Law and has been granted an authorisation by the supervisory authority, under the procedure established by the latter, to liquidate the insurance or reinsurance undertaking.
2. The supervisory authority shall take a decision on granting an authorisation to liquidate the insurance undertaking within 30 working days from the submission of all the necessary and duly executed documents.
3. Before appointing a liquidator, a member of the liquidation commission or the chairman of the liquidation commission, approval of the supervisory authority for the candidate must be obtained under the procedure set out by the supervisory authority. The supervisory authority shall take a decision on the approval of the candidates within 30 working days from the submission of all the necessary and duly executed documents.
4. The insurance or reinsurance undertaking must, within three working days, notify the supervisory authority in writing of the adopted decision to liquidate the insurance or reinsurance undertaking and to appoint the liquidator or the decision to set up the liquidation commission and to appoint the chairman of the liquidation commission.
Article 141. Revocation of the business licence
1. Having revoked the business licence, the supervisory authority must oblige the insurance undertaking to transfer its rights and obligations under insurance contracts and must set a time limit within which the rights and obligations must be transferred.
2. An insurance or reinsurance undertaking having the rights and obligations under insurance or reinsurance contracts shall have no right to engage in any other economic and commercial activities.
3. Where an insurance undertaking fails to transfer its rights and obligations under insurance contracts within the time limit set by the supervisory authority, the latter shall have the right to impose the sanctions provided for in this Law.
4. In the event of a failure to transfer the rights and obligations under insurance contracts within the time limit set by the supervisory authority, the insurance contracts shall expire on the day following the day of expiry of the time limit set by the supervisory authority. Upon expiry of the insurance contract, the amount of the creditors’ claim of the policyholder shall be determined in accordance with the provisions of Article 206(6). Having evaluated the financial situation of the insurance undertaking, the supervisory authority shall have the right to establish that the insurance contracts are valid until the date of expiry thereof.
Article 142. Compulsory liquidation
1. Before passing a decision regarding the compulsory liquidation of an insurance or reinsurance undertaking on the grounds laid down in Article 2.106 of the Civil Code, the court must inform the supervisory authority thereof and receive its conclusion regarding the compulsory liquidation of the insurance or reinsurance undertaking.
2. The supervisory authority shall submit to the court the nominations for the post of a liquidator or members and the chairperson of the liquidation commission. Having passed a decision to liquidate the insurance or reinsurance undertaking and to appoint a liquidator or a liquidation commission and its chairperson, the court must notify the supervisory authority thereof in writing within three working days.
Article 143. Bankruptcy
1. Bankruptcy proceedings of an insurance or reinsurance undertaking shall be governed by the Law of the Republic of Lithuania on Insolvency of Legal Persons, except where this Law provides otherwise.
2. Bankruptcy proceedings against an insurance or reinsurance undertaking shall be conducted only in court. The petition for the initiation of bankruptcy proceedings shall be filed with the court by the supervisory authority. The court shall, within seven days, examine the petition for the initiation of bankruptcy proceedings filed by the supervisory authority.
3. Where, under the procedure established by the Law on Insolvency of Legal Persons, the petition for the initiation of bankruptcy proceedings against an insurance or reinsurance undertaking is filed by other persons, the court shall, prior to passing a decision to initiate bankruptcy proceedings, be required to receive a conclusion from the supervisory authority regarding the insolvency of the insurance or reinsurance undertaking.
4. The supervisory authority shall propose the administrator of an insurance or reinsurance undertaking to the court alongside filling the petition for the initiation of bankruptcy proceedings against an insurance or reinsurance undertaking or at the request of the court.
5. The administrator of an insurance or reinsurance undertaking shall be selected under the procedure set out by the restructuring authority, having taken account of the candidate’s qualification (the level and field of education, relationship with the activities of the insurance or reinsurance undertaking, and knowledge of financial markets and specific features of accounting and management of the credit institution); professional experience or work experience; experience in carrying out credit institutions’ bankruptcy proceedings or similar work experience; ability to ensure a smooth course of bankruptcy administration of the insurance or reinsurance undertaking with the indication of employees, assistants, service providers and other resources intended to be used in the specific bankruptcy proceedings; good repute and impartiality as defined in the Law on Insolvency of Legal Persons; and the sanctions applicable to the candidate in view of the assets of the insurance or reinsurance undertaking and the scale and complexity of the activities of the undertaking.
6. The court shall appoint the administrator proposed by the supervisory authority as the administrator of an insurance or reinsurance undertaking where the administrator may be appointed as the insolvency administrator under the Law on Insolvency of Legal Persons and where the application for the appointment of the administrator of the insurance or reinsurance undertaking submitted to court is accompanied by a consent in the form of a declaration, the content whereof is subject mutatis mutandis to the requirements set out in the Law on Insolvency of Legal Persons.
7. The court ruling to appoint an administrator of an insurance or reinsurance undertaking may be appealed against to court under the procedure set out in the Code of Civil Procedure of the Republic of Lithuania.
8. The administrator of an insurance or reinsurance undertaking shall submit to the first creditors’ committee a plan of the bankruptcy proceedings of the insurance or reinsurance undertaking which shall indicate:
1) the anticipated duration of the bankruptcy proceedings of the insurance or reinsurance undertaking;
2) the target indicators of income, expenditure and creditors’ claims pursued in the course of the bankruptcy proceedings of the insurance or reinsurance undertaking;
3) the anticipated income from and time limits for the realisation of the assets of the insurance or reinsurance undertaking;
4) the anticipated duration and cost-benefit analysis of judicial disputes of the insurance or reinsurance undertaking;
5) the anticipated human, material, and financial resources necessary for the administration of the bankruptcy proceedings of the insurance or reinsurance undertaking;
6) other information that is considered relevant by the administrator of the insurance or reinsurance undertaking.
9. The administrator of an insurance or reinsurance undertaking shall report to the creditors’ committee on the implementation of the plan of the bankruptcy proceedings of the insurance or reinsurance undertaking under the procedure set out by the creditors’ committee.
10. The administrative costs of the bankruptcy proceedings of an insurance or reinsurance undertaking shall comprise all the expenses incurred during the bankruptcy proceedings, with the exception of the expenses for the economic and commercial activities of the insurance or reinsurance undertaking. The administrative costs shall consist of the following:
1) remuneration to the administrator of the insurance or reinsurance undertaking;
2) payments related to employment relations paid to the employees of the insurance or reinsurance undertaking (including taxes calculated on payments related to employment relations) who participate in the administration of bankruptcy proceedings, with the exception of the employees participating in the economic and commercial activities of the insurance or reinsurance undertaking;
3) costs of the audit of the insurance or reinsurance undertaking, valuation of assets, and services rendered by legal experts and other specialists approved by the creditors’ committee;
4) costs of the recovery, safekeeping, sale and transfer of assets;
5) costs of the sorting out of the documents of the insurance or reinsurance undertaking and of the transfer of the documents of the insurance or reinsurance undertaking for archival storage;
6) litigation costs incurred by the insurance or reinsurance undertaking and payable by the insurance or reinsurance undertaking to other persons participating in the proceedings;
7) organisational and other costs approved by the creditors’ committee and necessary for the administration of bankruptcy proceedings.
11. Administrative costs of the bankruptcy proceedings of an insurance or reinsurance undertaking, including the remuneration of the administrator of the insurance or reinsurance undertaking, shall be determined and paid under the procedure set out by the creditors’ committee. An estimate of administrative costs related to the bankruptcy proceedings of an insurance or reinsurance undertaking shall be approved under the procedure set out in the Law on Insolvency of Legal Persons.
12. The minimum amount under a compulsory professional civil liability insurance of the administrator of an insurance or reinsurance undertaking shall constitute EUR 300,000 per insured event and EUR 1,000,000 for all insured events per year. Upon payment of an insurance benefit in the case of an insured event and reduction of the minimum insured amount, the administrator of the insurance or reinsurance undertaking must, within one month, take out an insurance against civil liability in order to restore the compulsory minimum amount insured.
13. Having passed a decision to initiate bankruptcy proceedings against the insurance or reinsurance undertaking, the court must notify the supervisory authority thereof in writing within three working days.
14. No meetings of policyholders and other creditors shall be convened in the course of the bankruptcy proceedings of the insurance or reinsurance undertaking. The interests of the said persons shall be represented by a creditors’ committee formed by the supervisory authority. The creditors’ committee shall consist of not more than 15 members. The creditors’ committee shall consist of policyholders, insured persons, beneficiaries, injured third parties (only after the court ruling to liquidate the insurance undertaking by reason of bankruptcy becomes effective), other creditors and representatives of the supervisory authority. The regulations of the creditors’ committee shall be approved by the supervisory authority.
15. The first meeting of the creditors’ committee shall be convened by the supervisory authority or, on the instruction of the supervisory authority, by the administrator of the insurance or reinsurance undertaking.
Article 144. Reorganisation of a third country insurance undertaking related to a branch established in the Republic of Lithuania
1. Reorganisation of a third country insurance undertaking may have legal consequences for the rights and obligations of policyholders, insured persons, beneficiaries and injured third parties of a branch of this undertaking in the Republic of Lithuania only upon obtaining an authorisation from the supervisory authority.
2. The supervisory authority shall have the right to oblige a branch of a third country insurance undertaking to notify of the reorganisation procedures and, having regard to the provisions of Article 147 of this Law, to establish the procedure for the submission of such information.
Article 145. Termination of activities of a branch of a third country insurance or reinsurance undertaking established in the Republic of Lithuania
1. A third country insurance or reinsurance undertaking shall have the right to adopt a decision to terminate the activities of its branch established in the Republic of Lithuania only upon transferring, under the procedure set out by this Law, the rights and obligations under insurance contracts concluded by the branch and upon obtaining an authorisation from the supervisory authority.
2. The supervisory authority shall take a decision on granting an authorisation within 30 working days from the date of receipt of all the necessary and duly executed documents.
3. Having adopted a decision to terminate the activities of a branch, the third country insurance or reinsurance undertaking must appoint a person responsible for the termination of the activities of the branch. Prior to appointing a person responsible for the termination of the activities of the branch, the third country insurance or reinsurance undertaking must obtain approval of the supervisory authority for the candidate under the procedure established by the supervisory authority. The supervisory authority shall take a decision on the approval of the candidate specified in this paragraph within 30 working days from the date of receipt of all the necessary and duly executed documents.
4. A third country insurance or reinsurance undertaking shall be required to notify the supervisory authority in writing of the adopted decision to terminate the activities of a branch of a third country insurance or reinsurance undertaking established in the Republic of Lithuania and of the appointment of a person responsible for the termination of the activities of the branch within three working days.
Article 146. Compulsory termination of activities of a branch of a third country insurance or reinsurance undertaking established in the Republic of Lithuania
1. The activities of a branch of a third country insurance or reinsurance undertaking established in the Republic of Lithuania shall be terminated in a compulsory manner after the supervisory authority adopts a decision to revoke the authorisation for insurance activities of the branch. In this case, the supervisory authority shall nominate a person responsible for the termination of activities.
2. Where, under the procedure established by law, other institutions of the Republic of Lithuania intend to adopt a decision to terminate the activities of a branch of a third country insurance or reinsurance undertaking established in the Republic of Lithuania, the supervisory authority shall nominate a person responsible for the termination. Having adopted the decision to terminate the activities of the branch of a third country insurance undertaking and appoint a person responsible for the termination, the state institution must notify the supervisory authority thereof in writing within three working days.
3. Having withdrawn the authorisation for the insurance activities of the branch, the supervisory authority must oblige the branch of the third party insurance undertaking to transfer the rights and obligations under the insurance contracts and shall set a time limit within which the rights and obligations must be transferred, except for the cases set out in Article 150(3)(1) and Article 150(3)(2) of this Law.
4. Should a branch of a third country insurance undertaking fail to transfer the rights and obligations under insurance contracts within the time limit set by the supervisory authority, the supervisory authority shall be entitled to impose the sanctions set out in this Law.
5. In the event of a failure to transfer the rights and obligations under insurance contracts within the time limit set by the supervisory authority, the insurance contracts shall expire on the date following the end of the time limit set by the supervisory authority. Upon expiry of an insurance contract, the amount of the creditors’ claim of the policyholder shall be determined under Article 206(6) of this Law. Having evaluated the financial situation of the branch of the third country insurance undertaking, the supervisory authority shall have the right to establish that the insurance contracts shall be valid until the date of expiry thereof.
Article 147. Information on liquidation and bankruptcy proceedings of an insurance undertaking and on termination of activities of a branch of a third country insurance undertaking
1. The supervisory authority must immediately notify the supervisory authorities of other states of the European Economic Area about the adopted decision to liquidate the insurance undertaking, the decision to terminate the activities of a branch of a third country insurance undertaking or the decision to initiate bankruptcy proceedings against the insurance undertaking, indicating the possible consequences of the above actions for natural or legal persons of this state of the European Economic Area.
2. Where possible, the supervisory authority must notify the supervisory authority of another state of the European Economic Area of the intention to adopt a decision to liquidate the insurance undertaking, a decision to terminate the activities of a branch of a third country insurance undertaking or a decision to institute bankruptcy proceedings against the insurance undertaking before adopting the decision to liquidate the insurance undertaking, to terminate the activities of a branch of a third country insurance undertaking or to initiate bankruptcy proceedings against the insurance undertaking.
3. The liquidator of the insurance undertaking in liquidation, the chairman of the liquidation commission, the person responsible for the termination of activities of a branch of a third country insurance undertaking or the administrator of the insurance undertaking in bankruptcy must immediately publish information about the decision to liquidate the insurance undertaking, to terminate the activities of the branch of the third country insurance undertaking or to initiate bankruptcy proceedings against the insurance undertaking on the website of the undertaking.
4. The liquidator of the insurance undertaking in liquidation, the chairman of the liquidation commission, the person responsible for the termination of activities of a branch of a third country insurance undertaking or the administrator of the insurance undertaking in bankruptcy must immediately publish an excerpt from the adopted decision in the Official Journal of the European Union. In addition to other information, the announcement must contain the address and other contact information of the liquidator of the insurance undertaking in liquidation, the chairman of the liquidation commission, the person responsible for the termination of activities of a branch of a third country insurance undertaking or the administrator of the insurance undertaking in bankruptcy as well as the law applicable to liquidation or bankruptcy proceedings.
5. The liquidator of the insurance undertaking in liquidation, the chairman of the liquidation commission, the person responsible for the termination of activities of a branch of a third country insurance undertaking or the administrator of the insurance undertaking in bankruptcy must immediately notify in writing every known creditor whose domicile, habitual residence or registered office is in another state of the European Economic Area of the decision to liquidate the insurance undertaking, to terminate the activities of the branch of a third country insurance undertaking or to initiate bankruptcy proceedings against the insurance undertaking. The information must specify the following:
1) the time limits and procedure for lodging creditors’ claims and the entity with whom the claims shall be lodged;
2) legal consequences of a failure to lodge or belated lodging of creditors’ claims;
3) order or precedence of satisfaction of creditors’ claims and measures securing the claims;
4) consequences of liquidation and bankruptcy of an insurance undertaking and termination of activities of a branch of a third country insurance undertaking for insurance contracts and the moment of expiry of the rights and duties arising from the insurance contracts.
6. The information specified in paragraph 5 of this Article shall be presented in the Lithuanian language and the state language or one of state languages of a state of the European Economic Area. The document must bear the heading ‘Invitation to lodge a claim. Time limits to be observed’ in all the official languages of the European Union. Where the creditors’ claim arises from the insurance contract, the information shall be submitted in the state language or in one of the state languages of the state of the European Economic Area where the creditor has a domicile, habitual residence or registered office.
7. In exercising the right to lodge a creditors’ claim, a creditor whose domicile, habitual residence or registered office is in another state of the European Economic Area must submit copies of documents confirming the creditors’ claim, if any; indicate the date when the creditors’ claim arose, the amount of the claim and measures whereby the claim is secured. The creditor’s information shall be submitted in the state language or one of the state languages of the state of the European Economic Area where the creditor has a domicile, habitual residence or registered office. However, the information must bear the heading ‘Kreditorių reikalavimas’ (Creditors’ claim) or ‘Pastabos dėl kreditorių reikalavimo’ (Comments on the creditors’ claim) in the Lithuanian language.
8. The liquidator of the insurance undertaking in liquidation, the chairman of the liquidation commission, the person responsible for the termination of activities of a branch of a third country insurance undertaking or the administrator of the insurance undertaking in bankruptcy or in liquidation by reason of bankruptcy must properly and on a regular basis inform creditors about the progress of liquidation or bankruptcy proceedings.
9. The liquidator of the insurance undertaking in liquidation, the chairman of the liquidation commission, the person responsible for the termination of activities of a branch of a third country insurance undertaking or the administrator of the insurance undertaking in bankruptcy or in liquidation by reason of bankruptcy must submit information to the supervisory authority in accordance with under the procedure set out by the supervisory authority.
10. Upon request of the supervisory authority of another state of the European Economic Area, the supervisory authority must submit information about the liquidation of an insurance undertaking, termination of activities of a branch of a third country insurance undertaking or bankruptcy of the insurance undertaking.
Article 148. Use of assets covering technical provisions of an insurance undertaking in liquidation, an insurance undertaking in liquidation by reason of bankruptcy or a branch of a third country insurance undertaking the activities of which are terminated
1. Assets listed in Article 42(12) of this Law and covering the technical provisions of an insurance undertaking in liquidation, an insurance undertaking in liquidation by reason of bankruptcy or a branch of a third country insurance undertaking the activities of which are terminated as well as the revenue derived from the assets may only be used to satisfy creditors’ claims of the policyholders, insured persons, beneficiaries and injured third parties arising from insurance contracts, except as provided for in paragraph 4 of this Article. Assets covering the technical provisions and funds received following the transfer of the assets may not be used for recovery under other liabilities of an insurance undertaking or a branch of another third country insurance undertaking and under the recourse claims of the Motor Insurers’ Bureau of the Republic of Lithuania concerning the benefits paid due to insolvency of the insurance undertaking.
2. Where assets covering technical provisions are not sufficient to satisfy all the creditors’ claims arising from insurance contracts of the insurance undertaking in liquidation, the insurance undertaking in liquidation by reason of bankruptcy or a branch of a third country insurance undertaking whose activities are terminated, the said claims shall be satisfied in proportion to the sum due to each creditor, respectively.
3. Funds other than assets covering the technical provisions of the insurance undertaking or a branch of a third country insurance undertaking shall be used under the procedure set out by law to satisfy the claims of the creditors referred to in paragraph 1 of this Article, which are not fully satisfied from the assets covering technical provisions, and to satisfy the claims of all other creditors. The balance of assets covering technical provisions which remains after satisfying the creditors’ claims of persons referred to in paragraph 1 of this Article shall also be used under the procedure established by law to satisfy the claims of all other creditors, including the Motor Insurers’ Bureau of the Republic of Lithuania.
4. Where assets other than those covering technical provisions of the insurance undertaking in bankruptcy prove insufficient to cover bankruptcy administration costs, the court, upon the proposal of the creditors’ committee, having regard to the opinion of the supervisory authority, upon the administrator’s request, shall have the right to allocate up to 10% of the assets covering technical provisions to bankruptcy administration costs of the insurance undertaking in bankruptcy, including the remuneration to the administrator of the insurance undertaking.
Article 149. Termination of insurance contracts of insurance undertakings in bankruptcy
1. After the court ruling to initiate bankruptcy proceedings becomes effective, the following rules shall apply:
1) non-life insurance contracts, except for contracts of compulsory insurance against civil liability for the use of motor vehicles, shall terminate;
2) contracts of compulsory insurance against civil liability for the use of motor vehicles shall terminate after 30 days, except for the cases where contracts of compulsory insurance against civil liability for the use of motor vehicles provide for an earlier date of termination of the insurance contract;
3) life assurance contracts shall terminate if the rights and duties under these contracts are not transferred within the time limit set by the supervisory authority.
2. Policyholders of the insurance contracts specified in paragraphs 1(1) and 1(2) of this Article shall acquire the right to creditors’ claims in respect of the share of paid insurance premiums for the period from the termination of the insurance contract on the grounds specified in paragraph 1 of this Article to the expiry of the insurance contract.
Article 150. Termination of insurance contracts of branches of third country insurance undertakings
1. Upon revocation by the supervisory authority of an authorisation for the activity of a branch of a third country insurance undertaking due to the fact that the liabilities of the branch exceed the assets assigned to it, termination of insurance contracts shall be governed as follows:
1) non-life insurance contracts, except for contracts of compulsory insurance against civil liability for the use of motor vehicles, shall terminate;
2) contracts of compulsory insurance against civil liability for the use of motor vehicles shall terminate after 30 days, except for the cases where contracts of compulsory insurance against civil liability for the use of motor vehicles provide for an earlier date of termination of the insurance contract;
3) life assurance contracts shall terminate where the rights and obligations under these contracts are not transferred within the period from the revocation of an authorisation for the activity of the branch of a third country insurance undertaking until the expiry of the time limit set by the supervisory authority.
2. Policyholders of the insurance contracts referred to in paragraphs 1(1) and 1(2) of this Article shall acquire the right to creditors’ claims in respect of the share of paid insurance premiums for the period from the termination of the insurance contract on the grounds specified in paragraph 1 of this Article to the expiry of the period of validity of an insurance contract.
3. Where the liabilities of a branch of a third country insurance undertaking exceed the assets assigned to it after the revocation of an authorisation for the activity of a branch of a third country insurance undertaking, the supervisory authority shall state this fact in its resolution. In this case, termination of contracts shall be governed as follows:
1) non-life insurance contracts, except for contracts of compulsory insurance against civil liability for the use of motor vehicles, shall terminate;
2) contracts of compulsory insurance against civil liability for the use of motor vehicles shall terminate after 30 days, except for the cases where contracts of compulsory insurance against civil liability for the use of motor vehicles provide for an earlier date of termination of the insurance contract;
3) the supervisory authority shall set a time limit for the transfer of rights and obligations under life assurance contracts. Life assurance contracts shall terminate if the rights and obligations under these contracts are not transferred within the time limit set by the supervisory authority.
4. Policyholders of the insurance contracts referred to in paragraphs 3(1) and 3(2) of this Article shall acquire the right to creditors’ claims in respect of the share of the insurance premiums paid for the period from the termination of the insurance contract on the grounds specified in paragraph 3 of this Article to the expiry of the period of validity of the insurance contract.
Article 151. Creditors’ claims of policyholders upon termination of life assurance contracts
1. Each policyholder of life assurance contracts which have terminated on the grounds specified in Article 149 or Article 150 of this Law shall acquire the right of a creditors’ claim against an insurance undertaking or a branch of a third country insurance undertaking.
2. Where a life assurance contract has been concluded only for covering a death risk, the policyholders shall acquire the right of a creditors’ claim to the share of the paid insurance premium for the period from the termination of the insurance contract on the grounds specified in Article 149 or Article 150 of this Law until the expiry of the period of validity of the insurance contract provided for in the contract.
3. The amount of the policyholder’s creditors’ claim in case of a life assurance contract linked to capital accumulation shall be equal to the amount of the technical provisions formed for the insurance contract of that policyholder on the day of termination of the contract.
Article 152. Transfer of rights and obligations under life assurance contracts
1. For transfer of rights and obligations under the life assurance contracts of an insurance undertaking in bankruptcy or a branch of a third country insurance undertaking the liabilities of which exceed the assets assigned to the branch, the provisions of paragraphs 3, 4, 5, 8 and 9 of Article 206 of this Law shall apply.
2. Where the assets covering the technical provisions of the insurance undertaking in bankruptcy prove insufficient to satisfy creditors’ claims arising from life assurance contracts linked to capital accumulation, the insurance undertaking in bankruptcy transferring the rights and obligations under life assurance contracts shall have the right to transfer a share of the obligation related to the insurance benefit and payment of surrender value. In this case, the contract on the transfer of rights and obligations must specify the share of the insurance benefit and surrender value that the entity taking over the rights and obligations under insurance contracts must pay. From the moment of transfer of rights and obligations under the insurance contracts, the policyholder shall acquire the right of creditors’ claim to the share of the surrender value calculated for the period preceding the day of transfer of rights and duties, the obligation of payment whereof has been retained by the insurance undertaking in bankruptcy.
Article 153. Transfer of rights and obligations under life assurance contracts of a branch of a third country insurance undertaking the activities of which are terminated
Having regard to the provisions of Article 152 of this Law, the supervisory authority shall establish the procedure for the transfer of rights and obligations under life assurance contracts of a branch of a third country insurance undertaking the activities of which are terminated and the liabilities of which exceed the assets assigned to it.
Article 154. Business licence of an insurance or reinsurance undertaking in liquidation or in bankruptcy
1. Where the business licence has not been revoked before the adoption of the decision to liquidate the insurance or reinsurance undertaking or to initiate bankruptcy proceedings against it, the supervisory authority shall suspend the business licence after the adoption of the above-mentioned decision.
2. After suspension of the business licence, the insurance or reinsurance undertaking in liquidation or in bankruptcy shall have the right to perform only the insurance activities set out in the decision of the supervisory authority on the suspension of the business licence.
3. Before applying to the data processor of the Register of Legal Entities for removal of the insurance or reinsurance undertaking from the Register, the liquidator of the insurance or reinsurance undertaking in liquidation, the chairman of the liquidation commission, or the administrator of the insurance or reinsurance undertaking in bankruptcy must submit to the supervisory authority an application for the revocation of the business licence.
Article 155. Authorisation to engage in insurance activities granted to a branch of a third country insurance or reinsurance undertaking the activities of which are terminated
1. Where the authorisation to engage in activities of a branch has not been revoked under the procedure set out in this Law before the adoption of the decision to terminate the activities of the branch of a third country insurance undertaking, the supervisory authority shall suspend the validity of the said authorisation.
2. Upon suspension of an authorisation to engage in activities of a branch, the branch of a third country insurance or reinsurance undertaking shall have the right to engage only in the activities set out in the decision of the supervisory authority.
3. Before applying to the data processor of the Register of Legal Entities for the removal of the branch of a third country insurance or reinsurance undertaking from the Register, the person responsible for the termination of activities of the branch must submit to the supervisory authority an application for the revocation of an authorisation to engage in activities of the branch.
Article 156. Rights of third parties
1. Application of intervention measures, liquidation of an insurance undertaking, termination of activities of a branch of a third country insurance undertaking or bankruptcy of an insurance undertaking shall not affect the rights in rem as regards the assets that are assigned to the insurance undertaking or the branch of a third country insurance undertaking and located in another state of the European Economic Area at the moment of coming into force of the decision to apply intervention measures, to liquidate the insurance undertaking, to terminate the activities of the branch of a third country insurance undertaking or to initiate bankruptcy proceedings against the insurance undertaking. The consequences of the application of intervention measures, liquidation, termination of activities of a branch or bankruptcy for the rights and obligations of participants of the regulated market shall be established by legal acts applicable to this regulated market.
2. Application of intervention measures, liquidation of the insurance undertaking, termination of activities of a branch or bankruptcy of the insurance undertaking shall not affect the seller’s rights to the assets held for transfer, the transferred assets or the assets being transferred to the purchaser – an insurance undertaking or a branch of a third country insurance undertaking – based on the retention of title until full settlement for the assets is effected or other contractual conditions are satisfied if the assets were located in another state of the European Economic Area at the moment of coming into force of the decision to apply intervention measures, to liquidate the insurance undertaking, to terminate the activities of the branch of the third country insurance undertaking or to initiate bankruptcy proceedings against the insurance undertaking.
3. Application of intervention measures, liquidation of the insurance undertaking, termination of activities of a branch or bankruptcy of the insurance undertaking shall not serve as a basis for terminating the sales contract concluded by the seller – an insurance undertaking or a branch of a third country insurance undertaking – after the transfer of the assets to the purchaser; it shall also not affect the transfer of the title to the assets to the purchaser if the assets are located in another state of the European Economic Area at the moment of coming into force of the decision to apply intervention measures, to liquidate the insurance undertaking, to terminate the activities of the branch of the third country insurance undertaking or to initiate bankruptcy proceedings against the insurance undertaking.
4. Application of intervention measures, liquidation of the insurance undertaking, termination of activities of a branch or bankruptcy of the insurance undertaking shall not affect the right of creditors to demand the set-off of their claims where such a set-off is permitted by the law applicable to the creditors’ claim of the insurance undertaking or creditors’ claim of a branch of a third country insurance undertaking.
5. Provisions of paragraphs 1 to 4 of this Article shall not preclude actions for voidness, voidability or unenforceability of acts and other transactions violating legal acts, the rights or legitimate interests of creditors of the insurance undertaking or a branch of a third country insurance undertaking.
6. Provisions of the laws of the Republic of Lithuania in respect of voidness, voidability or unenforceability of acts and other transactions violating legal acts and the rights or legitimate interests of creditors of the insurance undertaking or a branch of a third country insurance undertaking shall not apply where it is established that:
1) these acts and other transactions are subject to the law of another state of the European Economic Area;
2) the applicable law does not provide for any means of challenging those acts and other transactions.
7. Where, after the entry into force of the decision to apply intervention measures, to liquidate the insurance undertaking, to terminate the activities of a branch of another third country insurance undertaking or to initiate bankruptcy proceedings against the insurance undertaking, the insurance undertaking or the branch of a third country insurance undertaking concludes a transaction under which it transfers the title to an immovable item, a ship or an aircraft subject to registration in a public register, or to securities the title whereto or transfer whereof presupposes, under the law of the state of the European Economic Area, entry in a register or securities account or placement in the Central Depository, the validity of that transaction shall be governed by the law of the state of the European Economic Area within whose territory the immovable item, the register, the securities account or the Central Depository is situated.
8. The effect of intervention measures, liquidation of the insurance undertaking, termination of activities of a branch or bankruptcy of the insurance undertaking on a pending lawsuit concerning the assets or the rights of the insurance undertaking or of the branch of another third country insurance undertaking shall be governed by the law of the state of the European Economic Area in which the lawsuit is pending.
9. The legal consequences of the decision to apply intervention measures, liquidate the insurance undertaking, terminate the activities of a branch of another third country insurance undertaking or initiate bankruptcy proceedings against the insurance undertaking shall be set out as follows:
1) for employment contracts and employment relationships, the law of the state of the European Economic Area applicable to employment contracts and employment relationships shall apply;
2) for transactions concerning possession, use of an immovable item and disposal thereof, the law of the state of the European Economic Area in which the immovable item is located shall apply;
3) for rights to an immovable item, a ship or an aircraft subject to registration in a public register, the law of the state of the European Economic Area in which the public register is kept shall apply.
Article 157. Requirements for appointed persons
1. A person appointed liquidator of an insurance or reinsurance undertaking in liquidation, chairman of the liquidation commission, a person responsible for the termination of the activities of the branch of the third country insurance or reinsurance undertaking or administrator of the insurance or reinsurance undertaking in bankruptcy must be of good repute, qualifications and experience. The administrator of an insurance or reinsurance undertaking in bankruptcy or in liquidation due to bankruptcy shall meet the requirements specified in Articles 143(5) and 143(6) of this Law.
2. The person appointed to the positions specified in paragraph 1 of this Article shall be entitled to receive a copy of the decision on the appointment.
3. Persons specified in paragraph 1 of this Article acting in another state of the European Economic Area must comply with the requirements of legal acts of that state, in particular the requirements for the sale of assets and the provision of information to the employees. Where legal acts of another state of the European Economic Area provide for the possibility to register the applied intervention measures, liquidation or bankruptcy of the insurance undertaking in the public registers of that state of the European Economic Area, the persons specified in paragraph 1 of this Article shall have the right to do so. Where registration of the applied intervention measures, liquidation or bankruptcy of the insurance undertaking in public registers of the respective state of the European Economic Area is mandatory, persons specified in paragraph 1 of this Article must do so. Registration costs shall be included in the costs of application of intervention measures, liquidation of the insurance undertaking, termination of the activities of the branch or bankruptcy of the insurance undertaking.
4. Persons specified in paragraph 1 of this Article shall be under obligation to refrain from disclosing the information set out in Article 43 of this Law.
5. Where persons specified in paragraph 1 of this Article, whose appointment is out of the court’s jurisdiction, fail to properly discharge their functions, or violate legal acts or interests of the policyholders, insured persons, beneficiaries, injured third parties or other creditors, the supervisory authority shall have the right to request replacement of the person and to set the time limit for the appointment of a new person.
6. Where persons specified in paragraph 1 of this Article, whose appointment is within the court’s jurisdiction, fail to properly discharge their functions, or violate legal acts or interests of the policyholders, insured persons, beneficiaries, injured third parties and other creditors, the supervisory authority shall have the right to apply to the court requesting replacement of a person appointed to this position. In such a case, the supervisory authority shall nominate a new candidate for the position.
7. Where the insurance undertakings of third countries have branches in other states of the European Economic Area, the persons specified in paragraph 1 of this Article shall coordinate their actions with the persons appointed to the positions specified in paragraph 1 of this Article by the authorities or other entities of other states of the European Economic Area.
CHAPTER VII
DISTRIBUTION OF INSURANCE AND REINSURANCE PRODUCTS
SECTION ONE
GENERAL PROVISIONS
Article 158. Application of the provisions of this Chapter
1. The provisions of this Chapter shall not apply to ancillary insurance intermediaries rendering insurance distribution services where all the following conditions are met:
1) the insurance offered is an ancillary service intended for or related to the goods or services offered by the supplier of goods or service provider, where the insurance is intended to cover the risks of breakdown, damage to, or destruction of the good or the non-use of the service offered by that service provider, the risks of damage to, or destruction of baggage, and other risks linked to travel booked with that service provider;
2) the amount of the annual premium under one insurance contract does not exceed EUR 600. This amount is calculated on a pro rata annual basis.
2. Notwithstanding the provisions of paragraph 1(2) of this Article, the provisions of this Chapter shall not apply where the insurance product is complimentary to a service set out in paragraph 1(1) of this Article offered by an ancillary insurance intermediary and where the duration of provision of that service does not exceed three months and the amount of the premium paid per person does not exceed EUR 200.
3. An insurer distributing its insurance products through an ancillary insurance intermediary not subject to the provisions set out in paragraphs 1 or 2 of this Article shall ensure that a procedure is in place to take account of the needs and demands of the policyholder and to comply with the requirements set out in Articles 901, 93(1) and 1584 of this Law, and that, prior to the conclusion of the contract, the policyholder is provided with the insurance product information document specified in Article 93(2) of this Law and the following information:
1) the name and address of the insurance undertaking;
2) the procedure for handling complaints and providing replies to applicants.
4. Ancillary insurance intermediaries rendering services that do not meet the conditions set out in paragraphs 1 and 2 of this Article shall be subject only to the provisions of Articles 1581 and 1861 of this Law.
Article 1581. Suitability and preparedness requirements of distributors of insurance or reinsurance products
1. The employees of insurance and reinsurance undertakings, of insurance and reinsurance intermediaries, and of ancillary insurance intermediaries, whose functions are directly related to the distribution of insurance or reinsurance products, as well as insurance agents (natural persons) and ancillary insurance intermediaries (natural persons) must possess a sufficient level of knowledge of laws governing the distribution or insurance or reinsurance products; insurance or reinsurance products; terms and conditions of insurance or reinsurance contracts; management of claims; handling of complaints; assessing policyholder needs; insurance markets and other relevant financial services markets or pension systems; management of conflicts of interest; and other related knowledge and ability to carry out their activity, and must undergo at least 15 hours of professional training or development per year. Detailed requirements for professional qualifications and improvement thereof, criteria for effective control and assessment of the qualifications required to exercise the functions set out in this Law, and the procedure for the recognition of professional qualifications approved by other states of the European Economic Area shall be set out by the supervisory authority.
2. The employees of insurance and reinsurance undertakings, of insurance and reinsurance intermediaries, and of ancillary insurance intermediaries, whose functions are directly related to the distribution of insurance or reinsurance products, as well as insurance agents (natural persons) and ancillary insurance intermediaries (natural persons) may not pursue their activities, where:
1) they have been found guilty of a serious or grave crime or a crime or a misdemeanour against property, property rights, property interests, economy, business practice, the financial system or equivalent criminal acts under criminal laws of other states, where their conviction for the crimes referred to in this point has not expired or has not been annulled or less than three years have elapsed from the date of entry into force of the court judgement whereby a natural person was found guilty of misdemeanours referred to in this point;
2) they have been subject to personal bankruptcy proceedings within the past ten years.
3. In order to ensure that the persons referred to in paragraph 1 of this Article meet the requirements set out in paragraphs 1 and 2 of this Article, the supervisory authority, insurance and reinsurance undertakings, and undertakings of insurance and reinsurance intermediaries shall have the right to process personal data, including data on previous convictions, of the employees of these persons, whose functions are directly related to the distribution of insurance or reinsurance products, as well as the said data on insurance agents (natural persons) and ancillary insurance intermediaries (natural persons).
4. When assessing compliance of the persons with the requirements set out in this Article, the supervisory authority shall, where appropriate, cooperate and exchange information with the supervisory authorities of other states of the European Economic Area.
Article 1582. Conditions for the distribution of insurance products
1. Prior to the conclusion of the contract, the insurance distributor shall determine, on the basis of information obtained from the policyholder, the demands and the needs of the policyholder and shall provide the policyholder with objective information about the insurance product in a comprehensible form to allow that policyholder to make an informed decision. Any contract proposed shall be consistent with the policyholder’s insurance demands and needs. Where advice is provided prior to the conclusion of every specific contract, the insurance distributor shall provide the policyholder with a personalised recommendation explaining why a particular product would best meet the policyholder’s demands and needs.
2. The information referred to in paragraph 1 of this Article shall be modulated according to the complexity of the insurance product being proposed and the type of the policyholder (depending on whether the person is concluding a consumer contract or a compulsory insurance contract, the conditions whereof are set out in legal acts, etc.).
3. Where an insurance brokerage firm informs the policyholder that the firm gives its advice on the basis of a fair and personal analysis, the firm shall give that advice on the basis of an analysis of a sufficiently large number of insurance contracts available on the market to enable it to make a personal recommendation under professional criteria as to which insurance contract would meet the policyholder’s needs.
4. It shall be prohibited to publish, advertise and present insurance distribution services as independent services, where remuneration for these services is not received from the policyholder.
5. The information referred to in paragraphs 1, 2 and 3 of this Article shall not be provided where a contract covering large insurance risks is concluded; where a contract on an insurance-based investment product is concluded, this information shall not be provided to a professional client defined in the Law on Markets in Financial Instruments.
Article 1583. Assessment of suitability and appropriateness of insurance products
1. Prior to the conclusion of the contract on the insurance-based investment product when a recommendation is made, an insurer or insurance intermediary shall obtain information regarding the policyholder’s knowledge and experience in the investment field relevant to the specific type of product or service; the policyholder’s financial situation, including the readiness to bear losses; the policyholder’s risk tolerance; objectives pursued by such contract and other related information so as to enable the insurance intermediary or the insurance undertaking to recommend to the policyholder the insurance-based investment product that is suitable for that policyholder.
2. After assessing the information referred to in paragraph 1 of this Article, the insurer or insurance intermediary shall submit a recommendation on the suitability of the insurance-based investment product to the policyholder on a durable medium in accordance with the requirements set out in Articles 931(1), 931(2) and 931(3) of this Law. Where the insurance contract is concluded by means of communication which prevent the provision of the recommendation on the suitability of the insurance-based investment product to the policyholder in advance, the insurer or insurance intermediary may provide the recommendation on a durable medium immediately after the conclusion of the insurance contract, where both of the following conditions are met:
1) the policyholder has consented to the way in which the recommendation is provided;
2) the insurer or the insurance intermediary has given the policyholder the option of delaying the conclusion of the contract in order to receive the recommendation on the suitability of the insurance-based investment product in advance of such conclusion.
3. Prior to the conclusion of the contract on the insurance-based investment product when a recommendation is not made, an insurer or insurance intermediary shall obtain information regarding the policyholder’s knowledge and experience in the investment field relevant to the specific type of product or service and other related information so as to enable the insurer or insurance intermediary to assess whether the insurance-based investment product is appropriate for the policyholder.
4. Where the insurer or insurance intermediary establishes, on the basis of the information received under paragraph 3 of this Article, that the insurance-based product is not appropriate for the policyholder, the insurer or insurance intermediary shall warn the policyholder to that effect.
5. Where policyholders do not provide the information referred to in paragraph 3 of this Article, or where they provide insufficient information, insurers or insurance intermediaries must warn the policyholders that the insurers or insurance intermediaries are not in a position to determine whether the insurance-based product is appropriate for the policyholders.
6. Where, in the cases set out in paragraphs 1 and 3 of this Article, the distribution of an insurance-based investment product together with another product is envisaged, as provided for in Article 1584 of this Law, the insurer or insurance intermediary must assess the suitability or appropriateness of the overall bundled package of products or services for the policyholder.
7. The insurer or insurance intermediary must keep the documents and other information received and submitted to the policyholder in the course of performance of the duties of the insurer or insurance intermediary set out in this Article. These documents and information must be kept until the end of the contractual relations between the policyholder and the insurer or insurance intermediary in respect of the insurance-based investment product.
8. Having carried out the assessment referred to in this Article as regards the suitability and/or appropriateness of the insurance-based investment product to the policyholder, the insurer or insurance intermediary must, on a periodical basis but at least once a year, and taking into account the type and the complexity of the insurance-based investment product and the nature of the service rendered, provide the policyholder with reports on a durable medium on the services provided; those reports shall also include the costs associated with the transactions made and services provided on behalf of the policyholder.
9. Where the insurer or insurance intermediary informs the policyholder that the insurer or insurance intermediary will assess, on a periodical basis, the suitability of the insurance-based investment product to the policyholder, the periodical report referred to in paragraph 8 of this Article shall include updated information on the compliance of the insurance-based product with the information specified in paragraph 1 of this Article and relating to the policyholder.
10. The information specified in this Article shall not be provided to a professional client defined in the Law on Markets in Financial Instruments.
Article 1584. Requirements for the distribution of insurance products offered together with ancillary products
1. Where, together with an ancillary product or service other than insurance, an insurance product is offered as part of a bundled package of products or services (hereinafter: ‘package’) or as part of the same agreement, the insurance distributor must inform the policyholder whether it is possible to buy the different components of the package or the agreement separately and, if so, must provide a description of the different components of the agreement or package as well as separate evidence of the costs and charges of each component.
2. In the circumstances referred to in paragraph 1 of this Article, and where the risk or the insurance cover resulting from such an agreement or package offered to a policyholder is different from the risk associated with the components of the agreement or package taken separately, the insurance distributor must provide a description of the different components of the agreement or package and the way in which their interaction modifies the risk or the insurance cover.
3. Where an insurance product is ancillary to a good or a service other than insurance, and is offered as part of a package or as part of the same agreement, the insurance distributor must offer the policyholder the possibility of buying the good or service separately. This paragraph shall not apply where an insurance product is ancillary to an investment service or activity defined in the Law on Markets in Financial Instruments, a credit agreement defined in the Law of the Republic of Lithuania on Credit Relating to Immovable Property, or a payment account defined in the Law of the Republic of Lithuania on Payments.
4. This Article shall not prevent the distribution of insurance products which provide coverage for various types of risks (multi-risk insurance policies).
5. In the cases specified in paragraphs 1 and 3 of this Article, an insurance distributor shall set out the demands and needs of the policyholder in relation to the insurance products that form part of the overall package or the same agreement.
6. The supervisory authority shall have the right to prohibit the sale of insurance products together with an ancillary service or product other than insurance, as part of a package or the same agreement, when it can demonstrate that such practices are detrimental to policyholders, insured persons, beneficiaries or injured third parties.
Article 1585. Requirements for the oversight and management of insurance products
1. An insurance undertaking or a branch of a third country insurance undertaking must set out a procedure for the approval of insurance products, which should include processes for the approval of new insurance products and for significant adaptations of existing insurance products. Before any insurance product is marketed or distributed to policyholders, an insurance undertaking or a branch of a third country insurance undertaking shall maintain, operate and review the processes specified in this paragraph.
2. The product approval process must be proportionate and appropriate to the nature of the insurance product. The product approval process must specify an identified target market for a specific insurance product and assess all risks relevant to the identified target market. An insurance undertaking, a branch of a third country insurance undertaking or an insurance undertaking of another state of the European Economic Area providing services in the Republic of Lithuania or having established a branch in the Republic of Lithuania shall ensure that the product distribution strategy is consistent with the identified target market and take all steps to ensure that the insurance product is distributed to the identified target market.
3. An insurance undertaking, a branch of a third country insurance undertaking or an insurance undertaking of another state of the European Economic Area providing services or having established a branch in the Republic of Lithuania must have knowledge of and regularly review the insurance products it offers or markets, taking into account any event that could materially affect the potential risk to the identified target market, in order to assess at least whether the insurance product remains consistent with the needs of the identified target market and whether the intended distribution strategy remains appropriate.
4. An insurance undertaking, a branch of a third country insurance undertaking or an insurance undertaking of another state of the European Economic Area providing services in the Republic of Lithuania or having established a branch in the Republic of Lithuania shall make available to insurance distributors all appropriate information on the insurance product and the product approval process, including the identified target market of the insurance product.
5. Where an insurance distributor advises on, or proposes, insurance products which it does not develop, it must take the necessary measures to obtain the information specified in paragraph 4 of this Article and to understand the characteristics and the identified target market of each insurance product.
6. The requirements referred to in this Article shall apply without prejudice to other requirements under in this Law, including those relating to disclosure of information, suitability or appropriateness of the insurance product, identification and management of conflicts of interest, and inducements.
7. The requirements of this Article shall not apply to insurance products which consist of the insurance of large risks set out in Article 10 of this Law.
Article 1586. Registration of insurance intermediaries
1. Persons shall acquire the right to engage in the activities of an insurance brokerage firm from the day on which the supervisory authority takes a decision to include them on the list of insurance brokerage firms.
2. Persons shall acquire the right to engage in the activities of an insurance agent from the day on which an insurance undertaking or a branch of a third country insurance undertaking takes a decision to include them on the list of insurance agents.
3. Persons included on the lists specified in paragraphs 1 and 2 of this Article shall have the right to engage in the activities of insurance distribution having exercised the freedom of establishment and/or the right to provide services under the conditions set out in Article 188 of this Law.
4. Persons shall be included on the lists specified in paragraphs 1 and 2 of this Article for an unlimited period of time.
5. The list of insurance brokerage firms shall be published on the website of the supervisory authority.
6. Each insurance undertaking or a branch of a third country insurance undertaking shall publish on its website a list of insurance agents representing them, indicating the name and code of the undertaking of insurance agents and/or the name (names) and surname (surnames) of the insurance agent (natural person) and other information specified by the supervisory authority.
7. The website of the supervisory authority shall publish the links to the lists of insurance agents published on the website of insurance undertakings.
8. In the event of a change in any of the particulars in the lists specified in paragraphs 1 and 2 of this Article, the supervisory authority or an insurance undertaking or a branch of a third country insurance undertaking shall make respective changes in the lists not later that within five working days from the receipt of the notification of the change in the particulars.
9. Persons included on the lists specified in paragraphs 1 and 2 of this Article who have not carried out insurance distribution activities for the last 12 months or have not commenced carrying them out within 12 months from the date of inclusion on the list specified in paragraphs 1 or 2 of this Article, must immediately notify thereof the supervisory authority or the insurance undertaking in writing.
10. The lists specified in paragraphs 1 and 2 of this Article shall be maintained under the procedure set out by the supervisory authority.
11. The registration form of an insurance brokerage firm may be completed in the online registration system set up by the supervisory authority.
SECTION TWO
INSURANCE BROKERAGE FIRMS OF THE REPUBLIC OF LITHUANIA
Article 159. Repealed as of 01/10/2018.
Article 160. Procedure for inclusion on the list of insurance brokerage firms
1. A person applying for inclusion on the list of insurance brokerage firms shall submit the documents specified in paragraph 2 of this Article and meet the requirements set out in Articles 161(3), 161(5), 161(6) and 162(1) of this Law; the participation of its participants specified in paragraph 3(3) of this Article must not hinder the supervisory authority from exercising effective supervision of the insurance brokerage firm, its planned activity must adequately protect the interests of policyholders, insured persons, beneficiaries and injured third parties; the persons specified in Article 1581 of this Law must meet the requirements set out in Article 1581(1) of this Law and must not be subject to the restriction under Article 1581(2) of this Law to pursue the activities. The supervisory authority shall take a decision to include a person on the list of insurance brokerage firms and shall notify this person of the adopted decision within three months from the date of receipt of the person’s application and all the documents and information specified in paragraph 2 of this Article.
2. When applying for inclusion on the list of insurance brokerage firms, a person shall provide the following:
1) an application for inclusion on the list of insurance brokerage firms;
2) information and documents proving that the head of the insurance brokerage firm is of good repute, qualifications and experience;
3) information and documents confirming the identity of the participants in the insurance brokerage firm who hold, directly and indirectly, more than 10% of the authorised capital and/or voting rights, and the identity of persons who have close links with these participants, and confirming that participation of all these persons in the activities of the insurance brokerage firm will not prevent the supervisory authority from exercising effective supervision of the insurance brokerage firm;
4) information on the measures set out in Article 161(6) of this Law and intended for the protection of the funds of policyholders, insured persons, beneficiaries and injured third parties;
5) a certificate of professional indemnity insurance set out in Article 161(3) of this Law;
6) an operational plan with a description of the intended services, the planned number of persons to be provided with services, the turnover, the internal organisation of the undertaking, and the territory of activity, and indicating the number of insurance brokers to be employed and the measures for the protection of the interests of policyholders, insured persons and injured third parties;
7) a document confirming the payment of the state fee.
3. The supervisory authority shall refuse to include a person on the list of insurance brokerage firms, where:
1) the submitted documents and/or information specified in paragraph 2 of this Article do not meet the requirements for the content and form of the documents and information set out in legal acts of the supervisory authority or not all required documents and/or information have been submitted;
2) the head of the insurance brokerage firm is not of good repute and does not have the adequate professional qualifications and experience;
3) the participation of the participants of the person submitting an application for inclusion on the list of insurance brokerage firms, which hold, directly and indirectly, more than 10% of the authorised capital and/or voting rights, and of the persons who have close links with these participants in the activities of the insurance brokerage firm will prevent the supervisory authority from exercising effective supervision of the insurance brokerage firm;
4) the conditions set out in Article 161(6) of this Law for the protection of the funds of policyholders, insured persons, beneficiaries and injured third parties are not in place;
5) the insurance brokerage firm has no professional indemnity insurance set out in Article 161(3) of this Law;
6) the submitted operational plan suggests that the interests of policyholders, insured persons, beneficiaries and injured third parties will not be properly protected;
7) the number of insurance brokers intended to be employed is insufficient in view of the planned scope of activities.
4. The supervisory authority shall specify in detail the content of the documents and information specified in paragraph 2 of this Article and the form and procedure for submitting them.
5. An insurance brokerage firm must immediately but no later than within 10 working days, submit to the supervisory authority the information about the changes in the circumstances which existed at the time of its inclusion on the list of insurance brokerage firms or the changes in documents and/or information as soon as these changes occur.
Article 161. Requirements for insurance brokerage firms
1. No other legal person, except for an insurance brokerage firm and the exceptions provided for by law, shall have the right to use in its name the word combinations “draudimo brokerių bendrovė” (insurance brokerage firm), “draudimo brokeris” (insurance broker) or a word combination equivalent to it. Taking into account the planned territory of activity, the afore-mentioned word combinations may also be used in a foreign language.
2. The authorised capital of an insurance brokerage firm may not be less than EUR 18,750, while the equity capital may not be less than 4% of an insurance brokerage firm’s insurance premiums received over a financial year and payable to insurers and not less than EUR 18,750.
3. An insurance brokerage firm must hold professional indemnity insurance. The amount insured shall provide cover for at least EUR 1,250,000 per each insured event and in aggregate EUR 1,850,000 per year for all insured events. The insurance cover shall be valid in all states of the European Economic Area. An insurance brokerage firm shall possess insurance cover for the entire period of its activities.
4. An insurance brokerage firm shall have no right to engage in any other economic activities, except for the distribution of insurance, reinsurance and pension accumulation products and the provision of other financial services. In addition, an insurance brokerage firm may carry out valuation of property to be covered by insurance under the procedure established by the Law on the Bases of Property and Business Valuation.
5. The functions related to the distribution of insurance or reinsurance products may be performed at an insurance brokerage firm only by an insurance broker employed or holding an elective position at that firm.
6. An insurance brokerage firm must open a separate account in a credit institution exclusively for the funds of policyholders, insured persons, beneficiaries and injured third parties as well as the funds of the insurers assigned for payments to the above-mentioned persons. Recovery of claims arising from other obligations of the insurance brokerage firm may not be levied against the said funds and, in the case of bankruptcy of the insurance brokerage firm, only the claims of policyholders, insured persons, beneficiaries and injured third parties may be satisfied from the funds kept in the account. The supervisory authority shall have the right to set mandatory requirements for insurance brokerage firms as regards the funds kept in a separate account of a credit institution.
7. An insurance brokerage firm must provide statistical, financial and other information to the supervisory authority in the form established by the supervisory institution, where such information is required for the supervision of the activities of the insurance brokerage firm.
8. Prior to the conclusion of an insurance contract, an insurance brokerage firm must provide the information set out by the supervisory authority and specified in Articles 93 and 116 of this Law.
9. An insurance brokerage firm shall have the right to engage in the insurance distribution activities on instruction from the insurer, the policyholder, the insured, the beneficiary or the injured third party; however, the insurance brokerage firm must always act in the interests of the policyholder, the insured, the beneficiary or the injured third party.
10. Under the procedure set out by the supervisory authority, an insurance brokerage firm must examine complaints (applications) from policyholders, insured persons, beneficiaries and injured third parties. An insurance brokerage firm must examine written complaints from policyholders, insured persons, beneficiaries and injured third parties and, not later than within 15 working days from the receipt of the complaints, submit a complete, reasoned and documented written reply on paper or on another durable medium, where this has been agreed upon by the policyholder, the insured person, the beneficiary, the injured third party and the insurance brokerage firm. In exceptional cases, where it is impossible to provide a reply within 15 working days for reasons beyond the control of the insurance brokerage firm, the firm must send a non-exhaustive reply indicating clearly the reasons for the delay in the reply to the complaint and the time limit within which the policyholder, the insured person, the beneficiary and the injured third party will receive a definitive reply. In any case, the time limit for submitting a definitive reply may not exceed 35 working days from the date of receipt of the complaint. An insurance brokerage firm shall examine complaints free of charge.
Article 162. Management of an insurance brokerage firm and obligation to ensure compliance with the requirements of suitability and preparedness of insurance brokers
1. The persons in control of an insurance brokerage firm, the undertakings participating therein, members of their management bodies, and members of the supervisory and management bodies of the insurance brokerage firm must not have been found guilty of a serious or grave crime or a crime or a misdemeanour against property, property rights and property interests, economy, business practice, the financial system or of equivalent criminal acts under criminal laws of other states, if their conviction for the said crimes has not expired or has not been annulled or less than three years have elapsed from a court judgement whereby a natural or legal person was found guilty of the misdemeanours referred to in this paragraph; they must not have been subject to personal bankruptcy proceedings within the last ten years, while the head of the insurance brokerage firm must be of good repute, qualification and experience.
2. An insurance brokerage firm must ensure and, at the request of the supervisory authority, prove that the insurance brokers it employs are of good repute, meet the requirements set out in Article 1581(1) of this Law and are not subject to the restriction to pursue the activities under Article 1581(2) of this Law. An insurance brokerage firm shall adopt, implement and regularly, but at least once a year, review its internal policies and respective internal procedures to ensure compliance with these requirements. An insurance brokerage firm shall appoint a person responsible for proper implementation of the established internal policies and procedures and shall indicate this person’s name and surname to the supervisory authority at its request within five working days.
Article 163. Repealed as of 01/10/2018.
Article 164. Removal from the list of insurance brokerage firms
1. The supervisory authority shall remove an insurance brokerage firm from the list of insurance brokerage firms under the following circumstances:
1) the firm has violated the conditions for the distribution of insurance products;
2) the firm has violated legal acts governing its activities;
3) the firm has submitted a request for removal from the said list;
4) the firm has not commenced insurance distribution activities within 12 months from the date of its entry on the list of insurance brokerage firms;
5) the firm has not engaged in insurance distribution activities for more than 12 months.
2. The supervisory authority shall, within five working days from the establishment of the circumstances provided for in paragraph 1 of this Article, take a decision to remove an insurance brokerage firm from the list of insurance brokerage firms. The decision must be thoroughly substantiated. The supervisory authority shall inform the insurance brokerage firm about the decision taken and the reasons thereof.
3. A person (and a participant thereof) removed from the list of insurance brokerage firms shall have no right to engage in the activities of an insurance brokerage firm and apply for its repeated entry on the list of insurance brokerage firms for a period of one year from the date of adoption of the decision on removal from the list of insurance brokerage firms, except for the case where the insurance brokerage firm has been removed from the list of insurance brokerage firms on the grounds set out in paragraph 1(3) of this Article.
SECTION THREE
INSURANCE BROKERS AND THE CHAMBER OF INSURANCE BROKERS
Article 165. Qualifying examination of insurance brokers and other conditions for the activities of insurance brokers
1. A person who has passed the qualifying examination of insurance brokers shall be considered an insurance broker. The qualifying examination of insurance brokers shall be conducted by the Chamber of Insurance Brokers or a third party invited by it. The procedure for the qualifying examination of insurance brokers shall be set out in this Law and the legal acts of the supervisory authority and the Chamber of Insurance Brokers. Decisions of the Chamber of Insurance Brokers violating the legal acts governing the qualifying examination of insurance brokers may be appealed against under the procedure set out in the Law of the Republic of Lithuania on Administrative Proceedings, notwithstanding the fact that the Chamber of Insurance Brokers has transferred the performance of the qualifying examination to a third party.
2. Persons must pass the qualifying examination of insurance brokers prior to commencing the insurance distribution activities. The Chamber of Insurance Brokers shall issue the person who has passed the qualifying examination of insurance brokers with a certificate to that effect.
3. The qualifying examination of insurance brokers shall be held at least once every four months.
4. An insurance broker must become a member of the Chamber of Insurance Brokers prior to taking up the activities of insurance distribution. An insurance broker must be of good repute. Upon becoming a member of the Chamber of Insurance Brokers, an insurance broker shall be included on the list of members of the Chamber of Insurance Brokers indicating the name, surname (surnames) of the insurance broker, the date of entry on the list of members of the Chamber of Insurance Brokers and the number of the certificate of the insurance broker. The updated list of members of the Chamber of Insurance Brokers shall be regularly published on the website of the Chamber of Insurance Brokers to ascertain that persons have passed the qualifying examination of insurance brokers and have become members of the Chamber of Insurance Brokers.
5. When preparing the qualifying examination of insurance brokers, the Chamber of Insurance Brokers and the third party invited by it must comply with the requirements set out in this Law and the legal acts of the supervisory authority and ensure the quality and continuity of examination of insurance brokers. To this end, the Chamber of Insurance Brokers must have an internal system in place for quality assurance and envisage modes of action and means of ensuring compliance with the requirements of legal acts as well as quality and continuity of the examination of insurance brokers. The Chamber of Insurance Brokers shall, once a year, submit to the supervisory authority the information on compliance with the requirements for quality assurance of the examination of insurance brokers. At the request of the supervisory authority, this information may be provided more frequently.
6. The Chamber of Insurance Brokers shall publish on its website the number of persons who have passed the qualifying examination of insurance brokers, also, at least once a year, the number of qualifying examinations of insurance brokers which have taken place over a year, the number of persons who have taken part therein, the number of persons who have passed the qualifying examination of insurance brokers, information about the complaints received and the outcomes of the complaints handled. Personal data of the person lodging a complaint shall not be made public.
7. An insurance broker may perform the functions related to the distribution of insurance and reinsurance products only if the insurance broker is employed or holds an elective position at an insurance brokerage firm.
Article 166. Chamber of Insurance Brokers
1. The Chamber of Insurance Brokers shall be an association bringing together all insurance brokers and implementing self-governance principles of insurance brokers.
2. The Chamber of Insurance Brokers shall have the seal bearing its name and a settlement account. The Chamber of Insurance Brokers shall be liable for its obligations to the extent of its assets and shall not be liable for the commitments assumed by its members, whereas members of the Chamber of Insurance Brokers shall not be liable for the obligations of the Chamber of Insurance Brokers.
3. In its work, the Chamber of Insurance Brokers shall be guided by this Law and other legal acts as well as the articles of association of the Chamber of Insurance Brokers.
Article 167. Establishment and registration of the Chamber of Insurance Brokers
1. The Chamber of Insurance Brokers shall be established at the general statutory meeting of members of the Chamber of Insurance Brokers.
2. The statutory meeting shall approve the articles of association of the Chamber of Insurance Brokers. Where the statutory meeting fails to approve the articles of association of the Chamber of Insurance Brokers, a repeat meeting must be called within 30 days.
3. The Chamber of Insurance Brokers shall be deemed to be established from the date of its registration in the Register of Legal Entities.
Article 168. Articles of association of the Chamber of Insurance Brokers
1. The articles of association of the Chamber of Insurance Brokers shall indicate the following data:
1) the name, legal form, symbols and registered office of the Chamber of Insurance Brokers;
2) objectives, functions and tasks of the Chamber of Insurance Brokers;
3) conditions and procedure for entry, withdrawal and expulsion from membership in the Chamber of Insurance Brokers;
4) rights and obligations of members of the Chamber of Insurance Brokers;
5) the procedure for establishing and liquidating branches; their rights and relations with the management bodies of the Chamber of Insurance Brokers;
6) the procedure for setting up the management bodies of the Chamber of Insurance Brokers, their competences, functions and responsibility, and the procedure for calling the General Meeting and for recalling the elective management bodies and their members;
7) sources of assets and funding as well as control of financial activities;
8) the procedure for providing financial and other support;
9) the procedure for amending and supplementing the articles of association;
10) the procedure for reorganisation and liquidation of the Chamber of Insurance Brokers.
2. The articles of association of the Chamber of Insurance Brokers may also include other provisions regulating the activities of the Chamber of Insurance Brokers, provided such provisions are not in conflict with this Law and other laws.
Article 169. Members of the Chamber of Insurance Brokers
1. Only the persons who have passed the qualifying examination of insurance brokers, are of good repute, and have taken the oath of the insurance broker under the established procedure shall be entitled to membership of the Chamber of Insurance Brokers. The Chamber of Insurance Brokers shall be prohibited from refusing membership to a person meeting these requirements, with the exception of the case set out in Article 170(2) of this Law. An insurance broker must submit information about his good repute or information about new circumstances due to which he cannot be considered to be of good repute to the Chamber of Insurance Brokers, in the form and under the procedure set out by it.
2. Members of the Chamber of Insurance Brokers shall have the right to:
1) take part in the activities of the Chamber of Insurance Brokers and nominate their representatives to the management bodies of the Chamber of Insurance Brokers;
2) make use of the services provided by the Chamber of Insurance Brokers;
3) make use of the information accumulated by the Chamber of Insurance Brokers;
4) obtain information about the activities of the Chamber of Insurance Brokers;
5) contest the decisions of the bodies of the Chamber of Insurance Brokers in court.
Article 170. Expulsion of an insurance broker from membership of the Chamber of Insurance Brokers
1. An insurance broker shall be expelled from membership of the Chamber of Insurance Brokers under the procedure set out by the General Meeting of the Chamber of Insurance Brokers in the following cases:
1) at a written request of an insurance broker;
2) in the event of death of the insurance broker;
3) on a proposal of the Court of Honour of Insurance Brokers;
4) in the event of emergence of new circumstances due to which the insurance broker can no longer be considered to be of good repute;
2. The person expelled from membership of the Chamber of Insurance Brokers pursuant to paragraph 1(3) of this Article shall have the right to regain membership of the Chamber of Insurance Brokers not earlier than three years after the expulsion from membership of the Chamber of Insurance Brokers.
Article 171. Functions of the Chamber of Insurance Brokers
The Chamber of Insurance Brokers shall perform the following functions:
1) draw up and adopt the code of professional ethics of insurance brokers and monitor compliance with it;
2) draft amendments and supplements to the articles of association of the Chamber of Insurance Brokers;
3) draw up the regulations of the Court of Honour of Insurance Brokers;
4) approve the programme and the assessment methodology of the qualifying examination of insurance brokers, establish the procedure for taking and the arrangement for paying for the examination, organise the qualifying examination of insurance brokers and conduct examinations for insurance brokers or transfer the performance of the qualifying examination of insurance brokers to a third party;
5) address matters pertaining to improvement of professional activities of insurance brokers;
6) handle complaints of persons with regard to violations of professional ethics of insurance brokers;
7) maintain the list of members of the Chamber of Insurance Brokers;
8) perform other functions specified in the articles of association of the Chamber of Insurance Brokers.
Article 172. Management of the Chamber of Insurance Brokers
The bodies of the Chamber of Insurance Brokers shall consist of the General Meeting of the Chamber of Insurance Brokers, the Presidium and the Administration. The Presidium and the Administration shall be the management bodies of the Chamber of Insurance Brokers.
Article 173. General Meeting of the Chamber of Insurance Brokers
1. Insurance brokers shall attend annual General Meetings of the Chamber of Insurance Brokers to discuss and develop activities of insurance brokers.
2. The General Meeting of the Chamber of Insurance Brokers shall be convened and organised by the Presidium of the Chamber of Insurance Brokers.
3. The General Meeting of the Chamber of Insurance Brokers shall be the supreme body of the Chamber of Insurance Brokers.
4. The General Meeting of the Chamber of Insurance Brokers shall be convened under the procedure set out by the articles of association of the Chamber of Insurance Brokers. An extraordinary meeting shall be convened if so requested by at least 1/5 of the members of the Chamber of Insurance Brokers or by the Presidium in its resolution.
5. The General Meeting of the Chamber of Insurance Brokers shall have the right to:
1) adopt, amend and supplement the articles of association of the Chamber of Insurance Brokers;
2) set the number of members to sit on the Presidium of the Chamber of Insurance Brokers;
3) elect and remove members of the Presidium of the Chamber of Insurance Brokers;
4) elect the President of the Chamber of Insurance Brokers;
5) appoint insurance brokers as members of the Court of Honour of Insurance Brokers;
6) choose an audit firm for auditing sets of financial statements of the Chamber of Insurance Brokers;
7) set the amount of the membership fee to be paid by members of the Chamber of Insurance Brokers;
8) approve the regulations of the Court of Honour of Insurance Brokers;
9) approve the code of professional ethics of insurance brokers;
10) approve the report on the use of funds of the Chamber of Insurance Brokers;
11) set the number of employees of the Chamber of Insurance Brokers and determine their salary level;
12) address other matters provided for in the articles of association of the Chamber of Insurance Brokers.
6. The General Meeting of the Chamber of Insurance Brokers shall be valid if it is attended by at least one half of the members. Decisions shall be taken by a simple majority vote, except for the cases set out by laws.
7. Where the General Meeting of the Chamber of Insurance Brokers does not have a quorum, a repeat meeting shall be held under the procedure set out in the articles of association of the Chamber of Insurance Brokers not later than 30 days thereafter. This meeting shall have the right to take decisions on the items on the agenda of the failed meeting, irrespective of the number of members attending the repeat meeting.
Article 174. Presidium and Administration of the Chamber of Insurance Brokers
1. Activities of the Chamber of Insurance Brokers falling between the General Meetings of the Chamber of Insurance Brokers shall be managed by the Presidium. The Presidium of the Chamber of Brokers shall be elected pursuant to the procedure set out in the articles of association of the Chamber of Insurance Brokers.
2. The meeting of the Presidium of the Chamber of Insurance Brokers may deliberate validly if it is attended by the President of the Chamber of Insurance Brokers or a member of the Presidium substituting for the President and at least one half of the members of the Presidium; its decisions shall be valid if at least one half of the Presidium members present, including the President of the Chamber of Insurance Brokers or the member of the Presidium substituting for the President, vote in favour. All members shall have equal voting rights. In the event of a tie, the President of the Chamber of Insurance Brokers or the member of the Presidium substituting for the President shall have the casting vote.
3. Activities of the Chamber of Insurance Brokers shall be organised and carried out by the Administration.
4. The Administration of the Chamber of Insurance Brokers shall be headed by the Director. The Director and the chief accountant (accountant) shall be appointed by the Presidium of the Chamber of Insurance Brokers. The duties of the chief accountant (accountant) may also be performed by companies providing accounting services.
Article 175. Grounds for bringing a disciplinary action against an insurance broker
1. A disciplinary action may be brought against an insurance broker on a proposal from the Presidium of the Chamber of Insurance Brokers for violations of this Law, other legal acts, professional activities or the code of professional ethics of insurance brokers.
2. Within 30 days of receipt of the proposal from the Presidium of the Chamber of Insurance Brokers to bring a disciplinary action against an insurance broker, the Court of Honour of Insurance Brokers shall take a decision whether or not to bring a disciplinary action against the insurance broker.
Article 176. Court of Honour of Insurance Brokers
1. The Court of Honour of Insurance Brokers shall be composed under the following procedure:
1) the General Meeting of the Chamber of Insurance Brokers shall appoint three insurance brokers with at least three years’ experience in the field of insurance distribution;
2) the supervisory authority and the State Consumer Rights Protection Authority shall each appoint one member.
2. The mandate of the Court of Honour of Insurance Brokers shall run for a period of three years. The same person may be appointed as member of the Court of Honour of Insurance Brokers for not more than two consecutive terms of office.
3. The Court of Honour of Insurance Brokers may hear cases if the hearing is attended by at least three members, provided that at least one of them has been appointed by other than the meeting of members the Chamber of Insurance Brokers.
4. The Court of Honour of Insurance Brokers must take its decision within 60 days of adoption of the decision to bring a disciplinary action.
5. The Court of Honour of Insurance Brokers shall act under its regulations. The regulations of the Court of Honour of Insurance Brokers shall be approved by the General Meeting of the Chamber of Insurance Brokers.
Article 177. Disciplinary penalties and other decisions taken by the Court of Honour of Insurance Brokers
1. For the violations specified in Article 175(1) of this Law, the Court of Honour of Insurance Brokers may impose the following penalties on an insurance broker:
1) a warning;
2) a reprimand;
3) a public reprimand.
2. A single instance of misconduct shall not give rise to more than one disciplinary penalty. The insurance broker shall be deemed not to have incurred a disciplinary penalty after the lapse of one year from the imposition thereof.
3. Where, during the period of validity of the penalty, the insurance broker commits the violations specified in Article 175(1) of this Law, the Court of Honour of Insurance Brokers may take a decision to apply to the Chamber of Insurance Brokers for expulsion of the insurance broker from membership of the Chamber of Insurance Brokers.
4. Having adopted a decision to impose a penalty provided for in paragraph 1 of this Article or the decision specified in paragraph 3 hereof, the Court of Honour of Insurance Brokers must submit the decision to the Chamber of Insurance Brokers within 14 days of adoption of the relevant decision. The insurance broker shall be notified in writing of the adopted decision within three days of the date on which the decision is adopted.
5. In the course of the hearing of a case at the Court of Honour of Insurance Brokers, the insurance broker concerned may proceed with his duties.
Article 178. Appeals against decisions of the Court of Honour of Insurance Brokers
Decisions adopted by the Court of Honour of Insurance Brokers may be appealed within one month of service of the relevant decision under the procedure established by legal acts.
Article 179. Sources of funds of the Chamber of Insurance Brokers
The funds of the Chamber of Insurance Brokers shall come from the following sources:
1) membership fees set out in the articles of association of the Chamber of Insurance Brokers and other target contributions;
2) income collected for the qualifying examination of insurance brokers and for the training services rendered;
3) funds and assets donated by natural and legal persons;
4) target funds of the State and municipalities;
5) funds donated by organisations without legal personality, international organisations and foundations;
6) interest from the funds deposited in credit institutions;
7) assets inherited under a will;
8) borrowed funds;
9) other lawfully obtained funds.
Article 180. Audit of a set of financial statements of the Chamber of Insurance Brokers
Sets of financial statements of the Chamber of Insurance Brokers shall be audited by the audit firm chosen by the General Meeting of the Chamber of Insurance Brokers.
Article 181. Reorganisation and termination of the Chamber of Insurance Brokers
The Chamber of Insurance Brokers may be reorganised and terminated under the procedure established by laws.
SECTION FOUR
INSURANCE AGENTS OF THE REPUBLIC OF LITHUANIA
Article 182. Procedure for inclusion on the list of insurance agents
1. Every insurance undertaking or a branch of a third country insurance undertaking must, under the procedure established by the supervisory authority, maintain the list of insurance agents acting in its name and on its behalf. The list shall, inter alia, contain the names and surnames of persons who are employed by the undertaking of insurance agents and whose duties cover insurance distribution.
2. A person applying for inclusion on the list of insurance agents must meet the requirements set out in Articles 1581(1) and 183 of this Law and must not be subject to the restriction to pursue activities under Article 1581(2) of this Law; the participation of its participants specified in paragraph 3(3) of this Article must not hinder the supervisory authority from exercising effective supervision of the insurance agent. When applying for inclusion on the list of insurance agents, a person shall provide the insurance undertaking or a branch of a third country insurance undertaking with the following documents:
1) an application for inclusion on the list of insurance agents;
2) information and documents attesting to the suitability and preparedness of the persons referred to in Article 1581 of this Law;
3) information on the identity of the person submitting an application or on the identity of its participants holding more than 10% of the authorised capital and/or voting rights; the proportion of their share in the authorised capital and/or voting rights; the identity of closely linked persons; and the data confirming that the participation of these persons in the activities of the insurance agent will not prevent the supervisory authority from exercising effective supervision of the insurance agent;
4) a certificate of professional indemnity insurance or information on the application of the exemptions specified in Article 183 of this Law.
3. An insurance undertaking or a branch of a third country insurance undertaking shall have no right to include a person on the list of insurance agents where:
1) the submitted documents and/or information specified in paragraph 2 of this Article do not meet the requirements set out in legal acts of the supervisory authority for the content and form of the documents and information or not all the required documents and/or information have been submitted;
2) the persons specified in Article 1581 of this Law do not meet the requirements set out in Article 1581(1) of this Law and/or they are subject to the restriction to pursue activities under Article 1581(2) of this Law;
3) the participation of the person submitting an application to be included on the list of insurance agents or its participants holding more than 10% of the authorised capital and/or voting rights or the participation of the persons who have close links with the applicant in the activities of the insurance agent will prevent the supervisory authority from exercising effective supervision of the insurance agent;
4) the insurance agent does not have professional indemnity insurance and he is not subject to the exceptions provided for in Article 183 of this Law.
4. Upon entering a person on the list of insurance agents, an insurance undertaking or a branch of a third country insurance undertaking must issue the person with a certificate to this effect.
5. The supervisory authority shall specify in detail the content requirements for the documents and information specified in paragraph 2 of this Article, and the form and procedure for submitting them.
6. An insurance agent must immediately, but not later than within ten working days, submit to the insurance undertaking or a branch of a third country insurance undertaking the information about the changes in the circumstances which existed at the time of the inclusion of the agent on the list of insurance agents or the changes in documents and/or information as soon as these changes occur.
Article 183. Professional indemnity insurance of insurance agents
1. Insurance agents must hold professional indemnity insurance to cover liability risks that might arise in the event of failure to properly pursue insurance distribution activities. The amount insured must provide cover for at least EUR 1,250,000 per each insured event and in aggregate EUR 1,850,000 per year for all insured events. The insurance cover shall be valid in all states of the European Economic Area. An insurance agent must possess insurance cover throughout the period of insurance distribution activities.
2. An insurance agent shall have the right to hold no professional indemnity insurance, where:
1) an insurance undertaking or a branch of a third country insurance undertaking has concluded a professional indemnity insurance contract of an insurance agent for the amount specified in paragraph 1 of this Article, and the insurance cover under this insurance contract is valid throughout the territory of the European Economic Area for the entire period of activities of the insurance agent on behalf and in the interests of the insurance undertaking or the branch of the third country insurance undertaking;
2) an insurance undertaking or a branch of a third country insurance undertaking, when concluding a contract with an insurance agent, has assumed an obligation to fully compensate for the loss resulting from the failure by the insurance agent to perform the agent’s professional duties or from improper performance thereof.
3. An insurance undertaking or a branch of a third country insurance undertaking must ensure that the insurance agents acting on their behalf and in their interests comply with the requirements specified in paragraphs 1 or 2 of this Article. In case of failure by an insurance undertaking or a branch of a third country insurance undertaking to fulfil the above obligation, the insurance undertaking or a branch of a third country insurance undertaking must fully compensate for the loss resulting from the failure by the insurance agent to perform the agent’s professional duties or from improper performance thereof.
Article 184. Insurance distribution activities pursued by insurance agents
1. The rights and obligations of insurance agents in pursuing insurance distribution activities shall be established in a written agreement with the insurance undertaking or a branch of a third country insurance undertaking.
2. An insurance agent shall be prohibited from concurrently pursuing, on behalf and in the interests of two or more insurers, insurance distribution activities relating to insurance contracts providing identical or similar insurance cover.
3. An insurance agent must provide to policyholders, insured persons, beneficiaries and injured third parties the information set out by the supervisory authority and, prior to the conclusion of the insurance contract, must also provide the information set out by the supervisory authority and specified in Articles 93 and 116 of this Law.
4. The insurance premium paid to an insurance agent shall be considered to be paid to the insurance undertaking or a branch of a third country insurance undertaking; however, the amounts paid by an insurance undertaking or a branch of a third country insurance undertaking to the insurance agent and intended for making payment to policyholders, insured persons, beneficiaries or injured third parties shall be deemed to be paid to those persons only upon the actual receipt of the said amounts by the said persons.
5. An insurance undertaking or a branch of a third country insurance undertaking, having regard to the resolutions and recommendations of the supervisory authority, must provide mandatory instructions on the insurance distribution activities to insurance agents acting on its behalf and in its interests.
6. Insurance undertakings, branches of third country insurance undertakings or third parties engaged by them must organise the professional training provided for in Article 1581(1) of this Law for insurance agents’ staff in charge of distribution of insurance products as well as for insurance agents (natural persons).
Article 185. Distribution of insurance products of insurance undertakings established in another state of the European Economic Area by insurance agents pursuing their activities in the Republic of Lithuania
1. An insurance agent who distributes insurance products of an insurance undertaking of another state of the European Economic Area providing services in the Republic of Lithuania or having established a branch in the Republic of Lithuania shall be subject to the same requirements as the ones covering distribution of insurance products of an insurance undertaking or a branch of a third country insurance undertaking.
2. The provisions of Articles 1586, 182, 183, 184 and 186 of this Law shall mutatis mutandis apply to insurance undertakings of other states of the European Economic Area that have insurance agents in the Republic of Lithuania.
3. The supervisory authority shall give recommendations to an insurance undertaking of any other state of the European Economic Area, which provides services in the Republic of Lithuania or has established a branch in the Republic of Lithuania, regarding the maintenance of the list of insurance agents, control of professional indemnity insurance and professional training of insurance agents (natural persons) and insurance agents’ staff in charge of distribution of insurance products.
Article 186. Removal from the list of insurance agents
1. Insurance agents shall be removed from the list of insurance agents by an insurance undertaking or a branch of a third country insurance undertaking which has included it therein.
2. The removal of insurance agents from the lists of insurance agents shall mutatis mutandis be subject to provisions of Article 164 of this Law.
Article 1861. Ancillary insurance intermediaries
Ancillary insurance intermediaries and their activities shall mutatis mutandis be subject to the requirements set out in Articles 182 to 186 of this Law.
SECTION FIVE
REINSURANCE INTERMEDIARIES
Article 187. Reinsurance intermediaries
1. The entities specified in points 1 and 3 of Article 3(1), points 1 and 3 of Article 4(1), and points 1, 2, and 3 of Article 5(2) of this Law shall have the right to pursue reinsurance distribution activities only after the supervisory authority enters them, under the procedure set out by it, on the list of reinsurance intermediaries, maintained by the supervisory authority.
2. The inclusion of a person on the list of reinsurance intermediaries and his removal from this list shall mutatis mutandis be subject to provisions of Articles 160 and 164 of this Law. The list of reinsurance intermediaries shall be announced on the website of the supervisory authority.
SECTION SIX
ACTIVITIES OF INSURANCE AND REINSURANCE INTERMEDIARIES
IN OTHER STATES OF THE EUROPEAN ECONOMIC AREA
Article 188. Right to provide services and freedom of establishment
1. An insurance, reinsurance or ancillary insurance intermediary intending to provide services for the first time in other states of the European Economic Area must notify the supervisory authority thereof and provide the following information:
1) the name and code of the legal person and the address of the registered office of the legal person; or the name and surname of the natural person and the address of the place of business activities;
2) the name of another state of the European Economic Area in which it intends to provide services;
3) the type of intermediary (insurance, reinsurance or ancillary insurance intermediary);
4) the names of the insurance and (or) reinsurance undertakings represented;
5) the classes of insurance products which it has the right to distribute.
2. An insurance, reinsurance or ancillary insurance intermediary intending to establish a branch in other states of the European Economic Area must notify the supervisory authority thereof and provide the following information:
1) the name of the insurance, reinsurance or ancillary insurance intermediary, the code of the legal person, and the address of the registered office of the legal person;
2) the name of another state of the European Economic Area in which it intends to establish a branch and the address to which documents may be delivered in that state;
3) the type of intermediary (insurance, reinsurance or ancillary insurance intermediary);
4) the names of the insurance and (or) reinsurance undertakings represented;
5) the classes of insurance products which it has the right to distribute;
6) the names of the persons responsible for the management of the established branch and the documents evidencing compliance with the requirements of Article 162(1) of this Law.
3. The supervisory authority shall, within one month from the receipt of the information referred to in paragraph 1 or 2 of this Article, notify thereof the supervisory authority of another state of the European Economic Area and, upon receipt of the latter’s acknowledgement of receipt of this information, notify in writing the insurance, reinsurance or ancillary insurance intermediary that the supervisory authority of another state of the European Economic Area has received information about the intermediaries intention to engage in the activities of distribution of insurance or reinsurance products.
4. Having regard to the intended activities of distribution of insurance products, the supervisory authority shall refuse to forward to the supervisory authority of another state of the European Economic Area the information specified in paragraph 2 of this Article where it has reason to doubt the financial situation or suitability of the organisational structure of an insurance, reinsurance or ancillary insurance intermediary and shall, within one month from the receipt of the information specified in paragraph 2 of this Article, inform the insurance, reinsurance or ancillary insurance intermediary of the reasons for such refusal.
5. Having obtained the information forwarded by the supervisory authority about the requirements of legal acts of another state of the European Economic Area and having fulfilled them, an insurance, reinsurance or ancillary insurance intermediary shall have the right to start operating in another state of the European Economic Area in the ways specified in paragraphs 1 or 2 of this Article. Where an insurance, reinsurance or ancillary insurance intermediary fails to obtain information about the applicable requirements of legal acts of another state of the European Economic Area from the supervisory authority within one month from the receipt of the notification provided for in paragraph 3 of this Article, it may establish a branch and start operating.
6. In the list of insurance brokerage firms and in the list of reinsurance intermediaries the supervisory authority shall indicate the states of the European Economic Area in which insurance or reinsurance distributors have the right to provide services or have established a branch; the insurance undertaking shall indicate the said states in the list of insurance agents. The supervisory authority shall notify the European Insurance and Occupational Pensions Authority, under the procedure set out by this institution, of insurance, reinsurance or ancillary insurance intermediaries providing services or having established a branch in other states of the European Economic Area.
7. The insurance, reinsurance or ancillary insurance intermediary must notify the supervisory authority of the intended changes in the information specified in paragraph 1 or 2 of this Article at least one month before the date of implementation of the changes. The supervisory authority shall inform the supervisory authority of another state of the European Economic Area about the intended changes as soon as possible but not later than within one month from the receipt of the information.
8. The supervisory authority shall exchange information with the supervisory authorities of other states of the European Economic Area about the sanctions imposed on insurance, reinsurance or ancillary insurance intermediaries. The supervisory authority shall provide information to the supervisory authorities of other states of the European Economic Area in which insurance, reinsurance or ancillary insurance intermediaries have the right to provide services or have established a branch about the removal of insurance, reinsurance or ancillary insurance intermediaries from the lists of insurance brokerage firms, insurance agents or reinsurance intermediaries. Upon request of supervisory authorities of other states of the European Economic Area, the supervisory authority shall also provide other information concerning activities of insurance and reinsurance intermediaries.
9. Where an insurance, reinsurance or ancillary insurance intermediary’s primary place of business is located in another state of the European Economic Area, the supervisory authority may agree with that state’s supervisory authority for the latter to exercise supervision of activities of the insurance, reinsurance or ancillary insurance intermediary. The supervisory authority shall, without delay but not later than within two working days from the signing of the agreement, notify thereof the insurance, reinsurance or ancillary insurance intermediary and the European Insurance and Occupational Pensions Authority under the procedure and within the time limits set out by this authority.
SECTION SEVEN
ACTIVITIES IN THE REPUBLIC OF LITHUANIA OF INSURANCE,
REINSURANCE AND ANCILLARY INSURANCE UNDERTAKINGS OF
OTHER STATES OF THE EUROPEAN ECONOMIC AREA
Article 189. Forms of activities of insurance, reinsurance and ancillary insurance intermediaries
Insurance, reinsurance and ancillary insurance intermediaries of other states of the European Economic Area shall have the right to establish a branch or to provide services in the Republic of Lithuania.
Article 190. Taking-up of activities of insurance, reinsurance and ancillary insurance intermediaries
1. When the supervisory authority receives information from the supervisory authority of another state of the European Economic Area about the intention of insurance, reinsurance or ancillary insurance intermediaries of other states of the European Economic Area to start providing services or establishing a branch in the Republic of Lithuania, it shall immediately acknowledge receipt of this information to the supervisory authority of another state of the European Economic Area and, within one month from the receipt of the information, send to that supervisory authority the information about the requirements of legal acts of the Republic of Lithuania applicable to insurance, reinsurance or ancillary insurance intermediaries of other states of the European Economic Area providing services or having established a branch in the Republic of Lithuania. The supervisory authority shall publish on its website and regularly update the list of legal acts of the Republic of Lithuania and information on the requirements of legal acts of the Republic of Lithuania applicable to insurance, reinsurance or ancillary insurance intermediaries of other states of the European Economic Area providing services or having established a branch in the Republic of Lithuania.
2. Insurance, reinsurance or ancillary insurance intermediaries of other states of the European Economic Area shall have the right to start providing services or establishing a branch in the Republic of Lithuania upon receiving from the supervisory authority of another state of the European Economic Area information about the requirements of legal acts of the Republic of Lithuania applicable to insurance, reinsurance or ancillary insurance intermediaries of other states of the European Economic Area providing services in the Republic of Lithuania or having established a branch in the Republic of Lithuania. Where insurance, reinsurance or ancillary insurance intermediaries of other states of the European Economic Area fail to receive information about the requirements of legal acts of the Republic of Lithuania applicable to insurance, reinsurance or ancillary insurance intermediaries of other states of the European Economic Area providing services in or having established a branch in the Republic of Lithuania within one month from the date of acknowledgement of receipt of information by the supervisory authority specified in paragraph 1 of this Article, they may start providing services or establishing a branch in the Republic of Lithuania.
3. Insurance, reinsurance or ancillary insurance intermediaries of other states of the European Economic Area must, when pursuing their activities in the Republic of Lithuania, hold professional indemnity insurance set out in Article 161(3) or 183(1) of this Law, or apply another method to ensure indemnification against any losses arising from their activities that is analogous to the method set out in Article 183(2) of this Law.
Article 191. Activities of insurance, reinsurance and ancillary insurance intermediaries
1. Insurance, reinsurance and ancillary insurance intermediaries of other states of the European Economic Area must provide the policyholders, insured persons, beneficiaries, injured third parties and other persons with the information set out by the supervisory authority; in addition, insurance intermediaries, prior to the conclusion of an insurance contract, must also provide the information specified in Articles 93 and 116 of this Law.
2. Insurance, reinsurance and ancillary insurance intermediaries of other states of the European Economic Area, when pursuing their activities in the Republic of Lithuania, must comply with the requirements set out for them in this Law as well as other legal acts of the Republic of Lithuania.
3. A branch of insurance intermediaries of another state of the European Economic Area must be staffed by insurance brokers or other persons who, under the requirements of legal acts of this state of the European Economic Area, may be in charge of providing insurance distribution services.
4. The supervisory authority shall set mandatory requirements for insurance undertakings and branches of third country insurance undertakings and recommendations for insurance undertakings of other states of the European Economic Area providing services or having established a branch in the Republic of Lithuania regarding the maintenance of the list of insurance agents and ancillary insurance intermediaries of other states of the European Economic Area pursuing their activities in the Republic of Lithuania, control of their professional indemnity insurance, professional training of employees of undertakings of these insurance agents and undertakings of ancillary insurance intermediaries whose duties cover the distribution of insurance products, and professional training of insurance agents (natural persons) and ancillary insurance intermediaries (natural persons).
SECTION EIGHT
ACTIVITIES OF THIRD COUNTRY INSURANCE AND
REINSURANCE INTERMEDIARIES IN THE REPUBLIC OF LITHUANIA
Article 192. Branch of an undertaking of insurance intermediaries
1. An undertaking of third country insurance intermediaries shall have the right to establish a branch in the Republic of Lithuania.
2. A branch of an undertaking of third country insurance intermediaries shall have the right to provide insurance product distribution services in the Republic of Lithuania only after the undertaking of third country insurance intermediaries is included on the list of third country insurance intermediaries, maintained by the supervisory authority, and the branch is registered in the Register of Legal Entities. The data processor of the Register of Legal Entities must, within five working days, notify the supervisory authority about the registration of a branch of an undertaking of third country insurance intermediaries.
3. Registration of undertakings of third country insurance intermediaries, distribution of insurance products, and activities of insurance brokers working in branches of the undertaking of third country insurance intermediaries shall be subject to the same provisions as those applied to insurance brokers and undertakings of insurance brokers of the Republic of Lithuania, with due regard to the conditions set out in this Law and the specific features of activities of the branch of the undertaking of third country insurance intermediaries.
4. An undertaking of third country insurance intermediaries may be included on the list of third country insurance intermediaries provided that the supervisory authority and the supervisory authority of the third country have concluded a cooperation agreement thereby committing, inter alia, to exchange information regarding the supervision of the branch, the preservation of market integrity and the protection of the interests of policyholders, insured persons and injured third parties.
5. An undertaking of third country insurance intermediaries may not be included on the list of third country insurance intermediaries where the legal acts of the third country applicable to natural or legal persons having close links with the undertaking of third country insurance intermediaries or any difficulties in the implementation of these legal acts make effective supervision impossible.
6. An undertaking of third country insurance intermediaries shall be included on the list of third country insurance intermediaries for an indefinite period of time. An undertaking of third country insurance intermediaries included on the said list shall have the right to engage in insurance distribution activities only in the Republic of Lithuania.
7. The supervisory authority shall specify in detail the content, form and procedure for the submission of the documents and information to be submitted when applying for the registration of an undertaking of third country insurance intermediaries.
Article 193. Inclusion on the list of third country insurance intermediaries
The inclusion of undertakings of third country insurance intermediaries on the list of third country insurance intermediaries shall mutatis mutandis be subject to provisions of Article 160 of this Law.
Article 194. Removal from the list of third country insurance intermediaries
The removal of undertakings of third country insurance intermediaries from the list of third country insurance intermediaries shall mutatis mutandis be subject to provisions of Article 164 of this Law.
Article 195. Reinsurance intermediaries
1. Third country reinsurance intermediaries shall have the right to either provide services in the Republic of Lithuania without being established there or to establish a branch in the Republic of Lithuania.
2. The provisions of Article 187 of this Law shall mutatis mutandis apply to activities of the branches of third country reinsurance intermediaries in the Republic of Lithuania.
CHAPTER VIII
SUPERVISION OF INSURANCE AND REINSURANCE ACTIVITIES AND
OF DISTRIBUTION OF INSURANCE AND REINSURANCE PRODUCTS
SECTION ONE
GENERAL PROVISIONS
Article 196. Supervisory authority, purpose and independence of supervision
1. The supervisory authority shall be an authority fulfilling the functions of supervision of insurance and reinsurance activities and of distribution of insurance and reinsurance products as specified in this Law.
2. The purpose of supervision of insurance and reinsurance activities and of distribution of insurance and reinsurance products shall be to ensure reliability, efficiency, safety, and stability of the insurance system and protection of the interests and rights of the policyholders, insured persons, beneficiaries, and injured third parties.
3. The supervisory authority shall carry out financial supervision of insurance and reinsurance undertakings and the activities in which they are engaged as part of exercising the freedom of establishment or the right to provide services.
4. State government and administration institutions shall be prohibited from exerting influence on the fulfilment of the functions of the supervisory authority set out in this Law.
5. Funding of the supervisory authority must ensure independence of the supervisory authority, proper fulfilment of its functions, as well as recruitment and retention of specialists with appropriate qualification and experience.
Article 197. General provisions concerning state supervision of insurance and reinsurance activities and of distribution of insurance and reinsurance products
1. State supervision of insurance and reinsurance activities and of distribution of insurance and reinsurance products shall be based on the forward-looking and risk- assessment-based approach. The supervisory authority shall inspect whether insurance and reinsurance activities are carried out properly and whether insurance and reinsurance undertakings comply with the legal acts governing their activities. The aforementioned function of the supervisory authority must be fulfilled on a regular basis.
2. State supervision shall be carried out by analysing the information provided by the undertakings under supervision to the supervisory authority and by conducting inspections in the premises of such undertakings.
3. When carrying out supervision, the nature, scale and complexity of the risks inherent in the activity of the particular insurance or reinsurance undertaking shall be taken into account.
4. The supervisory authority shall exercise the rights granted by legal acts in a timely manner and in compliance with the principle of proportionality.
5. When fulfilling the assigned functions, the supervisory authority shall be obliged to take the following circumstances into account:
1) the fact that the insurance market participants are entitled to engage in activities in the states of the European Economic Area, which results in the need for closer cooperation at the European Union level;
2) the need of the states of the European Economic Area to harmonise the application and supervision of implementation of legal acts of the European Union and the national legal acts adopted on their basis.
6. In fulfilment of its functions, in the light of the available information and without prejudice to the purpose provided for in Article 196 of this Law, the supervisory authority shall be obliged to assess the possible impact of its decisions, in particular, the decisions taken in emergency situations, on the stability of the financial system of the states of the European Economic Area. In times of exceptional changes in the financial markets, the supervisory authority shall take into account the potential pro-cyclical effects of its respective decisions.
Article 198. Transparency and accountability of the activities of the supervisory authority
1. In its activities, the supervisory authority shall adhere to the principles of transparency and accountability; in fulfilling its supervisory functions, the supervisory authority must ensure the protection of confidential information obtained. The provisions of Article 43 of the Law on the Bank of Lithuania shall apply to the protection of information obtained by the supervisory authority for the purpose of supervision.
2. The supervisory authority, taking into account the legal acts of the European Union, shall ensure that the following information is made public and regularly updated on the website of the supervisory authority:
1) legal acts, drafts thereof, and recommendations governing insurance and reinsurance activities and distribution of insurance and reinsurance products;
2) criteria and methods of supervision of insurance and reinsurance activities;
3) aggregate statistical information on key aspects of the application of the prudential framework and statistical data on the market of distribution of insurance and reinsurance products;
4) information on the implementation in the Republic of Lithuania of the provisions of Directive 2009/138/EC and Directive (EU) 2016/97, which are implemented at the choice of a state of the European Economic Area;
5) objectives of supervision of insurance and reinsurance activities and the functions and activities of the supervisory authority in relation to the supervision of such activities.
Article 199. Supervisory process
1. The supervisory authority shall inspect and assess the strategies, processes and reporting procedures established by insurance and reinsurance undertakings to comply with the provisions of this Law and other legal acts. The inspection and assessment shall comprise the analysis of qualitative requirements relating to the management system of insurance and reinsurance undertakings, the analysis of risks that the undertakings concerned face or may face, and the analysis of the ability of the undertakings to evaluate those risks taking into account the environment in which the undertakings are operating.
2. The supervisory authority shall inspect and assess compliance with the requirements set by an insurance or reinsurance undertaking in respect of the following matters:
1) the management system;
2) the calculation of the technical provisions;
3) the solvency capital requirement and the minimum capital requirement;
4) investment;
5) own funds;
6) the full or partial internal model.
3. The supervisory authority shall have in place appropriate monitoring tools that enable it to identify a deteriorating financial situation in an insurance or reinsurance undertaking and to monitor how the situation is remedied.
4. The supervisory authority shall have in place appropriate measures and methods to inspect the management system of an insurance or reinsurance undertaking and assess new risks identified by the undertaking, which may have an impact on the soundness of the financial situation. The supervisory authority shall be entitled to request that an insurance or reinsurance undertaking improves and strengthens its management system and ensures its conformity with the requirements of legal acts.
5. The supervisory authority must assess the methods and practices of insurance and reinsurance undertakings designed to identify possible events or future changes in economic conditions that could have adverse effects on the financial situation of the undertaking concerned and assess the ability of the undertakings to withstand those possible events or future changes in economic conditions.
6. Upon the request of the supervisory authority, the insurance and reinsurance undertakings must remedy weaknesses or deficiencies identified in the supervisory process.
7. The inspections and assessments referred to in paragraphs 1, 2 and 5 of this Article shall be carried out by the supervisory authority on a regular basis.
8. The supervisory authority shall establish the minimum frequency and scope of those reviews and assessments having regard to the nature, scale, and complexity of the activities of the insurance or reinsurance undertaking concerned.
SECTION TWO
Competence of the supervisory authority
Article 200. Functions of the supervisory authority
When implementing the provisions of this Law, the supervisory authority shall perform the following functions:
1) issue licences for insurance and reinsurance activities, as well as other authorisations provided for in this Law and suspend or revoke them, include persons in the lists of insurance brokerage firms and reinsurance intermediaries and remove them from these lists;
2) observe, analyse, inspect and supervise in other ways the activities of insurance and reinsurance undertakings, insurance and reinsurance intermediaries, ancillary insurance intermediaries, branches of third country insurance or reinsurance undertakings and branches of third country insurance or reinsurance intermediaries, as well as their compliance with laws and other legal acts;
3) lay down the procedure for the registration and record-keeping of insurance policies;
4) submit recommendations to the Chamber of Insurance Brokers, insurance undertakings, and branches of third country insurance undertakings exercising control over the activities of insurance agents in order to ensure that the functions of the Chamber of Insurance Brokers, insurance undertakings, or branches of third country insurance undertakings related to the control of insurance agents are disclosed and comprehensible to the general public;
5) within the remit of its competence, represent the interests of the Republic of Lithuania at the institutions of the European Union and their working bodies;
6) cooperate with and engage in the activities of the European Insurance and Occupational Pensions Authority, and, in fulfilment of its own functions, take into account the guidelines and recommendations drawn up by the European Insurance and Occupational Pensions Authority and, in the event of a failure to take them into account, explain the reasons for the failure and immediately provide the European Insurance and Occupational Pensions Authority with information necessary for the fulfilment of its functions under Regulation (EU) No 1094/2010;
7) perform the functions of a single point of contact specified in Article 11(4) of Directive (EU) 2016/97 and responsible for providing information on the requirements of the legal acts of the Republic of Lithuania applicable to persons engaged in distribution of insurance and reinsurance products in the Republic of Lithuania;
8) perform other functions assigned to the competent authority by this Law, other legal acts of the Republic of Lithuania, Regulation (EU) 2019/2088 and Regulation (EU) 2020/852.
.
Article 201. Rights of the supervisory authority
1. In addition to other obligations and rights set out in this Law, the Law on the Bank of Lithuania, and other legal acts, the supervisory authority, in fulfilment of its functions, shall:
1) establish the procedure of insurance activities under insurance classes or the risks attributable thereto, the terms of the contracts of insurance against separate insurance risks, including compulsory insurance, and the requirements that the insurer must comply with when providing services to customers by means of communication;
2) apply to a court for repeal of decisions of the bodies of an insurance or reinsurance undertaking or an insurance brokerage firm in the cases set out in Article 2.82(4) of the Civil Code, as well as for invalidation of contracts concluded by an insurance or reinsurance undertaking or an insurance brokerage firm by reason of the said decisions;
3) be member of international institutions for the supervision of insurance or reinsurance undertakings, insurance or reinsurance intermediaries and other financial institutions;
4) in the event of a real threat that an insurance or reinsurance undertaking will become insolvent or the assets assigned to a branch of a third country insurance or reinsurance undertaking will become smaller than the obligations of the branch, oblige the insurance or reinsurance undertaking or the branch of a third country insurance or reinsurance undertaking intending to execute material contracts to obtain the approval of the supervisory authority;
5) in its supervision activities, introduce and use quantitative assessment measures that allow determining the ability of insurance or reinsurance undertakings to act under changes in economic conditions or in events that may have an adverse effect on the financial situation in future; also request that insurance or reinsurance undertakings carry out the respective assessments.
2. The supervisory authority, upon discovering or having grounds to suspect violations of the legal acts within the scope of its competence or deficiencies in the activities of an insurance undertaking, reinsurance undertaking, or insurance intermediary, also in the event of a threat to the stability and soundness of the activities of an insurance undertaking, reinsurance undertaking or insurance intermediary or to the interests of the public and/or the policyholders, insured persons, beneficiaries or injured third parties, shall give the following instructions binding the insurance undertaking, reinsurance undertaking or insurance intermediary under the procedure set out by the Law on the Bank of Lithuania:
1) to eliminate the violations of the legal acts or deficiencies within the time limit set out by the supervisory authority;
2) to suspend the provision of one or several insurance or reinsurance services or distribution services of insurance or reinsurance products;
3) to suspend or terminate the provision of one or several insurance or reinsurance services or distribution services of insurance or reinsurance products related to the sale of an insurance-based investment product;
4) to terminate the publication and provision to investors of the key investor information document inconsistent with the requirements set out in Regulation (EU) No 1286/2014 and publish a new key investor information document consistent with the requirements of legal acts;
5) in the cases set out in Articles 45 or 46 of this Law, to demand that an insurance or reinsurance undertaking or a branch of a third country insurance or reinsurance undertaking submits plans for the restoration of the financial situation and to set a time limit for the submission of the plans;
6) on the grounds established in Article 206 of this Law, to obligate an insurance undertaking or a branch of a third country insurance undertaking to transfer the rights and obligations under the insurance contracts within a time limit set by the supervisory authority;
7) to restore the state of play that existed prior to the violation of legal acts;
8) to provide additional information to the supervisory authority or provide the information required for the performance of supervisory functions more frequently than required by legal acts;
9) to publicly disclose additional information;
10) to carry out other measures or to refrain from carrying out certain measures in order to eliminate deficiencies or violations of legal acts.
3. Insurance and reinsurance undertakings and undertakings of insurance intermediaries must comply with the mandatory instructions set out in paragraph 2 of this Article within the time limits set out by the supervisory authority and immediately, but not later than on the next working day following the completion of the instruction, notify thereof the supervisory authority in writing.
4. The supervisory authority shall also exercise the rights set out in paragraph 2 of this Article in respect of a branch of a third country insurance or reinsurance undertaking or insurance intermediary established in the Republic of Lithuania.
5. The rights of the supervisory authority set out in paragraph 2 of this Article may also be applied with respect to insurance or reinsurance undertakings and insurance intermediaries of the states of the European Economic Area providing services in the Republic of Lithuania or with respect to the branches established in the Republic of Lithuania by these undertakings or insurance intermediaries where the suspected deficiencies or violations of legal acts are related to public order or public interests and/or interests of the policyholders, insured persons, beneficiaries or injured third parties.
Article 2011. Reporting on violations
The supervisory authority shall establish measures that encourage reporting on violations of the legal acts on distribution of insurance products and Regulation (EU) No 1286/2014. These measures must meet the following requirements:
1) special procedures must be in place for the receipt and assessment of reports on the said violations;
2) confidentiality of a person reporting violations must be ensured, except for the cases where such information must be disclosed in the cases and under the procedure provided by law;
3) personal data must be managed under the procedure set out in the legal acts regulating personal data protection;
4) appropriate protection from revenge, discrimination or other unlawful or unfair conduct against the staff whistle-blowers must be guaranteed.
Article 202. Repealed as of 15/06/2018.
Article 203. Repealed as of 15/06/2018.
Article 204. Sanctions
The supervisory authority shall impose the following sanctions:
1) publicly announce the violation (type and nature) of this Law and other legal acts the supervision of compliance whereof falls within the remit of the supervisory authority, the sanction imposed, the business name and code of legal persons who have committed violations, and/or the name and surname of natural persons who have committed violations;
2) notify of the violation of this Law and other legal acts the supervision of compliance whereof falls within the remit of the supervisory authority and instruct the violator to terminate the violation of the legal act within the set time limit;
3) impose fines set out by this Law;
4) temporarily suspend (restrict) the voting rights of a shareholder of an insurance or reinsurance undertaking for as long as the grounds for the suspension exist;
5) demand that the management or supervisory bodies of an insurance or reinsurance undertaking replace the supervisory board or a member thereof, the board or a member thereof, the manager, persons responsible for risk management, actuarial, compliance assessment and internal audit functions or other persons holding management positions within the time limit set by the supervisory authority;
6) demand that an insurance holding company or a mixed-activity holding company replace the supervisory board or a member thereof, the board or a member thereof, or the manager within the time limit set by the supervisory authority;
7) demand that a third country insurance or reinsurance undertaking replace the manager, persons responsible for risk management, actuarial, compliance assessment and internal audit functions or other persons holding management positions at a branch of a third country insurance or reinsurance undertaking established in the Republic of Lithuania within the time limit set by the supervisory authority;
8) demand the replacement of the liquidator, the chairman or a member of the liquidation commission, or the person responsible for the liquidation of a branch of a third country insurance or reinsurance undertaking established in the Republic of Lithuania within the time limit set by the supervisory authority;
9) seize, on the grounds set out in Article 207 of this Law, the assets of insurance or reinsurance undertakings and branches of third country insurance or reinsurance undertakings established in the Republic of Lithuania;
10) temporarily suspend the licence to engage in insurance activities, the licence to engage in reinsurance activities, the authorisation for insurance or reinsurance activities of a branch of a third country insurance or reinsurance undertaking or the rights conferred by them and temporarily prohibit an insurance, reinsurance or ancillary insurance intermediary from engaging in distribution of insurance or reinsurance products;
11) on the grounds specified in points 1, 2, 4, 5 and 6 of Article 20(2), Article 20(3), points 1, 2, and 4 to10 of Article 82(2), Article 82(3), and points 1, 2, 4 and 5 of Article 164(1) of this Law, revoke the licence to engage in insurance activities, the licence to engage in reinsurance activities, the authorisation for insurance or reinsurance activities of a branch of a third country insurance or reinsurance undertaking, remove the entity concerned from the list of insurance brokerage firms or the list of third country insurance intermediaries, and permanently prohibit an insurance or reinsurance intermediary or ancillary insurance intermediary from engaging in distribution of insurance or reinsurance products;
12) temporarily prohibit members of the management body of an insurance intermediary or an insurance undertaking from holding management positions in the insurance intermediary or insurance undertaking.
Article 205. Grounds and procedure for imposing sanctions
1. Except for the cases where Article 204 of this Law sets out the grounds for the imposition of a specific sanction, sanctions shall be imposed on at least one of the following grounds:
1) where insurance or reinsurance activities or distribution of insurance or reinsurance products are carried out without any right granted under the procedure set out by this Law, this right is restricted under this Law, or other actions or activities prohibited by this Law are carried out;
2) where the licence or authorisation specified in this Law has been obtained by submitting misleading information to the supervisory authority or by employing other unlawful means;
3) where legal acts of another state of the European Economic Area have been violated and the supervisory authority of another state of the European Economic Area has requested the supervisory authority to impose sanctions on a natural or legal person of the Republic of Lithuania;
4) where the conditions for insurance or reinsurance activities or distribution of insurance or reinsurance products have been breached;
5) where there has been a failure to adhere to the plan for the restoration of the financial situation of an insurance or reinsurance undertaking or plan for the restoration of the financial situation of another third country insurance or reinsurance undertaking approved by the supervisory authority under Article 45 of this Law;
6) where the structure of the group to which the insurance or reinsurance undertaking belongs precludes effective supervision;
7) where persons in control of an insurance or reinsurance undertaking; undertakings and persons participating in an insurance or reinsurance undertaking; members or head of the supervisory board or the board; persons responsible for risk management, actuarial, compliance assessment and internal audit functions; or other persons holding management positions in such insurance or reinsurance undertakings fail to meet the criteria set out in Article 22(5) of this Law;
8) where persons in control of a third country insurance or reinsurance undertaking; undertakings and persons participating in a third country insurance or reinsurance undertaking; members or manager of the supervisory board or the board; manager of a branch; persons responsible for risk management, actuarial, compliance assessment and internal audit functions; or other persons holding management positions fail to meet the criteria set out in Article 80 of this Law;
9) where persons in control of an insurance brokerage firm; undertakings and persons participating in an insurance brokerage firm; members or manager of the supervisory board or the board fail to meet the criteria set out in Article 162(1) of this Law; persons in control of an undertaking of third country insurance intermediary, undertakings and persons participating in a third country insurance intermediary, members of the supervisory and management bodies, and the manager of a branch fail to meet the criteria set out in Article 193 of this Law; persons specified in Article 1581 of this Law fail to meet the requirements set out in Article 1581(1) of this Law and/or are subject to a restriction to pursue the activities under Article 1581(2) of this Law; and/or the participation in the activities of an insurance brokerage firm by participants who hold more than 10% of the authorised capital and/or voting rights and by persons who have close links with the insurance brokerage firm prevent the supervisory authority from exercising effective supervision of the insurance brokerage firm;
10) where the repute of the members of the supervisory board, the board and the manager of an insurance holding company or a mixed-activity financial holding company is considered other than good or their qualification is inappropriate for ensuring sound prudential management;
11) where the financial situation of an insurance or reinsurance undertaking, an insurance brokerage firm, or a branch of a third country insurance or reinsurance undertaking, or a branch of a third country insurance intermediary deteriorates and where the abovementioned financial situation no longer meets the requirements set out in legal acts; where the activities of an insurance undertaking, a branch of a third country insurance undertaking, an insurance brokerage firm, or a branch of a third country insurance intermediary may infringe on the interests of the policyholders, insured persons, beneficiaries, or injured third parties; or where a threat of such a deterioration or infringement arises;
12) where shareholders of an insurance or reinsurance undertaking or the acquirers specified in Article 23 of this Law have or intend to have a negative effect on transparent, prudent and sound prudential management of the insurance or reinsurance undertaking;
13) where information specified in this Law and other legal acts the supervision of compliance whereof falls within the remit of the supervisory authority or information requested by the supervisory authority is not submitted within the set time limits or incomplete, incorrect or inaccurate information is provided;
14) where there is a failure to follow or properly follow mandatory instructions of the supervisory authority issued under Article 201 of this Law;
15) where the requirements set out in Regulation (EC) No 1060/2009 have been violated;
16) where the requirements set out in Regulation (EU) No 1286/2014 have been violated;
161) where the requirements set out in Regulation (EU) No 2019/2088 have been violated;
162) where the requirements set out in Articles 5 –7 of Regulation (EU) 2020/852 have been violated;
17) where inspections by the supervisory authority or persons authorised by it are hindered;
18) where standard terms and conditions of insurance contracts of an insurance undertaking, a branch of a third country insurance undertaking, or an insurance undertaking of a state of the European Economic Area fail to meet the requirements established by legal acts;
19) where an insurance or reinsurance undertaking or an insurance or reinsurance intermediary uses the services of distribution of insurance or reinsurance products provided by persons who do not have the right to engage in distribution of insurance or reinsurance products;
20) where other violations of this Law or other legal acts, the supervision of compliance whereof falls within the remit of the supervisory authority, are committed.
2. The procedure for imposing sanctions shall be set out by the Law on the Bank of Lithuania.
3. The supervisory authority shall be entitled, without prejudice to the provisions of Articles 45 and 46 of this Law, to take all the necessary measures to protect the interests of the policyholders under the insurance or reinsurance contracts where the financial situation of an insurance or reinsurance undertaking or a branch of a third country insurance or reinsurance undertaking established in the Republic of Lithuania has been deteriorating. The said measures must be proportionate to the level and duration of solvency deterioration.
4. When deciding on the imposition of an effective sanction for violations committed in the course of cross-border activities, the supervisory authority shall closely cooperate and coordinate its actions with supervisory authorities and other institutions of the Republic of Lithuania, of other states of the European Economic Area and of third countries.
Article 206. Compulsory transfer of rights and obligations under insurance contracts
1. If an insurance undertaking faces a real risk of insolvency or if there is a risk that the liabilities of a branch of a third country insurance undertaking will exceed the assets assigned to it, in order to protect the interests of the policyholders, insured persons, beneficiaries or injured third parties, the supervisory authority shall have the right to oblige the insurance undertaking or the branch of a third country insurance undertaking to transfer the rights and obligations under insurance contracts to entities intending to take them over.
2. In the cases set out in Articles 141(1) and 146(3) of this Law, the supervisory authority must oblige the entity concerned to transfer the rights and obligations under insurance contracts.
3. An agreement on the transfer of rights and obligations may not and shall not be subject to a resolution passed by the general meeting of shareholders, the supervisory board or the board of an insurance undertaking or any other approval or consent granted by these bodies or other persons. The agreement on the transfer of rights and obligations shall be signed by the manager of an insurance undertaking or the manager of a branch of a third country insurance undertaking.
4. An insurance undertaking or a branch of a third country insurance undertaking under an obligation to transfer the rights and obligations under insurance contracts must announce about the envisaged transfer and, if the authorisation of the supervisory authority obliges them to announce solely about the executed transfer, announce about the executed transfer in at least two national newspapers and announce about the transfer in another state of the European Economic Area where the insurance undertaking carries out its activities.
5. The policyholder who objects to the compulsory transfer of rights and obligations under insurance contracts shall have the right to terminate the insurance contract under the procedure set out in the insurance contract within one month from the transfer of rights and obligations.
6. Where a policyholder terminates the insurance contract in the case specified in paragraph 5 of this Article, the following shall be reimbursed to the policyholder:
1) in case of provision of non-life insurance services, the reimbursement shall cover the entire amount of insurance premiums paid for the period from the transfer of rights and obligations under the insurance contract until the expiry of the term provided for in the insurance contract;
2) in case of provision of life assurance services, where a life assurance contract has been concluded only against the risk of death, the reimbursement shall cover the entire amount of insurance premiums paid for the period from the transfer of rights and obligations under the insurance contract until the expiry of the term provided for in the insurance contract; where a life assurance contract related to capital accumulation has been concluded, the reimbursement shall cover the amount equal to the amount of technical provisions formed for the insurance contract of that policyholder on the day of the transfer of rights and obligations under the contract.
7. If the assets to cover the technical provisions of the undertaking transferring its rights and obligations are insufficient for satisfying the claims arising out of the insurance contracts, the supervisory authority shall be entitled to oblige the insurance undertaking to transfer a part of the obligations concerning the payment of the benefit, the repayment of the premium or, in case of provision of life assurance services, the payment of surrender value. In such a case, the supervisory authority obliging the entity concerned to transfer the rights and obligations must indicate the part of the benefit, premium and surrender value that must be paid by the entity accepting the rights and obligations under insurance contracts. The remaining part of the claims must be satisfied by the insurance undertaking which transfers the rights and obligations.
8. The supervisory authority obliging the entity concerned to transfer the rights and obligations must consult the supervisory authorities of other states of the European Economic Area specified in Article 49 of this Law.
9. The supervisory authority shall establish, in its legal acts, a detailed procedure for the implementation of the provisions of this Article.
Article 207. Seizure of assets
1. The supervisory authority shall have the right to seize the assets of an insurance or reinsurance undertaking or a branch of a third country insurance or reinsurance undertaking only on one of the following conditions:
1) failure to comply with the requirements for calculation of the technical provisions (Article 41 of this Law);
2) failure to comply with the solvency capital requirement or the minimum capital requirement (Articles 37 and 40 of this Law);
3) failure to submit or implement the plans for the restoration of the financial situation (Articles 45 and 46 of this Law);
4) failure to fulfil the obligation of the supervisory authority to transfer the rights and obligations under insurance contracts;
5) revocation of a licence to engage in insurance or reinsurance activities or an authorisation for insurance or reinsurance activities of a branch.
2. Upon establishing, or having grounds to suspect violations of legal acts or deficiencies in the activities of an insurance or reinsurance undertaking or a branch of a third country insurance or reinsurance undertaking, also in the event of a threat to the stability and soundness of the activities of an insurance or reinsurance undertaking or a branch of a third country insurance or reinsurance undertaking or the interests of the public, policyholders, insured persons, beneficiaries or injured third parties, the supervisory authority shall have the right mutatis mutandis to apply for temporary seizure of assets of persons by a court ruling under the procedure set out in Article 421 of the Law on the Bank of Lithuania. The applications of the supervisory authority regarding the seizure of assets shall be heard by the Vilnius Regional Administrative Court. The assets seizure act shall be signed by the head of the supervisory authority. The assets seizure act shall be registered under the procedure set out in the Law of the Republic of Lithuania on the Register of Property Seizure Acts.
3. The supervisory authority shall have the right to enter an action in court for the invalidation of the transaction of the seizure of assets.
Article 208. Fines
1. The supervisory authority shall impose the following fines:
1) fines on legal persons in the amount of up to 5 per cent of the annual gross income;
2) fines on managers of legal persons and on other natural persons in the amount of up to EUR 350,000; and fines for breach of requirements for the distribution of insurance-based investment products in the amount of up to EUR 700,000.
2. The annual gross income of a legal person used for the calculation of the fine shall be determined on the basis of the data of the latest annual financial statements drawn up/signed by the legal person. Where a legal person belongs to a parent undertaking within the meaning of Article 2(22) of the Law on the Supplementary Supervision of Entities in a Financial Conglomerate, the annual gross income used for the calculation of the fine shall consist of the income indicated in the latest consolidated annual financial statements drawn up/signed by the parent undertaking.
3. Where the violations listed in Article 205(1) of this Law result in illegally received income, other pecuniary advantage, illegally avoided losses or damage incurred, and the amount of such income, other pecuniary advantage, losses avoided or damage incurred, where it is possible to establish the said amount, exceeds the amounts of fines specified in paragraphs 1, 4 or 5 of this Article, the supervisory authority shall impose a fine in the amount of up to twice the amount of the illegally received income, other pecuniary advantage, losses avoided or damage incurred.
4. Where it is difficult or impossible to establish the annual gross income of a legal person, the supervisory authority shall impose on the legal person a fine in the amount of up to EUR 700,000 instead of the fine specified in point 1 of paragraph 1 of this Article.
5. Where the annual gross income of a legal person is less than EUR 1,000,000, the supervisory authority shall impose on the legal person a fine in the amount of up to EUR 100,000 instead of the fine specified in point 1 of paragraph 1 of this Article.
6. In the cases specified in Article 205(1)(14) of this Law, the supervisory authority shall impose a fine of up to 1% of the annual gross income for each day of failure to follow or properly follow a mandatory instruction, and in the cases where it is difficult or impossible to establish the annual gross income, the supervisory authority shall impose a fine of up to EUR 1,500.
7. Fines shall be calculated under the procedure set out in Article 43(3)of the Law on the Bank of Lithuania.
Article 209. Supervision of insurance or reinsurance undertakings of other states of the European Economic Area providing services or established in the Republic of Lithuania
1. Financial supervision of insurance or reinsurance undertakings of other states of the European Economic Area providing services in the Republic of Lithuania, or of branches of such undertakings established in the Republic of Lithuania shall be carried out by the supervisory authorities of respective states of the European Economic Area. Notwithstanding the above provision, the supervisory authority shall have the right to check whether the said entities breach public order while carrying out their activities in the Republic of Lithuania (Article 74(1) of this Law); the supervisory authority shall also have other rights and obligations set out in this Article.
2. The supervisory authority must notify the supervisory authority of another state of the European Economic Area where there are grounds to believe that the activities of insurance or reinsurance undertakings of another state of the European Economic Area providing services in the Republic of Lithuania and branches of insurance or reinsurance undertakings of the states of the European Economic Area established in the Republic of Lithuania may have an impact on the stable and sound financial situation of such undertakings.
3. The supervisory authority:
1) shall have the right to receive from an insurance or reinsurance undertaking or a branch of an insurance or reinsurance undertaking of another state of the European Economic Area information necessary for carrying out the supervisory functions. The information shall be provided in Lithuanian and/or English;
2) shall have the right to carry out inspections of a branch established in the Republic of Lithuania under the procedure set out in Article 212 of this Law;
3) shall have the right to participate in the inspection of a branch of an insurance and reinsurance undertaking of another state of the European Economic Area established in the Republic of Lithuania where such inspection is carried out by the supervisory authority of the respective state of the European Economic Area;
4) shall have the right to impose sanctions specified in paragraph 4 of this Article on the grounds set out in points 13 and 20 of Article 205(1) of this Law, also shall have the right to impose sanctions in the event of deterioration of the financial situation of an insurance or reinsurance undertaking of another state of the European Economic Area, in the event where the activities of an insurance undertaking of another state of the European Economic Area may result in infringement of the interests of the policyholders, insured persons, beneficiaries or injured third parties or in the event of a threat of such deterioration or infringement;
5) must impose sanctions specified in points 3 and 5 of paragraph 4 of this Article upon receipt of a request from the supervisory authority of another state of the European Economic Area, without prejudice to other provisions of this Article;
6) shall be entitled to give recommendations and mandatory instructions to an insurance and reinsurance undertaking or of another state of the European Economic Area or a branch thereof concerning their activities in the Republic of Lithuania.
4. The supervisory authority may impose the following sanctions on an insurance or reinsurance undertaking of another state of the European Economic Area:
1) warn of the violations of this Law and other legal acts the supervision of compliance whereof falls within the remit of the supervisory authority and instruct the violator to terminate the violation of the legal act within the set time limit and prevent its reoccurrence;
2) demand the replacement of a manager of a branch of an insurance or reinsurance undertaking of another state of the European Economic Area;
3) under the procedure set out in Article 207(2) of this Law and at the request of the supervisory authority of another state of the European Economic Area, seize the assets, located in the Republic of Lithuania, of an insurance or reinsurance undertaking of another state of the European Economic Area ;
4) impose the penalties set out in this Law;
5) temporarily or permanently prohibit an insurance or reinsurance undertaking of another state of the European Economic Area from engaging in activities in the Republic of Lithuania.
5. Where an insurance or reinsurance undertaking of another state of the European Economic Area violates legal acts of the Republic of Lithuania applicable to it, fails to submit information to the supervisory authority, or is engaged in risky activities which may be detrimental to the interests of the policyholders, insured persons, injured third parties and beneficiaries, the supervisory authority shall primarily impose the sanction set out in point 1 of paragraph 4 of this Article. If the violations are not eliminated within the time limits and in the manner set out by the supervisory authority, the supervisory authority must inform thereof the supervisory authority of another state of the European Economic Area and request that the latter supervisory authority undertakes all measures permissible under legal acts to eliminate the violations.
6. If it is discovered that the measures provided for in paragraph 5 of this Article are insufficient to eliminate the violations, the supervisory authority, having warned the supervisory authority of another state of the European Economic Area in advance, shall have the right to impose sanctions provided for in points 2, 4, and 5 of paragraph 4 of this Article. In the event of urgent necessity, where there is a direct threat to the interests of the policyholders, insured persons, injured third parties and beneficiaries or to proper functioning of the markets of insurance or reinsurance products, the supervisory authority shall impose these sanctions disregarding the provisions of paragraph 5 of this Article. The supervisory authority may apply to the European Insurance and Occupational Pensions Authority for help under Article 19 of Regulation (EU) No 1094/2010.
7. A sanction shall be chosen having regard to the nature of the violation for which it is to be imposed, the consequences of the violation and the sanction on the insurance or reinsurance undertaking of another state of the European Economic Area and the impact on the safety, stability and soundness of the insurance system of the Republic of Lithuania. The supervisory authority shall notify the insurance or reinsurance undertaking of another state of the European Economic Area of the sanction in writing and provide a thorough justification for the imposition of the sanction.
Article 210. Supervision of insurance, reinsurance or ancillary insurance intermediaries of another state of the European Economic Area providing services in or established in the Republic of Lithuania
1. Supervision of the activities of insurance, reinsurance, or ancillary insurance intermediaries of another state of the European Economic Area providing services in the Republic of Lithuania or of branches of such intermediaries established in the Republic of Lithuania shall be carried out by the supervisory authority of the respective state of the European Economic Area. Notwithstanding this provision, the supervisory authority shall supervise compliance with the requirements set out for informing the policyholders and for running other activities in the Republic of Lithuania and shall have other rights and obligations specified in this Article.
2. The supervisory authority shall have the right to:
1) obtain information from an insurance, reinsurance, or ancillary insurance intermediary of another state of the European Economic Area or a branch established by it;
2) carry out inspections of a branch of an insurance, reinsurance, or ancillary insurance intermediary of another state of the European Economic Area under the procedure set out in Article 212 of this Law;
3) participate in the inspection of a branch of an insurance, reinsurance, or ancillary insurance intermediary of another state of the European Economic Area where such inspection is carried out by the supervisory authority of the respective state of the European Economic Area;
4) impose sanctions provided for in paragraph 3 of this Article on the grounds set out in Articles 205(1)(113) and 205(1)(20) of this Law; also impose the said sanctions in the event of deterioration of the financial situation of a branch of an insurance, reinsurance, or ancillary insurance intermediary of another state of the European Economic Area; in the event where the branch of an insurance, reinsurance, or ancillary insurance intermediary no longer meets the requirements of legal acts; in the event of violation of the interests of the policyholders, insured persons, beneficiaries or injured third parties; in the event of a threat of such deterioration or violation, or in the event where risky activities of an insurance, reinsurance, or ancillary insurance intermediary of another state of the European Economic Area or a branch thereof may be detrimental to the interests of the policyholders, insured persons, injured third parties and beneficiaries;
5) issue recommendations and mandatory instructions to an insurance, reinsurance, or ancillary insurance intermediary of another state of the European Economic Area or a branch established by it concerning their activities in the Republic of Lithuania.
3. The supervisory authority shall have the right to impose the following sanctions on an insurance, reinsurance, or ancillary insurance intermediary of another state of the European Economic Area or a branch thereof:
1) warn an insurance, reinsurance, or ancillary insurance intermediary of another state of the European Economic Area of the violation of this Law and other legal acts the supervision of compliance whereof falls within the remit of the supervisory authority and instruct the violator to terminate the violation of the legal act within the set time limit and prevent its reoccurrence;
2) demand replacement of the manager or the staff engaged in insurance or reinsurance product distribution in a branch of an insurance, reinsurance, or ancillary insurance intermediary of another state of the European Economic Area established in the Republic of Lithuania;
3) impose the fines set out in this Law;
4) temporarily or permanently prohibit the distribution of insurance or reinsurance products of another state of the European Economic Area in the Republic of Lithuania.
4. The supervisory authority must notify the supervisory authority of another state of the European Economic Area where there are grounds to believe that an insurance, reinsurance, or ancillary insurance intermediary of another state of the European Economic Area which provides services or has established a branch in the Republic of Lithuania violates the requirements of the applicable legal acts of the Republic of Lithuania, so that the supervisory authority of another state of the European Economic Area undertakes all the measures permissible under legal acts to eliminate the violations.
5. Where it transpires that the measures provided for in paragraph 4 of this Article are insufficient or have not been taken and an insurance, reinsurance or ancillary insurance intermediary continues to pursue the activities which may harm the interests of the policyholders, insured persons, injured third parties and beneficiaries or proper functioning of the markets of insurance or reinsurance products, the supervisory authority, having warned the supervisory authority of another state of the European Economic Area in advance, shall have the right to impose sanctions provided for in points 2, 3 and 4 of paragraph 3 of this Article. In the event of urgent necessity, where there is a direct threat to the interests of the policyholders, insured persons, injured third parties and beneficiaries or to proper functioning of the markets of insurance or reinsurance products, the supervisory authority shall impose these sanctions disregarding the provisions of paragraph 4 of this Article. The supervisory authority may apply to the European Insurance and Occupational Pensions Authority for help under Article 19 of Regulation (EU) No 1094/2010.
6. The supervisory authority shall choose a sanction having regard to the nature of the violation for which it is imposed and the consequences of the violation and the sanction on an insurance, reinsurance, or ancillary insurance intermediary of another state of the European Economic Area or a branch thereof. The supervisory authority shall immediately notify the insurance, reinsurance, or ancillary insurance intermediary of another state of the European Economic Area, the supervisory authority of another state of the European Economic Area, the European Insurance and Occupational Pensions Authority and the Commission of the sanction imposed.
7. Where the primary place of business of an insurance, reinsurance, or ancillary insurance intermediary of another state of the European Economic Area from where the main business is managed is located in the Republic of Lithuania, the supervisory authority may agree with the supervisory authority of that state to exercise the supervision of the activities of the insurance, reinsurance or ancillary insurance intermediary.
8. The supervisory authority may, after notifying the supervisory authority of the home state, apply all the necessary measures provided for in this Law in order to protect the rights of the policyholders, insured persons, injured third parties and beneficiaries where the activities of the distributor may infringe consumer rights in the Republic of Lithuania and where the activities of a distributor of insurance products of another state of the European Economic Area are entirely or mainly carried out on the territory of the Republic of Lithuania and the said distributor pursues activities in the Republic of Lithuania by exercising the freedom to provide services or the freedom of establishment only in order to avoid the application of the legal provisions which would apply if the distributor of insurance products had a place of residence or registered office in the Republic of Lithuania and. In relation to this matter, the supervisory authority may also apply to the European Insurance and Occupational Pensions Authority for help under Article 19 of Regulation (EU) No 1094/2010.
Article 211. Insurance undertakings of third countries which are members of the World Trade Organisation
1. In carrying out supervision of the activities of an insurance undertaking of a third country which is member of the World Trade Organisation, the supervisory authority shall be entitled:
1) to obtain from a third country insurance undertaking the information necessary for the performance supervisory functions;
2) to impose sanctions provided for in paragraph 2 of this Article on the grounds set out in Articles 205(1)(13) and 205(1)(20) of this Law and where the interests of the policyholders, insured persons, beneficiaries and injured third parties are violated.
2. The supervisory authority may impose the following sanctions on a third country insurance undertaking:
1) warn of the violation of this Law and other legal acts and instruct the violator to terminate the violation within the specified time limit and to prevent its reoccurrence;
2) temporarily or permanently prohibit a third country insurance undertaking from concluding insurance contracts with natural or legal persons of the Republic of Lithuania.
Article 212. Inspections by the supervisory authority
1. The supervisory authority shall have the right to organise and carry out inspections in order to verify compliance with this Law and the legal acts adopted on the basis thereof and for other purposes set out in this Law.
2. Repealed as of 15/06/2018.
3. The supervisory authority shall have the right to carry out inspections of the following entities:
1) insurance and reinsurance undertakings, undertakings of insurance or reinsurance intermediaries, and insurance holding companies of the Republic of Lithuania;
2) branches of insurance and reinsurance undertakings and branches of insurance and reinsurance intermediaries of the Republic of Lithuania established in another state of the European Economic Area, with prior notice to the supervisory authority of the respective state and enabling the participation of representatives of this authority in the inspection;
3) branches of insurance and reinsurance undertakings or branches of insurance and reinsurance intermediaries of another state of the European Economic Area established in the Republic of Lithuania, provided the inspection is carried out at the request of the supervisory authority of the respective state or at the initiative of the supervisory authority with prior notice given to the supervisory authority of the respective state of the European Economic Area;
4) branches of third country insurance and reinsurance undertakings or branches of third country insurance and reinsurance intermediaries established in the Republic of Lithuania;
5) persons with whom an insurance or reinsurance undertaking, an insurance or reinsurance undertaking of another state of the European Economic Area or a branch of a third country insurance or reinsurance undertaking has entered into outsourcing contracts;
6) persons unlawfully engaged in the activities of an insurance or reinsurance undertaking or distribution of insurance or reinsurance products, or who are associated with a violation of this Law or legal acts adopted on the basis thereof;
7) other undertakings specified in this Law.
4. Requirements for the inspections carried out by the supervisory authority shall be set out in Article 421 of the Law on the Bank of Lithuania. When carrying out an inspection, employees of the supervisory authority shall have the rights set out in the Law on the Bank of Lithuania and in this Law.
5. The rights of the supervisory authority to carry out inspections of branches of insurance and reinsurance undertakings of the Republic of Lithuania, branches of insurance or reinsurance intermediaries of the Republic of Lithuania and other persons of the Republic of Lithuania established in third countries shall be specified in the cooperation agreements with the supervisory authorities of the third countries concerned.
6. Having notified the supervisory authority, the supervisory authority of another state of the European Economic Area shall be entitled to inspect a branch of an insurance or reinsurance undertaking of that state established in the Republic of Lithuania, a branch of an insurance or reinsurance intermediary of that state of the European Economic Area established in the Republic of Lithuania or an undertaking contracted by the insurance or reinsurance undertaking under an outsourcing contract and shall have the same rights in respect of such a branch and an undertaking as the supervisory authority in respect of the entities under inspection. The supervisory authority shall have the right to participate in such an inspection.
7. The supervisory authority may apply to the European Insurance and Occupational Pensions Authority for help under Article 19 of Regulation (EU) No 1094/2010 where the supervisory authority is prevented from exercising the right to arrange an inspection or participate in an inspection in the cases provided for in point 2 of paragraph 3 and in paragraph 6 of this Article.
8. The European Insurance and Occupational Pensions Authority may exercise the right to participate in an inspection where it is carried out by two or more supervisory authorities.
Article 213. Insurance and reinsurance rules and other information
1. The supervisory authority shall not be entitled to request that insurance or reinsurance undertakings submit, for prior approval or regularly, insurance or reinsurance rules or other descriptions of the terms and conditions of the contracts and documents, non-life insurance and reinsurance premium rates or information of an increase therein, and actuarial information used for the calculation of non-life insurance and reinsurance premium rates and/or technical provisions.
2. In case of provision of life assurance services, the supervisory authority shall be entitled to request that insurance or reinsurance undertakings regularly submit actuarial information used for the calculation of insurance and reinsurance premium rates and/or technical provisions. A request to submit the aforementioned information cannot constitute a prerequisite for insurance activity.
3. The supervisory authority shall not be entitled to request that insurance or reinsurance undertakings of other states of the European Economic Area providing services in or established in the Republic of Lithuania submit, for prior approval or regularly, insurance or reinsurance rules or other terms and conditions of the contracts as well as documents, insurance and reinsurance premium rates or information of an increase therein, and actuarial information used for the calculation of non-life insurance and reinsurance premium rates and/or technical provisions.
4. The supervisory authority shall be entitled to request that insurance undertakings of other states of the European Economic Area providing services in or established in the Republic of Lithuania submit insurance rules or other terms and conditions of the contracts and documents with a view to assessing if they meet the applicable requirements established in the legal acts of the Republic of Lithuania. A request to submit the aforementioned information cannot constitute a prerequisite for insurance or reinsurance activities. The supervisory authority shall be prohibited from setting out regular submission of the aforementioned information.
5. Exceptions to the application of the provisions of paragraphs 1 to 4 of this Article to compulsory insurance and health insurance shall be set out by this Law and other legal acts.
SECTION THREE
COOPERATION WITH THE COMMISSION, THE EUROPEAN IINSURANCE AND OCUPATIONAL PENSIONS AUTHORITY AND THE SUPERVISORY AUTHORITIES OF OTHER STATES OF THE EUROPEAN ECONOMIC AREA
Article 214. Cooperation on supervision
1. The supervisory authority must closely cooperate with the Commission and the supervisory authorities of other states of the European Economic Area on the improvement of supervision of and regulation of insurance and reinsurance and distribution of insurance and reinsurance products.
2. The supervisory authority must inform the Commission of any major difficulties arising in the application of the provisions of legal acts of the Republic of Lithuania adopted on the basis of directives of the European Union and, together with the Commission and other supervisory authorities of the states of the European Economic Area, analyse the emerging problems in order to find an appropriate solution thereto.
3. The supervisory authority must inform the Commission on the following:
1) type and number of cases of refusal to submit documents to the supervisory authority of another state of the European Economic Area under Articles 68(3) and 69(4) of this Law;
2) type and number of sanctions imposed on insurance undertakings of other states of the European Economic Area;
3) under Article 22(2) of Directive (EU) 2016/97, notify the Commission of the provisions of legal acts of the Republic of Lithuania which are more stringent than those set out in Directive (EU) 2016/97.
4. The supervisory authority must inform the supervisory authority of another state of the European Economic Area on the following:
1) activities of insurance undertakings in that state of the European Economic Area providing, at the request of the supervisory authority of the state of the European Economic Area, aggregate statistical data on the activities;
2) circumstances relevant to fulfilment of the functions of the supervisory authority of that state of the European Economic Area in relation to licensing of a subsidiary insurance or reinsurance undertaking of the Republic of Lithuania or assessment of repute, qualification and experience of persons holding management positions in such an undertaking.
5. The supervisory authority shall inform the European Insurance and Occupational Pensions Authority on the following:
1) on issuance or withdrawal of the licence to engage in activities, to be communicated under the procedure set out by the European Insurance and Occupational Pensions Authority;
2) on type and number of cases of refusal to submit documents to the supervisory authority of another state of the European Economic Area under Articles 68(3) and 69(4) of this Law, to be communicated under the procedure set out by the European Insurance and Occupational Pensions Authority;
3) on type and number of sanctions imposed on insurance undertakings of other states of the European Economic Area, to be communicated under the procedure set out by the European Insurance and Occupational Pensions Authority;
4) annually, on whether insurance products placed on the Lithuanian market provide long-term guarantees and on the long-term investment strategies used by of insurance and reinsurance undertakings;
5) annually, on the number of insurance and reinsurance undertakings that apply the matching adjustment, volatility adjustment, extension of the period of restoration of the financial situation under Article 45(4) of this Law or transitional measures for risk-free interest rates and technical provisions;
6) annually, on the impact of the symmetric adjustment mechanism applied to the matching adjustment, volatility adjustment, and capital requirement for equity risk as well as on the impact of transitional measures for risk-free interest rates and technical provisions on the financial situation of insurance and reinsurance undertakings at the level of all insurance and reinsurance undertakings and at the level of an unspecified individual insurance or reinsurance undertaking;
7) annually, on the impact of the symmetric adjustment mechanism applied to the matching adjustment, volatility adjustment, and capital requirement for equity risk on investment behaviour of insurance and reinsurance undertakings and on whether such measures lead to an excessive decrease in the capital requirements;
8) annually, on the impact of the extension of the period of restoration of the financial situation under Article 45(4) of this Law on the efforts of insurance and reinsurance undertakings to restore the level of eligible own funds covering the solvency capital requirement or reduce the underwriting risk with a view to ensuring compliance with the solvency capital requirement;
9) where insurance and reinsurance undertakings apply transitional measures to risk-free interest rates and technical provisions, the supervisory authority shall annually provide information on their compliance with the procedure set out by the supervisory authority concerning gradual implementation plans and the prospects for their smaller dependence on the transitional measures, as well as information on the measures employed or envisaged by the undertakings and the supervisory authority under the requirements of legal acts;
10) annually, on the average capital add-on that had to be held by all insurance and reinsurance undertakings and separately by life assurance and non-life insurance undertakings, undertakings providing life assurance and non-life insurance services and reinsurance undertakings during the previous calendar year, expressed in percent, against the solvency capital requirement and percentage allocation of the capital add-on into the aforementioned categories of undertakings, taking into account the grounds for the capital add-on requirement set out in points 1, 2 and 3 of Article 48(1) of this Law;
11) annually, on the number of insurance and reinsurance undertakings subject to reduced regular reporting requirements for supervision purposes and on the solvency capital requirements, insurance premiums, technical provisions and assets of such undertakings, expressed in percent, against the solvency capital requirements, insurance premiums, technical provisions and assets of all insurance and reinsurance undertakings;
12) annually, on the number of classes subject to reduced requirements for regular reporting for supervision purposes and the solvency capital requirements, insurance premiums, technical provisions and assets of such classes, expressed in percent, against the total of solvency capital requirements, insurance premiums, technical provisions and assets of all classes;
13) concurrently with the public announcement, under Article 204(1) of this Law, on the sanction imposed; annually, provide a summary of all the sanctions imposed for violations of insurance product distribution activities; under the procedure set out by the European Insurance and Occupational Pensions Authority, inform on all the sanctions unannounced under Article 433(15) of the Law on the Bank of Lithuania and on appeals against the decisions to impose sanctions and the results of consideration of these appeals;
14) under Article 22(2) of Directive (EU) 2016/97, on the provisions of legal acts of the Republic of Lithuania which are more stringent than those set out in Directive (EU) 2016/97.
Article 215. Information on compulsory insurance
1. The supervisory authority must inform the Commission about the compulsory insurance in the Republic of Lithuania and indicate the following information:
1) legal rules regulating compulsory insurance;
2) information which must be included in the compulsory insurance policy.
2. Compulsory insurance policies and other certificates of insurance undertakings of other states of the European Economic Area shall be recognised in the Republic of Lithuania provided their content complies with the requirements announced by the Commission in the Official Journal of the European Union.
Article 216. Information related to persons of third countries
1. The supervisory authority must inform the Commission and the supervisory authorities of other states of the European Economic Area about the following:
1) issuance of a business licence to an insurance or reinsurance undertaking which, directly or indirectly, is a subsidiary of a third country legal person or persons. In this case, the supervisory authority must also provide information on the structure of the group to which the subsidiary insurance or reinsurance undertaking belongs;
2) shares of an insurance or reinsurance undertaking, acquired by a third country legal person or persons, where this undertaking becomes a subsidiary insurance or reinsurance undertaking;
3) public authorities competent to issue certificates of good repute, qualification and experience of a person;
4) submission to the supervisory authority of documents relevant to assessment of good repute, qualification and experience of persons related to licensing of an insurance or reinsurance undertaking.
2. The supervisory authority must notify the Commission and the European Insurance and Occupational Pensions Authority of any major obstacles and difficulties encountered by insurance or reinsurance undertakings of the Republic of Lithuania when establishing themselves or carrying out their activities in third countries.
21. The supervisory authority must inform the Commission of any major obstacles and difficulties encountered by insurance or reinsurance intermediaries or ancillary insurance intermediaries of the Republic of Lithuania when establishing themselves or carrying out insurance or reinsurance distribution activities in third countries.
3. Upon the request of the Commission, the supervisory authority must temporarily suspend the following procedures:
1) granting of authorisations to a branch of a third country insurance or reinsurance undertaking for operation in the Republic of Lithuania or issuance of a business licence to an insurance or reinsurance undertaking which, directly or indirectly, is a subsidiary of a third country legal person or persons;
2) granting of authorisations for acquisition of shares of an insurance or reinsurance undertaking to a third country legal person or persons which, following the acquisition, will directly or indirectly own a subsidiary insurance or reinsurance undertaking in the Republic of Lithuania.
4. The procedures provided for in paragraph 3 of this Article shall be suspended for a period not exceeding three months; however, the supervisory authority must extend this term upon the request of the Commission.
5. The provisions set out in paragraph 3 of this Article shall not apply where subsidiary insurance or reinsurance undertakings of third country legal persons established in other states of the European Economic Area or subsidiaries of these insurance or reinsurance undertakings establish a subsidiary insurance or reinsurance undertaking in the Republic of Lithuania or intend to acquire shares of an insurance or reinsurance undertaking in the Republic of Lithuania.
6. At the request of the Commission, the supervisory authority must inform the Commission about:
1) all applications for an authorisation to engage in insurance or reinsurance activities of branches of third country insurance or reinsurance undertakings in the Republic of Lithuania or applications for issuance of business licences to insurance undertakings which, directly or indirectly, are subsidiary of a third country legal person or persons;
2) applications for acquisition of shares of an insurance or reinsurance undertaking by a third country legal person or persons who, following the acquisition, will directly or indirectly own a subsidiary insurance or reinsurance undertaking in the Republic of Lithuania.
7. The supervisory authority must notify the European Insurance and Occupational Pensions Authority of the following:
1) the structure of the group to which the subsidiary insurance or reinsurance undertaking belongs, where the business licence has been issued to an insurance or reinsurance undertaking which, directly or indirectly, is a subsidiary of a third country legal person or persons;
2) shares of an insurance or reinsurance undertaking acquired by a third country legal person or persons, where this undertaking becomes a subsidiary insurance or reinsurance undertaking.
Article 217. Transfer of rights and obligations under insurance or reinsurance contracts
1. Where the supervisory authority of another state of the European Economic Area requests the supervisory authority for its opinion regarding the intention of an insurance or reinsurance undertaking supervised by the supervisory authority of another state of the European Economic Area to transfer the rights and obligations under insurance or reinsurance contracts to an insurance or reinsurance undertaking of the Republic of Lithuania, the supervisory authority must, within three months, notify of its objection or consent to the transfer of rights and obligations.
2. The supervisory authority shall object to the transfer of rights and obligations under insurance or reinsurance contracts where it may be concluded that, after the transfer of rights and obligations, the accepting undertaking will not satisfy the solvency capital requirements.
Article 218. Sanctions
1. Upon receipt of information from the supervisory authority of another state of the European Economic Area that an insurance or reinsurance undertaking or an insurance or reinsurance intermediary of the Republic of Lithuania engaged in activities in another state of the European Economic Area has violated the legal acts of that state or represents a threat to the interests of the policyholders, insured persons, beneficiaries or third parties, the supervisory authority must impose the sanctions provided for in this Law and notify the supervisory authority of another state of the European Economic Area of the sanctions imposed.
2. Upon receipt of information from the supervisory authority of another state of the European Economic Area about restrictions on the management, use and disposal of assets imposed on an insurance or reinsurance undertaking of that sate and a request to impose equivalent restrictions in the Republic of Lithuania, the supervisory authority must adopt a decision on the imposition of these restrictions (seizure of assets) in the Republic of Lithuania.
3. Upon receipt of information from the supervisory authority of another state of the European Economic Area about the revocation of a business licence of an insurance or reinsurance undertaking of that state, the supervisory authority must adopt a decision to prohibit this insurance undertaking from engaging in activities in the Republic of Lithuania.
Article 219. Intervention measures
1. Intervention measures which are applied by the authorities of other states of the European Economic Area and which will or may affect natural and legal persons of the Republic of Lithuania shall be fully recognised in the Republic of Lithuania without any additional formalities even if the intervention measures of this kind are not provided for in the Republic of Lithuania or the application of these intervention measures in the Republic of Lithuania is associated with the fulfilment of certain additional conditions and these conditions have not been fulfilled.
2. The intervention measures applied by other states of the European Economic Area shall come into force in the Republic of Lithuania at the same time as they become effective in other states of the European Economic Area.
3. Upon receipt of information from the supervisory authority of another state of the European Economic Area about the adopted decision to apply an intervention measure, the supervisory authority shall have the right, taking into consideration the possible effect of such a measure on natural and legal persons of the Republic of Lithuania, to announce the information on the website of the supervisory authority.
Article 220. Liquidation and bankruptcy
1. Upon receipt of information from the supervisory authority of another state of the European Economic Area about the decision to liquidate an insurance or reinsurance undertaking of another state of the European Economic Area or to institute bankruptcy proceedings against it, the supervisory authority shall have the right, taking into consideration the possible effect of the decision on natural and legal persons of the Republic of Lithuania, to announce the information on the website of the supervisory authority.
2. The decision to liquidate an insurance or reinsurance undertaking of another state of the European Economic Area and the branches thereof in the Republic of Lithuania shall be fully recognised in the Republic of Lithuania without any additional formalities and shall come into force at the same time as it becomes effective in the relevant state of the European Economic Area.
3. A person appointed by a public authority or another entity of another state of the European Economic Area to the position referred in Article 157(1) of this Law, who intends to engage in activities in the Republic of Lithuania, must have a translation into Lithuanian of the decision on the appointment. Legalisation and other similar formalities shall not be required.
4. Persons specified in paragraph 3 of this Article or their representatives appointed under the procedure established by legal acts of another state of the European Economic Area shall have the right to perform in the Republic of Lithuania all the actions which they have the right to perform in that state of the European Economic Area.
CHAPTER IX
FINAL PROVISIONS
Article 221. Engagement in life assurance and non-life insurance activities
Operating non-life insurance undertakings which have valid life assurance contracts shall exercise the rights and perform the obligations under such contracts until the expiry thereof. Upon the entry into force of this Law, the parties to these insurance contracts may not change the period of validity of the life assurance contract concluded before the entry into force of this Law by establishing a longer period of validity of the life assurance contract. Operating non-life insurance undertakings with valid life assurance contracts must act in compliance with the requirements of the supervisory authority regarding separate administration of life assurance and non-life insurance activities.
Article 222. Monetary unit
The amounts specified in euro in this Law, the indexation of which is provided for in legal acts of the European Union, as well as the amount specified in Article 126(3) of this Law shall be indexed by the supervisory authority taking into account the European Index of Consumer Prices announced by the Eurostat, unless the legal acts of the European Union provide otherwise.
Article 223. Repealed.
I promulgate this Law passed by the Seimas of the Republic of Lithuania.
PRESIDENT OF THE REPUBLIC ROLANDAS PAKSAS
Annex to
Law on Insurance
of the Republic of Lithuania
LEGAL ACTS OF THE EUROPEAN UNION IMPLEMENTED BY THIS LAW
1. European Parliament and Council Directive 95/26/EC of 29 June 1995 amending Directives 77/780/EEC and 89/646/EEC in the field of credit institutions, Directives 73/239/EEC and 92/49/EEC in the field of non-life insurance, Directives 79/267/EEC and 92/96/EEC in the field of life assurance, Directive 93/22/EEC in the field of investment firms and Directive 85/611/EEC in the field of undertakings for collective investment in transferable securities (Ucits), with a view to reinforcing prudential supervision, as last amended by Directive 2009/65/EC of the European Parliament and of the Council of 13 July 2009;
2. Council Regulation (EC) No 2157/2001 of 8 October 2001 on the Statute for a European company (SE), as last amended by Council Regulation (EU) No 517/2013 of 13 May 2013;
3. Directive 2002/13/EC of the European Parliament and of the Council of 5 March 2002 amending Council Directive 73/239/EEC as regards the solvency margin requirements for non-life insurance undertakings;
4. Directive 2002/87/EC of the European Parliament and of the Council of 16 December 2002 on the supplementary supervision of credit institutions, insurance undertakings and investment firms in a financial conglomerate and amending Council Directives 73/239/EEC, 79/267/EEC, 92/49/EEC, 92/96/EEC, 93/6/EEC and 93/22/EEC, and Directives 98/78/EC and 2000/12/EC of the European Parliament and of the Council, as last amended by Directive (EU) 2019/2034 of the European Parliament and of the Council of 27 November 2019;
5. Council Directive 2004/113/EC of 13 December 2004 implementing the principle of equal treatment between men and women in the access to and supply of goods and services;
6. Directive 2005/1/EC of the European Parliament and of the Council of 9 March 2005 amending Council Directives 73/239/EEC, 85/611/EEC, 91/675/EEC, 92/49/EEC and 93/6/EEC and Directives of the European Parliament and of the Council 94/19/EC, 98/78/EC, 2000/12/EC, 2001/34/EC, 2002/83/EC and 2002/87/EC in order to establish a new organisational structure for financial services committees, as last amended by Directive 2009/65/EC of the European Parliament and of the Council of 13 July 2009;
7. Regulation (EC) No 1060/2009 of the European Parliament and of the Council of 16 September 2009 on credit rating agencies, as last amended by Regulation 2017/2402 of the European Parliament and of the Council of 12 December April 2017;
8. Directive 2009/103/EC of the European Parliament and of the Council of 16 September 2009 relating to insurance against civil liability in respect of the use of motor vehicles, and the enforcement of the obligation to insure against such liability;
9. Directive 2009/138/EC of the European Parliament and of the Council of 25 November 2009 on the taking-up and pursuit of the business of Insurance and Reinsurance (Solvency II) as last amended by Directive (EU) 2019/2177 of the European Parliament and of the Council of 18 December 2019;
10. Directive 2011/89/EU of the European Parliament and of the Council of 16 November 2011 amending Directives 98/78/EC, 2002/87/EC, 2006/48/EC and 2009/138/EC as regards the supplementary supervision of financial entities in a financial conglomerate;
11. Directive 2013/34/EU of the European Parliament and of the Council of 26 June 2013 on the annual financial statements, consolidated financial statements and related reports of certain types of undertakings, amending Directive 2006/43/EC of the European Parliament and of the Council and repealing Council Directives 78/660/EEC and 83/349/EEC, as last amended by Directive 2014/102/EU of the European Parliament and of the Council of 7 November 2014;
12. Regulation (EU) No 1286/2014 of the European Parliament and of the Council of 26 November 2014 on key information documents for packaged retail and insurance-based investment products (PRIIPs), as last amended by Regulation (EU) 2019/1156 of the European Parliament and of the Council of 20 June 2019;
13. Directive (EU) 2016/97 of the European Parliament and of the Council of 20 January 2016 on insurance distribution, as last amended by Commission Delegated Regulation (EU) 2019/1935 of 13 May 2019;
14. Regulation (EU) 2019/2088 of the European Parliament and of the Council of 27 November 2019 on sustainability-related disclosures in the financial services sector, as last amended by Regulation (EU) 2020/852 of the European Parliament and of the Council of 18 June 2020;
15. Regulation (EU) 2020/852 of the European Parliament and of the Council of 18 June 2020 on the establishment of a framework to facilitate sustainable investment, and amending Regulation (EU) 2019/2088.