Insurance law in Italy - 10 things to know

Publication | April 2013

1. A European jurisdiction

Under EU Treaties, Italy recognises the possibility for EEA insurers and intermediaries to passport their licences and operate in Italy under the freedom of services or the freedom of establishment regimes, although subject to the supervision of the home-country authority.

Italian Insurance law is largely harmonised with other European jurisdictions as a consequence of the application and implementation of numerous EU Directives, in particular with regard to insurance mediation, financial products, auto insurance and, in relation to regulation and supervision, solvency margins, technical reserves and authorisation processes for insurance licences, portfolio transfers or the acquisition of an insurance business or entity.

Certain rules and practices are, however, unique to the Italian market, particularly in respect of auto insurance, which represents a very large share of the total insurance business in Italy.

2. Insurance contracts

Material information must be fully and correctly disclosed to the insurer by the insured at the time of entering into or renewing an insurance contract. A policy is void in the event of intentional or grossly negligent misrepresentation or non-disclosure on the part of the insured that is likely to have materially affected the assessment of risk.

In relation to casualty policies, statutory provisions compel insurers to cover legal expenses relating to a covered claim, up to 25 percent in excess of the applicable limit.

3. Insurance intermediaries

Italian intermediaries are classified into three main categories:

  • agents (acting on behalf of insurers)
  • brokers (acting on behalf of the insured) and
  • banks or financial institutions (acting under the direction of the insurer and having joint and several liability with the same).

Each of these intermediaries may appoint sub-intermediaries.

No exclusivity can be granted by a non-life insurer to an insurance intermediary; insurance intermediaries (both life and non-life) are, however, free to collaborate and may therefore refer their clients to other intermediaries.

Banks and financial institutions can only distribute "standardised" insurance products (with some exceptions) and cannot therefore assist the client in relation to the negotiation of a tailor-made insurance policy.

4. Motor insurance

Third party liability (TPL) motor insurance is mandatory for all car owners in Italy and the Italian TPL auto insurance sector is highly regulated. Insurers have an obligation to offer TPL auto insurance to all persons requiring coverage. Consequently, insurers also have an obligation to calculate a tariff for each potential client, which must be prepared by an actuary consistently with the insurer's technical data based on the statistics of the previous five years, or market data, if the insurer’s statistics are not reliable.

A large number of provisions also apply to many other aspects of motor TPL contracts, including their duration, publication of the premiums, pre-contractual information and claims management, as well as reports to be made to the authorities for anti-fraud purposes.

Since the European Court of Justice has recognised that this legislation is to be considered of general benefit, the above-mentioned obligations and rules apply to both Italian and non-Italian insurers, unless they limit their "Italian" motor TPL licences to fleets only.

5. CPI business

In relation to insurance products connected to loans, intermediaries must be transparent as regards commissions received and are prevented from being, directly or indirectly, the beneficiaries of indemnity rights.

Furthermore, if an insurance guarantee is required for the grant of a loan, intermediaries (i.e. banks or financial institutions offering the loan) can not compel the client to purchase an insurance policy mediated by them. In addition, they are obliged to offer the client at least two alternative life insurance policies, or to accept a life policy selected by the client.

6. Insurance portfolio transfers

The consent of policyholders is not required for insurance portfolio transfers, although insured parties must be notified of the transfer and may withdraw from their contracts if the assignee is a non-Italian insurer.

According to the Italian regulator, an insurance portfolio must (for these purposes) include policies which are still generating premiums and can not be made up of claims only.

7. Reinsurance

EEA and non-EEA reinsurers may underwrite risks in Italy under the freedom of services regime - not having an establishment in Italy - without any previous authorisation and with no requirement to post a specific amount as collateral. However, the Italian regulator, for the purposes of the solvency margin of Italian insurers, may disregard reinsurance contracts entered into with a non EEA reinsurer, based on the solvency of the latter.

8. Financial Products

Financial products issued by insurance companies and marketed in Italy are subject to the same rules which apply to financial products issued by banks and financial intermediaries under the MIFID Directive and are subject to the supervision of the financial market authority; for certain transactions, a prospectus must be filed with such authority beforehand.

In relation to both index linked policies and capitalisation contracts, Italian insurers may not transfer to the client the risk of default relating to an issuer of the asset covering the insurer's reserves.

9. Outsourcing

Outsourcing of insurance activities is allowed, although an insurance company cannot become a so-called “empty shell”. Underwriting cannot be outsourced, but a call centre may underwrite risks on behalf of insurance companies. Outsourcing of essential and important functions must be notified to the regulator beforehand and may not in any case compromise the stability of the company or the quality of its services, nor increase its operational risks.

10. Pre-contractual information

Except in the case of cover for large risks (as defined in EU Directives), insurers must provide clients with pre-contractual information, which is contained in an information booklet. The contents and format of this booklet are determined by the regulator. In addition to the terms and conditions, the booklet must contain a summary of the insurance contract, with requirements that may differ on the basis of the type of contract.