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Regulatory Work:
Can an Israeli insurer acquire reinsurance from a foreign reinsurer?
There is no prohibition on local Israeli companies which prevent them from reinsuring with any reinsurers in the world. The only element which is reviewed by the regulators is the rating of such reinsurer and the rating company's name. The said rating is for the following purposes:
· The Israeli insurer's Board of Directors, has the duty and the liability to determine, at least once a year, its exposure policy to its reinsurers, inter alia, according to the foreign reinsurer's financial quality (e.g.: according to its international rating like of S&P).
· The Israeli insurer has to report to the Commissioner of Insurance, in a special form, once a year, about the management of its reinsurance exposure which should also relate to their rating.
· For the capital requirements according to the Israeli Insurance Control (Business) Law - 1981 (hereinafter: the Control Law).
Can a foreign reinsurer conduct reinsurance business in Israel?
The Control Law, provides under section 14(a) that -
"An insurer who carries on insurance business mainly outside of Israel and carries only reinsurance business in Israel will, for the purpose of the Law, not be regarded as carrying on insurance business unless such insurer is a company incorporated in Israel."
Namely, in order to conduct reinsurance business in Israel, the foreign insurer does not need a license from the Israeli Commissioner of Insurance.
To whom does the Insurance Control Law apply?
The provisions of the Insurance Control law apply to entities which are engaged in insurance business in Israel.
Section 1 to the Insurance Control Law defines the term "Insurance Business" as follows:
"Insurance Business" means entering into insurance contracts by way of business...; for this purpose, "entering into a contract" includes offering to enter into a contract and also entering into a contract otherwise than for the purpose of gain".
There is no definition to the term "Insurance Contract" in the Insurance Control Law. However, Section 1 to the Insurance Contract Law - 1981 defines the term "Insurance Contract" as follows:
"An insurance contract is a contract between an insurer and an insured which obligates the insurer, in consideration of premiums paid, to pay insurance benefits to the beneficiary upon the occurrence of the event insured against"
Therefore, in order to check whether a special transaction is subject to the provisions of the Control Law, we should scrutinize the various characteristics of the transaction and examine whether the Insured's actions fall within the scope of "entering into insurance contracts":
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