Europe
In this chapter of our Annual Insurance Review 2019, we look at the main developments in 2018 and expected issues in 2019 in Europe.
The Netherlands - Kennedy Van Der Laan
Key developments in 2018
With regard to regulation and enforcement action, sanctions was the key topic in the Dutch market in 2018. The Dutch supervisory authority, the Dutch Central Bank, actively engaged and questioned Dutch insurers as well as Dutch branch offices of EU insurers on their compliance with the Dutch Sanctions Act. This reflects the Dutch Central Bank’s focus on the Dutch sanctions regulations and we expect regulatory enforcement action to follow.
With regard to the law on avoidance (annulment), the High Court handed down a decision relating to an insurer’s “deviating acceptance policy”. This is where an insurer wishes to annul a policy when its policyholder does not satisfy a specific acceptance criterion, which other insurers would not insist on. The court ruled that such insurer can only do so it if can demonstrate the policyholder was aware of or should have known about this specific acceptance criterion before entering into the insurance.
What to look out for in 2019
From 1 January 2019, certain surviving relatives of deceased victims of accidents, medical errors or violent crimes will be entitled to compensation of emotional loss. This will be a new head of loss and the amounts of compensation will vary from €12,500 to €20,000 (depending on surviving relatives’ personal circumstances), and will be payable by the liable party. This new act comes into force on 1 January 2019 and applies to harmful events taking place after that date.
The Netherlands is becoming an important jurisdiction for collective claims, and there is a bill being discussed by the House of Representatives that might result in a full class action regime. At the moment, an interest group can obtain a court finding of (for example) breach of duty but still require follow-on claims by each claimant individually relying on that generic finding. The new proposal will give the interest group the opportunity to recover damages in a collective action, with the right for claimants to opt out. It is not yet known when the act will come into force.
Lithuania - Glimstedt
Key developments in 2018
In 2018, the Supreme Court of Lithuania handed down several decisions that developed the law on directors and officers liability. The Supreme Court ruled that the standard by which directors are judged in their discharge of fiduciary duties is measured against the “business judgment rule”. In other words, there is a presumption that the directors acted on an informed basis and in good faith when making the business decisions.
This presumption can be rebutted only if the claimant (a company itself or its creditor) proves that: (i) the director had personal financial interest in a transaction; (ii) that he/she acted ultra vires and in breach of conflict of interest; or (iii) that harmful effect of his/her decision was obvious. Accordingly, the courts should be slow to interfere with legitimate business decisions – although where a company is de facto insolvent, the directors must then act conservatively and give priority to the interests of the company’s creditors, rather than to the interests of the company itself.
What to look out for in 2019
There has been a 15% growth in the Lithuanian insurance industry in 2018, and it is expected that the same trend will continue in 2019. Premium income in 2018 is expected to be over €1bn. As in 2018, the largest commercial risks will be covered by international insurance companies (rather than local ones), mostly from other EU countries.
As a result of pending cases before the Supreme Court, we expect there will be clarification of the principle of the utmost good faith at the pre-contractual stage – in particular, how the innocent non-disclosure clauses and severability language, common in the directors and officers wordings used by international insurers, interplays with Lithuanian insurance law.
Turkey - Ercin Bilgin Bektasoglu
Key developments in 2018
2018 saw a number of cases of direct action against liability insurers, particularly under directors and officers, comprehensive crime and professional indemnity policies. The right to bring such direct actions was introduced as part of the Turkish Commercial Code – specifically, article 1478 stipulates that the party suffering loss may request indemnification of the loss directly from liability underwriters within the limitation period applicable to the insurance contract, and up to the insured sum.
What to look out for in 2019
In addition to the increase in the frequency of direct actions, we anticipate the claimants in those actions will also claim interim payments under article 1427 of the code. Insurers are required to complete their investigations within three months of the loss and if they fail to do so then they can be liable to pay at least 50% of the loss. We expect these provisions will be further tested by the courts – early indications suggest there is not yet an established practice for such advance payments, particularly where the insurer can argue there is insufficient evidence relating to liability and quantum.
In addition to the Turkish Commercial Code, the other source of Turkish insurance law is the General Conditions approved by the Treasury and published by the General Directorate of Insurance. There are about 54 General Conditions, each relating to specific types of insurance. 2019 will see the publication of General Conditions for directors and officers policies, and this will be an important development for underwriters of such policies.
France – HMN
Key developments in 2018
In June 2018, the Cour de Cassation (French Supreme Court) reversed its earlier position regarding the validity and enforceability of an endorsement that is not signed by the policyholder. The previous position was that the non-signed endorsement was not enforceable, notwithstanding any extrinsic evidence that the policyholder had agreed to the endorsement. Now, the Cour de Cassation considers the lack of signature of the endorsement is not an obstacle to its application and, by extension, such endorsements are also enforceable against third parties who have rights under the policy.
The Cour de Cassation’s position is seemingly inconsistent with the ACPR, the French Financial Authority. The ACPR has found an insurer to be subject to disciplinary sanctions when endorsements are not signed by both parties. As a result of this apparent inconsistency, it seems the Cour de Cassation ruling allows an insurer who is potentially subject to a fine for a regulatory breach to nevertheless enforce that endorsement against that insured or a third party.
What to look out for in 2019
The fast development of personal transport devices is causing potential insurance issues. Paris has seen the introduction of electric scooters, which can be hired through a smartphone app and have speeds of up to 15 miles per hour. There is no competency requirement, so a complete novice can use these scooters – and it will not be long before we see injuries and property damage claims, which will then beg questions around the responsive insurance products.
To the extent these scooters are deemed to be motor vehicles, they will be subject to compulsory motor insurance. Clearly, this will come as a surprise to the casual users – most of whom are young adults who may not have their own motor policies and may not be insured under a household policy. We are sure this point will be clarified in 2019.
Download our full Annual Insurance Review 2019 for more insights.