Costa Rican President Oscar Arias and the executive president of the National Insurance Institute (INS), Guillermo Constenla, signed last July 22 the Insurance Market Regulatory Law, which effectively ends 84 years of state monopoly in the insurance market. It is estimated that the guidelines complementing this law will ready next September.
But even before regulations are in place, private insurers - such as U.S.-based Pan American Life - are already announcing their interest in participating in the new Costa Rican insurance market. The INS itself has been modifying its service strategy for the past few months in anticipation of the market opening, offering new types of insurance policies for vehicles and announcing its interest to do business in other Central American countries.
The new insurance legislation allows for regulation of insurance industry, creating an insurance superintendent’s office, strengthening INS, and decentralizing operations of the Firefighters Corps - which has been a unit of INS in the past.
“As soon as this law is published, the insurance market will open to competition as indicated by the will of Costa Ricans, of our legislators, and of this government,” Arias said. “From the beginning, we were very clear in saying that certain protections were tying us to a past that was very good, but which is, above all, past. If the INS is to persist and endure, if it’s to be stronger and more efficient every day, it should compete and must have the tools to do it. That is, precisely, what we are seeking with this law.”
Constenla, meanwhile, said that “the INS has been preparing for some time now for competition, and we believe that we have the ability to remain afloat in an open market and be a leader in it, and so we continue working out the details while the superintendent’s office is established and we are informed of the date when other insurance companies can begin offering services here.”
Establishment of a regulatory authority for the insurance market will be done by the National Financial System Supervisory Council (Conassif), which will determine the date when new companies can join the market once they have met all requirements - which is expected to be no later than September of this year.
INS officials indicated that the insurance superintendent’s office will make the private businesses’ work easier and will provide confidence and security for consumers. Additionally, the government will create an insurance policy holder ombudsman.
The guidelines will also establish rules regarding capitalization requirements for companies that wish to operate in Costa Rica, plus it will set minimum technical provisions to guarantee solvency of the insurers and clear rules regarding the work of insurance brokers.
While allowing foreign companies to operate here, the law also lets INS to do business abroad through strategic alliances or formation of societies. Additionally, the government lifts some financial charges currently placed on INS and allow the state company to invest its earnings so that it can better conduct its business plans, both in the commercial and social arenas.
“Apparently this law will allow for the transition from a monopolized insurance market to one of competition to be a valuable experience for all Costa Ricans, who will be the most benefited from the change,” Constenla said.
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