Financial News: Termination of a Foreign Insurance Organization’s Branch Activities

In the event of a violation by a foreign organization of the legislation of the Russian Federation, the Bank of Russia revokes its license and makes a decision to terminate the accreditation of its branch.

Information about the review of a foreign organization’s license is published on the Bank of Russia’s website. Additionally, stakeholders and other persons are notified about this through the publication of information by the foreign organization in periodical printed editions, posting it on its official website, as well as by sending SMS notifications or messages via email.

After the withdrawal of the foreign organization’s insurance license, insurance protection under insurance contracts remains in effect for another 45 calendar days. This means that if an insured event occurs during this period, the client of the foreign insurance organization has the right to report the event and will be entitled to receive compensation in accordance with the terms of the insurance contract.Also, during the specified period, the policyholder has the right to terminate the insurance contract early, which entails the return to them of part of the insurance premium (proportional to the unexpired term of the contract) or, if it concerns a life insurance contract, the payment of the surrender value.

Contracts of civil liability insurance for vehicle owners remain effective regardless of the revocation of the license from the foreign insurance organization. Such contracts provide for the payment of compensation at the expense of the professional association of insurers.

Simultaneously with the license revocation, the Bank of Russia appoints temporary administration for the foreign organization’s branch.

The functions of the temporary administration are performed by ASV. The temporary administration identifies creditor claims, establishes the sufficiency of the guarantee deposit funds for satisfaction, makes a decision on the necessity of payments from the guarantee deposit for satisfaction of creditor claims, and other matters.

The list of claims by persons entitled to payment is formed by the temporary administration and is subject to closure 45 days after the revocation of the foreign organization’s license. Until this deadline expires, creditors have the right to submit their claims containing demands and supporting documents to the foreign organization (temporary administration of the foreign organization).Within 20 calendar days after the closure of the list of claims, the temporary administration sends it to the ASV with an indication of the amount of claims, bank account details, and other information necessary for the transfer of funds to the creditors of the foreign organization.

Payments from the guarantee deposit funds are directed to the DIA:

• to creditors under insurance contracts (reinsurance) – regarding insurance payments for insured events that have occurred, as well as in connection with the return of part of the insurance premium in the event of early termination of contracts;
• to the professional association of vegetable growers – in connection with the implementation of compensation payments to them;
• to credit organizations – in part for the payment of remuneration under the special bank account agreement.

Satisfaction of creditors’ claims of a foreign organization shall be carried out within 30 calendar days from the date of completion of the formation of the list of claims in the following order:

1. primarily– requirements for insured persons, regarding which the obligation of a foreign organization to pay insurance compensation under life insurance contracts providing for the survival of insured persons to a certain age or term has arisen;
2. in the second place– requirements of insured persons or beneficiaries under life insurance contracts and other types of personal insurance;
3. in third place– requirements of insurers and beneficiaries under civil liability insurance contracts for causing harm to life or health, requirements for compensation payments in excess of damage compensation or instead of damage compensation;
4. for the fourth time– requirements of insurers and beneficiaries under contracts of civil liability insurance for causing harm to the property of third parties and under contracts of property insurance;
5. in fifth place– requirements of the professional association of gardeners in connection with the implementation of compensation payments;
6. in sixth place– requirements of credit organizations regarding the payment of remuneration under the special bank account agreement.

In case of insufficient funds in the guarantee deposit to satisfy the claims of persons in one queue, the funds are distributed among such persons proportionally to the sums and number of claims included in the list of claims.

If the funds of the guarantee deposit of one branch of a foreign organization are insufficient to satisfy creditors’ claims, the DIA may use the funds of another branch of the same foreign organization.

After settlements with ASV creditors, copies of documents confirming the satisfaction of claims (partial satisfaction of claims) of creditors are sent to the address of the foreign organization and the Bank of Russia. In the case of partial satisfaction of creditors’ claims, they have the right to apply to the foreign organization for full satisfaction of their claims.