1 Legal framework

1.1 Which legislative and regulatory provisions govern the insurance sector in your jurisdiction?

The Italian insurance field is primarily regulated by:

  • Articles 1882–1932 of the Italian Civil Code;
  • Legislative Decree 209 of 7 September 2005 (the Code of Private Insurance Companies); and
  • the regulations of the Italian Insurance Supervisory Authority (IVASS).

1.2 Which bilateral and multilateral instruments on insurance have effect in your jurisdiction?

At an international level, the insurance field is regulated by various multilateral instruments. They include:

  • Directive 2016/97/EU on insurance distribution, which is aimed at harmonising national provisions concerning insurance and reinsurance distribution;
  • the Solvency II Directive (2009/138/EC), which harmonised the prudential framework for insurance companies; and
  • Directive 2009/103/EC on motor insurance.

1.3 Which bodies are responsible for enforcing the applicable laws and regulations? What powers do they have?

The Italian Insurance Supervisory Authority (IVASS) exercises supervisory powers over:

  • insurance and reinsurance companies;
  • insurance groups;
  • financial conglomerates;
  • entities that perform functions that are partly included in the operational cycle of companies; and
  • insurance and reinsurance intermediaries.

Such powers concern:

  • assets and liabilities;
  • financial and technical controls over corporate governance and shareholdings (so-called ‘micro-prudential supervision'); and
  • the system's stability (so-called ‘macro-prudential supervision').

IVASS also has:

  • authorisation powers (ie, the power to approve the business of insurance and reinsurance companies); and
  • inspection powers, also in collaboration with other supervisory authorities of the European Union.

It also keeps the register of insurance and reinsurance intermediaries, and promotes good practices among market participants.

In the exercise of its supervisory functions, IVASS has regulatory powers concerning the implementation of the Code of Private Insurance Companies and of directly applicable EU provisions, as well as regulations for the implementation of recommendations, guidelines and other provisions issued by the European Insurance and Occupational Pensions Authority.

1.4 What is the regulators' general approach in regulating the insurance sector?

IVASS endeavours to guarantee an adequate protection of policyholders by promoting the prudent management of insurance and reinsurance companies, and their transparency and correctness towards clients. It also seeks to ensure the stability of the financial system and markets.

2 Insurance contracts

2.1 What are the main types of insurance available in your jurisdiction?

In Italy, insurance contracts fall within one of two macro sectors:

  • life insurance; or
  • insurance against damages (or ‘non-life insurance').

Both of these sectors include various types of contracts, distinguished on the basis of the risk insured. Examples include:

  • under the life insurance category, insurance in the event of death; and
  • under the non-life insurance category, motor insurance and health insurance.

2.2 Are all insurance contracts regulated? What terms do they typically include?

The life and non-life insurance sectors are respectively regulated under Articles 1882 and following and Articles 1919 and following of the Civil Code. The Code of Private Insurance Companies also sets out some specific rules concerning insurance contracts.

However, the content of insurance contracts is not strictly regulated and the parties can modify the policy's clauses to achieve the purpose of the contract. That said, as they are considered to enjoy a position of strength with respect to policyholders, insurance companies are subject to specific duties relating to:

  • bargaining;
  • the specific approval of certain contractual clauses; and
  • the drafting and submission of clear insurance product information documents.

The terms that are typically included relate to the following:

  • the insured person;
  • the object of the guarantee;
  • the policy period;
  • the policy limit;
  • the premium;
  • deductibility (if any);
  • retroactivity (if any); and
  • risks excluded from the insurance.

2.3 What are the formal and documentary requirements for conclusion of an insurance contract?

In order to be proven, an insurance contract must be executed in writing. Moreover, any clauses which provide for unfair treatment of the consumer must be specifically undersigned by the latter in order to be valid.

Insurance companies and intermediaries must also provide the insured with a pre-contractual information document, which sets out the essential information needed to understand how the policy works before the insured subscribes to it. The document briefly illustrates the main characteristics of the proposed insurance product and helps the client to make an informed purchase.

2.4 What are the procedural requirements for conclusion of an insurance contract?

The insurance contract is subject to the general rules laid down in the Civil Code regarding the formation of contracts by mutual agreement. This means that the contract proposal, which must be drawn up clearly and comprehensively by the insurer, must be signed for acceptance by the policyholder. The signed text must correspond in full to the contract proposal.

Generally, insurance companies issue policies based on standardised general terms and conditions.

2.5 What are the respective obligations and liabilities of insurer and insured, both on concluding an insurance contract and during its term? What are the consequences of any breach?

The insured is obliged to pay the premium. The first premium must be paid in advance and, if periodic, at the beginning of each insurance period.

In case of non-payment or delay, for the non-life insurance sector, protection is suspended:

  • until the first premium has been paid; or
  • after 15 days for all premiums subsequent to the first.

In the life insurance sector, in case of non-payment or delay, the insurer may take action to recover payment of the first premium within six months of the due date; while for subsequent premiums, the contract is terminated by law after 15 days.

Moreover, the insured must:

  • report a claim by any means to the insurer within three days;
  • comply with the duty of salvation – that is, act diligently to avoid the claim or reduce its consequences; otherwise, he or she will lose the right to compensation or suffer a reduction in the indemnity; and
  • at the time of signing the contract, describe without reticence or inaccuracy the risk which he or she intends to insure.

The insurer has:

  • duties relating to transparency, pre-contractual information and exhaustive drafting of the contract; and
  • an obligation to pay compensation when a claim is made.

3 Making a claim

3.1 What are the formal and documentary requirements for making a claim?

There are no formal or documentary requirements to make a claim. In particular, pursuant to Article 1913 of the Civil Code, the insured must notify the claim to the insurer within three days of its occurrence.

However, insurance contracts often include special clauses concerning the terms, methods and subjects on which a claim should be made. These often include the delivery of written notice to the broker by email, registered mail or fax.

3.2 What are the procedural requirements for making a claim?

Please see question 3.1.

3.3 On what grounds can the claim be denied? How can the insured challenge the denial of claim?

There are many grounds on which a claim can be refused, depending on the type and scope of the insurance contract. In particular, the insurer might argue that the claim is outside the object/scope of the policy or arose outside of the policy's period of effectiveness.

Special attention should be paid with regard to so-called ‘claims made' policies, which provide cover when a claim is made against the policyholder during the policy period. In such cases, the date of the facts from which the claim originated may be irrelevant.

The insured can challenge the denial by sending a complaint to the Italian Insurance Supervisory Authority (IVASS). However, IVASS cannot intervene on the merits of the contractual relation; therefore, the only effective way to obtain payment of the indemnity by the insurance company is to file an application with judicial bodies.

3.4 How can third parties make a claim?

Please see question 3.1.

4 Form and structure of insurers

4.1 What types of insurance companies are typically found in your jurisdiction?

In Italy, insurance companies can be established in the form of:

  • a joint stock company (Società per azioni);
  • a cooperative company (Società cooperativa);
  • a mutual insurance company (Società di mutua assicurazione);
  • a European company; or
  • a European cooperative company.

Both Italian and foreign companies can provide insurance services under certain conditions.

Generally, insurance companies cannot provide insurance products in both the life and non-life sectors.

4.2 How are these insurance companies typically structured and funded?

Italian insurance companies must have their general and administrative management established in Italy.

They must also have funds of not less than:

  • €2.5 million for non-life insurance companies;
  • €3.7 million for life insurance companies; or
  • €6.2 million, or the sum of the amounts in the first and second bullets above, for insurers that provide both life and non-life insurance.

4.3 Are there any restrictions on foreign ownership of insurance companies?

The main restrictions on foreign ownership concern the purchase of shareholdings which result in a change of control of the relevant company or the acquisition of a qualified shareholding. In such cases, the purchase is subject to prior authorisation by the Italian Insurance Supervisory Authority, aimed at ascertaining:

  • whether the investment will guarantee the prudent management of the company;
  • the quality of the potential buyer;
  • the financial soundness of the proposed acquisition; and
  • the possible effects of the transaction with regard to the protection of policyholders.

5 Authorisation

5.1 What authorisations are required to provide insurance services in your jurisdiction? What activities do they cover?

Insurance activity in Italy is subject to the prior authorisation of the Italian Insurance Supervisory Authority (IVASS). Authorisation is not required for EU companies which carry out their activities under the freedom to provide services regime.

Authorisation is granted for the specific life or non-life sectors for which it is requested and covers all activities that fall within those sectors.

Authorisation is valid both for Italy and for all other EU member states, pursuant to the rules on the establishment and freedom to provide services regime.

5.2 What requirements must be satisfied to obtain authorisation?

In addition to the requirements discussed in question 5.1, the following requirements, among others, also apply:

  • Qualifying shareholders must meet honourableness requirements;
  • The insurance company must demonstrate that it will be able to comply with the corporate governance system set out under Italian law;
  • The persons who perform administrative, management and control functions must meet requirements of professionalism, honourableness and independence; and
  • There must be no close ties between the company or the subjects of the group and other subjects that may prevent the effective exercise of supervisory functions.

5.3 What is the procedure for obtaining authorisation? How long does this typically take?

The company must submit an application for authorisation to IVASS, enclosing the relevant documentation and information, and including the programme of activities – a document which sets out in full the company's operational characteristics. The application should be sent to vigilanza.prudenziale@pec.ivass.it.

If the outcome of the preliminary investigation is positive, IVASS will issue authorisation within 90 days of submission of the complete application.

The insurance company can commence operations only once it has been registered in the Register of Insurance Companies.

6 Regulatory capital and liquidity

6.1 What minimum capital requirements apply to insurance companies in your jurisdiction?

Please see question 4.2.

6.2 What liquidity requirements apply to insurance companies in your jurisdiction?

Insurance companies must have sufficient own funds to cover the solvency capital requirement. This is determined in such a way as to ensure that all quantifiable risks to which the insurance company is exposed are considered, according to specific rules set out by the Italian and European law. It must cover at least the following risks:

  • underwriting risk;
  • market risk;
  • credit risk; and
  • operational risk.

7 Supervision of insurance groups

7.1 What requirements apply with regard to the supervision of insurance groups in your jurisdiction?

Groups of insurance companies are supervised by the Italian Insurance Supervisory Authority (IVASS) in collaboration with other relevant authorities (national and foreign). IVASS has supplementary supervisory powers over financial conglomerates and prudential control powers over national and cross-border insurance groups, pursuant to the new regulatory framework introduced by the EU Solvency II Directive. Insurance group supervision is also pursued through the appointment of colleges of supervisors, which aim to:

  • enhance the efficiency and effectiveness of the supervision of cross-border groups; and
  • reinforce cooperation between the supervisory authorities of various countries with regard to the exchange of information, planning and coordination of operational activities.

8 Reporting, governance and risk management

8.1 What key disclosure requirements apply to insurance companies in your jurisdiction?

Insurance companies must provide the Italian Insurance Supervisory Authority (IVASS) with the information necessary to enable IVASS to carry out prudential control and supervision. The information provided must include elements sufficient to assess:

  • the system of corporate governance adopted by the company;
  • the activities it performs;
  • the principles applied to evaluate the company's solvency;
  • the risks to which it is exposed and the risk management system; and
  • its capital structure, capital requirements and capital management.

The information should further be sufficient to enable IVASS to take all appropriate decisions arising from the exercise of its supervisory functions and powers.

8.2 What key reporting requirements apply to insurance companies in your jurisdiction?

Pursuant to the EU Solvency II Directive, insurance companies must submit to IVASS each year a regular supervisor report, containing data on the main company parameters. The volume of information that must be transmitted is significant and relates to all important aspects of the business of an insurer.

Moreover, pursuant to European Central Bank (ECB) regulations, insurance companies must report statistical data to the ECB concerning insurance assets and liabilities.

8.3 What key governance requirements apply to insurance companies in your jurisdiction?

The corporate governance system is regulated by IVASS Regulation 2018/38, which sets out, among other things, the rules on:

  • the core functions of corporate governance (ie, risk management, regulatory compliance review and internal audit);
  • group corporate governance; and
  • remuneration regulations.

Italian law requires that the persons who carry out administrative, management and control functions, as well as those who carry out fundamental functions within the company:

  • meet requirements of professionalism, honourableness and independence;
  • meet criteria of competence and correctness; and
  • devote the necessary time for the good performance of their tasks so as to ensure the prudent management of the insurance company.

Pursuant to the Code of Private Insurance Companies, the corporate governance system must at least:

  • guarantee an adequate and transparent organisational structure, with a clear allocation and separation of the responsibilities, functions and bodies of the company;
  • provide for an effective information transmission system; and
  • provide for the internal audit, compliance, risk management and actuarial functions.

The corporate governance system must be subject to periodic internal review at least annually.

8.4 What key risk management requirements apply to insurance companies in your jurisdiction?

The risk management requirements system is regulated by IVASS Regulation 2018/38, which sets out rules concerning the internal control system and the risk management system, among other things.

In most cases, in order to carry out the tasks relating to the internal audit and risk management system, the administrative body must establish an internal audit and risk committee, composed of non-executive directors, the majority of whom must be independent. The committee has advisory and proposing functions, and is responsible for carrying out fact-finding investigations. It assists the administrative body with:

  • the determination of the guidelines for the internal control and risk management system;
  • the periodic assessment of the adequacy and effective functioning of the risk management system; and
  • the identification and management of the main risks.

Pursuant to the Code of Private Insurance Companies, the risk management system must:

  • include, at least, the strategies, processes and reporting procedures necessary to identify, measure, monitor, manage and conduct ongoing reporting on the risks at the individual and aggregate levels to which the company is or may be exposed, as well as the interdependencies among those risks;
  • take into account the roles of the persons who carry out functions of administration, management and control or other key functions; and
  • consider the risks to be included in the calculation of the solvency capital requirement (see question 6.2).

9 Senior management

9.1 What requirements apply with regard to the management structure of insurance companies in your jurisdiction?

Under Italian law, persons who carry out management functions in an insurance company must:

  • meet requirements of professionalism, honourableness and independence;
  • meet criteria of competence and correctness; and
  • devote the necessary time for the good performance of their tasks so as to ensure the prudent management of the insurance company.

9.2 How are directors and senior executives appointed and removed? What selection criteria apply in this regard?

The insurance company has full discretion to determine the organisational allocation of the fundamental functions of corporate governance, in compliance with the principle of separation between operational and fundamental functions, in order to guarantee their independence, autonomy and objectivity of judgement.

Depending on the legal form adopted by the company, the appointment and removal of directors and senior executive are also subject to the rules set out in the Civil Code (in this regard, please see Article 2383 of the Civil Code). Please also see question 9.1.

9.3 What are the legal duties of directors and senior executives of insurance companies?

The management body of the company has ultimate responsibility for compliance with the laws, regulations and directly applicable European regulations.

It is ultimately responsible for the company's corporate governance system:

  • It defines the company's strategic policies and ensures their completeness, functionality and effectiveness, also with regard to outsourced activities; and
  • It ensures that the corporate governance system is suitable to achieve the objectives of corporate governance set out by law.

The specific legal duties of directors and senior executives of insurance companies are set out in Italian Insurance Supervisory Authority Regulation 38/2018 (in particular, see Article 5 of such regulation).

9.4 How is executive compensation regulated in your jurisdiction?

In addition to establishing the compensation of the bodies it appoints, the ordinary shareholders' meeting approves the remuneration policies for those corporate bodies.

The remuneration policies must:

  • ensure that remuneration does not undermine the adequate economic capacity of the company;
  • not encourage excessive risk taking; and
  • guarantee compliance with the provisions of the law and the articles of association.

Insurance companies can appoint a remuneration committee, composed of non-executive directors, which advises and proposes remuneration policies. The committee verifies the appropriateness and proportionality of the remuneration.

10 Change of control and transfers of insurance companies

10.1 How are the assets and liabilities of insurance companies typically transferred in your jurisdiction?

The transfer of assets and liabilities can take place through the transfer of a group of contracts in the insurance sector in which the company carries out its business activities. The transfer may relate to either the entire portfolio of the company or a part thereof.

The transfer can also take place through a merger or a demerger, which must be authorised by the Italian Insurance Supervisory Authority (IVASS). IVASS will verify whether the acquirer:

  • is authorised to conduct the transferred business; and
  • has the necessary funds to cover the solvency capital requirement (see question 6.2).

If the transfer includes a portfolio of companies established in other EU member states, the favourable opinion of the authorities of those states is required.

Under certain conditions, the portfolio may also be transferred to companies which are established in a non-EU country.

10.2 What requirements must be met in the event of a change of control?

The acquisition, for any reason whatsoever, of a shareholding in an insurance company that results in a change of control of the company (also taking into account shares or quotas already held) must be authorised in advance by IVASS.

Authorisation will be granted if the conditions to ensure the sound and prudent management of the insurance company are met. To this end, IVASS will assess:

  • the quality of the potential buyer;
  • the financial soundness of the proposed acquisition; and
  • the possible impact of the transaction on the protection of policyholders.

11 Consumer protection

11.1 What requirements must insurance companies comply with to protect consumers in your jurisdiction?

Consumer protection is regulated by Legislative Decree 206 of 6 September 2005 (the Consumers' Code).

Companies must comply with the code's provisions in concluding a contract with a natural person who is acting for purposes that are unrelated to any entrepreneurial, commercial or professional activity.

In particular, in this regard, all contractual clauses that result in a significant imbalance of rights and obligations to the detriment of the consumer are considered void.

Clauses which aim to limit the risk of the insured are not considered unfair; nor are those which impose certain obligations of diligence on the insured or which provide for the loss of the right to the indemnity in the event of wilful exaggeration of the damage.

11.2 What other measures has the state implemented to protect consumers in the insurance sector?

Please see question 11.1.

12 Data security and cybersecurity

12.1 What is the applicable data protection regime in your jurisdiction and what specific implications does this have for insurance companies?

Insurance companies must comply with the EU Data Protection Regulation (2016/679).

12.2 What is the applicable cybersecurity regime in your jurisdiction and what specific implications does this have for insurance companies?

Pursuant to Italian Insurance Supervisory Authority Regulation 38/2019, the IT systems of insurance companies must be appropriate to the nature, scope, risks and complexity of the company's business.

The management body must approve an information and communication technology strategic plan that also sets out the company's cybersecurity policies aimed at ensuring the existence and maintenance of a secure IT systems architecture that is appropriate to the company's needs.

In particular, this plan must provide for the following:

  • roles and responsibilities;
  • adequate resources;
  • the risk that various activities may lead to the unlawful acquisition, transfer, modification or destruction of data; and
  • a monitoring process to ensure that incidents are identified promptly and the effectiveness of the IT safeguards is periodically assessed.

13 Financial crime

13.1 What provisions govern money laundering and other forms of financial crime in your jurisdiction and what specific implications do these have for insurance companies?

The money laundering and financial crimes regime is set out in Italian Insurance Supervisory Authority Regulation 44/2019.

Pursuant to this regulation, insurance companies must take into account the nature and complexity of the money laundering risk in order to define an appropriate corporate governance system. Corporate governance system controls should also address this risk.

Insurance companies must promote a culture of internal control over money laundering risk.

The management and control bodies and the senior executives, in accordance with their own powers and responsibilities, must establish corporate policies and implement the necessary measures to manage the risk of money laundering. They must establish controls to ensure compliance with anti-money laundering regulations and the adequate monitoring of this risk.

In particular, the management body must:

  • define and annually review the strategic guidelines on the management of the risk of money laundering;
  • in line with these strategic guidelines, approve a company policy indicating the relevant choices regarding organisation, procedures, internal controls and data storage appropriate to the company's actual exposure to the risk of money laundering; and
  • ensure that tasks and responsibilities relating to the risk of money laundering are allocated in a clear and appropriate manner.

The control body supervises compliance with the relevant regulations and verifies the adequacy of the management and control system to address the risk of money laundering.

14 Competition

14.1 What specific challenges or concerns does the insurance sector present from a competition perspective? Are there any pro-competition measures that are targeted specifically at insurance companies?

The Competition Law (124/2017) has had an impact on the insurance sector and, in particular, on motor third-party liability (MTPL) contracts, which are compulsory in Italy. According to the new version of Article 132, para 1-ter of the law, insurance companies are not obliged to accept proposals for compulsory MTPL insurance if the information provided by the policyholder does not match the results in the relevant insurance sector databases. However, the Italian Insurance Supervisory Authority can take action on complaints regarding refusals to enter into compulsory MTPL contracts and issue fines accordingly.

The Competition Law also introduced two new articles to the Insurance Code. Article 132-bis obliges intermediaries to inform policyholders about the premiums applied by other insurance companies (the contract is null in case of non-compliance). Article 132-ter requires that compulsory and significant discounts to insurance be imposed if:

  • the policyholder agrees to a vehicle inspection;
  • the policyholder agrees to the installation of a black box by the insurer or a portable black box is already installed in his or her vehicle; or
  • a breath alcohol ignition interlock device is installed in the vehicle.

15 Restructuring and insolvency

15.1 What provisions govern insolvency in your jurisdiction and what specific implications do these have for insurance companies?

Insolvency is currently regulated by Royal Decree 267 of 16 March 1942 and the Code of Private Insurance Companies. However, as from 1 September 2021, it will also be regulated by Decree Law 23/2020.

Pursuant to the relevant legislation, insurance companies are subject only to compulsory administrative liquidation. The procedure commences with an administrative measure by the Italian Insurance Supervisory Authority and is aimed at liquidating the assets of the insurance company.

From the date of issue of the measure ordering the commencement of compulsory administrative liquidation, no action can be initiated or continued against the insurance company; and no acts of execution or precautionary measures can be initiated or continued for any reason whatsoever.

Insurance contracts in the course of execution as of the date of publication of the measure in the Official Gazette will continue to cover risks until the 60th day thereafter. However, insured parties have the right to withdraw from the contract. The withdrawal will take effect on the day following that on which the notice is received by the liquidators.

16 Trends and predictions

16.1 How would you describe the current insurance landscape and prevailing trends in your jurisdiction? Are any new developments anticipated in the next 12 months, including any proposed legislative reforms?

Although we do not foresee any major developments in the next 12 months from a legislative standpoint, it is worth noting that the Italian insurance market has been significantly affected by EU Directive 2016/97 on insurance distribution. This directive aims to harmonise national provisions on insurance and reinsurance distribution and to change the perspective of the insurance industry, placing the needs of the client at the centre of insurance product development and distribution.

The directive is still under implementation in Italy, with the latest implementing measure adopted by the Italian government on 9 February 2021.

In particular, Legislative Decree 68 of 21 May 2018 gave the Italian Insurance Supervisory Authority (IVASS) new regulatory and supervision powers which IVASS will exercise in the coming months in order to ensure greater adherence of the Italian regulations to the European framework.

17 Tips and traps

17.1 What are your top tips for insurance companies operating in your jurisdiction and what potential sticking points would you highlight?

Compared with other countries in the Eurozone, the data on the Italian insurance market shows a lower coverage in the non-life insurance sector, where the ratio of premiums paid to gross domestic product is only 1.9%. This is the sector with the higher possibility of investment.

However, due to the COVID-19 crisis and uncertainty regarding Italy's economic future, investors and companies should pay close attention to the risk of an eventual decrease in profitability of this (and the other) sector(s), caused mostly by the possibility that individuals and companies will invest their savings in solutions other than insurance products.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.