2009 saw several local regulators step up efforts to contravene "grey market practices," that is activities prohibited by local law but previously engaged in by many foreign companies. These efforts by the Argentine, Costa Rican and Mexican authorities underscore that foreign companies presented with an opportunity to broke or underwrite a risk located in Latin America need to first understand and ensure compliance with local regulatory requirements before participating in any such insurance activity.


In June 2009, the Argentinean authorities fined an individual insured 8 times premium and an insurance intermediary 15 times premium for illegally transacting life insurance business with a non-authorized foreign life insurer. Argentinean law provides that property and persons located in Argentina must be insured through an insurance policy issued in Argentina by an insurance company authorized to carry on insurance business in the country. In the event that these requirements are not met, the authorities may impose a fine up to 25 times premium upon each of the insured and the insurance intermediary and a fine up to $100,000 against the insurance company (directors and officers and other responsible persons may be held jointly liable for these fines). The illegal insurance policy will also be considered null and void and unenforceable under Argentinean law (directors and officers and other responsible persons may also be held jointly liable for any damages due to the nullity).

Costa Rica

In November of 2008, La Nacion of Costa Rica reported that the new Superintendencia General de Seguros (Sugese) was investigating 15 persons concerning allegations of illegal sales of foreign insurance policies. Complaints were filed with Sugese against the 15 persons by the INS). Tomas Soley, the superintendent at the time, reportedly indicated that the allegations would be investigated in due course, but did not provide a timetable for any resolution. Potential fines for illegal sales of foreign insurance (the definition of which includes marketing of foreign policies by phone, email or facsimile) can exceed $200,000 under the new insurance laws.

An INS representative reportedly stated that the INS became aware of the illegal activity based upon reports from consumers and further stated that the INS intended to file complaints against additional persons. The INS representative also reportedly commented that, although the INS has always been aware of illegal insurance sales activity, difficulties in making complaints and minor penalties provided no incentive to report such activities under the prior laws.

In June 2009, the interim regulator of the Costa Rican (re)insurance market, the Superintendencia de Pensiones, also issued a technical note providing further guidance as to several regulatory issues of significant importance to foreign (re)insurance companies:

  • The Ley Reguladora del Mercado de Seguros applies to any person involved in the development or realization of any insurance activities, whether in the nature of insurance, reinsurance, intermediary or auxiliary services. The Law applies to such activity whether it occurs within the Costa Rican territory or from abroad directed toward Costa Rica and whether such activities are conducted directly or through intermediaries.
  • The public offering of insurance services, which is prohibited in the absence of proper authorization or an applicable exemption, includes any activity that procures the sale of an insurance policy or provides specific or concrete information concerning a particular insurance policy.
  • Any provider of cross-border insurance services that includes a risk within Costa Rica must register with the Superintendency. This requirement does not apply to providers of cross-border reinsurance or retrocession, reinsurance intermediary services or auxiliary reinsurance service--such entities may contract with authorized Costa Rican insurers when contacted directly by such authorized companies.
  • No company may commercialize or otherwise market cross-border insurance services in Costa Rica unless the policies in question have been registered with the Superintendency. Registration of policies is only permitted by the Superintendency if such policies have been registered in the company's home jurisdiction.
  • The only cross-border direct insurance services currently permitted by law in Costa Rica are those established by the CAFTA-DR treaty. As concerns direct insurance, said treaty applies only to space, maritime transport and commercial aviation insurance and only to member countries.
  • Surplus lines insurance may only be purchased after local vetting and therefore may not be publicized in Costa Rica and may only be offered through brokers.
  • The 4% premium surcharge on all insurance policies for the benefit of the Costa Rican Firemen's Fund applies to all policies, including cross-border and surplus lines policies.


In September 2009, Eduardo Iturriaga, Director General of Mexico's insurance regulator, the Comision Nacional de Seguros y Fianzas, reminded the market that purchasing foreign insurance from within Mexico is both a violation of the insurance law and a criminal offense that can carry penalties of a fine between 200 and 2,000 days of salary and a prison sentence of between 3 and 10 years. The insurance law more specifically states that a person may not enter into an insurance contract with a foreign insurer while located within Mexico. Despite the prohibition and the potential penalties, both the CNSF and Mexico's insurance association assert that the practice continues in the market.

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.