The insurance market experiences constant change because of its interdependence with the economy as a whole. The Greek insurance market continues to be under pressure (as is the rest of the Greek economy), with its main characteristic being a significant and continuous drop in premium production, especially in the car insurance sector. However, local insurers are looking to switch to technology platforms that enable development and cost reduction. The EU Solvency II framework, which directly links taking new risks with efficiency and maintaining high capital adequacy, is leading companies to stable and safe paths on policies for new production, avoidance of guarantees, and complex products that usually bring higher capital requirements.
i Regulatory agencies and legislation
In 2008, the supervision of insurance companies was passed from the Ministry of Trade to a legal entity called the Private Insurance Supervisory Committee (PISC). Soon thereafter, pursuant to Law 3867/2010, the PISC was abolished and the Bank of Greece was appointed to regulate the private insurance sector.
State supervision of the Greek private insurance and reinsurance industry is mainly governed by Law 4364/2016, which introduced in Greece the Solvency II Directive (2009/138/EC), Articles 2 and 8 of Directive 2014/51/EU and Article 4 of Directive 2011/89/EU. Hence, the provisions of the previous law (Decree 400/1970) were abolished. Law 4364/2016 governs all primary aspects of insurance and reinsurance undertakings' licensing, conduct of business, state supervision, solvency requirements and winding-up proceedings. Insurance intermediaries' conduct of business is governed by Law 1569/1985 supplemented by Presidential Decree 190/2006 (implementing the Insurance Mediation Directive 2002/92).
ii Position of non-admitted insurers
A licence is required for insurers and reinsurers to undertake primary or reinsurance risks in Greece. The licence is granted by the Bank of Greece. The licensee is granted the right to provide its services in all European Union (EU) or European Economic Area (EEA) Member States. Insurers domiciled or established in other EU or EEA Member States can undertake risks in Greece by virtue of the single licence passport set by the Third Non-Life and the Consolidated Life Assurance Directives. Non-EU and non-EEA domiciled insurers and reinsurers can also undertake the relevant risks in Greece pursuant to Law 4364/2016.
iii Insurance intermediaries and their position
Insurance mediation is defined by Article 2(3) and (4) of Decree 190/2006 as any activity of introducing, proposing or carrying out other work that is preparatory to the conclusion of contracts of insurance or reinsurance, or of concluding such contracts, or of assisting in the administration and performance of such contracts, particularly in the event of a claim. The provision of information on an incidental basis shall not constitute insurance mediation if provided in the context of a professional activity other than that of assisting the customer in concluding or performing an insurance contract, of claims management and of loss adjusting of an insurance undertaking on a professional basis, and of expert appraisal of claims.
Insurance and reinsurance mediators must be registered with the professional chamber of their seat. The application for registration must be accompanied by documents evidencing that the applicant has the qualifications required by law. Employees of insurance and reinsurance companies can undertake to conduct insurance and reinsurance mediation without having to be registered with the local professional chamber, if their annual gross income deriving from the provision of mediation does not exceed €5,000. EU or EEA insurance and reinsurance mediators can operate in Greece under the single licence set by the Insurance Mediation Directive.
Act No. 86 of 5 April 2016 of the Executive Committee of the Bank of Greece introduced the Code of Conduct of insurance and reinsurance intermediaries. This Act establishes the framework of principles and rules of professional conduct of insurance and reinsurance intermediaries in their transactions with the consumers of insurance products, the insurance and reinsurance companies and the other insurance and reinsurance intermediaries.
iv Requirements for authorisation
Requirements for the insurer
An insurer domiciled in Greece must be incorporated as a société anonyme or a società europea or a mutual association (e.g., a protection and indemnity club (for marine risks of this kind)) as provided by Law 4364/2016. The insurer's activities must be restricted to the provision of insurance business, such as risk assessment, underwriting, risk management and solicitation of clients. The actual administration of the company must be conducted in Greece.
Requirements for the reinsurer
A reinsurer domiciled or established in Greece must be licensed, and also has to satisfy the capital and solvency requirement provided by Law 4364/2016. The reinsurer's activities must be restricted to the provision of reinsurance business; however, if a reinsurer is incorporated as a société anonyme, it can also be a mixed financial holding company. Non-EU and non-EEA reinsurers must be licensed (Article 130 of Law 4364/2016), established in Greece, and abide by the capital and solvency requirements of Greek reinsurance undertakings.
Licence to conduct insurance or reinsurance business
A licence is granted according to the type of insurance for all or some of the risks, and grants the insurer the right to provide its services under the freedom of establishment (FOE) or freedom of services (FOS) regime within EU and EEA Member States, and Switzerland (with respect to non-life risks, pursuant to the bilateral agreement between the EU and the Swiss Confederation 91/370/EEC). An insurer can also undertake reinsurance risks within the scope of its primary insurance licence.
With respect to reinsurance, the licence can be granted for both life and non-life reinsurance risks, or for either of the two alone. The licensee can operate in all EU and EEA Member States under the FOS or FOE regime.
v Regulation of directors and officers
According to Law 4364/2016, the board of directors of every Greek insurance or reinsurance company should consist of a majority of Greek citizens or citizens of other EU or EEA Member States. Any person who has been convicted of theft, embezzlement, usury, swindling, fraud, extortion, forgery, corruption, bankruptcy or smuggling, who has been declared bankrupt, or who has been a director of an insurance company that has been declared bankrupt or whose licence has been revoked because of infringement of the law, cannot be elected or appointed as chief executive officer, managing director, executive director, deputy chief executive officer, officer or board member of a Greek insurance company.
Furthermore, Law 4364/2016 provides that the members of the board of directors of an insurance or reinsurance company should have the requisite good reputation and experience to safeguard the sound and prudent management of the company. The Law also provides that the eligibility criteria of members of the board of directors of insurance or reinsurance companies and the other persons managing its activities could be subject to further specifications by a decision of the Bank of Greece.
vi Compulsory insurance
Compulsory insurance is imposed in cases where it is essential to protect innocent third parties from damages caused by high-value risks.
A third party (i.e., a person other than the policyholder) can file a direct action if it is the person insured in a policy concluded on the account of that third party (Article 9 of Law 2496/1997); or if it is the person injured, and the insurer has undertaken to provide compulsory third-party liability cover to the person liable to compensate the third party (Article 26 of Law 2496/1997). However, with the exception of motor third-party liability claims (regulated by Law 489/1976) and claims arising from wreck removal, this right of direct action is still not in effect, as practical issues must still be resolved by means of a ministerial decision regulating which authorities shall be authorised to certify compliance with the requirements of compulsory insurance.
vii Requirements with respect to reserves maintained by insurance and reinsurance companies
Insurers and reinsurers must conduct their business in a fit and proper manner, and comply with the regulatory obligations that have been set to safeguard their soundness. These obligations are compliant with the provisions of the EU Solvency II legislative framework enacted in Greece in 2016. In particular, insurance and reinsurance companies must form and maintain adequate technical reserves or provisions, which must be prudently covered by investments. With respect to insurers, these investments must meet the statutory eligibility requirements, especially in terms of safety and profitability. Reinsurers, on the other hand, must abide by the prudent management requirement for investing in assets and securities. Insurers and reinsurers must also maintain a solvency margin and a guarantee fund to meet their obligations. If they fail to meet the above solvency requirements, the regulator may impose administrative sanctions, such as the submission of a plan for their short-term funding and the reorganisation of their business or a financial recovery plan, or may freeze their assets or revoke their licence and place them under compulsory winding-up proceedings.
Regarding capital requirements, each insurance and reinsurance company is obliged to comply with the Solvency II regulatory requirements. Regarding reinsurance companies, the minimum solvency margin should amount to at least €3 million pursuant to Article 267 of Law 4364/2016.
Insurance and reinsurance companies are placed under compulsory winding-up proceedings if their licence has been revoked on the grounds of failing to abide by solvency requirements or if the regulator has frozen their assets pursuant to Law 4364/2016. The proceedings have immediate effect in all EU and EEA Member States where the insurer is established. The liquidator is appointed by the local regulator, and has the duty to notify all persons who are entitled to insurance compensation and domiciled in other EU and EEA Member States about the proceedings and the procedure to notify their claims. Persons domiciled in Greece are invited to notify their claims and all evidence by an invitation published in national newspapers. Claims arising from compulsory third-party liability insurance are covered by the Auxiliary Fund. Claims arising from life assurance are handled by the Private Insurance Guarantee Fund (established by Law 3867/2010).
All transactions involving a change of control of insurance and reinsurance companies have to be approved by the local regulator. In this case, the directors and officers of the acquirer will be subjected to due diligence by the Bank of Greece. An approval decision of the Bank of Greece is also necessary in the case of an insurance or reinsurance portfolio transfer.
There are no specific provisions in the law introducing regulations regarding the financing of an acquisition of an insurance or reinsurance company by either a person or a legal entity. Subject to the specifications of each financing scheme, corporate law restrictions, including the prohibition of loan or guarantee granting by an insurance or reinsurance company for the acquisition of its own shares by third parties, the rules on qualified holdings requirements and anti-money laundering regulations, should also be taken into account.
The law does not discriminate with regard to the origin of the investment capital that may be invested in a insurance or reinsurance company. However, it should comply with anti-money laundering and counterterrorist financing legislation.
xi Key information documents for packaged retail and insurance-based investment products
Regulation (EU) No. 1286/2014 on key information documents for packaged retail and insurance-based investment products (PRIIPs) entered into force on 1 January 2018. This Regulation obliges the producers or sellers (such as fund managers, insurance undertakings, credit institutions or investment firms) of investment products intended to be sold to small and non-professional investors or retail investors to supply key information documents (KIDs) providing accurate, fair, clear and not misleading information about these investment products. This Regulation also provides for the civil liability of the producers or sellers of such investment products for any infringement of the Regulation where damage was suffered by retail investors as a result of compliance with a KID that is inconsistent with pre-contractual or contractual documents under the producers' or sellers' control or that is misleading or inaccurate.
The aim of the Regulation is to help investors to understand and compare the key features and risk-and-reward profile of such products, to establish uniform rules on transparency at EU level that apply to all participants in the PRIIPs market and thereby to enhance investors' protection, and to rebuild their confidence in the financial market, in particular in the aftermath of the financial crisis.
III INSURANCE AND REINSURANCE LAW
i Sources of law
Greece has a statutory legal system. Law 2496/1997, the Insurance Contract Act (ICA), sets out the regulatory contents of an insurance contract, and the obligations and rights of the insurer and the insured. Law 4364/2016 and the Greek Civil Code apply on a supplemental basis, as required.
There are no special regulatory or material law requirements with respect to reinsurance agreements, except Articles 168 and 169 of Law 4364/2016, which refer to finite reinsurance. The ICA does not apply directly to the reinsurance contract. Parties are free to draft and conclude the terms and conditions of their reinsurance contracts. The provisions of the ICA apply to reinsurance contracts by way of analogy, with the exception of the provisions that are not suitable for the nature and the function of reinsurance contracts.
ii Making the contract
According to Article 1 of the ICA (as amended), the minimum statutory or regulatory contents of an insurance contract are:
- the details of the contracting parties and the name of the person entitled to receive the insurance money (if that person is not the policyholder);
- the period for which insurance cover is granted;
- the insured risks;
- the insured sum;
- exceptions to the cover;
- the premium;
- the applicable law; and
- the unit to which the policy is linked (with respect to unit-linked insurance policies).
According to Article 2 of the ICA, the insurance contract is exclusively evidenced by a document signed by the insurer (insurance policy). The insurance policy shall state the basic elements of the insurance contract as well as the date and place of its issue. If the insurance contract is governed by general or special terms and conditions, the policy must also state that these terms and conditions apply to the contract, and a copy of the terms must be provided to the policyholder.
Article 3 of the ICA sets out the statutory or regulatory requirements aimed at the protection of the policyholder during the conclusion process of an insurance contract. The insurer bears the following notification duties:
- to supply the policyholder with the information required under law prior the conclusion of the contract;
- to inform the policyholder in writing or via an easily legible notice appearing on the first page of the policy of:
- any inconsistencies between the application for insurance and the policy;
- the policyholder's rights to object if the policy is inconsistent with the application for insurance, or the insurer failed to provide the policyholder with the information required under law or failed to communicate the insurance terms and conditions; and
- the policyholder's cooling-off rights; and
According to Article 3 of the ICA, the insurer can revoke cover if the policyholder intentionally breached its disclosure duties. Breach of these duties by negligence entitles the insurer to terminate the contract or request its variation within one month following the discovery of said breach. If the peril insured against materialises before the termination or the variation of the contract, the compensation shall be reduced in proportion to the difference between the premium paid and the premium that should have been paid if the breach of the duty to disclose had not occurred.
As mentioned in subsection i, reinsurance contracts are not regulated by law; therefore, there are no minimum statutory or regulatory requirements.
iii Interpreting the contract
Every declaration of will, including offer and acceptance during the formation of a contract, is construed according to the true intention of the parties (Article 173 of the Civil Code). Furthermore, contracts are interpreted according to the requirements of good faith and common (business) ethics (Article 200 of the Civil Code).
Implied terms may be accepted as part of a contract either by legal provisions (terms implied in law or default terms) or by contract interpretation (terms implied in fact). Terms implied in law are those provided for in the Civil Code or in other statutes that take effect in specific contract types, unless the contract stipulates otherwise. Terms implied in fact refer mostly to supplementary contract provisions that fill gaps in the contract (i.e., provide for certain situations that are not covered by an express term of the contract or by a term implied in law). Implied terms are based upon the principle of good faith (Article 288 of the Civil Code).
Greek law requires that for the insurer to be exempted from payment, a breach must be causally connected to the loss. Article 4 of the ICA entitles the insurer to terminate the cover if the nature of the risk changes during the policy period.
The effects of a contract can be made dependent on the occurrence of future and uncertain events, which are called conditions. Conditions fall into two main categories: those that suspend the effects of the contract until the condition is met, and those that allow for the effects of the contract to occur immediately. However, upon their fulfilment, the effects of the contract will cease automatically.
An insurer cannot deny coverage based on late notice of claim unless there is an express provision to that effect in the agreed terms. The insurer can only claim damages. The wrongful denial of a claim could lead to a claim for bad-faith damages, owing to the moral pain and suffering caused to the insured.
Usually, the liability insurer has a right, but not an obligation, to defend a claim. Subject to the specific contractual arrangements, the notification, by either the policyholder or the insured, of the occurrence of an insured peril triggers payment under the policy provided the quantum of damages is known.
In indemnity policies, the insurer's indemnity obligation is triggered by the notification of the occurrence of the event by the policyholder to the insurer. If a longer period is required for the assessment of the full extent of the loss, the insurer shall pay the undisputed amount without undue delay.
No specific law exists. Reinsurance contacts are subject to specific contractual arrangements. If a cedent fails to provide timely or sufficient notice, remedies stipulated in the contract are available.
The duty of utmost good faith implied in reinsurance contracts differs from that applicable to other commercial agreements, in that the reinsurer relies on the diligence of the insurer. If, for example, a claim in excess was notified to the reinsurer, it could result in the total release of the reinsurer, while in other commercial agreements this could only result in the recovery of a reduced amount.
A policyholder or non-signatory to a reinsurance agreement cannot bring an action against a reinsurer unless this is specifically provided in a clause in the reinsurance contract.
IV DISPUTE RESOLUTION
i Jurisdiction, choice of law and arbitration clauses
The method of dispute resolution, jurisdiction and choice of law should be agreed upon by the parties in advance and in writing, but, in any case, the defendant may make an appearance without challenging the jurisdiction of the court. If an agreement provides that a court other than the competent Greek court has exclusive jurisdiction, this agreement must be in writing. In relation to future disputes, jurisdiction clauses must be in writing and define the legal relationships to which they refer.
Most insurance policies specify the law that applies and the courts before which any dispute should be referred. Where there is some link to an EU Member State, it is important for insurers to be mindful of the impact of the Regulation (EU) No. 1215/2012 on jurisdiction and the recognition and enforcement of judgments in civil and commercial matters (especially Articles 10 to 16 regarding jurisdiction in matters relating to insurance) (choice of court and jurisdiction) and the Rome I Regulation (especially Article 7 regarding insurance contracts) (choice of law) on the application of such provisions in policies.
Most insurance disputes are referred to the courts. However, arbitration has been enjoying increasing popularity, unlike other dispute resolution mechanisms such as mediation, which is still of limited application.
Proceedings start by way of filing a lawsuit that, apart from the names and addresses of the parties (actions in rem are not allowed under Greek law), also include full particulars of the claim. The claimant must, at the outset, specify the exact amount sought rather than a range or a statement that the amount sought will be notified during the proceedings.
There are three types of civil courts of first instance: courts of peace, which hear claims of up to €20,000; single-member courts of first instance, which hear claims between €20,000.01 and €250,000; and multi-member courts of first instance, which hear claims in excess of €250,000.
There is no prescribed claim form. The issue of proceedings does not interrupt the time bar; this requires that the lawsuit has also been served on the defendant.
The only available method of service is via a court bailiff instructed by the claimant to serve the lawsuit on the defendant. In cases where the defendant is domiciled in Greece, the lawsuit should be served within 30 days of its filing; where the defendant is not domiciled in Greece, it should be served within 60 days. If the defendant is domiciled in an EU Member State, the service is effected pursuant to the provisions of Regulation (EC) No. 1393/2007; for non-EU residents, the Hague Service Convention of 1965 applies.
After the lawsuit is served, the main stages of the proceedings are as follows:
- Pleadings are submitted within 100 or 130 days (depending on the case) of the date of submission of the lawsuit; supplementary pleadings are submitted within 15 days of the expiry of the above deadline. The case file is then considered closed. Within 15 days, the case is assigned to a court judge, and at the same time the hearing is scheduled within a period of no longer than 30 days. No witnesses are examined at the hearing, and the case may be heard without the parties or their lawyers being present. Following the study of the file, witnesses can be examined later if this is considered necessary by the court.
- The judgment usually takes three to 10 months to be issued. In complex cases, the court may reserve its final judgment and issue a preliminary judgment requesting additional evidence by way of, for example, expert witness or opinion.
- The final judgment is subject to appeal. There is no need for leave to appeal – all judgments are subject to appeal, either on questions of fact or on questions of law. The appeal must be filed within 30 days of the service of the judgment, within 60 days of the service of the judgment in case the appellant is resident abroad or its address is unknown, or within two years of the date the judgment was drawn up and sealed by the court but not served on the other party (service is done by the parties).
- A further appeal may be filed before the Supreme Court, but only on questions of law. This must be filed within 30 days of the service of the appeal court judgment, within 60 days of the service of the judgment in case the appellant is resident abroad or its address is unknown, or within two years of the day the judgment was drawn up and sealed by the appeal court but not served on the other party (service is, again, pursued by the parties).
Generally, all documents to which reference is made in the action, or that support the claim or the defence, must be submitted together with the parties' pleadings as outlined above.
The disclosure is not a pretrial stage. An application seeking a disclosure order can be filed, but, since the particular documents for which disclosure is sought must be prescribed in great detail, this remedy is rarely sought.
The oral debate that took place during hearings was abolished by the amendments to the civil procedural law, and has been replaced by a written procedure. The main rule, as mentioned above, is that witnesses shall no longer be examined at the hearing. If the court considers that the case has not been sufficiently clear to proceed with the issuance of the decision, it may issue an act ordering that witnesses be examined. Following the repetition of the hearing, the parties have the right to submit within eight working days their memoranda commenting on or evaluating the testimonies, or both.
An expert witness may be appointed by the court to give an opinion only if the court finds that the matter calls for expert knowledge or a party requests the appointment (Article 368 of the Code of Civil Procedure (CCP)). The number of experts appointed is at the discretion of the judge. In this case, the parties are entitled to appoint their own experts, known as technical advisers.
The rule is that the unsuccessful party pays the costs of the other party. However, the courts usually order the defeated party to pay a nominal amount, which is only a fraction of the actual costs incurred by the successful party. A trend has developed in commercial disputes to award costs on the basis of 2 per cent of the court's adjudged amount or, if a claim is rejected, of the amount of the original claim. A defendant can, in theory, apply to the court for security for legal costs if there is an obvious risk of non-payment by the claimant if the latter is ordered to pay the costs, but this is rarely granted in practice.
Format of insurance arbitrations
Provided there is an arbitration agreement, all disputes concerning insurance and reinsurance matters can be resolved by arbitration. The arbitration agreement must be in writing and signed by the parties to be legally binding. A signature may be substituted by the exchange of a signed letter or fax. If the agreement is not in writing, it is only enforceable if the parties appear before the arbitrators and participate voluntarily in the proceedings without contesting the tribunal.
Domestic arbitration is governed by the rules set out in the CCP. Unless otherwise provided, domestic arbitral awards cannot be appealed, but can be annulled if certain strict requirements are met. An award can be annulled for the following reasons, among others:
- the arbitration agreement was invalid;
- the arbitration award was issued after the arbitration agreement ceased to be in force, or was against public policy or good morals;
- the arbitrators were not validly appointed or requested to be exempted from the process for serious reasons;
- the arbitrators abused the powers vested in them by law or by the parties;
- principles were violated concerning the equality of the parties, the delivery of the award and the existence of grounds for the reopening of the decision; and
- the award itself is incomprehensible or contains inconsistent provisions.
International arbitration is governed by Law 2735/1999, which introduced the UNCITRAL Arbitration Rules into national law, and is applicable in cases where Greece is the chosen venue for the arbitration.
Procedure and evidence
As with court litigation, the principle of civil procedure, which requires that evidence should be provided at the initiative of the parties to an action, also applies in arbitration.
With regard to domestic arbitration, the arbitrators' remuneration is calculated as a percentage of the value of the claim. The award determines which party is responsible for paying the arbitrators' fees and the costs of the arbitration. In international commercial arbitration, the allocation of costs and expenses is subject to the parties' agreement; in the absence of an agreement, the tribunal allocates costs and fees between the parties. This allocation may be the subject of a separate decision by the tribunal.
Mediation in civil and commercial matters was introduced as a result of the harmonisation of Greek law with Directive 2008/52/EC. Recourse to mediation depends on (1) the parties' will (which may be encouraged by the court), (2) a court order of another Member State or (3) imposition by the law (e.g., the Hellenic Consumers' Ombudsman is the competent authority for the conduct of an amicable settlement of consumer disputes). The mediator's fees are split equally between the parties, unless the parties have agreed otherwise, while each party bears its own costs.
The CCP also provides for out-of-court settlement of private disputes with the participation of the lawyers of the parties or any other third person of common choice (this is optional and is a confidential procedure).
V YEAR IN REVIEW
The debt crisis in the eurozone and the economic downturn have had a severe impact on the local insurance industry over the past eight years. The Commission for Credit and Insurance Issues of the Bank of Greece has permanently revoked the operation licences of major insurance companies and placed them in liquidation because of their failure to maintain solvency margin requirements and establish adequate technical reserves covering their deficit.
In addition, the control of major state-owned insurance companies (e.g., ATE Insurance SA) was transferred to private interests (e.g., Piraeus Bank SA) as part of a restructuring plan with the aim of strengthening their financials and improving their position towards other market competitors. In April 2017, the National Insurance Company of Greece (Ethniki Hellenic Insurance Company) was put up for sale by its parent organisation, the National Bank of Greece. In October 2018, the sale was extended after talks with a potential buyer fell through. The National Bank of Greece is expected to restart the sale in the second half of 2019.
VI OUTLOOK AND CONCLUSIONS
The debt crisis is expected to further affect Greece's insurance and reinsurance sector in the coming years. The pressure in this sector will continue. The insurance and reinsurance intermediaries will also face considerable difficulties, especially in view of the new tax and social security contributions regime implemented in 2017, bancassurance and competition with e-shops of insurance companies.
1 Dimitris Giomelakis is a partner, Dimitris Kapsis is a managing associate and Nikolaos Mathiopoulos is a senior associate at Herring Parry Khan Law Office, trading as Ince & Co. The authors would like to thank George Iatridis for his assistance with writing this chapter.