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FACI INTERNATIONAL SUBCOMMITTEE 2020

Market Access / Level Playing Field: Key Challenges for International Insurers

Around the globe, U.S. insurers face market access restrictions and other discrimination that limits their 

ability to compete. Opening foreign markets would enable U.S. insurers to expand their businesses and 

support high-quality job growth in the U.S. in the areas of investment, risk management, product 

development and information technology. Allowing U.S. insurers to compete fairly would benefit host 

countries as well. U.S insurers bring best-in-class products and services to market, provide financial 

protection for individuals and families against the consequences of untimely loss of life and other 

catastrophic events, and make significant investments in both domestic and international capital markets.

The U.S. Government −including the Office of the U.S. Trade Representative and the Departments of 

Treasury, Commerce, Labor and State− has been a steadfast partner to the American insurance industry. 

By working through trade negotiations, international organizations, and bilateral dialogues, the U.S. 

Government has successfully addressed numerous foreign market barriers, including China’s recent 

commitment to eliminate foreign equity caps in the life, health and pension insurance sectors. 

The FACI International Subcommittee has endeavored to identify key market access and level playing field 

issues that impact insurers globally and develop recommended steps and actions the U.S. Government 

can take to the issues. Notably, these barriers affect both U.S. global insurers and reinsurers, as well as 

non-U.S. global firms by directly impacting the ability of insurers to enter/operate in a market and/or tilt 

the playing field toward local competitors.

1. Restrictions on Foreign Direct Investment (FDI) and Forms of Establishment

• U.S. insurers are required to form a joint venture with a domestic equity partner. In some 

countries, the foreign investor is further restricted to maintaining a minority position. Leadership 

selection, day-to-day management, company culture, strategic direction and legal exposure for 

the U.S. partner – all are impacted by the joint venture mandates.

• U.S. insurers are limited in the selection of the juridical form (i.e., branch, subsidiary, joint 

venture) most appropriate for the business. Upstream restrictions include limits on multiple 

license holding, financial services holding structures, affiliate insurance asset management, claims 

processing, and other authorizations services auxiliary to insurance necessary for a level playing 

field. 

• Insurers face outright prohibition on entry and participation in certain lines of business. In these 

sectors (e.g., private pensions, industrial, energy, other products where there is a domestic 

champion), U.S. insurers are prohibited from providing insurance services. In addition, the

insurance providers for these protected sectors may not be regulated by the same insurance 

regulator or same laws as other private market companies. 

• These restrictions impact multiple stakeholders beyond U.S. and other foreign insurers, including: 

- Consumers – through fewer options in insurance providers and product offerings, and

reduced-price competition. These restrictions also limit innovation and access to insurance 

for emerging risks by the under- and un- insured. 

- Domestic market stability and prosperity – by protecting insolvent and uncompetitive

domestic champions (both state-owned and affiliated), thus restricting competition,

development of the market – e.g., delayed adoption of modern accounting, corporate 

governance and consumer protection best practices, and putting solvency at risk.
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- The economy is harmed through inhibited growth of the insurance sector and its multiplier 

economic benefits: greater capital investment flows into the market, better capacity to 

absorb risks that might otherwise fall on the public sector, and stronger long-term capital 

market development.

- Taxpayers through the potential need for bailouts of insolvent state-owned and affiliated 

companies due to failures that result from differential regulations and supervision. 

MARKET EXAMPLES 

AFRICA Ethiopia FDI Prohibited

Ghana Nationality-Based Capital Requirement

Kenya FDI Limit 66%

South Africa FDI Investments Prior Approval

Tanzania FDI Limit 66%

EAST ASIA/PACIFIC China FDI Limit 51% but implementing regulations to reflect removal of cap

EUROPE/CENTRAL ASIA Russia FDI Limit 50%

MIDDLE EAST/NORTH 

AFRICA

Saudi Arabia FDI Limit 49%; Joint Stock Requirement; Cooperative or Mutual Requirement

UAE FDI Limit 49%

SOUTH ASIA India FDI Limit 49%

Indonesia FDI Limit 80%

Malaysia FDI Limit 70%

2. Restrictions on Management Control / Key Foreign Personnel / Other Corporate Governance 

Requirements

• U.S. insurers face barriers to hiring and appointments, including mandates to employ nationals 

and follow nationality quotas for senior management and board of director positions. 

• Restrictions/requirements on management, personnel, corporate governance, the location of 

certain functions, and other elements impede the ability of insurers to implement company 

transparency, control and governance requirements; direct business operations; develop and 

deliver strategic objectives; and, protect the rights of minority shareholder and contractual 

freedom between joint venture partners.

MARKET EXAMPLES 

AFRICA Ghana The National Insurance Commission (NIC) imposes nationality requirements for 

board and senior management of insurance/reinsurance company.

Tanzania One-third of controlling interest must be held by Tanzania citizens, per 

Insurance Act.

MIDDLE EAST/NORTH 

AFRICA

Saudi Arabia Foreign investment license from Saudi Arabia General Investment Authority 

(SAGIA) is required for insurance/reinsurance company ownership by non-Saudi 

Arabia national.

SOUTH ASIA India IRDAI requires the Indian partner of an insurance joint venture to appoint the 

CEO and the majority of non-independent directors.

3. Data/IT Localization and Digital Protectionism
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• U.S. insurers are required to follow regulations to physically house customer and company data 

in country, adhere to severe restrictions on data flows, and establish data and call centers in 

country. 

• Data and IT localization restrictions are a critical non-tariff barrier to trade in the insurance sector 

and confer an advantage to domestic competitors:

- The mandate for data centers in country adds layers of cost for hardware and maintenance, 

increases the complexity of global information technology systems, and impairs overall 

resilience, cybersecurity and risk management practices.

- Digital protectionism narrows the data pool – placing U.S. insurers at a competitive 

disadvantage in the use of data for predictive modeling, predictive analytics, claims 

processing, fraud detection, pricing and risk selection. 

MARKET EXAMPLES 

AFRICA Kenya Kenya’s Data Protection Act requires data controllers to provide “proof” that 

personal data will be secure as a condition for transferring data outside Kenya 

but does not describe what would constitute proof. The Act requires consent of 

data subject as a condition for cross-border transfer of any “sensitive personal 

data,” a broad category of information. 

Nigeria NITDA guidelines require all insurers to store data of Nigerian citizens in Nigeria.

AMERICAS Brazil Brazil is considering draft legislation that could regulate cross-border data flows 

and storage requirements. Currently, Brazil’s Marco Civil, an Internet law that 

determines user rights and company responsibilities, is being imposed on 

insurers for data collected or processed in Brazil but subsequently stored 

outside the country.

EAST ASIA/PACIFIC China China’s Cybersecurity Law and related draft and final implementing measures 

include mandates to purchase domestic ICT products and services, restrictions 

on cross-border data flows and requirements to store and process data locally.

South Korea Through KORUS, Korea undertook commitments to allow financial institutions to 

transfer data to foreign affiliates and allow certain data processing and other 

functions to be performed outside Korea. Implementation of this commitment 

has been slow. As of 2018, difficulties remain due to Korea’s consent 

requirement. Korea imposes constraints on ability of banks and insurance cos to 

utilize cloud computing services.

EUROPE/CENTRAL ASIA EU General Data Protection Regime (GDPR) restricts imposes onerous restrictions 

on the movement of EU citizens’ data, including where data was collected 

outside the EU. 

Russia Federal Law No. 242-FZ requires local storage and processing of data. 

Switzerland The Swiss-US Privacy Shield Framework provides a mechanism to comply with 

Swiss requirements when transferring personal data from Switzerland to US. 

Switzerland issued a partial adequacy decision for US, limited to companies in 

Privacy Shield Framework.

Turkey Data localization is required. Turkey also imposes restrictions on transfers of 

personal data out of Turkey. Information systems used by financial firms for 

keeping documents and records must be located within Turkey. 

SOUTH ASIA India On July 27, 2018, India announced a proposed Data Privacy Bill. The draft is 

based on EU’s General Data Protection Regulation (GDPR). However, it seems to 

extend beyond reach of GDPR as it looks to require data localization, limits 
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processing, and allows government-wide access to data. It would apply to any 

company that handles data of Indian citizens in almost any manner.1

Indonesia OJK’s Regulation 69/POJK.05/2016 mandates insurers/reinsurers to establish 

data centers and disaster recovery centers in Indonesia. Indonesia is 

considering national legislation and additional regulations on personal data 

protection, which could expand requirements for data localization.

Malaysia Bank Negara Malaysia has data localization elements in its Risk Management in 

Technology framework but noted it intends to remove them. It has amended its 

recent Outsourcing Guidelines to remove original data localization requirement. 

Thailand Thai government in February 2019 passed new laws and regulations on 

cybersecurity and personal data protection that raise concerns over Thai 

authorities’ broad power to demand confidential and sensitive information 

without sufficient legal protections or a company’s ability to appeal or limit such 

access. 

4. Discriminatory Screening and Approval Mechanisms, and Other Regulatory Trade Barriers

• Discriminatory screening and approval mechanisms are applied to U.S. but not domestic insurers. 

These mechanisms lead to denial of the ability to own 100% of an insurance entity, denials or 

delays of product approval or licensing decisions; application of needs tests; and, imposition of 

quantitative limits on product license requirements.

• Unequal application of regulatory standards to foreign companies --through formal and/or 

differential application of regulations-- results in advantageous treatment to domestic 

champions, including state-owned and affiliated insurers.

• These barriers serve as de facto restraints on the ability of foreign insurers to establish, conduct 

and expand their product offerings and business opportunities. 

MARKET EXAMPLES 

EAST ASIA/PACIFIC China On several product licenses such as enterprise annuities, tax advantaged 

pension pilot programs and political risk insurance there has been a de facto 

freeze on new licenses that effectively has prevented US entry into those 

products. 

Japan State affiliated cooperatives are not subject to insurance business law and/or 

supervision by an independent regulator. They also currently escape 

supervisory intensity or systemic risk review by IMF.

SOUTH ASIA India The former life and nonlife monopoly companies Life Insurance and General 

Insurance Corporations of India respectively remain dominant market players; 

however, these companies are not independently regulated and not currently 

subject to supervisory intensity or systemic risk review by IMF.

Indonesia Indonesia is currently considering how to recapitalize numerous insolvent stateowned and “crony” companies at expense of foreign companies. 

5. Non-Regulatory Barriers

• U.S. insurers face industry and market practices that contribute to an unlevel playing field and 

impact the operations and growth of U.S. insurers. Marginalizing U.S. company participation in 

jurisdictional industry trade associations, for example, perpetuates disparate market and 

regulatory treatment in favor of domestic player interests.
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• U.S. insurers are not provided the same opportunity as domestic insurers to review and provide 

comment on draft regulations. An unlevel playing field in regulatory development disadvantages 

the ability of U.S. firms to shape, understand, anticipate, and respond to changes in the regulatory 

landscape. 

MARKET EXAMPLES

EAST ASIA/PACIFIC China Regulatory practice is to deny national licensing to foreign insurers.

Japan Although a critical source in the formation of life insurance regulations, the 

Japan Life Insurance Association does not permit foreign insurer members to 

contribute to and advocate for insurance policy.

6. State-Owned Enterprises (SOEs)

• Government policies can play a critical role in providing access to (re)insurance, particularly in 

regions without a developed private market. State-owned (re)insurers, however, can impede 

development of a healthy, sustainable private market: the potential application of less stringent 

prudential supervision, regulatory favoritism, and implicit or explicit government guarantees can 

disincentivize competition and subject policyholders, consumers, and taxpayers to heightened 

risks without supporting the ability of an SOE to fulfill its public purpose.

• Policymakers should establish transparent, objective, and measurable benchmarks through trade 

agreements to facilitate fair competition for all market participants, promote growth of the 

sector, and protect policyholders, consumers, and taxpayers. In cases where state-owned 

(re)insurers no longer serve a legitimate social objective – such as addressing areas of market 

failure - governments should curtail the size and role of the SOE. Supervision and regulation of all 

market participants should be in accordance with regulatory and industry best practices and at a 

minimum, provide for nondiscriminatory and transparent treatment of all (re)insurers.

MARKET EXAMPLES

AFRICA Ethiopia There is a state monopoly in the insurance sector.

Sudan Local insurers are required to cede 50% of their treaty business to state-owned 

National Re. Local cedants must also offer all non-life facultative reinsurance to 

National Re, which has option of accepting or declining on a case-by-case basis.

EUROPE/CENTRAL ASIA Russia It is mandatory to offer up to 10% of any cession to national reinsurer, NRC. 

NRC is not obliged to accept offer. They can also accept a lower share or 

decline offer.

MIDDLE EAST/NORTH 

AFRICA

UAE State-owned enterprises are key components of UAE economic model and are 

perceived to be favored in legal disputes with foreign cos brought before

local judiciary.

SOUTH ASIA India Insurance Regulatory and Development Agency of India (IRDAI) in 2017 

introduced Regulation 28(9) to establish an Order of Preference for placement 

of reinsurance business with a four-tiered system: (i) first preference to stateowned reinsurer and any other domestic reinsurer that has three years of 

credit ratings (none exists); (ii) second preference to branches of foreign 

reinsurers and domestic reinsurers without three years of credit ratings; (iii) 

third preference to foreign reinsurers in special economic zones; and (iv) fourth 

preference to cross-border reinsurers. Also, 5% of each non-life policy must be 

ceded to Indian reinsurer, General Insurance Corporation.

Indonesia Since 2016, Indonesian insurers have been required to place all “simple risks” 

with domestic Indonesian reinsurers, generally a newly formed state-owned 
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reinsurer. This includes all reinsurance of life, health, personal accident, motor, 

credit and suretyship business. For other insurance business (“non-simple 

risks”), a minimum of 25% of (re)insurance must be placed with domestic 

reinsurers. “Non-simple risks” and a narrow band of exempted “simple risks” 

must run through a tiered declinature procedure before they can be placed 

with foreign (re)insurers.

7. Cross Border Reinsurance Restrictions

• U.S. insurers are subject to local presence requirements; mandatory cessions/right of first refusal 

to domestic reinsurers (including state-owned reinsurers); intra-group cessions restrictions; and, 

mandates for insurer retention of specific risk levels.

• These barriers impede the ability of reinsurers, including affiliates, to operate efficiently, diversify

risk globally, and promote economic recovery and growth. They lead to higher reinsurance costs 

when the local reinsurer cedes the risk internationally through retrocession or concentrates risk 

within a jurisdiction.

• Mandatory localization also harms both primary companies and their policyholders by forcing 

them to buy reinsurance from companies that may not adhere to best practices or be subject to 

adequate regulation. 

• Reinsurance barriers also impede the development of local insurance and reinsurance markets 

and are counter to international best practices.

MARKET EXAMPLES 

AFRICA African Union In AU shareholder member states, a 5% mandatory offer of each risk must be 

made to reinsurer Africa Re, a government-supported entity.

AMERICAS Argentina Cross-border reinsurance restrictions are being eased but, but 25% local 

cessions will still be required as of 2019. 

Brazil Local reinsurers receive preference in cession offers (in 2020, the threshold is 

15%). 

EAST ASIA/PACIFIC China With exception of aviation, aerospace, nuclear, oil and credit reinsurance 

contracts, amount of proportional business ceded to any one reinsurer in 

respect of any one risk may not exceed 80% of sum insured or liability limit of 

direct insurance policy. The amount of each facultative cession to an affiliated 

company of cedant may not exceed 20% of sum insured or limit of liability of 

direct insurance policy.

EUROPE/CENTRAL ASIA Russia Mandatory cession requirement: 10-percent of each contract must be offered to 

state-owned Russia National Reinsurance Company. NRC is not obliged to accept 

offer. They can also accept a lower share or decline offer.

MIDDLE EAST/NORTH 

AFRICA

UAE The regulation requires that at least 51% of capital of a reinsurance company

incorporated in UAE be owned by natural persons who are UAE or GCC nationals 

or by legal persons fully owned by UAE or GCC nationals. The UAE Insurance 

Authority must approve any employees that carry out controlled function 

activities

SOUTH ASIA India On January 16, 2017, Insurance Regulatory and Development Agency of India 

(IRDAI) introduced with immediate effect its Regulation 28(9) which establishes 

an Order of Preference for placement of reinsurance business. It stipulates a 

four-tiered system with (i) first preference going to state-owned reinsurer and 

any other domestic reinsurer that has three years of credit ratings (none 

currently exist); (ii) second preference going to branches of foreign reinsurers 

and any domestic reinsurer not having three years of credit ratings; (iii) third 

preference going to offices of foreign reinsurers in special economic zones; and 
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(iv) fourth preference going to cross-border reinsurers. Furthermore, 5% of each 

non-life policy must be ceded to "Indian reinsurer," General Insurance 

Corporation. 

Indonesia Since 2016, Indonesian insurers have been required to place all “simple risks” 

with domestic Indonesian reinsurers, generally a newly formed state-owned 

reinsurer. This includes all reinsurance of life, health, personal accident, motor, 

credit and suretyship business. For other insurance business (“non-simple 

risks”), a minimum of 25% of (re)insurance must be placed with domestic 

reinsurers. “Non-simple risks” and a narrow band of exempted “simple risks” 

must run through a tiered declinature procedure before they can be placed with 

foreign (re)insurers.

Malaysia There is a tiered system of reinsurance. Bank Negara requires all local direct 

insurers to cede business first to local reinsurers (first tier) and then to Labuanbased reinsurers (second tier). Only after these two options have been 

exhausted may business be offered to 'offshore' or third tier reinsurers. 

Furthermore, (a) Malaysian Re must be offered up to 15% for both proportional 

and non-proportional treaty reinsurance (excluding aviation, energy and D&O); 

(b) for facultative and engineering reinsurance Malaysian Re must be offered up 

to 15% of MYR 5mn on a total sum insured basis, PML monetary limit being MYR 

1.5mn; (c) for retrocession, 20% must be offered by Malaysian Re to licensed 

direct insurers in Malaysia, for treaty and facultative business.

8. Capital Outflow and Investment Restrictions

• Beyond requirements to maintain adequate levels of regulatory capital, restrictions on capital 

outflows and currency conversions are a significant disincentive to investment in a market. 

Foreign insurers often need to provide additional capital to local operations to grow in a market 

but are disincentivized from doing so where that capital becomes effectively stranded, which can 

adversely impact the ability for insurers to manage capital and liquidity needs and efficiency at 

the group level. 

• Capital outflow and investment restrictions impact risk diversification of insurers by concentrating 

investments in one currency. The restrictions can lead to instability in the insurance market and 

to changes in business strategy, product offerings and regulatory capital positions. Importantly, 

the restrictions inhibit the ability for insurers to achieve appropriate outcomes in the best interest 

and protection of policyholders. 

MARKET EXAMPLES 

AMERICAS Argentina Restricts investment in foreign denominated assets

EAST ASIA/PACIFIC China China has a requirement for SAFE approval and separate Insurance Asset 

Management License.