Insurance and insurance mediation are highly regulated businesses. Compliance with the applicable regulations leads to corresponding costs for the regulated market participants. To recoup these costs, participants rely on having as large a distribution market as possible. This is especially true for innovative start-ups, which scale their businesses to a large extent by using new technologies, but also literally reach (national) borders more quickly due to the technologies’ broad impact.
A cross-border activity in the sale of an insurance contract exists if the insured risk is located in a different country than where the insurer or insurance intermediary. The same applies in principle if business is actively sought with customers domiciled abroad or if business is solicited from such customers.
States can secure access abroad for their market participants by concluding multilateral or bilateral treaties with other states. The Liechtenstein insurance center is uniquely positioned in Europe in that it enjoys full freedom to provide services in all EEA states as well as Switzerland. As a result of these “passporting rights”, insurance contracts can be distributed from Liechtenstein to virtually all of Europe without the need to establish and maintain an expensive network of subsidiaries or branch offices.
The freedom to provide services between the EFTA countries - including Liechtenstein - and the member states of the EU is provided for in the Agreement on the European Economic Area (EEA Agreement). In return for being granted the freedom to provide services, Liechtenstein undertakes to transpose legal acts adopted into the EEA into national law, thus ensuring the desired (minimum) harmonization.
The legal acts adopted include, among others, Directive (EU) 2016/97 of 20 January 2016 on insurance operations (IDD). This regulation sets forth the (minimum) requirements for the distribution of insurance products by insurance companies and insurance intermediaries established and licensed in an EEA member state. The IDD provides for equal legal treatment of the various distribution channels and regulates direct sales by both insurance companies and insurance intermediaries. All advisory activities and preparatory work required to conclude an insurance contract fall under the concept of insurance distribution. This may also include internet comparison portals that enable the conclusion of an insurance contract directly or indirectly - by forwarding to the website of the insurance company - or robo-advisors. The directive is reflected in the Liechtenstein Insurance Distribution Act.
Between Liechtenstein and Switzerland, the freedom to provide services is guaranteed in the bilateral agreement concerning direct insurance and insurance mediation. In contrast to the EWRA, the adoption of (minimum) regulations is not required, but rather the equivalence of the legal regulations is assumed in principle. This means that insurance undertakings and insurance intermediaries established and licensed in Liechtenstein may also operate in Switzerland without further licensing (and vice versa). The respective national law applies to the distribution activity itself.
