ACTIVITIES REQUIRING AUTHORIZATION
Section 57. (1) The Commission's authorization shall be required for a) the foundation of insurance companies (Sections 58-62);
b) commencement and termination of insurance activities, and for the commencement of activities involved in or closely related to insurance activities (Section 63);
c) the activities of independent insurance intermediaries and for the employment of principal insurance agents;
d) any changes in insurance activity (Section 92);
e) transferring the insurance portfolio (Sections (93-95);
f) transformation of insurance companies (merger, demerger, transformation into a limited insurance company);
g) investment of technical reserves of insurance companies in excess of the limits defined in this Act, and for any deviation from the categories of assets;
h) foundation of an insurance company or independent insurance intermediary in a third country by a resident insurance company as well as for the acquisition of any share in a third-country
31
insurance company or a business association engaged in independent insurance mediation activities and for establishing a branch in a third country;
i) foundation of a business association to engage in independent insurance mediation activities in a third country by a resident independent insurance intermediary as well as for the acquisition of a qualifying interest in such company or in an insurance company and for establishing a branch in a third country;
j) acquisition of an interest specified in Subsection (1) of Section 111;
k) foundation of a business association to engage in independent insurance mediation activities by an independent insurance intermediary as well as for the acquisition of a qualifying interest in such company;
l) in respect of an insurance company licensed to provide life assurance and non-life insurance, replenishing any deficiency in the solvency margin of one branch of insurance from another in accordance with Subsection (5) of Section 124;
m) employment (appointment, election) of the persons specified in Subsection (6) of Section 38, Paragraph j) of Subsection (2) of Section 70, Section 83 and Sections 86-90, whether as paid employees or in a self-employed capacity;
n) amendment of the charter in terms of payments to be made from the shares of association members, if the association's solvency margin is calculated in consideration of these shares;
o) the inclusion if reinsurance to the extent specified in Subsection (5) of Section 126; p) the suspension of the activities of an independent insurance intermediary upon request.
(2) The applicant shall supply a statement in which it declares that it has provided the Commission with all of the data and information required for the authorization(s) of activities under this Act.
(3) The Commission shall resolve all matters of authorization on the basis of the provisions of this Act and other legal regulation on insurance and with due consideration to the interests of the policyholders and the fulfillment of the commitments of insurance companies.
(4) In the cases referred to in Paragraph f) of Subsection (1), a transformation strategy shall be prepared showing the transformation of the insurance company, and shall be submitted to the Authority. The transformation strategy, in addition to the conditions specified for the authorization for the taking up of the activities and to the provisions of the Companies Act pertaining to transformation, shall contain:
a) the proposed date of transformation;
b) accurate description of the insurance portfolio to be transferred to the successor insurance company (companies) and the contractual conditions thereof;
c) a description of the technical provisions connected to the portfolio to be transferred to the successor insurance company (companies) and the cover for these provisions;
d) proof that the successor insurance company has the solvency margin required for the insurance portfolio received in addition to the solvency margin required for its own insurance portfolio;
e) as regards the transformation of a mutual association into a limited company, the share to be allocated to members of the association from the successor limited company’s capital, and the criteria based on which it was determined.
(5) The Authority shall refuse to grant authorization for the transformation of an insurance company if:
a) the conditions set out in Subsection (4) are not satisfied;
b) there is reason to believe that the transformation might be harmful to the policyholders affected, or to the members in connection with the transformation of a mutual association into a limited company.
(6) The authorization granted for the operations defined in Paragraphs h) and i) and - if the insurance portfolio is received from an insurance company that is registered in a third country or in a
32
Member State - Paragraph e) of Subsection (1) shall not exempt the applicant from the obligation of obtaining any other authorization that may be required by the regulations of the country where the activity is pursued.
Authorization of the Foundation of Insurance Companies
Section 58.
Subject to the exception set out in Section 58/A, the application for a foundation permit of an insurance company shall include:
a) the deed of foundation (charter), which clearly defines the type and sphere of activities of the insurance company to be established;
b) estimates of the costs of setting up the administrative services and the organization for securing business; proof of the financial resources intended to meet those costs deposited in a credit institution;
c) description of the drafts for the organizational structure, system of management, decision making and control mechanisms as well as the bylaws, if such are not contained in detail in the deed of foundation;
d) in the case of applicants domiciled abroad, a statement concerning the applicant's agent for service of process;
e) the applicant's statement in which it declares that it has provided the Commission with all of the data and information required for the authorization(s) of activities under this Act;
f) in the case of limited insurance companies, information concerning the shareholders, whether they are natural or legal persons, on persons holding a qualifying interest and the extent of the qualifying interest;
g) in the case of insurance cooperatives, information on the members, whether they are natural or legal persons, and on the face value of the members' share certificates.
h) in the case of insurance companies that are subject to supervision on a consolidated basis or supplementary supervision, a description of the apparatus for the conveyance of information related to supervision on a consolidated basis or supplementary supervision and a statement from the persons with a close link to the insurance company guaranteeing to provide the Commission with the data, facts and information that are necessary for supervising the insurance company on a consolidated basis or for supplementary supervision;
i) a statement from each natural person closely affiliated with the insurance company containing his consent to have the personal data he has disclosed to the insurance company processed and released for the purposes of supervision on a consolidated basis or supplementary supervision in accordance with this Act.
Section 58/A. Section 59.
With the exceptions laid down in Subsections (3) and (4) of Section 64, an insurance company - other than reinsurance companies - shall not be authorized to provide life assurance and non-life insurance concurrently.
33
(1) If there is a person among the founders of a limited insurance company who wishes to acquire a qualifying interest in the insurance company under foundation, the following must be attached - subject to the exception set out in Subsection (2) - to the application for authorization in addition to what is contained in Section 58:
a) proof of the requirements set out in Paragraphs b)-g) and i)-k) of Subsection (3) of Section 111; b) proof of the requirements set out in Subsection (5) of Section 111; and
c) proof of appropriate professional qualifications and a good business reputation (Section 91). (2) If the applicant fails to verify the data specified in Paragraphs b), d), e) and i) of Subsection (3) of Section 111, the Authority shall launch a data disclosure request - in connection with the authorization of acquisition - to the authority or court that has the required information on record.
Section 60/A.
The Commission shall request the opinion of the competent supervisory authorities of other Member States of the European Union concerned prior to issuing a foundation permit to an insurance company, if the insurance company requesting the permit:
a) is a subsidiary of an investment firm, credit institution, insurance company or reinsurance company established in another Member State of the European Union;
b) is a subsidiary of the parent company of an investment firm, credit institution, insurance company or reinsurance company established in another Member State of the European Union;
c) has an owner, whether a natural or legal person, with a dominant influence in an investment firm, credit institution, insurance company or reinsurance company that is established in another Member State of the European Union.
Section 61.
In possession of the foundation permit, the insurance company may begin to make preparations for its insurance activity and activities involved in or closely related to insurance.
Section 62.
(1) The Commission shall refuse to grant authorization for foundation if: a) any information provided by the applicant is false or misleading, b) the application fails to satisfy the requirements laid down in Section 58,
c) the organizational structure of the proposed insurance company is not in compliance with the requirements set out in this Act.
(2) If there is a person among the founders of a limited insurance company who wishes to acquire a qualifying interest in the insurance company under foundation, the Authority - in addition to what is contained in Subsection (1) - shall refuse the application for authorization even if the applicant is able to satisfy the conditions contained in Subsection (1) of Section 112.
Authorization for the Commencement of Insurance Operations
Section 63.
(1) Upon receipt of the Commission's authorization for foundation, the insurance company shall submit an application within 90 days for authorization for the commencement of insurance operations. The Commission shall revoke the foundation permit from any insurance company that
34
fails to submit the above-specified application in due time. The Commission shall have powers to conduct inspections to check compliance with the requirements for operations.
(2) The application for authorization for the commencement of insurance operations shall include: a) proof of possession of the minimum security capital;
b) the scheme of operations;
c) proof of compliance with personnel and material requirements;
d) a statement to indicate the proposed date for the commencement of operations;
e) a statement declaring the presence of sufficient facilities to comply with the data disclosure obligations prescribed in or on the basis of legal regulations, as well as the results of tests of the computer programs used for such disclosure of data;
f) the scheme of accounting policy and a detailed accounting system;
g) the procedure to be applied in the event of an emergency situation seriously jeopardizing the liquidity or solvency of the insurance company;
h)
i) if the application pertains to covering risks under motor vehicle liability, proof of appointment of claims representatives in all Member States where such risks are covered;
j) money laundering regulations as governed under Act XV of 2003 on the Prevention of Money Laundering.
(3) The Authority shall refuse to grant authorization for an activity, if the applicant:
a) does not have the minimum guarantee fund prescribed in Section 126 or the minimum solvency margin to engage in the operations described in the scheme of operations;
b) the applicant is deemed unable to comply with the statutory provisions regarding its activities by virtue of its scheme of operations, other documents attached to the application for authorization, or of any document, data or information furnished to the Authority, or its conduct is likely to violate or jeopardize the interests of policyholders;
c) fails to meet the personnel and infrastructure requirements prescribed.
(4) The Commission shall also reject the application for authorization if it learns about any facts, information or circumstance based on which it is liable to be prevented from effectively exercising its supervisory functions, in particular if
a) the activities of any direct or indirect owner of the insurance company or his influence on the insurance company endangers its prudent management for effective, reliable and independent operations;
b) the character of business activities and relations of any direct or indirect owner of the insurance company or his direct or indirect ownership in other companies is structured in a manner that obstructs supervisory activities;
c) the regulations of a third country in which any direct or indirect owner of the insurance company is domiciled is likely to prevent the effective exercise of supervisory functions.
Conditions for the Commencement of Insurance Activities
Section 64.
(1) The Commission shall authorize the commencement of operations separately for each branch of insurance requested and each class of insurance for which the insurance company in question is eligible. Authorization pertains to an entire class, unless the insurance company has indicated in its business plan that it only covers selected risks (risk groups) within a class. Authorization for the commencement of operations may also be granted according to the classification of risks under Part B) of Schedule No. 1.
35
(2) With the exceptions laid down in Subsections (3) and (4), an insurance company - other than reinsurance companies - shall not be authorized to provide life assurance and non-life insurance concurrently.
(3) The Commission may authorize an insurance company licensed to engage in the business of life assurance to engage in the classes set out under Points 1 and 2 of Part A) of Schedule No. 1 with an indication that the insurance company shall not be authorized to engage in other classes in the non- life insurance branch.
(4) The Commission may authorize an insurance company licensed to engage exclusively in the classes set out under Points 1 and 2 of Part A) of Schedule No. 1 to engage in the classes of insurance set out in Schedule No. 2.
(5) In the cases referred to in Subsections (3) and (4), the regulations pertaining to accountancy and liquidation in the life assurance branch shall apply to all activities of the insurance company.
(6) Authorization for non-life insurance services may include combining services in various classes of insurance in the manner defined in Part C) of Schedule No. 1.
(7) In terms of territory, the authorization shall apply to all Member States, including where services are provided by way of a branch office or in the form of cross-border services.
Section 65.
The following requirements shall be satisfied for authorization for the commencement and pursuit of insurance operations:
a) ownership title or the right to use or lease of premises that are appropriate for providing the customer service and claim administration for the insurance operations defined in the scheme of operations and
b) sufficient facilities for keeping records, data processing and data disclosure, an information and control system for reducing operating risks, and a plan for handling extraordinary situations,
c) a filing system (manual or automated) with sufficient facilities for data protection.
Section 66.
(1) Upon commencement of insurance activities, the subscribed capital of joint-stock insurance companies, the share capital of cooperatives, the initial capital of associations and the endowment capital of the branch offices of third-country insurance companies must be sufficient to cover
a) the personnel and material conditions required for the commencement of operations and
b) the commitments undertaken upon the commencement of operations (minimum security capital).
(2) The minimum amount of the funds referred to in Paragraph b) of Section 58 is
a) one hundred million forints for joint-stock insurance companies and for branch offices of third- county insurance companies ,
b) fifty million forints for insurance cooperatives, c) one million forints for insurance associations.
(3) Until receipt of authorization for the commencement of operations, the funds of an insurance company referred to in Subsection (2) may only be used to satisfy the conditions of operations as prescribed in this Act.
(4) The amount of minimum security capital shall be determined separately for insurance branches and organizational types in accordance with the provisions of Sections 125-128.
36
Scheme of Operations
Section 67.
(1) The scheme of operations shall specify the scope of the insurance activities and the important facts and information from the perspective of performing the commitments undertaken in the insurance contract, particularly:
a) descriptions of the branch and class of insurance and the risk categories in the various classes; b) definition of the field of operation;
c) amount and composition of the capital required for commencing the activities;
d) plans for setting up administration, sales and claim adjustment networks; the estimated costs involved and the resources that will finance them; if the insurance company plans to provide assistance services, a description of the financial resources and other assets at the insurance company's disposal for performing such assistance services.
(2) In addition to what is contained in Subsection (1), the scheme of operations shall contain estimated figures for the first three years of operation for
a) operating costs, particularly the costs of acquisitions, administration and claim adjustment; b) the number of policies and the proceeds from premium payments for each product; c) the ratio between revenue and settlements for each product;
d) the estimated liquidity position;
e) financial resources required to cover underwriting obligations, the minimum solvency margin and the minimum security capital;
f) a forecast balance sheet.
(3) In addition to what is contained in Subsection (2), the scheme of operations shall specify any plans pertaining to reinsurance, showing separately the estimated proceeds and expenses regarding reinsurance.
Conditions for Mortgage Loan Operations
Section 68.
(1) The Commission's authorization is required for an insurance company to commence mortgage loan operations. Subject to the exception set out in Subsection (6), the application for authorization shall contain:
a) the amended articles of association, b) the scheme of operations,
c) proof of having the personnel and material conditions for commencing the activities,
d) adequate proof of having the requisite minimum solvency margin following commencement of the activities, and
e) a statement on joining the central credit information system defined by specific other act.
(2) The Commission shall not grant authorization if it deems it possible that the insurance company will not be able honor those of its commitments arising from insurance contracts following the commencement of mortgage loan operations.
(3) The amount of principal in a mortgage loan must not exceed sixty per cent of the value of the real property being used as security, which provides the basis for determining the amount of the loan (hereinafter referred to as "credit insurance value"). In order to secure the loan, a clause shall be added to ban the alienation and encumbrance of the mortgaged property.
37
(4) The amount of the mortgage loan may not exceed the amount of coverage of the underlying life assurance policy.
(5) The methodological principles for establishing credit insurance value are laid down in specific other legislation. Based on these provisions, insurance companies shall prepare credit insurance value calculation regulations, which shall be submitted to the Commission for approval.
(6)
Section 69.
(1) Insurance companies shall rate and evaluate the individual risks, outstanding receivables and securities in connection with mortgage loan operations in the manner specified in Subsection (3).
(2) The aggregate amount of all mortgage loans placed by an insurance company shall not exceed