New Insurance Legislation for Lebanon

Colin McNairn and Lawrie Savage have been working on a new Insurance Law for the Government of Lebanon.

The new law, unveiled by Minister of the Economy and Trade on April 16, 2004, is intended to help establish the country as a regional centre for the insurance industry by increasing consumer protection and establishing modern rules for the operation of the insurance marketplace. The Law also establishes higher standards of corporate governance for insurers and strengthens the ability of the Insurance Control Commission to oversee the sector. The new Law, along with other measures designed to benefit both insurance consumers and the insurance sector, has been developed as part of a project sponsored by the International Finance Corporation, the World Bank, the Canadian International Development Agency (CIDA) and the Financial Sector Reform and Strengthening Initiative (FIRST).

The draft law is intended to serve as a model not just for Lebanon, but also to provide a framework that can be adapted to the environment of other emerging market countries that require modern insurance legislation. The proposed new legal framework draws on leading edge concepts from developed countries but does so in a way that recognizes the size of the industry and the nature of the Lebanese insurance environment. For example, a number of key provisions, regarded as fundamental to a modern insurance regime, will be phased in over a period of several years so that local companies will be able to avoid disruption and carefully adapt to the new approaches. As well, while the draft law is based on what are recognized as the most advanced legal principles for insurance supervision, the Lebanon version is greatly simplified compared to developed countries that have much larger and more mature insurance industries. The model law also conforms to the Core Principles adopted by the International Association of Insurance Supervisors in October, 2003.

The draft law sets out a comprehensive framework for the operation of the insurance industry and protection of the public, from the perspective of both insurer solvency and consumer protection. This includes the following main areas:

1. Organization, corporate governance and responsibilities of the Insurance Control Commission;
2. Requirements for insurer licensing, including minimum capital;
3. Corporate governance for insurers;
4. Business powers of insurers;
5. Insurer investments and coverage of technical provisions;
6. Requirements for auditors and actuaries;
7. Regulatory reporting and inspections;
8. Mergers and acquisitions;
9. Market conduct of insurers;
10. Regulation of insurance agents and brokers;
11. Supervisory intervention;
12. Remedial powers and sanctions; and
13. Miscellaneous provisions.

Many of the above areas are not dealt with at all in the present Lebanese Insurance Law, or if dealt with, are not provided for in a modern and comprehensive manner designed to ensure a healthy, vibrant insurance industry capable of providing the public with a wide variety of insurance products for protection and investment.

The draft law constructs an insurance supervisory model for Lebanon which is succinct but robust, incorporating the IAIS Core Principles and recognized supervisory principles from a number of countries.

To contact us:

Lawrie Savage & Associates Inc.

Phone: (416) 916-0702
Fax: (416) 363-7454

222 The Esplanade, Suite 201
Toronto, Ontario,
Canada M5A 4M8