Legislation regulating the insurance market has been passed, and conditions will have to be met by insurance companies, reinsurance companies, brokerages, agencies, and insurance auxiliaries applying for licenses to operate in this country. Parameters of financial solvency, guarantees, and technical expertise will have to be maintained. The regulations were approved in the face of fierce opposition by several factions who seemed to purposely make it hard for INS competitors to enter the market and operate here. Reportedly, the conditions in Costa Rica are much stricter than in other countries. Also, many of the rigorous conditions to be met by insurance companies are also required of brokerages – small fry in comparison – which find the conditions very hard to comply with.

New insurance companies will need to race to set up shop here. To get their licenses, they must establish legal structures, integrate corporate bodies, obtain premises and equipment, develop computer programs, select and train personnel, and perform a myriad of other steps. They are going to have to develop products to conform to the Costa Rican market. The newly-formed insurance commission will have to approve the technical and legal aspects of each type of policy.

There is a question as to who is going to sell the new insurers' products. All current INS agents are automatically licensed by the Insurance Commission to sell for all the insurance companies in the market, but each new insurance company will have to decide who is going to sell its products. Meanwhile, INS is being obdurate and resistant to change, and recently announced that those agencies wishing to convert to brokerages (an AGENCY sells insurance for ONE insurance company, whereas a BROKERAGE "brokers" its clients' business between SEVERAL insurance companies) will have their commissions reduced to 20% of the current level – something that INS agencies can ill afford.

There are three options for agencies – to continue selling exclusively for INS, to establish "sister corporations" to sell policies other than those of INS, or to brave the wrath and reprisals of INS and convert to brokerages. Time will tell how this all shakes out.

For more information, please contact David Garrett at 2233 2455 or david@InsuranceCostaRica.info. Our purpose is to give the reader a better understanding of insurance in Costa Rica. The opinions and viewpoints expressed herein are those of the writer, and do not necessarily represent the official position of the National Insurance Institute (INS).