Legal Regime of Insurance Outsourcing

Abstract

Following the Solvency II Directive, the detailed rules for delegating own activities to external providers by insurance and reinsurance undertakings have been introduced into the insurance law regime, including the requirements regarding the contents of agreements under which the outsourced services are provided (outsourcing contracts). As institutions of public trust, insurance undertakings should perform their functions properly and safely for customers. Hence, the requirements for outsourcing certain activities and functions constitute an important element of the insurance company management system. Insurance outsourcing is subject to disclosure obligations, and is supervised by the Polish Financial Supervision Authority (KNF). The article discusses legal provisions specifying the basic outsourcing rules for insurance and reinsurance undertakings, including the principles for the development of internal policy and the fulfillment of disclosure requirements, with special emphasis on the outsourcing of certain activities and functions of the management system. Moreover, it also presents the requirements for outsourcing contracts which are imposed on insurance undertakings both by EU and Polish legislation. An appropriate formulation of the rights and obligations of the parties to the contract should ensure, in particular, both compliance with the law and the effective services supervision. More importantly, the KNF has been authorized to perform inspection activities in respect of entities providing outsourced services.