Each country has a supervisory and regulatory body responsible for overseeing the proper functioning of the insurance sector ensuring compliance with the laws and regulations in force by all insurance companies established or operating in its jurisdiction.
The Insurance Commissariat, a public establishment under ministerial authority, is the official Luxembourg supervisory body for the insurance sector, responsible for supervising all the participant in the insurance sector, as well as their activities. It protects the interests of clients while at the same time offering a degree of flexibility as regards the rules applying to eligible assets.
There are numerous measures aimed at ensuring the smooth operation of the insurance sector, among them:
- the conditions of access to the profession of insurer are very strict and are aimed in particular at ensuring the financial solidity of insurance companies;
- each Luxembourg insurance company must at all times have a prescribed level of free assets (solvency margin plus assets guaranteeing insured risks) sufficient to cover its commitments;
- each company must submit to the Commissariat a quarterly report showing the amount of its clients' assets. In this way the Commissariat can verify whether the technical provisions correspond to the assets representing them;
- the Commissariat is charged with checking the solvency and financial solidity of each undertaking. To do so, it may carry out inspections in situ and is entitled to demand any document allowing it to carry out its checks (while at the same time complying with professional secrecy);
- if it detects non-compliance with laws or regulations, the Commissariat has the power to sanction any regulated entity within the insurance sector. This may extend to withdrawal of approval;
- should an undertaking cease to trade, the Commissariat oversees the process of liquidation in order to preserve the rights of the policyholders.
Apart from this, there is also a supervisory body at European level: the European Insurance and Occupational Pensions Authority (EIOPA), an independent authority of the EU which works to ensure effectiveness and consistency in the regulation and prudential oversight of insurance and occupational pensions.