The Naegelen Act: new insurance-related obligations

An eventful year 2020

In 2020, more and more insurance professionals suffered administrative sanctions by both the DGCCRF and the ACPR for failing to comply with obligations related to cold calling.

These sanctions are part of a legislative framework that is becoming increasingly restrictive for insurance product distributors.

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Warranty exclusion in French-based insurance contracts, an insoluble equation with variable parameters?

The debate on exclusion of warranty in insurance contracts is endless witness the numerous ongoing litigation cases before the French courts.

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Insurance Contracts : Limitations Are Already Underway

What is worthy of attention in your contracts and programmes in order to avoid broader limitations and poorer covers ?

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Warranty & Indemnity (W&I) Insurance

In respect of M&A transactions, the insurance market – first in the United Kingdom – has developed suitable warranties with insurers with the aim of externalising part of the risk transferred to the buyer by the seller. Indeed, in the aftermath of the transaction, it is not unlikely that a liability both the seller and buyer should not be aware of occurs while being already underlying before the transaction takes place. Buyers accordingly guard against this additional burden by using W&I, which those insurance policies try to partly externalise. The ultimate example is the tax risk carried by a company that did not comply with its obligations prior to the transaction but that actually turns out once the deal is done.

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The role of insurance in M&A transactions

The importance of insurance issues, the value to be gained from controlling them and the risks to which companies are exposed if they do not consider such issues are increasingly taken into account in mergers and acquisitions. Insurance issues must be considered from both a financial and legal perspective. The legal aspects of insurance policies are seemingly the most important, as the value of the policies largely depends on qualitative criteria: exclusions contained in agreements, reconstitution of cover, scope of insurance, definition of claim, etc. They overlap with quantitative aspects when the available amount of cover is defined by a clause in the insurance policy.

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Insurance intermediaries, beware the regulator!

The mass-market sale of affinity insurance and the rapid rise of insurtechs make the insurance industry a particularly attractive one. This is fantastic news for private equity funds, which are investing massively in brokers and other intermediaries in these days of low returns. The sanction imposed on affinity broker SFAM, which was slammed by the DGCCRF on 5 June 2019 for misleading commercial practices, serves as a reminder to managers and investors that affinity distribution practices must not ignore the rights of consumers and policyholders. The increasing number of ACPR sanctions against businesses in the sector is a clear sign that insurance remains a highly regulated area. These are two issues that will command the attention of parties to M&A transactions involving insurance intermediaries.

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