According to Article 2 of the Law of Ukraine “On Insurance” dated 7 March 1996, № 85/96-ВР (hereinafter the “Insurance Law”), insurance activity can be carried out exclusively by Ukrainian Insurers. No exceptions are mentioned in the Insurance Law. Any legal entity carrying out insurance activity in Ukraine without a license issued by the competent authority of Ukraine, which is currently the State Commission for the Regulation of the Financial Services Markets in Ukraine (hereinafter “State Commission”), is subject to civil, administrative and, for the managers of such legal entity, criminal liability by the state, and all the premiums may be confiscated.
However, theoretically local companies and individuals can buy insurance abroad directly from non-residents according to the current Ukrainian insurance legislation that should not apply abroad and that does not prohibit such foreign activity if such contracts are concluded outside of Ukraine. However, there are a number of factors which should make this very unattractive, including the strict Ukrainian exchange controls and Ukrainian taxation issues.
According to Article 15 of the Insurance Law, intermediary activity that relates to the conclusion of insurance agreements with foreign insurers shall not be allowed in the territory of Ukraine, except for reinsurance agreements. This provision unambiguously excludes the possibility of the foreign insurer being represented by any legal entity and/or individual in the territory of Ukraine to conclude an insurance agreement other than for reinsurance.
According to the official position of the State Commission, Non-Admitted Insurance is strictly prohibited in Ukraine. As a matter of practice, if the State Commission discovers any Non-Admitted Insurance in Ukraine, it immediately notifies the state enforcement agencies (tax authorities, police, etc).
In common with other Eastern European countries, an intermediary known as “Safeinvest” operated in Ukraine during the 1990s and sold life insurance products of some European life companies, which in fact constituted unauthorized Non-Admitted Insurance. This organization has now been legitimized in Ukraine (after the State Security Service of Ukraine (“SBU”, successors to the KGB) was involved) acting as an insurance broker under the name “Eurolife” exclusively to sell the products of the Ukrainian Insurer “Grave Ukraine” which is 100% owned by an Austrian company.
According to Ukrainian insurance legislation, there are no specific cases where the involvement of an insurance broker is mandatory.