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Mexico

Published on Wednesday 25th October 2017

    Regulation

    • Mexico

      Insurance and reinsurance legislation in Mexico is federal. The states in Mexico have no authority to issue insurance or reinsurance laws (however, they can issue statutes under their areas of competition that may indirectly address insurance matters (eg, vehicle insurance for vehicles on local roads).

      Mexico is a civil law country. Thus, the main sources of law reside in legislative and regulatory provisions rather than in court decisions. Accordingly, the main sources of insurance and reinsurance law in Mexico are, in descending level of importance:

      • statutes issued by the Mexican Congress and published by the President;
      • administrative regulations issued by the President;
      • administrative rules issued by the insurance regulator (ie, the National Commission of Insurance and Surety (CNSF)), by delegation of the President; and
      • court precedents that constitute jurisprudence are also binding in court procedures when interpreting the application of insurance legislation. Jurisprudence is not binding on administrative authorities or regulators.

      The main laws ruling the insurance and reinsurance markets are:

      • the General Law of Insurance Institutions and Mutual Companies (LGISMS), which will cease to have effect in April 2015;
      • the Insurance and Surety Institutions Law, which will enter into effect in April 2015 and replace the LGISMS;
      • the Law Governing Insurance Contracts; and
      • the Navigation and Maritime Commercial Law.

      The main administrative regulations and rules for the insurance and reinsurance sector include:

      • the insurance compiled regulations;
      • the regulations of insurance and surety agents; and
      • the regulations of group life insurance and the collective insurance for accidents and illnesses.
    • Mexico

      The insurance and reinsurance sectors are regulated and supervised nationwide by the CNSF, an arm of the Ministry of Finance (SHCP).

      The CNSF regulates and supervises the formation, operation and functioning of insurance institutions, mutual insurance companies, surety companies, insurance agents, reinsurance intermediaries and other participants in the insurance market. The CNSF has authority to issue administrative rules addressed to the insurance and reinsurance sector.

      The CNSF’s supervision and regulatory authority covers different types of matters including, among others:

      • licensing processes;
      • corporate governance;
      • capitalisation and prudency rules (Solvency II);
      • authorised and forbidden activities for insurers, agents and other players in the insurance, reinsurance and surety sectors;
      • transactions including transfers of shares, mergers, bankruptcy, dissolution and liquidation of insurance and surety companies; and
      • product registration, supervision, investigation and sanctioning procedures.

      The SHCP, on the other hand, is the regulator authorised to interpret, apply and resolve, for administrative effects, matters relating to the application of the Insurance Law (eg, consultations and interpretative rulings), as well as to collect sanctions and issue and implement anti-money laundering regulation and supervision.

      The National Commission for the Defence and Protection of Users of Financial Services (CONDUSEF) regulates and supervises consumer protection matters in the financial and insurance sectors. The CONDUSEF may act as mediator and arbitrator in insurance claims at the behest of the insured party. It is also responsible for the registration procedures of adhesive contracts, the interpretation of their clauses in disputes, and the rejection of abusive clauses in said type of agreements during their registration procedure.

    • Mexico

      As a general rule, only insurers licensed in Mexico (and not foreign insurers) are authorised to cover risks in Mexican territory. There are some exemptions to this rule, including travel insurance or person insurance (ie, life or health) when the insured individual is outside of Mexico when acquiring the insurance policy. A foreign insurer is not generally allowed to write insurance in Mexico either, as only insurers licensed in this country are generally allowed to do so. Foreign insurers, however, can obtain exceptional licenses in Mexico to write insurance on Mexican territory that is limited to covering risks outside Mexico and for persons who can prove that no other local insurer licensed in Mexico may or is willing to offer a particular type of insurance to that person.

      Thus, except for a few exceptions, a fronting insurance company licensed in Mexico is normally required for foreign insurers or reinsurers to cover or be the assignee of risks, as well as to write insurance in Mexico.

    • Mexico

      Reinsurance can be written in Mexico by insurance or reinsurance companies licensed in Mexico. Foreign reinsurers can take reinsurance from insurance companies licensed in Mexico, provided that the foreign reinsurers in question are registered in the Foreign Reinsurers’ Registry at the CNSF.

  • Classification of terms

    • Mexico

      Conditions precedents in insurance contracts governed by Mexican law are not typically recognised. An insurance contract cannot be subject to a condition precedent consisting of the delivery of the policy or any other document in which the acceptance is acknowledged, or to the condition of paying the premium. The insurance contract can be subject to a certain term or date that initiates its effect.

      The representations and declarations from the insured or contracting party are the basis for the insurer to take the risk. Omissions or misrepresentations of facts that prevent the insurer from properly assessing the risk, or false declarations from the insured or contracting party, will entitle the insurer to rescind the insurance contract and repudiate the claim.

  • Duty of good faith, non-disclosure and misrepresentation

    • Mexico

      If the insured or contracting party breached the duty of utmost good faith by making false declarations, or omitting or misrepresenting information used to assess the risk, the insurer will be entitled to rescind the insurance contract and repudiate the claim. 

    • Mexico

      The insured party has a duty to continue acting in good faith after the insurance is purchased. If, for instance, the insured party participated in the significant aggravation of the risk or did not inform the insurer in a timely manner of the risk’s significant aggravation, the insurer will be entitled to rescind the insurance contract and repudiate the claim.

  • Reinsurance issues

  • Claim process

    • Mexico

      The burden of proof of the insurable interest, including the existence of a loss and falling within the scope of the coverage of the policy, is on the insured or contracting party. The insurer shall prove the existing exclusions, if any, based on the facts declared by the insured party or discovered by the insurer.

    • Mexico

      As soon as the insured or beneficiary had knowledge of the casualty or insured event, and no later than five days after acquiring this knowledge, unless the policy provides a longer term. If the insured or beneficiary breaches this time limit, the insured may reduce the indemnification due by up to the amount that may have resulted if the notice was provided in a timely manner. The statute of limitation for actions deriving from insurance agreements is five years in life insurance and two years in other agreements following the casualty, insured event or loss.

    • Mexico

      There is no time limit within which the insurer must confirm cover. The insurer must pay the claim or deny coverage within 30 days after it receives the claim and all the documents and reports allowing it to assess the grounds of the claim, unless the insurer rejected the claim or gave notice of the rescission or nullification of the agreement.

  • Law and jurisdiction and dispute resolution

    • Mexico

      Insurance contracts executed on Mexican territory are governed and subject to Mexican insurance laws. Insurance agreements executed outside of Mexican territory are not subject to Mexican insurance law.

      Insurance contracts executed in Mexico must submit to mediation and arbitration by CONDUSEF or Mexican courts that have jurisdiction, as chosen by the insured or beneficiary.

      Privately administered arbitration clauses are not commonly used in Mexican insurance agreements.

    • Mexico

      The insured has the implicit and statutory right to choose a mediation procedure with CONDUSEF that is binding for the insurer in small amount policies.

      As of January 2015, the insurers have the right (not the obligation) to register binding arbitration offers with CONDUSEF applicable to designated insurance contracts. If a binding arbitration offer exists, the insured or beneficiary will then have the choice to either initiate a free-of-cost binding arbitration (except for expert costs) with CONDUSEF’s arbitration system, or file a claim with Mexican courts.

      Privately administered arbitration clauses are not commonly used in Mexican insurance practice, although they are allowed. They are more commonly used in reinsurance agreements, especially in dealings with foreign reinsurers.

    • Mexico

      Mediation of small amount insurance policies is compulsory for the parties only if the insured chooses this alternative resolution procedure. This is not applicable in reinsurance contracts.

    • Mexico

      Ordinary commercial action at first instance courts, appeal courts and then constitutional review avenues would be the normal stages of the procedure. Cases normally take between one and three years to be resolved in all instances.

    • Mexico

      Arbitration is not yet common in insurance transactions. The CONDUSEF arbitration system will begin to be implemented in 2015. Therefore, we will need to see its results in terms of common practice versus court jurisdiction.

  • Reservation of rights / without prejudice rule

  • Cost, interest, monetary correction, moral and punitive damages

    • Mexico

      Yes, in court and arbitration procedures. Arbitration through the CONDUSEF arbitral system will raise no costs for the parties, except for expert costs, if applicable.

  • Intermediaries

    • Mexico

      To intermediate in the insurance and reinsurance markets. Intermediaries require a license from the CNSF and their operations and activities are regulated and supervised by the authorities.

    • Mexico

      Insurance agents must comply with rules regarding ethics, respect and loyalty both concerning the insured party and the insurance company. They shall be loyal and protect the legitimate interests of insured parties or beneficiaries, but also have be loyal to and respect the insurers. 

  • Limitation

    • Mexico

      The statute of limitation for actions deriving from insurance agreements is five years in life insurance and two years in other agreements following the casualty, insured event or loss.

    • Mexico

      Yes, by filing ordinary courses of interruption, including, among others, filing claims before the insurance company or the courts, and initiating arbitration procedures.

    • Mexico

       Yes, in insurance contracts, including:

      • the name and domicile of the parties;
      • the insurers’ representative signature;
      • the things or persons insured;
      • the risks covered;
      • the time when coverage starts and ends;
      • the coverage amounts;
      • the premiums;
      • other mandatory clauses (eg, clauses protecting the insured, including the ability to file claims with specialised units of insurers and CONDUSEF); and

      The wording and clauses shall not oppose Mexican insurance laws and shall be written in accordance with them.

      More flexibility exists in reinsurance contracts, as our legal system does not provide strict requirements.

  • Other requirements

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