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2004-05-03 18:09:00
Embassy Bogota
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						UNCLAS SECTION 01 OF 02 BOGOTA 004475 



E.O. 12958: N/A

REF: STATE 82588

1. Following is post's response to REFTEL request for
information on Colombia's insurance sector in preparation for
FTA negotiations which begin on May 17.

2. Begin Questions and Answers:

Q: Has the country engaged in any treaties in which they
grant insurance-sector preferences to another country? If
so, please provide details.

A: Colombia is not party to any treaties granting insurance
preferences to other countries.

Q: Are there equity limits for foreign insurance companies?
If so, are there foreign insurance companies in the market
place with equity higher than the current restriction?

A: There are no equity limits for foreign insurance companies
in Colombia. Over 60% of insurers are foreign.

Q: Are there legal limitations on the structure of foreign
insurance companies operating in the host country (e.g.
branch, subsidiary, joint-venture, representative office)?

A: Yes, Decree 663 of 1993 prohibits transactions with
foreign insurance firms or their representatives if they do
not have a commercial presence in the country. This
limitation applies not only to life insurance, pensions, and
health insurance, but also to insurance for transportation of
people and merchandise. Foreign insurance companies must
establish commercial presence in the country through

Q: Can insurance companies engage in non-life, life and
reinsurance activities from the same legal entity?

A: No. Insurance companies cannot engage in different
insurance activities from the same legal entity (except for
some complementary activities as provided by law.) Life
insurance companies cannot engage in any other insurance
activity. Likewise, reinsurance companies are only
authorized to engage in reinsurance activities.

Q: Does the host country allow universal banking via foreign

A: Foreign providers are not barred from any activity as long
as they are established as a subsidiary with commercial
presence. This means they must comply with minimum capital
requirements as local companies. Foreign insurance companies
are not allowed to operate as branch offices (except for
advertising purposes). Banks cannot engage in different
financial activities; management for each activity must be

Q: What types of insurance services are compulsory? Are
foreign insurers allowed to provide compulsory insurance?

A: All automobile owners must purchase third-party auto
insurance. Also, work-related accident insurance is
mandatory in workmen's compensation plans. Foreign insurers
are allowed to provide compulsory insurance.

Q: Is there an obligatory pension scheme? Is there a

voluntary pension system? Do private firms manage voluntary
pensions? Is the market open to foreign participants? If
private firms can manage the voluntary portion of an
employee's pension, is this open to foreign competition?

A: A mandatory pension contribution of 13.5 percent of salary
must be deposited either in the state pension fund (ISS) or
in a private fund. According to the pension reform of 2003,
this contribution will increase one percentage point in 2004
and two percentage points in 2005. Moreover, the minimum
retirement age will increase from the current 60 for men and
55 for women (valid until 2008) to 62 for men and 58 for
women (from 2009-2018) to finally 65 for men and 62 for women
after 2018. A system for voluntary pensions also exists.
Private and public pension funds are able to manage
contributions to voluntary pension systems. Pension funds
can only invest up to 10 percent of their portfolios abroad.
The pension market (mandatory and voluntary regimes) is open
to foreign competition.

Q: Are capital controls applied to firms in the insurance

A: There are no capital controls in the insurance sector.

Q: What are the established capitalization levels? Are there
capitalization differences for domestic and foreign firms?
A: According to Colombian law, all insurance companies in
Colombia (except reinsurance companies) must maintain minimum
capitalization levels of 7.5 billion Colombian pesos (or
approximately US$ 2.5 million.) Reinsurance companies must
maintain minimum capitalization levels of 23.4 billion
Colombian pesos (or approximately US$ 8.5 million.) There
are no capitalization differences for domestic and foreign

Q: Are there limitations on how the minimum technical capital
can be invested? Can it be invested abroad?

A: 100 percent of the required technical capital must be
invested in government bonds or bonds issued by the Central
Bank, or FOGAFIN, or any other stock or securities issued by
private or public firms as approved by Decree 094 of 2000 and
Decree 2779 of 2001. It should be noted that minimum
technical capital is defined as the difference between the
present value of future risk (that would be paid by the
insurance provider) and the present value of net payments (by
the insured legal entity). Additional statutory capital that
is not part of the minimum technical capital has no
limitations and can be freely invested. A maximum of 10
percent of a company's investment portfolio can be invested
in securities issued by the same legal entity.

Q: Does the state insurance control body provide public
notice and an opportunity for public comment in the
development of new insurance regulations?

A: The Banking Superintendent acts as the state insurance
control body. All new insurance regulations are published on
their website There are no
established procedures for prior comment on new insurance

Q: Are there any state-controlled insurance or reinsurance
companies in the market place and, if so, are there any
requirements for mandatory reinsurance cessions to these

A: There are no state-controlled insurance or reinsurance
companies, nor mandatory reinsurance cessions. All
reinsurance companies operating in Colombia are foreign
reinsurance companies. Reinsurance activity is liberal in
Colombia. All foreign reinsurance companies are required to
register with the Banking Superintendent.

Q: Are there any limits on the consumption abroad of
insurance services?
A: Consumption of insurance services abroad is strongly
restricted in Colombia, including insurance for
transportation services needed abroad. The purchase of
insurance abroad is allowed only when no similar insurance
service is available domestically. To purchase insurance
services abroad, the purchaser must be authorized by the
Banking Superintendent.

Q: What types of insurance may be provided cross-border?

A: Colombian legislation restricts all cross-border insurance
activity, including insurance for transportation services as
explained above. Locally established insurance companies
must provide insurance for vessels, airplanes, and
automobiles operating domestically, even those under a
foreign flag. The Financial Statute prohibits transactions
with insurance companies that are not legally registered and
established in Colombia. Such limitations include life and
non-life insurance.