Learning the Law South of the Border

What happens when your clients are exposed to risks in Mexico and they seek the advice of their trusted professional insurance agent or broker?

Our experience has taught us that there is not a uniform response to the question. Depending on the level of experience and exposure to the international insurance market, agents will widely vary from a well-informed and appropriate response, to advice that may end up sending their insureds to a Mexican jail.

When American entities or persons seek insurance coverage for risks in the republic of Mexico, they are bound to comply with the laws and regulations of that country.

Insurance in Mexico is regulated by the General Law in Insurance (Ley General de Instituciones y Sociedades Mutualistas de Seguros) and by the Law of Insurance Contracts (Ley Sobre el Contracto de Seguros).

Both laws date back to the year 1935, and have been amended and updated throughout the years. The latest amendments to the laws were under the current administration of President Vicente Fox in January 2002.

The business of insurance in Mexico is regulated by the National Commission for Insurance and Bonding (Comision Nacional de Seguros y Fianzas—CONASEF). This entity, like most departments of insurance in the United States, regulates:
• Licensing of insurance companies authorized to transact in Mexico.
• Licensing of insurance agents in Mexico.
• Filing of forms, products, policy conditions and rates
• Compliance with the Laws of Insurance

In Mexico, non-admitted insurance is addressed under Article 3 of the General Insurance law. In summary, this article prohibits insurance transactions of risks in Mexico with foreign (non-admitted) insurance companies. Even though the law provides for certain exceptions, it requires that any and all insurance must be contracted with insurance companies admitted in Mexico to the extent that coverage is available in the Mexican insurance market.

The penalties for violating non-admitted insurance laws in Mexico under the Mexican legal system, which is more the Napoleonic Code as opposed to the common law system in the USA, are very clearly typified and stipulated. The General Insurance Law under article 141, under fraction II, stipulates that any person who violates the prohibition to contract insurance with foreign companies will be sanctioned with:
• Imprisonment for a term from 3 years to 10 years
• A fine between $200.00 and $2,000.00 (Daily Salaries)

It is of crucial importance that special attention be given to the placement of insurance for risks in Mexico. Some products currently used to insure risks in Mexico, such as FLEX policies, ThroughPut policies and International Packages (DIC, DIL, and Foreign Wrap-Arounds) will be in violation of Mexican law, unless carefully evaluated for compliance.

Edward Hernandez is marketing manager for MexiPass Global Assurance. For copies of the exact text of Mexican Law call MexiPass Global Assurance at (800) 639-4727.

Topics Mexico