Reinsurance is the infrastructure of the insurance market: an insurer transfers part of the risk it has assumed to another insurer — a reinsurer — and thereby manages the weight of its portfolio. In Georgia the field is regulated by the Law of Georgia on Insurance Activity, which defines reinsurance as a separately licensed activity. On this page we explain the legal logic of reinsurance: what it is as an activity, who may conduct it, why it is a condition of the insurer’s stability, and how cross-border reinsurance works.
The Concept of Reinsurance within Insurance Activity
Article 3 defines both foundational concepts. Insurance is the relationship protecting personal and property interests of natural and legal persons upon the occurrence of the insured event, at the expense of funds formed from insurance premiums paid by those persons and other lawfully permitted sources. Insurance activity is the insurer’s activity connected with concluding and executing contracts of insurance and reinsurance.
Reinsurance is therefore not a separate commercial phenomenon but an integral part of insurance activity, regulated by the same statute. A reinsurer stands in the same position as an insurer: it must hold a licence and submit to state supervision.
Who May Conduct Reinsurance — the Insurer and Licensing
Under Article 9, an insurer is a legal entity created for insurance activity and licensed for the relevant type of insurance. The only permissible organisational form is a joint-stock company, and the firm name of a licensed organisation must contain the Georgian word for “insurance”.
Article 9 also imposes conduct requirements: the insurer must act with integrity, good faith and prudence, must have an internal consumer-protection policy approved by its supervisory board, and must observe the Service’s norms — or, where none exist, international insurance norms and practice.
Licensing is regulated in detail by Article 22: the licence for insurance activity is issued only for three activities — life insurance, non-life insurance and reinsurance. Reinsurance is thus a distinct object of licensing. Where an insurer already holds a licence for a type of insurance and wishes to conduct reinsurance within that specific type, no additional licence is required — it suffices to notify the Service in writing within 10 working days of commencing reinsurance activity.
The licence is issued for an indefinite term, to a specific insurer, and is non-transferable. The insurer must use it at least once every 6 months, and the applicant submits a business plan for the 3 years following commencement, including the reinsurance programme. Agents, brokers, and advisory or research services in insurance need no licence.
Financial Stability — Why Reinsurance Is Necessary
Article 13 defines the foundations of financial stability as three elements: capital, insurance reserves and the reinsurance system — the law treats reinsurance as an institutional condition of stability, not merely a commercial choice. The minimum capital is set by the Service by type and form of insurance and must not be less than one third of the calculated solvency margin.
The funds corresponding to the minimum capital must be continuously placed in a licensed Georgian bank on a separate account with a periodicity of at least one year, and any transaction related to the minimum capital requires the Service’s prior written consent on a cashless basis.
Decisive for policyholders: notwithstanding a concluded reinsurance contract, the insurer remains responsible to the policyholder within the full scope of obligations under the insurance contract — reinsurance distributes the risk but does not release the insurer from liability. At the Service’s request the insurer must submit information on the foreign organisation with which it has reinsured, including its financial standing. Article 15 obliges the insurer to create reserves for assumed obligations, their types, admissible assets and structure being set by the Service.
Cross-Border Reinsurance
Article 7 regulates the international dimension: a Georgian insurance organisation may independently conclude a reinsurance contract with one or several foreign reinsurers directly. A foreign insurer may operate in Georgia as a direct insurer only through a branch or representative office, whereas for reinsurance abroad the insurer may use a foreign brokerage organisation directly.
Foreign persons, including foreign insurance and reinsurance organisations, may be founders of Georgian insurance and reinsurance organisations — an international group may enter the market through cross-border reinsurance or a local licensed company.
Frequently Asked Questions
Below are the questions businesses and policyholders ask us most often about reinsurance, answered from the norms of the Law of Georgia on Insurance Activity.
Does reinsurance require a separate licence?
Yes, reinsurance is a distinct item among licensed activities. However, an insurer already licensed for a specific type of insurance may conduct reinsurance within that type without an additional licence, notifying the Service within 10 working days.
Does reinsurance release the insurer from liability?
No. Under Article 13, the insurer remains responsible to the policyholder within the full scope of obligations under the insurance contract notwithstanding the reinsurance contract.
May risk be reinsured with a foreign reinsurer?
Yes. A Georgian organisation concludes reinsurance contracts directly with one or several foreign reinsurers and may use a foreign broker for reinsurance abroad.
Why does the law treat reinsurance as a condition of stability?
Because a single insurer’s resources are often insufficient to cover large risks: the reinsurance system distributes risk across the market, and Article 13 names it as one of the three foundations of stability alongside capital and reserves.
How We Help on Legal.ge
The lawyers of Legal.ge work across the full spectrum of reinsurance law: drafting and reviewing reinsurance contracts, disputes with reinsurers, cross-border schemes and relations with the supervisory service. Contact us — and your reinsurance programme will be legally sound.