11/16/2019 INSURANCE OF

NORWAY

BY
ANAND MALLIK
18382005
1. REGULATORY
1.1 Which government bodies/agencies regulate insurance (and reinsurance) 1.1

Which government bodies/agencies regulate insurance (and reinsurance)

companies?
The Norwegian Financial Supervisory Authority (Nw.Finanstilsynet)(the “Norwegian
FSA”) is responsible for the supervision and regulation of insurance and reinsurance
companies as well as insurance intermediaries. The Norwegian FSA is an independent
government agency whose powers and activities are founded on legislation from the
Norwegian Parliament (Nw. Stortinget ), the Government and the Ministry of Finance
(Nw. Finans departementet) as well as on international standards for financial
supervision and regulation. The Ministry of Finance is the complaints body for the
Norwegian FSA.
1.2 What are the requirements/procedures for setting up a new insurance (or 1.2
what are the requirements/procedures for setting up a new insurance (or
reinsurance) company?
Non-life and life insurance activities cannot be carried out in the same undertaking,
as an entity may only obtain a licence to perform one type of insurance activity.
Separate sets of rules apply to non-life and life insurance companies.

An undertaking may apply to the Norwegian FSA for a Norwegian licence to conduct
insurance activities pursuant to the Financial Undertakings Act Chapters 2-12 to 2-14.
If granted, a licence may be restricted to a certain geographical area, category of
client or in other ways. In practice, licences are often restricted to certain classes of
insurance.

Irrespective of the type of insurance licence being sought, an application for a licence
must contain all information relevant to process Irrespective of the type of insurance
licence being sought; an application for a licence must contain all information
relevant to process the application. The information to be provided is extensive and
includes a description, among other things, of the ownership structure, management,
organisation, management and control systems, funding of the business, capital and
solidity of the entity, including a three-year financial forecast, a three-year
operational plan, budget(s), internal routines and anti-money laundering procedures,
as well as descriptions of the types of insurance the undertaking intends to offer.
Further the application must account for the principles for premium calculation and
reinsurance as well as target customers. The application must also include
information about the incorporation of the insurance undertaking and its draft
articles of association.
It will be important in the application to demonstrate that the entity is adequately
organised, sufficiently capitalised, including having coverage for the minimum capital
requirements.

The entity must also have an experienced and qualified management and a board
that is clearly capable of managing the business within the Norwegian legislative
framework. The Norwegian FSA may always ask for additional information. An
application is usually written in the Norwegian language, but it may be acceptable to
do so in English.
1.3 Are foreign insurers able to write business directly or must they write Are foreign
Are foreign insurers able to write business directly or must they write
reinsurance of a domestic insurer??
To the extent the insurer is authorised in one Member State of the European
Union/EEA to carry out insurance activities, then it may carry out those insurance
activities in Norway through a branch or on a cross-border basis into Norway,
provided a notification procedure is complied with and certain terms are met. If the
insurer is incorporated in a third country outside the EU/EEA area, it may write
business in Norway through a Norwegian subsidiary provided that the subsidiary
holds a local licence to conduct the insurance activities in Norway. There is also
limited access to operate through a branch provided that certain terms are met.

There is no mandatory requirement for a foreign reinsurer to write reinsurance of a

domestic insurer under Norwegian law.

Are there any legal rules that restrict the parties’ freedom of contract by
implying extraneous terms into (all or some) contracts of insurance?
Yes, there are legal rules according to which extraneous terms may be implied into
contracts of insurance. Of most significance are the provisions of the Norwegian
Insurance Contracts Acts (the “ICA”), whose provisions are generally of mandatory
application to contracts of insurance.

The provisions of Part B (Life Insurance) of the ICA may not be contracted out of to
the detriment of insured’s. However, the provisions of Part A (Non-Life Insurance)
may be contracted out of, other than in respect of an injured third party’s direct right
of action against an insolvent tortfeasor’s liability insurer.

It should be noted that the right to contract out of the remaining provisions of the
ICA applies only to the extent the insured entity is a commercial insured; i.e. entities
satisfying two of the following three conditions:
 • Having more than 250 employees;
• Having sales income of at least NOK 100 million; or
• Having assets of at least NOK 50 million.
The commercial insured’s exception also applies to entities whose operations take
place mainly abroad, or where the insurance relates to shipping, aviation or
international transport.

It is important to note that even where the ICA has been contracted out of under the
commercial insureds exception, the ICA’s terms will still apply where a policy is silent
on an issue that is regulated by the ICA.

Other terms that may be implied from Norwegian background law include: (i) that
the insured is entitled to recover the entirety of its financial loss insured under an
insurance policy; (ii) where compensation is to be measured by the cost of reparation
or replacement, the insured is entitled to such compensation regardless of whether
reparation or replacement takes place; and (iii) the insured is entitled to have
compensation paid out in money. These three terms are, however, subject to the
express terms of the contract (so, for example, a clear contractual statement as to a
policy limit will override the first of these implied terms).

In addition, all property fire damage insurance extends automatically to cover

damage caused by other acts of nature. Finally, Norwegian courts have the power to
imply extraneous terms into contracts of insurance on a case-by-case basis based on
ordinary principles of contract law as well as out of reasonableness considerations
under the Norwegian unfair contract terms regulations contained in section 36 of the
Contracts Act.

Are companies permitted to indemnify directors and officers under local

company law?
Yes. Companies are permitted to indemnify their board members, managing
directors and other officers against third-party claims, albeit subject to certain
limitations. Agreements purporting to indemnify directors or limit their liability may
be deemed invalid in cases of wilful misconduct, gross negligence or bad faith. In
addition, such indemnities will be considered as remuneration due to their financial
value. Therefore, the extent to which public limited liability companies are able to
indemnify the board of directors may be subject to mandatory rules on remuneration
that cannot be contracted out of.

Further, the granting of any such indemnity must be approved by the relevant
corporate body.
In the case of private and public limited liability companies ( Nw. aksjeselskap,
allmennaksjeselskap ), the body with the authority to approve such indemnities to
board members is the general meeting of shareholders. Such companies may
indemnify their managing directors if approved by the board. In the case of general
partnerships (Nw. ansvarlig selskap ), the relevant authorising body is the partnership
meeting (Nw. selskapsmøte).

Are there any forms of compulsory insurance?

Yes. Employers are required to maintain insurance covering injury and sickness
suffered by their employees in the course of their employment. Likewise, car owners
are required to have third-party motor liability insurance.

Liability insurance is compulsory in connection with certain high-risk operations, for

instance, cargo vessels carrying 2,000 tons of petrol or more and nuclear plants must
have insurance in a form approved by the Norwegian authorities.

The members of certain professions are also required to maintain compulsory liability
insurance (e.g. lawyers).

Those holding licences for the exploration and development of oil and gas must have
insurance covering, among other things, loss resulting from damage to their facilities,
pollution and removal of wrecks. Property insurance covering fire damage must also
cover damage caused by other acts of nature.

2. RE-INSURANCE CLAIMS

In general terms, is the substantive law relating to insurance more favourable

to insurers or insureds?
Substantive law relating to insurance strikes a relatively fair balance between the
interests of insurers and insureds. However, the Norwegian Insurance Contracts Act
has developed along consumer lines to a greater extent than in certain other
jurisdictions and may for that reason be perceived as more favourable to insureds.

A practical result of this in commercial insurance is that commercial insureds are able
to take advantage of provisions designed to protect consumers. By way of example,
an insured has the right to interest (currently at 8.75% per annum) on insurance
payments from as early as two months after notification of a claim. While this is
designed to protect consumer insureds by ensuring the quick and efficient handling
of usually low-value claims, commercial insureds may earn considerable amounts in
late payment interest on covered claims, or use the right to late payment interest as
a bargaining chip to obtain a favourable settlement from insurers in high value
claims.

Can a third party bring a direct action against an insurer? an insurer?

Yes. An injured third party can claim compensation direct from insurers without
having to establish the insured tortfeasor’s liability first. As a result, it is normal
practice in Norwegian courts for a liability insurer to be joined as a party to
proceedings.

This right may be excluded by clear and express terms in a policy to the extent an
insured comes within the commercial insureds exception as described in question
above. As also noted in above question , an injured third party’s right to bring a direct
action against an insolvent tortfeasor’s liability insurer may not be contracted out of.

Can an insured bring a direct action against a reinsurer?

This issue is not regulated by Norwegian law. The Norwegian Insurance Contracts
Acts does not apply to reinsurance and there is little Norwegian case law or market
practice concerning reinsurance contracts. As a result, general principles of
Norwegian contract law and contractual interpretation will apply and a Norwegian
court or arbitral tribunal will place emphasis on the specific contractual wording of a
reinsurance contract as well as other sources of interpretation such as international
reinsurance law and practice (to the extent the application of that foreign law and
practice accords with an ordinary, natural understanding of the contractual wording).

In the absence of any comprehensive Norwegian law on reinsurance, an insured has

no general right to bring a direct action against a reinsurer with whom it has no
contractual relationship. An insured may bring a direct action against a reinsurer if
such a right is provided for in the contract, for instance by way of a cut-through
clause.

What remedies does an insurer have in cases of either misrepresentation or non-

disclosure by the insured?
The remedies available to an insurer for misrepresentation or non-disclosure depend
on the degree of fault on the part of the insured. If the insured’s misrepresentation
or non-disclosure was fraudulent, the insurer is free from liability. If the insured was
negligent, the insurer’s liability may be reduced or fall away entirely, depending on
the significance of the undisclosed/misrepresented information to the underwriter’s
assessment of the risk, the degree of fault by the insured, the chain of events and
other circumstances. In limited circumstances, the insurer may also be able to
terminate the policy if the misrepresentation or non-disclosure concerned essential
facts.

Is there a positive duty on an insured to disclose to insurers all matters material to

a risk, irrespective of whether the insurer has specifically asked about them?
An insured’s duty of disclosure can be said to have two aspects: passive and active.
The passive duty requires the insured to provide correct and exhaustive answers to
questions raised by insurers at placement or renewal. The active duty requires the
insured of its own accord to disclose information concerning special circumstances
which it must understand to be of material significance to the underwriter’s
assessment of the risk.

The passive duty is seen as the general rule and the active duty as an exception to it.
The scope of the active duty of disclosure may be narrower compared to the duty of
disclosure in other jurisdictions. It concerns circumstances that the insured cannot
reasonably expect the insurer to ask about.

Is there an automatic right of subrogation upon payment of an indemnity by the

insurer or does an insurer need a separate clause entitling subrogation?
There is a general principle that any party (including an insurer) who pays for another
party’s loss has a recourse claim ( Nw. regresskrav) against the party that caused the
loss. In bringing such a claim, the claimant steps into the position of the aggrieved
party and takes over its claim against the wrongdoer.

Insurers’ rights of subrogation are in some instances provided for by specific

legislation, e.g. in the case of first party losses, in the Norwegian Compensation Act.
In practice, this will normally be regulated by the terms of the policy.

3. LITIGATION – OVERVIEW

Which courts are appropriate for commercial insurance disputes? Does this depend
on the value of the dispute? Is there any right to a hearing before a jury?
Judges are generalists in Norway and there are no specialist, commercial courts that
handle insurance disputes. The District Courts (Nw. tingrettene) are therefore the
appropriate courts of first instance in commercial insurance disputes.

In some circumstances, the venue of first instance will be the Conciliation Board (Nw.
forliksrådene ), where lay judges facilitate discussions aimed at achieving settlement.
Cases must be commenced in the Conciliation Boards in claims valued at less than
NOK 125,000 or if one of the parties is not represented by a Norwegian lawyer
(irrespective of the value of the claim).

Insurance disputes may also be referred to the Financial Complaints Board (Nw.
Finansklagenemnda), which is a quasi-judicial body with highly specialised members
and which offers a low-cost alternative to proceedings in the Norwegian courts.
Decisions of the Financial Complaints Board are not binding. However, the parties will
normally accept the Board’s findings.

There are no longer jury trials in Norway.

How long does a commercial case commonly take to bring to court once it has been
initiated?
The Norwegian Disputes Act requires the main oral hearing in a case to take place
within six months of the date on which a statement of claim is filed. However, this
period may be longer in “exceptional circumstances”, typically in large, complex
disputes. Judgments are normally issued within two to six weeks of the close of the
hearing unless the case is particularly complex and extensive.

4. LITIGATION – PROCEDURE

What powers do the courts have to order the disclosure/discovery and inspection
of documents in respect of (a) parties to the action, and (b) non-parties to the
action?
There is no process for disclosure/discovery or inspection of documents in Norway.
Instead, parties normally make requests in the pleadings for the production of
specific documents, or narrowly defined classes of documents. To the extent the
request does not amount to a “fishing expedition” or documents are not exempt
from production, for example because they contain business or state secrets, the
court may order a party to produce documents if the party refuses to do so of its own
volition. If a document contains, for example, business secrets, a court will often
order its production in redacted form.

It should be noted that parties are under a statutory duty correctly and completely to
explain and elucidate the dispute to the court. As part of that duty, parties are
required to disclose and provide access to documents that can be relevant to the
court’s resolution of the dispute. In addition, parties are required to notify the
opposite party of material documents they are aware of but which are not in their
possession, even if such documents are detrimental to its case or supportive of the
opposite party’s case.
Non-parties to court proceedings in Norway are under a duty to provide factual
clarifications as well as access to objects and documents that may constitute
evidence.

Norwegian courts have powers to compel both parties and non-parties to comply
with these duties.

Can a party withhold from disclosure documents (a) relating to advice given by
lawyers, or (b) prepared in contemplation of litigation, or (c) produced in the
course of settlement negotiations/attempts? Litigation, or (c) produced in the
course of settlement negotiations/attempts?
(a) A party can withhold from disclosure documents containing information it
entrusted to its lawyers and legal advice provided by its lawyers.

(b) There is no separate ground of “privilege” that would allow a party to withhold
from disclosure documents by reason of the fact that they were prepared in
contemplation of litigation. For such documents to be withheld, they must fall within
the scope of the principle of legal advice confidentiality referred to at (a) above (or
one of the other narrow exceptions to the duty of disclosure under the Norwegian
Disputes Act, e.g. business or state secrets, etc.).

(c) The Ethics Code which applies to Norwegian lawyers prevents a lawyer from
referring to settlement offers made by the other party or its counsel in the course of
proceedings. A lawyer may refer to his/her client’s own settlement offers (unless
agreed otherwise between the parties) as long as such offers contain no information
of the other side’s settlement offers, which could normally be redacted in any case.
Settlement offers/negotiations in the course of court-sponsored or private
mediations are protected by a duty of confidentiality and are prohibited from being
adduced in evidence under the provisions of the Disputes Act.

Do the courts have powers to require witnesses to give evidence either before or at
the final hearing?
Yes, the courts have the power to require witnesses to give evidence at both interim
and final hearings. Witnesses’ court attendance is ordinarily secured by parties’
counsel. However, where it is unclear whether a witness will indeed attend to give
evidence, a court may compel such a witness to do so.
Is evidence from witnesses allowed even if they are not present?
As a general rule, witness evidence is only admissible if submitted orally. This general
rule is based on a well-established legal tradition that all evidence should be
“received” by the courts directly and orally, rather than in the form of pre-prepared
statements that other parties may have scope to influence. As a consequence,
witness statements are a rarity in practice. A witness statement from a witness who
does not appear in court for examination may only be adduced in evidence if all of
the parties to the dispute consent. For practical reasons, the courts frequently allow
witness evidence to be given by video or telephone link.

Are there any restrictions on calling expert witnesses? Is it common to have a

court-appointed expert in addition or in place of party-appointed experts?
Expert witnesses may either be appointed by the courts or the parties.

Courts may appoint expert witnesses on their own initiative or following an

application by at least one of the parties. Expert witnesses may be appointed if doing
so would be necessary to establish a reasonable basis for the court’s determination
of the parties’ dispute. Expert witnesses may also be appointed to ensure there is a
balance between the parties with respect to all other expert evidence before the
court.

Party-appointed expert witnesses are frequently used by parties. It is also not

unusual for witnesses with a certain connection to the parties being appointed as
experts, but to the extent their evidence relates to factual matters such testimony
will be deemed witnesses evidence for the parties.

What sort of interim remedies are available from the courts?

Norwegian courts have the power to order two broad categories of interim relief in
connection with civil proceedings: arrests; and interim measures. An arrest is a form
of an asset freeze or judicial lien (but may also, in exceptional circumstances, include
a restriction on an individual’s right to travel outside of Norway). An interim measure
is typically an order compelling the defendant to carry out an act, requiring the
defendant to refrain from carrying out an act or directing the defendant to transfer
an asset into the custody of, for example, an enforcement officer.

Both of these categories of relief are temporary and may be obtained before the
main proceedings are commenced. Most of the principles governing when such relief
is available are equally applicable to arrests and interim measures, as set out below.
However, arrests are available only in cases involving a monetary claim. So, in the
absence of a monetary claim, interim measures are the only form of interim relief
available.

Both arrests and interim measures may only be granted if both the substantive claim
underpinning the interim proceedings and the basis for why interim relief is
necessary are established on the balance of probabilities. As a condition to granting
interim relief, Norwegian courts may order the party requesting such relief to provide
security for any compensation that may subsequently be awarded to the other party
for any unjustifiable loss it suffers as a result of the relief given.

Is there any right of appeal from the decisions of the courts of first instance? If so,
on what general grounds? How many stages of appeal are there?
Norway has a unitary (rather than federal) court system that is comprised of 63
courts of first instance (62 District Courts and one Bankruptcy Court based in Oslo),
six regional Appeal Courts and the Supreme Court, which is Norway’s final court of
appeal and which sits in Oslo.

District Courts are normally the courts of first instance in most medium to high value
civil disputes (although as explained above, the Conciliation Board may in certain
circumstances be the court of first instance). Judgments of a District Court may be
appealed to a Court of Appeal on questions of fact, law or procedure. Such an appeal
is available as of right (except in cases of very low value, where permission to appeal
is required). An appeal from a judgment of the Court of Appeal to the Supreme Court
(the court of final instance) is available only by leave of the Appeals Selection
Committee. Such leave is given ordinarily only in cases of high precedential value,
public importance or where there are other strong reasons that merit consideration
of the case by the Supreme Court.

Is interest generally recoverable in respect of claims? If so, what is the current

rate?
The Insurance Contracts Act provides an insured with a right to interest on amounts
payable under an insurance policy. Such interest accrues from two months after
notification of a loss. The rate of interest is adjusted bi-annually and is currently
8.75%.

The insured’s right to interest is contingent on the insured having complied with its
duty to provide the insurer with information necessary to assess the extent of
coverage available under the policy and calculate any insurance compensation
payable. Nevertheless, recent case law suggests that the threshold for compliance
with this duty is relatively low so that late interest on a claim is a significant issue for
insurers to consider when handling claims.

It should be noted that interest on an insurance claim is payable over and above the
limit of indemnity in a policy.

What are the standard rules regarding costs? Are there any potential costs
advantages in making an offer to settle prior to trial?
Courts have the power to order a party to a dispute to pay costs of its opponent.
Such cost orders are made primarily on the basis of the degree of success
experienced by the parties in obtaining the outcome sought. In ordering costs, courts
take into account a broad range of factors, including the general importance of the
questions litigated and whether it was appropriate of the parties to have their
dispute determined by the courts rather than settled amicably.

Courts may also take into account a refusal to accept a reasonable settlement offer in
ordering costs. So, there is a potential cost advantage in making a reasonable offer to
settle.

Can the courts compel the parties to mediate disputes? If so, do they exercise such
powers?
Courts have no power to compel parties to mediate their disputes, other than in
certain family matters, and in claims of low value (under NOK 125,000), which would
be referred to the Conciliation Board.

However, courts are under an obligation to consider the possibility of mediation at

each stage of proceedings. As a result, courts encourage parties to consider
mediation in all claims and judges act as mediators in court sponsored mediations.

In addition, all parties are under an obligation to explore all possibilities for amicable
resolution of their disputes, including by way of mediation. Failure to comply with
that obligation may have cost consequences.
If a party refuses to a request to mediate, what consequences may follow?
A refusal to a reasonable request to mediate may be taken into account by courts
when determining the question of costs.
5. ARBITRATION

What approach do the courts take in relation to arbitration and how far is the
principle of party autonomy adopted by the courts? Are the courts able to
intervene in the conduct of an arbitration? If so, on what grounds and does this
happen in many cases?
Norwegian courts are favourably disposed to arbitration. They respect parties’ choice
of arbitration as a method of dispute resolution and are generally disinclined to
interfere in the conduct of arbitral proceedings.

Party autonomy is one of the fundamental pillars of Norwegian arbitration law and,
as such, great emphasis is placed on it by Norwegian courts. As a result, the general
rule is that a party may not partake in arbitral proceedings unless it has agreed to do
so.

However, there are a few exceptions to this general rule. One exception arises in the
context of party succession. A successor of a party to an arbitration agreement has
the same rights and obligations in connection with the arbitration agreement as its
predecessor, unless the arbitration agreement states otherwise. One further
potential exception operates in the context of agreements that benefit third parties.
In that context, it is possible in some circumstances for the third party to sue and be
sued under the arbitration agreement it was notionally not privy to.

Courts are able to assist the parties in the conduct of an arbitration only in the
circumstances expressly provided for in the Norwegian Arbitration Act, which broadly
reflect those set out in the UNCITRAL Model Law.

Court intervention in arbitration proceedings is rare.

Is it necessary for a form of words to be put into a contract of (re)insurance to

ensure that an arbitration clause will be enforceable? If so, what form of words is
required?
Arbitration agreements are not required to be in written form. So, an oral arbitration
agreement will be enforceable. Having said that, it may be more difficult for the
parties to prove that an arbitration agreement had indeed been entered into without
such an agreement existing in writing.

Moreover, an arbitration agreement concerning future disputes must be limited to

such disputes that can arise from a specific legal relationship. In addition, it is
possible to enter into an arbitration agreement concerning a dispute that has already
arisen.

Notwithstanding the inclusion of an express arbitration clause, is there any

possibility that the courts will refuse to enforce such a clause?
Courts may refuse to enforce an express arbitration clause only in exceptional
circumstances (such as where a party’s consent to the clause was obtained by way of
duress, fraud or undue influence, or where at least one of the parties lacked
capacity).

Unreasonableness has been debated as a potential broader basis for refusing to

enforce an express arbitration clause, but whether this basis exists as a matter of law
remains unsettled.

What interim forms of relief can be obtained in support of arbitration from the
courts? Please give examples.
The tribunal may grant interim measures as it sees fit, although such measures will
not be enforceable in the courts. Nevertheless, the courts have the power to order
the same forms of interim relief in support of arbitral proceedings as they do in the
context of litigation.

Is the arbitral tribunal legally bound to give detailed reasons for its award? If not,
can the parties agree (in the arbitration clause or subsequently) that a reasoned
award is required?
Arbitral tribunals are legally bound to give reasons for their awards. As a general rule,
reasoning in an arbitral award should be thorough. A failure to provide sufficient
reasons may constitute a ground for setting aside the arbitral award, although such a
failure must be shown to have had an obvious impact on the tribunal’s decision for
the award to be set aside.
Is there any right of appeal to the courts from the decision of an arbitral tribunal? If
so, in what circumstances does the right arise?
There is no right of appeal to the courts from the decision of an arbitral tribunal.
However, an arbitral award may be challenged in the District Court no later than
three months after the party received the award, and may set aside by the court on
the following limited grounds:
• One of the parties to the arbitration agreement lacks legal capacity;
• The arbitration agreement is invalid;
• The party bringing the action to set aside the award was not given sufficient
notice of the appointment of an arbitrator or the arbitration, or was not given
an opportunity to present his views on the case;
• The award falls outside the scope of the tribunal’s jurisdiction;
• The composition of the tribunal was incorrect; and
• The arbitral procedure was contrary to law or the agreement of the parties,
and it is evident this had an impact on the award.