11 September 2014

Agreement on insurance contracts providing for saving abroad; cf. the Rules on Foreign Exchange, no. 565/2014

Central Bank of Iceland

The Central Bank of Iceland has come to an agreement regarding contracts offered by Allianz Iceland to their customers.

The agreement enables the foreign insurance company and its customers in Iceland to retain their current contractual relationship without any changes, thereby preventing potential losses to consumers while mitigating the negative impact of the contracts on Iceland’s balance of payments. It also contributes to enhanced stability in matters related to the balance of payments and the exchange rate, in accordance with the objectives of the Foreign Exchange Act and the Rules adopted on the basis of the Act.

A further objective is to promote equal treatment among parties operating in the same market. It is assumed that the framework underlying the agreement will be used as a reference for potential arrangements undertaken by resident entities wishing to offer comparable products. It is clear, however, that fully unwinding the imbalances that have developed will take some time.

In order to mitigate the negative impact on Iceland’s balance of payments, the agreement stipulates that insurance companies will import foreign currency to Iceland to cover more than half of the future premium payments to be exported on the basis of current contracts over the term of the agreement. If the company enters into new contracts, it will import foreign currency in an amount matching the future premium payments to be exported on the basis of those contracts over the term of the agreement.

The Central Bank anticipates that today’s agreement will prove to be a major step towards eliminating the uncertainty that many consumers have faced in recent months, in addition to making a positive impact on the balance of payments and enhancing economic stability in Iceland.

Further information can be obtained from Arnór Sighvatsson, Deputy Governor of the Central Bank of Iceland, at tel: +354 569 9600.

No. 32/2014
11 September 2014