New agreement on insurance contracts providing for saving abroad
The Central Bank of Iceland has entered into an agreement regarding contracts offered by the German insurance company Bayern Versicherung to its customers in Iceland; cf. the Rules on Foreign Exchange, no. 565/2014.
The agreement enables the foreign 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 (see also the Central Bank press release of 11 September 2014).
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.
Further information can be obtained from Már Guðmundsson, Governor of the Central Bank of Iceland, at tel: +354 569 9600.
7 October 2014