San José, Costa Rica, since 1956

INS Competition Far Off

The National Insurance Institute’s (INS) monopoly on selling insurance in Costa Rica is ending, as required by the Central American Free-Trade Agreement with the United States (CAFTA). Bit by bit, the naysayers have been overcome; in fact, on July 2 the Legislative Assembly approved the opening of the insurance market (TT, July 4, 2008). So the day is coming when insurance companies other than INS will be able to do business here – but there will be a waiting period of several months.

At the end of September, legislation regulating the insurance market was approved, covering the conditions to be met by insurance companies, reinsurance companies, brokerages, agencies and insurance auxiliaries applying for licenses to operate in the country, as well as the parameters of financial solvency, guarantees and technical expertise that have to be maintained. These regulations were approved despite fierce opposition by factions expecting to participate in the insurance market, because it seems legislators purposely want to make it hard for competitors of INS to enter the market and operate here.

The severe conditions to be met by insurance companies are also required of brokerages – which are small fry in comparison – and are nigh impossible for the latter to comply with.

It will be a race for the incoming insurance companies to set up shop and start operating. To get their licenses, they will have to establish legal structures and corporate bodies, obtain premises and equipment, develop computer programs, select and train personnel, etc. They are going to have to develop products to conform to the Costa Rican market, and the newly formed insurance commission must approve the technical/ legal aspects of each type of policy.

There is a question as to who is going to sell the new insurers’ products. It is believed that all current INS agents will automatically be legally licensed by the insurance commission to sell for all the insurance companies in the market, but each insurance company will have to decide who is going to sell their products. Meanwhile, INS is being obdurate and resistant to change, and in October announced that those agencies wishing to convert to brokerages (an agency sells insurance for one insurance company, whereas a brokerage “brokers” its clients’ business among several insurance companies) will have their commissions slashed to 20 percent of the current level – something few INS agencies can afford.

Agencies have several options: to keep on selling exclusively for INS; to establish “sister corporations” to sell policies other than INS’s; or to brave the wrath and reprisals of INS and convert into brokerages.

For more information, contact David Garrett at 2233-2455 or The purpose is to give the reader a better understanding of insurance in Costa Rica. The opinions and viewpoints expressed are those of the writer and do not necessarily represent the official position of INS.


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