do business in the Dominican Republic - Pellerano & Herrera

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DOING BUSINESS INTHE DOMINICAN REPUBLICIn this regard, the compliance with such requirements is an obligation of financialentities, without the need of prior request by the Administration (Article 59).The law provides general rules for banking supervision, setting forth that theSuperintendence of Banks shall establish at the beginning of each year a generalplan of supervisions to be carried out on the system (Article 57).Furthermore, the law recognizes the principle of consolidated supervision, providingthat when a financial entity controls directly or indirectly entities of supportingor related services or any other entities, whether national or foreign,these shall be subject to supervision by the Superintendence of Banks on a consolidatedbasis (Article 58).g) Regularization, Dissolution and Liquidation. The preventive approach ofthe law may be particularly appreciated in the system created to face financialdifficulties that may arise in financial entities.In this regard, the law creates a regularization process that starts as soon as certaindeficiencies arise, such as reduction of regulatory capital, non-compliancewith capital ratio,negative opinion of auditors,among others.Under this process,entities of financial intermediation must in such cases submit a RegularizationPlan to the approval of the Superintendence of Banks with the necessary measuresto mend the situation that caused the regularization.The dissolution procedure is intended to protect depositors by trying to avoid theliquidation of the entity, and includes the assignment, under competitive conditions,of the deposits of the financial entity concerned to other solvent entities ofthe system, in exchange for the assets of such entity that have been excluded fromthe balance sheet to pay those liabilities. For these purposes, a Contingency Fundhas been created, which shall be formed of mandatory contributions made bybanking entities for a minimum yearly rate of 0.1%,payable quarterly.The resourcesof the fund shall guarantee deposits of the public up to RD$500,000 per depositor.Administrative liquidation may solely be used after the dissolution procedure hasbeen tried without success.h) Sanctions. The law creates a system of administrative sanctions that may beapplied in the event of non-compliance with the legal provisions. It providesclear rules for determining the existence of a violation,the types of violations andthe respective sanctions, as well as the particularities of the procedure. Both theentity and its administrators, as well as related companies, may be liable to theadministration and be subject to the sanctions provided in the law, which are forvery serious violations fines of up to ten million pesos and withdrawal of authorizationto operate as a financial entity.Furthermore, criminal sanctions are also established for activities such as distortionof information, filing false financial statements and misappropriation ofassets belonging to entities under liquidation.These violations are subject to finesof up to 2.5 million pesos and prison of three to ten years.82
Pellerano & HerreraAttorneys at law9INSURANCEOVERVIEW AND PERSPECTIVESAfter the year 2000, the sector increased considerably, while paid insurance premiumsgrew 17.1%.Being the principal sectors: Maritime and Aircraft Insurance, Bonds, LifeInsurance, Fire and Related Insurance and Motor Vehicles.The year 2003 was particularly difficult for the insurance sector, due to the exitfrom the market of two of the main companies, which caused a significantrestructuring of the insurance market.Up to this date, this reorganization process has continued, while the liquidationprocedures of these two companies has been moving forward.LEGAL FRAMEWORK: LAW 146-02Law on Insurance and BondsLaw 146-02 on Insurance and Bonds was passed on 11 September 2002.Thisstatute abrogates Law 126 of 1971 on Private Insurance, Law 400 of 1969 onSuperintendence of Insurance and Law 4117 on Mandatory Insurance forMotor Vehicles, grouping all of these aspects under a single comprehensiveframework.The main objective of the reform is to regulate clearly insurance business, mainlyin relation to aspects that had not been dealt with in previous laws and thatare today regulated almost world-wide, in order to adapt it to international standardsand provide a maximum level of protection to consumers, in the understandingthat the insurance business is a significant economic activity that shouldbe promoted in order to benefit the national economy.a) Superintendence of Insurance. This is a decentralized institution under thesupervision of the Ministry of Finance. It has the function to supervise the legalregime and operations of insurance and reinsurance companies, as well as intermediariesand adjusters.The main purpose of this entity is to ensure that theseinstitutions comply with the applicable legal provisions.b) Coverage. In general, insurance that covers risks in Dominican Republic mustbe subscribed in the country,except for insurance on surplus lines.The insurancebranches where insurers and reinsurers may operate are classified as follows:Personal Insurance. Here we find individual life insurance, collective lifeinsurance, accident insurance, incapacity, life annuity, health and others.General Insurance. These are fire insurance and related risks (earthquake,hurricane, flood, strike, explosion, theft, etc.), insurance for vessels, aircraft,transport,motor vehicles and civil,agricultural,general or technical liability,etc.Fidelity, performance or other bonds.c) Participants. The law defines the various participants in insurance business,such as the following:83
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