What is Portfolio Transfer? Definition of Portfolio Transfer, Portfolio Transfer Meaning and Concept

Definition of portfolio transfer is the transfer of insurance contracts between two or more insurance companies or insurance brokerages.

The transfer of portfolio allows to diversify the risk of insurance companies and increase their degree of specialization. It is carried out through the transfer between two insurers of current insurance contracts where they are reflected:

  • Personal data of the transferor.
  • Assignee.
  • The contractual part.
  • The insured.
  • The solicitor.
  • The beneficiary.
  • The risks of the operation.

There are a series of rules of action for the transfer of portfolios and this management must be approved by the Ministry of Finance, Finance and Economy by country (see list of countries below). In addition, the transferee company must have sufficient technical provisions and have a wide solvency margin.

Social welfare mutuals can only acquire the portfolios of entities of the same class.

Portfolio transfer procedure

The portfolio transfer procedure must be submitted to the General Directorate of Insurance (DGS) providing the following documentation:

  • Certification of portfolio transfer agreements.
  • Portfolio transfer agreement with the following documentation:
    1. Information about the assets and liabilities that are transferred.
    2. Date on which the assignment is made formal.
    3. Price of the negotiation agreement.
  • Balance sheet and profit and loss account.
  • Form of calculation and quantification of the coverage that is transferred.
  • Updated solvency margin.

In Spain, for example, the Ministry of Finance, Finance and Economy of the country in question will formalize the public information period, issuing the ministerial order on the transfer of portfolio and it will be published in the Official State Gazette. Once it is authorized, the assignment goes to a public deed, remitting it to the General Directorate of Insurance. Furthermore, if the transfer operation reaches a market share equal to or greater than 25%, the participants have to notify the operation by notifying the General Directorate of Insurance.

Finally, the liquidation of the entity will be the last phase of the entire process, being the Ministry of Finance, Finance and Economy who will be responsible in all powers regarding the management and supervision of the entity in liquidation, even going so far as to be able to audit the administration and accounting of the entities intervened when it deems it convenient.

Ministries of Finance, Finance and Economy by country

  • Germany, Federal Ministry of Finance.
  • Argentina, Ministry of Finance and Public Finance.
  • Colombia, Ministry of Finance and Public Credit.
  • Chile, Ministry of Economy, Development and Reconstruction and Ministry of Finance.
  • Ecuador, Ministry of Finance of Ecuador.
  • Spain, Ministry of Economy and Competitiveness and Ministry of Finance and Public Administrations.
  • United States, Department of the Treasury.
  • France, Ministry of the Economy, Finance and Industry.
  • Guatemala, Ministry of Economy and Ministry of Public Finance.
  • Japan, Ministry of Finance.
  • Mexico, Ministry of Finance and Public Credit and Ministry of Economy.
  • Paraguay, Ministry of Finance.
  • Peru, Ministry of Economy and Finance.
  • United Kingdom, Chancellery of the Échiquier (UK Ministry of the Economy).
  • Dominican Republic, Ministry of Economy, Planning and Development.