Different insurance contracts

According to the SOSIB a “life insurance agreement” is an insurance contract concerning the payment of cash benefits related to the life or death of man, and a “general insurance contract” is an insurance contract, other than a life insurance contract.

Generally, an insurance contract is understood to be an agreement whereby an insurer commits itself to the insured, against receipt of a premium, to compensate the latter for a loss, damage or loss of expected advantage which the insured could suffer as a result of an uncertain event.

There is no existing case-law or regulatory directive in Aruba offering any direct guidance as to the question whether a variable annuity constitutes an insurance product. We feel there is a strong argument that where the annuity pays out beginning at a certain date but not necessarily based on an event of loss, damage or expected disadvantage (e.g. it is not a death or disability benefit but merely an investment that pays out in the future) and where the amount of payout varies based on the value of the assets (foreign securities) purchased in the annuity, this type of variable annuity would be a security rather than an insurance product. If there is a death benefit or a payout based on an uncertain event (contingency), this argument becomes more difficult based on the aforementioned definition.

Karel Frielink
Attorney (Lawyer) / Partner

(14 December 2011)


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