General overview of the new provisions

On 8 April 2020, the Italian Government adopted Law Decree No. 23 ("Liquidity Decree"), entered into force on 9 April 2020 and converted into law, with amendments, with Law No. 40 of 5 June 2020, which, among others, extended to new sectors - in addition to those already included such as the defence, national security, communications, energy and transport - the Government’s powers of screening and intervention in non EU direct and indirect investments and in other corporate transactions in Italian companies, as ruled by Law Decree No. 21 of 15 March 2012 (so-called "Golden Power").

More specifically, such significant extension of the sectors falling within the scope of the Golden Power is aimed at including companies having assets and contractual relationships in those sectors provided under Regulation (EU) No. 2019/452, i.e., inter alia, critical infrastructures, both physical or virtual, including, among others, health, data processing or storage, aerospace, electoral or financial infrastructure, and sensitive facilities, as well as land and real estate crucial for the use of such infrastructure. Furthermore, the Liquidity Decree specified that the banking and insurance sectors are also included in the perimeter of the financial sector.

The scope of application of such extension to the insurance sector is not fully clear based on the wording of the Liquidity Decree. Therefore, in the absence of the implementing decrees, at present one may consider alternatively that the Golden Power legislation applies in relation to: (i) all the entities operating in the insurance sector, e.g. insurance and reinsurance undertakings and intermediaries or (ii) the physical or virtual insurance infrastructures, in line with the wording of Regulation (EU) No. 2019/452 which refers to "infrastructures". This latest interpretation seems to be the one which is more in line with the rationale of the new provisions; however, it poses certain issues in identifying what an insurance infrastructure is.

In this regard, on 28 May 2020, the Italian Council of Ministers preliminary discussed a draft decree aimed at identifying – within the sectors falling within the scope of the Golden Power - the specific assets and relationships considered of strategic importance for the national interest. The draft decree will be now subject to the scrutiny of the relevant parliamentary committees for their opinion thereon and will probably restrict the scope of application of the Golden Power on the insurance sector by clarifying the meaning of the relevant "assets" and "contractual relationships".

In light of the Liquidity Decree, starting from 9 April 2020 until 31 December 2020, the following transactions must be notified to the Italian Government:

1. Acquisitions of interests in companies operating in the insurance sector by foreign investors, including those belonging to the EU, of such importance as to determine the permanent establishment of the purchaser by reason of the acquisition of control of the company whose shareholding is the object of the acquisition;
2. Acquisitions of interests equal to or greater than 10% of the capital or voting rights of companies operating in the insurance sector when the total value of the investment is equal to or greater than one million euros (and also when the 15%, 20%, 25% and 50% thresholds are subsequently exceeded) by non-EU investors; and
3. Corporate resolutions, acts or transactions which have the effect of changing the ownership, control, availability or destination of strategic assets held by companies operating in the insurance sector.

The acquisitions of interests mentioned under points (i) and (ii) above shall be notified by the purchaser to the Presidency of the Council of Ministers within 10 days from the date of execution of a binding contract, together with any information relevant to the general description of the proposed acquisition, the acquirer and its scope of operations. The acts mentioned under point (iii) above shall be notified to the Presidency of the Council of Ministers within 10 days from the adoption of the relevant resolution/act/transaction and in any case before their implementation.

The failure to comply with the notification requirements mentioned above may lead to the application of an administrative sanction and, in some cases, to the nullity of the resolutions/transactions implemented in breach of such obligation or the obligation of the purchaser to sell the participation acquired.

The Liquidity Decree also provides that in case of breach of the notification requirement, the Italian Government may also initiate proceedings of its own motion for the purposes of the potential exercise of its Golden Power. This power is therefore additional to the applicability of sanctions and to the other provisions aimed at regulating the case of non-compliance with the notification requirement mentioned above.

In light of the transitional nature of the majority of the provisions introduced by the Liquidity Decree with respect to the Golden Power, it seems that after 31 December 2020 the Golden Power would only apply - in relation to the acquisitions of interests into companies holding assets and relationships in the insurance sector - to the acquisitions of controlling interests by non-EU investors. In this regard, it is worth to mention that pursuant to the rules governing the Golden Power, the following entities also fall within the meaning of non-EU investors: (i) EU entities directly or indirectly controlled by a non-EU entity and (ii) EU entities where there is evidence of an evasive behaviour with respect to the application of the rules set out under Law Decree No. 21 of 15 March 2012.

Coordination between the Golden Power and IVASS authorization/notification regime

The Liquidity Decree opens up the issue of the coordination between the powers of the Italian insurance regulator (“IVASS”) of screening acquisitions and other extraordinary transactions and those of the Government mentioned above.

Indeed, although as specified in recital 37 of Regulation (EU) 2019/452, in relation to the financial sector, the screening of the acquisitions and the transactions from a prudential perspective remains a distinct procedure with specific and different objectives, the two regimes could give rise to cases of overlap from both timing and screening perspectives.

In this regard, it is worth to mention that pursuant to Legislative Decree no. 209 of 7 September 2005 (the "Italian Insurance Code" or "IIC") a prior authorization requirement by IVASS is provided for the acquisition in an insurance or reinsurance undertaking of shareholdings entailing the control or the acquisition of a qualifying interest, as well as any change in those shareholdings where the share of voting rights or of the capital exceeds or is equal to 20%, 30% or 50% and, in any event, where such changes entail the control of the insurance or reinsurance undertaking. In addition to the above, where entities belonging to third States which do not ensure reciprocity conditions are involved in such acquisitions, IVASS authorization procedure also encompasses the Italian Minister for Economic Development and the President of the Council of Ministers. Pursuant to the IIC, also certain extraordinary transactions, such as insurance portfolio transfers, mergers and demergers, are subject to IVASS regulatory authorization. From a regulatory perspective, in general terms it may be deemed that the assessment carried out by IVASS concerns the qualities of the potential acquirer and the financial soundness of the transaction.

Notwithstanding the provisions of the IIC, the Liquidity Decree seems quite laconic on the coordination between IVASS and the Golden Power procedures. Indeed, it only provides that, without prejudice to the notification requirement, in certain regulated sectors - including the insurance sector - the special powers of the Government apply to the extent that the interests that the provisions governing the Golden Power are intended to protect (i.e. a threat of serious prejudice for the public interests, related to public security and to the functioning of networks and plants, or to the continuity of the supply of the resources, a risk for security, public order) are not adequately protected by the regulations of the specific industry sector. On the other hand, Law Decree No. 21 of 15 March 2012 provides for an obligation of cooperation between sectorial administrative authorities - including IVASS - and the Government, also through the exchange of information, in order to facilitate the exercise of the functions related to the Golden Power.

Next steps

In light of the issues we briefly depicted above, we deem that the decree aimed at identifying the specific assets and relationships considered of strategic importance for the national interest mentioned above – which will now be discussed by the competent parliamentary committees - could be the opportunity to better clarify the perimeter of application of the Golden Power to the entities belonging to the insurance sector and the coordination between IVASS and the Italian Government procedures.

At present, in the absence of a clear regulatory framework and in the event of uncertainty about the obligation to notify to the Italian Government the relevant transaction/act, a precautionary approach would be recommended.