Finance and Insurance
1. Finance and Insurance legal entities and natural person principals (who apply independent, professional or expert judgment; not ministerial servants) must elect (by filing a notice with the ZEDE personal or entity registry in connection with their residency application) to conduct their respective Finance or Insurance Industry operations AND/OR a specific project under any of:
- the liability framework of U.S. common law with liability for injuries enhanced by 3x compensatory damages and personal liability for officers, directors and owners to the extent of their equity investment or past year’s compensation;
- good faith compliance with the applicable national and subnational Finance or Insurance Industry regulations, respectively, of any of Honduras, United States of America, Australia, Austria, Belgium, Canada, Chile, Colombia, Costa Rica, Denmark, Dubai, El Salvador, Estonia, Finland, France, Germany, Guatemala, Hong Kong, Iceland, Ireland, Israel, Italy, Japan, Korea, Luxembourg, Mexico, Netherlands, New Zealand, Norway, Panamá, Poland, Singapore, Spain, Sweden, Switzerland, or United Kingdom (as if the Finance or Insurance Industry legal entity and natural person principal were operating and/or the project were located therein; notice of election must also be propagated in all contractual documents); or
- a self-designed regulatory framework proposed in the form of a petition for consideration and adoption by Próspera ZEDE Resolution, which can be made applicable to all similarly situated legal entities and natural person principals if they so elect.
2. Legal entities and natural person principals (who apply independent, professional or expert judgment; not ministerial servants) in the Finance or Insurance Industry must comply with the Personal Financial Responsibility Statute by obtaining insurance from a Qualified Insurer with annual loss limits of $500,000.00 USD/12,412,500 Lempira covering liability for final awards of the default Arbitration Service Provider. If such insurance is provided by the GSP as insurer of last resort, then the annual premium must not exceed $14,160.00 USD/360,000 Lempira.
Further, if the GSP is required to provide such insurance as the insurer of last resort, mandatory insurance terms may be adjusted by transparent negotiation and agreement; and thereafter made available to all insurers and insurers.
Postscript: So, You Want to Start a Bank… Introducing the Roatán Financial Services Authority
Things get even more interesting in the Finance and Insurance Industry. A Regulated Industry Person in the Finance and Insurance Industry needs to consider all of the preceding guidance. But it is also important to understand the special regulation that can apply to you in that industry. Unlike in any other Regulated Industry, the Finance and Insurance Industry has a specialized public regulator known as the Roatán Financial Services Authority (“RFSA”). The RFSA, however, only has jurisdiction over your Regulated Industry operations where you have either adopted an Optimal Regulation regulatory election that empowers it, such as the Próspera Financial Regulation A, or where your regulatory insurance policy’s interim or final endorsement requires you to submit to its jurisdiction in some fashion as a condition of obtaining or maintaining your policy.
In this sense, being regulated by the RFSA can be totally optional. It is possible that your operations in the Finance and Insurance Industry will be entirely regulated only by your regulatory insurer and the General Service Provider. But accessing and interfacing with the international financial and regulatory networks in the Finance and Insurance Industry, and credibly complying with AML and tax information sharing agreements, may require you to be regulated by an incontestably public regulatory authority, not merely by your regulatory insurer and General Service Provider. The RFSA fulfills that requirement because it is directly overseen by an indisputably public authority, namely the RFSA Oversight Committee of the Council of Trustees of Próspera ZEDE (the “RFSA Oversight Committee”), which is also empowered to confirm and remove appointments to the RFSA, as well as override its regulatory actions.
To the extent that its regulatory authority applies to you, the RFSA may directly impose licensure, permitting, reporting requirements, inspections, fees, penalties, mandates, enforcement proceedings, and other forms of regulation on your regulated operations. This could be in addition to what is imposed by the interplay between your regulatory election and regulatory insurance endorsement. In other words, if you have chosen to operate under a regulatory election that empowers the RFSA to regulate you, you should anticipate the possibility of being held accountable to the RFSA, your regulatory insurer, the General Service Provider, and your fellow (e)Residents for complying with your regulatory election. But regulatory streamlining is also possible.
Where the RFSA is robustly asserting its own regulatory authority in a manner that minimizes claims risks to the regulatory insurer’s satisfaction, a regulatory insurer might elect to enlist RFSA contractually in the enforcement of your regulatory election; and this could result in a decision to minimize or eliminate its own independent compliance certifier and compliance auditor requirements in your interim or final endorsement. Correspondingly, if the RFSA is satisfied with the quality of regulatory insurance practices, the RFSA can exercise its regulatory authority to create exemptions from its own direct regulatory authorities and defer to the regulatory practices of the regulatory insurer as duly adopted and officially sanctioned by the RFSA.
Applying for Regulatory Insurance
To obtain a regulatory policy from the insurer of last resort (Próspera Insurance Company LLC), an (e)Resident must first apply in a manner that provides sufficient information to assess the nature of the operations to be covered. This involves a fairly standard set of requests. For example, a statement should be provided to email@example.com including:
- The identification and description of Regulated Industry services to be provided within Próspera ZEDE.
- The location of facility where Regulated Industry services will be provided.
- The name, (e)Resident permit no. (or contact information), and CV/Resume/Background of each Regulated Industry professional service provider (both natural person and legal entity responsible for such services).
- The name, (e)Resident permit no. (or contact information), and CV/Resume/Background of the Regulated Industry facility operator (both natural person and legal entity responsible for such operations).
- The name, (e)Resident permit no. (or contact information), and CV/Resume/Background of the Regulated Industry expert who will certify compliance with reasonable standards of care (and your regulatory election, if any) with respect to each aforesaid Regulated Industry service provider and facility operator (discussed below).
- Where applicable, such as in the Health Industry, risk disclosure and informed consent forms to be utilized during operations.
In addition to this statement, the applicant should complete:
- The Insurance Questionnaire available here.
- The Hazardous Activity or Condition Disclosure available here.
Once these informational requests are completed, the insurer of last resort may be able to generate an appropriate policy and endorsement for your operations without further inquiry; but in many cases, you should expect an intake meeting from a representative of the regulatory insurer to clarify your intended operations.
Essentially, the information provided in the foregoing intake process allows for scientific screening to ensure that your proposed operations in a Regulated Industry are insurable. A proposed application can be rejected by a regulatory insurer due to a variety of factors, including unreasonably high risks, lack of apparent qualifications or competencies, unavailability of necessary regulatory experts, and likely violation of Honduran national criminal law (Prospera ZEDE is generally subject to Honduran national criminal laws). If the regulatory insurer rejecting your application on these grounds is the insurer of last resort, which is a quasi-governmental service provider, you may wish to consider challenging the decision as a violation of the Resident Bill of Rights in the default Arbitration Service Provider, as such a decision may effectively preclude you from operating in a desired Regulated Industry. However, all such litigation is subject to the rule of “loser-pays” with respect to litigation expenses and attorney’s fees.
Keep in mind that, in a competitive market of Qualified Insurers, each such Qualified Insurer can be expected to have its own application process, which may differ significantly from that of the insurer of last resort.