In an economic context marked by financial instability, persistent inflation and rising default rates, Insurance and Surety Law in Spain is establishing itself as a key tool for ensuring stability and confidence in commercial relations.
The insurance department at Belzuz Abogados S.L.P. analyses how this field of law acts as a shield against uncertainty, offering legal certainty and predictability to both companies and individuals in times of crisis.
The role of insurance in times of crisis
During periods of economic instability, the insurance sector becomes a key player in sustaining market confidence. However, it also faces increased pressure and conflict. When companies experience financial difficulties, defaults, bankruptcies and late payments multiply. This scenario leads to a significant increase in claims and disputes, which, in turn, leads to a greater number of legal disputes between insurers and policyholders.
In these contexts, insurance policies go from being simple contractual instruments to becoming tools for business survival, as they can make the difference between staying in business or going bankrupt. However, in order for them to fulfil their protective function, it is essential that both parties scrupulously respect their duties of disclosure, transparency and good faith.
Article 3 of the Insurance Contract Act (LCS) requires that all clauses limiting rights be clearly worded, highlighted in the contract and expressly accepted by the policyholder. This avoids situations of ambiguity or abuse which, in times of crisis, can lead to an unfair loss of cover. In fact, both case law and the Directorate General of Insurance have reiterated that obscure or confusing clauses must always be interpreted in favour of the insured, reinforcing the principle of consumer protection.
Similarly, the duty to declare risk set out in Article 10 of the LCS takes on particular relevance in times of uncertainty. The insured must accurately report all circumstances that may influence the assessment of risk. Any omission or inaccuracy — even if not intended to deceive — can have serious consequences: from a reduction in compensation to the total loss of the right to collect. In difficult times, when economic pressures lead to minimising or alter data, this aspect becomes a common source of litigation.
On the other hand, the solvency of insurance companies takes on strategic importance. In an environment where financial markets become unstable and assets lose value, ensuring that insurers have sufficient resources to meet their obligations is essential.
During periods of heightened systemic risk, the Directorate General of Insurance and Pension Funds (DGSFP) intensifies its supervision, ensuring that companies maintain adequate solvency ratios and technical provisions. In extreme cases, the authority may even intervene administratively to prevent the collapse of an entity, thus ensuring the protection of policyholders and the stability of the financial system as a whole.
Finally, it should be noted that risk management has become a central element in insurers’ strategies. Diversification of investments, prudence in underwriting policies and periodic review of the risks assumed are practices that help preserve the resilience of the Spanish insurance system. In short, in times of crisis, insurance acts as a balancing mechanism: on the one hand, it protects the insured against uncertainty and, on the other, it ensures that entities can meet their commitments without jeopardising their own solvency.
Surety insurance: a guarantee of compliance
Surety insurance, regulated by Article 68 of the Insurance Contract Act (LCS), occupies a special place within insurance law, as its function is not to compensate for damage, but to guarantee the fulfilment of a contractual or legal obligation. In other words, it acts as a promise that the policyholder—the person who takes out the insurance—will fulfil their commitments to the beneficiary. If the policyholder defaults, the insurer pays the beneficiary the guaranteed amount and then exercises its right of recourse against the policyholder to recover the amount paid.
This feature distinguishes it from traditional insurance and brings it closer, in certain respects, to instruments such as bank guarantees or sureties, although with significant advantages: it does not tie up the policyholder’s financial resources and does not appear as a liability on their balance sheet, which improves their financing capacity. For this reason, in recent years, surety insurance has become a highly valued tool for companies and public administrations to guarantee the fulfilment of contracts and obligations of various kinds.
In the private sector, surety insurance is also increasingly widely used. It is frequently used in sectors of high technical and financial complexity, such as construction, energy, infrastructure, financial services, leasing and international sales. In all these areas, surety bonds serve as an instrument of trust that ensures the fulfilment of contractual obligations—for example, the delivery of a project, the payment of rent or the performance of a service—and reduces the risk of costly defaults.
However, the proper functioning of this type of insurance depends largely on the precision with which the contractual conditions are drafted. The definition of the circumstances that allow the guarantee to be enforced, as well as the deadlines, limits and grounds for exclusion, are crucial in avoiding conflicts between the insurer, the policyholder and the beneficiary. An ambiguous clause or a poorly designed procedure can lead to unjustified enforcement or undue refusals of coverage, generating litigation and financial tensions.
During periods of recession or economic crisis, the role of surety insurance becomes even more relevant and, at the same time, more delicate. The increase in contractual defaults raises the risk of mass enforcement of guarantees, which can put the liquidity and solvency of insurance companies in jeopardy. For this reason, prior assessment of the policyholder’s solvency and reliability is an essential step before issuing the policy.
Conclusion
Insurance and surety law in Spain is undergoing a complete transformation. The combination of economic uncertainty, regulatory requirements, digitalisation and sustainability is redefining the way the sector operates.
In this context, Belzuz Abogados, S.L.P., as specialists in insurance law, believes that specialised legal advice is key to ensuring that insurers and companies can adapt to changes without losing stability or confidence.
Álvaro Tojo
Departamento de Seguros
España
BELZUZ ABOGADOS SLP, Insuralex´s Exclusive Member in Spain and Portugal
