KNF recommendations and foreign insurers | In Principle

Must foreign insurance companies operating in Poland under the freedom to provide services or the freedom of establishment comply with the Polish regulator’s new standards for insurance distribution?

On 26 June 2026 the Polish Financial Supervision Authority (KNF) adopted its new Recommendations for Insurance Undertakings on Insurance Distribution. The document is addressed not only to domestic insurers, but also to foreign insurance undertakings from the European Union or the European Economic Area doing business in Poland under the freedom of establishment or the freedom to provide services. But with respect to these foreign entities, the recommendations apply only insofar as they arise under principles of the “general good.”

This reservation is of great practical importance. It means that not all of the recommendations will apply to insurance undertakings conducting cross-border operations under a “European passport.” But determining which recommendations are binding on which entities raises a number of doubts in interpretation. These doubts arise mainly from the lack of a precise definition of principles of the general good, and from difficulties determining which provisions of Polish law further these principles.

Below we examine what principles of the general good are, and their relevance for application of the KNF recommendations by insurers operating in Polish territory.

Fundamental principles of functioning of the common insurance market in the EU

To properly understand the significance of principles of the general good, we should first go back to the fundamental rules governing the functioning of the common insurance market in the European Union.

An insurance undertaking that has obtained a licence to operate in one member state can also operate in the territory of other member states without the need to obtain an additional licence there. This entitlement arises under the so-called European passport and includes operating under the freedom of establishment (by opening a branch) as well as operating under the freedom to provide services.

The freedom of establishment and the freedom to provide services are among the fundamental principles upon which the EU’s common insurance market rests. As a rule, the member states cannot introduce measures hindering the exercise of these freedoms. Exceptions are permissible only when justified under EU law. One of the key justifications is protection of the general good by the host country. Consequently, regulations pursuing aims of the general good are an element of the national legal system that is also binding on foreign insurance undertakings from other EU countries.

Relying on jurisprudence from the Court of Justice of the European Union, the European Commission has identified the grounds that must all be fulfilled for a national measure restricting the freedom of establishment or the freedom to provide services to be consistent with EU law. Such a measure:

• Must involve an area that has not been harmonised at the level of EU law
• Must serve to protect the general good
• Cannot be discriminatory
• Must be objectively necessary to achieve the defined aim
• Must be proportional to attainment of the aim, and
• May be applied only when the aim of the general good is not already protected by the regulations binding on the service provider in the country where it is established.

These principles are vital for determining the scope within which a foreign insurance undertaking exercising a European passport can be subjected to the laws of the host country. Such an entity may be required to comply with the regulations of the country where it is operating only insofar as the regulations pursue the aims of the general good and meet the requirements arising out of EU law.

The notion of the “general good” under EU law

The “general good” is not defined in the Insurance Distribution Directive ((EU) 2016/97), the Solvency II directive (2009/138/EC), or any other act of EU law. It is a construct developed primarily in the case law of the Court of Justice, and its scope has evolved along with the growth of the case law. The Court of Justice has consciously left the notion undefined, so that its application can be tailored to the facts of the specific case.

In its jurisprudence, the Court of Justice holds that in areas that have not been harmonised at the level of EU law, considerations of the general good may justify restrictions on the freedom of establishment or the freedom to provide services.

Aims of the general good which have been recognised to date include, for example:

• Protection of employees (including social protections)
• Protection of consumers
• Protection of public order
• Protection of intellectual property rights
• Ensuring the consistency of the tax system
• Protection of national historical and cultural heritage.

But this is not a fixed list. The scope of the concept of general good is expanded upon by the Court of Justice as it considers new cases, and depends on the circumstances of the specific case.

The general good in Polish insurance regulations

Under Polish insurance law, the notion of the “general good” is expressly used in the Insurance Distribution Act, which implements the IDD into the Polish legal system. Under that act, the principles of the general good are defined as “the fundamental legal standards concerning the performance of insurance distribution or reinsurance distribution in the territory of a given member state of the European Union, intended for entities with their registered office or residence in another member state of the European Union, interested in performing insurance distribution or reinsurance distribution via a branch, or in some manner other than via a branch within the exercise of the freedom to provide services, in the territory of that member state of the European Union.” So, although the act does formally include a definition of “principles of the general good,” it does not specify what values or aims fall within that category.

This issue is dealt with differently in the Insurance and Reinsurance Act, which implements Solvency II. Although the directive itself does use the term “general good,” the Polish act does not adopt this term directly.

Under Art. 146(3) of the Solvency II directive, the supervisory authorities of the host member state shall inform the supervisory authority of the home member state of “the conditions under which, in the interest of the general good,” that business must be pursued in the host member state. A corresponding provision is found in Art. 206(2) of the Insurance and Reinsurance Act, under which KNF shall provide information to the competent authority of the other member state on the conditions for performance of insurance activity in the territory of the Republic of Poland by a foreign insurance undertaking, operating through a branch.

Meanwhile, Art. 205(1) of the same act provides that a foreign insurance undertaking from another EU member state conducting insurance activity in Poland shall apply the provisions of Polish law to the extent necessary to protect “the overriding public interest.”

The notion of the “overriding public interest” is defined by a cross-reference to the Act on the Rules for Participation by Foreign Undertakings and Other Foreign Persons in Commerce in the Territory of the Republic of Poland. It extends in particular to:

• Protection of public order, public safety, and state security
• Protection of public health
• Protection of the financial stability of the social insurance system
• Protection of consumers, service recipients and employees
• Honesty in commercial transactions
• Combatting abuses
• Environmental protection
• Protection of intellectual property
• Implementation of aims of social and cultural policy
• Protection of the national historical and artistic heritage.

Comparing this list to the aims of the general good recognised in the jurisprudence of the Court of Justice, it is apparent that the two concepts overlap to a great extent. This means that although the Insurance and Reinsurance Act does not use the term “the general good” as such, in interpreting the act the scope of this concept intersects or even coincides with the notion of the “overriding public interest.”

How does KNF understand the principle of the general good?

Both the IDD and the Insurance Distribution Act require KNF to publish information on its website on the rules for the general good that are applicable to the performance of insurance distribution and reinsurance distribution activity in the territory of Poland.

To meet that obligation, KNF has published “Information on ‘General Good’ Rules with Regard to Conducting Insurance Mediation Activities in the Republic of Poland.” This document includes a list of regulations which in KNF’s view further the protection of the general good and therefore should be observed by foreign insurance distributors operating in Poland under a European passport. At the same time, KNF expressly warns that this publication does not constitute an exhaustive source of information on all national regulations applicable to such activity.

KNF has also published a document entitled “Information on ‘General Good’ Rules,” intended for insurance undertakings in EU member states and in EFTA member states that are parties to the Agreement on the European Economic Area. This document plays an analogous role, identifying regulations which in the regulator’s view pursue aims of the general good and apply to foreign insurance undertakings operating in Poland.

Here too KNF stresses that the published information is not exhaustive. It primarily covers regulations directly related to the performance of insurance activity. It does not include regulations from other legal fields which under certain circumstances also serve to protect the general good.

Thus if a given regulation is mentioned in these documents published by KNF, a foreign insurer or insurance distributor can generally assume that in KNF’s view the regulation serves to protect the general good. Conversely, the failure to mention a regulation in these documents does not necessarily mean that the regulation does not further the aims of the general good and cannot apply to foreign entities operating in Poland.

What relevance do principles of the general good have for application of the KNF insurance distribution recommendations?

The discussion above raises the key question: must a foreign insurance undertaking operating in Poland under the freedom of establishment or the freedom to provide services apply all of the KNF recommendations on insurance distribution?

As a rule, no.

The mere fact that the recommendations are also addressed to foreign insurance undertakings doesn’t mean that all of the recommendations set forth in the document apply to entities operating under the freedom of establishment or the freedom to provide services. KNF expressly states that with respect to such undertakings, the recommendations apply only insofar as they involve the general good.

In practice, this requires an analysis of the specific recommendations. A foreign insurance undertaking should assess whether the duties arising under a given recommendation affect areas in which the host country may impose requirements consistent with EU law, that is, whether they serve to protect the general good and whether they meet the criteria developed in the jurisprudence of the Court of Justice of the European Union.

But conducting that assessment is no easy task. The “general good” is an indefinite notion, and the limits of the host country’s competence are not always obvious. This means that foreign insurance undertakings need to select one of two solutions.

The first is to adapt their operations to comply with all requirements in force in the host country, regardless of whether they arise under principles of the general good or not. This approach mitigates the risk of a dispute with the regulator or customers, but often entails significant organisational and financial costs and results in assuming obligations extending beyond the requirements of EU law.

The second solution is for the undertaking to make its own assessment of the scope of application of principles of the general good and to implement only those duties which, under EU law, can effectively be applied against foreign insurance undertakings operating in Poland under a European passport. This approach is consistent with the construction of the common market, but carries the risk that KNF or the Polish courts might reach a different conclusion.

In the event of a dispute, the insurance undertaking could rely directly on EU law and the case law from the Court of Justice, arguing that the specific obligation imposed on it does not meet the conditions for regarding it as a measure furthering the general good. This assessment would ultimately rest with the national court, although if the court had doubts on how to interpret EU law it could seek a preliminary ruling from the Court of Justice.

It should be borne in mind that the KNF recommendations are a form of “soft law.” They do not constitute a source of universally binding law, and generally do not impose new legal obligations on insurance undertakings. They do, however, set forth KNF’s supervisory expectations for the manner of applying the relevant regulations, and indicate the practices which the regulator regards as consistent with the proper functioning of the insurance market.

The recommendations operate under the principle of “comply or explain.” This means that an insurance undertaking may adopt solutions other than those indicated in the recommendations, so long as it is in a position to justify its approach and to show that it will achieve the aims of the specific recommendation in some other way. Undertakings should submit this information by 15 July 2027 to the KNF Office, which will then post the information on the KNF website.

In our view, in practice this means that a foreign insurance undertaking may submit its own position to KNF concerning the scope of application of the KNF recommendations, particularly by indicating which recommendations, in the undertaking’s assessment, apply in light of the principles of the general good, and the manner in which the undertaking intends to meet the aims defined by KNF. This approach will facilitate a dialogue with the regulator and mitigate the risk of a differing interpretation of the scope of duties arising under the recommendations.

The Polish Financial Supervision Authority expects insurance undertakings to implement the new Recommendations for Insurance Undertakings on Insurance Distribution by 1 July 2027 at the latest. There is an exception for recommendation 7.9 involving the savings portion of an insurance product, which should be applied by no later than 1 July 2028.

Mateusz Kosiorowski, adwokat, Anna Szczęsna, Insurance practice, Wardyński & Partners