Regulatory insurance (also called Resident Insurance from time to time) is a requirement under the Financial Responsibility Statute and Resolution. It is mandatory for all full-time Residents and optional for eResidents, whether they are natural persons or legal entities, unless the eResident is operating in a "Regulated Industry". If an (e)Resident is also involved in a Regulated Industry, that (e)Resident must also obtain a supplemental endorsement to their baseline insurance addressing the risks unique to that Regulated Industry.
Regulatory insurance policies combine fidelity bonding concepts, which provide coverage over injuries caused by intentional conduct, bad acts, and moral hazards, and traditional liability insurance concepts, which provide coverage for injuries caused by unintentional, negligent, or reckless conduct. Below is a chart detailing the mandatory minimum scope of coverage and terms of the baseline regulatory insurance policy, keeping in mind that the regulatory insurer of last resort can "make the market" by adjusting terms through transparent negotiation, agreement, and publication here.
Mandatory Minimum Terms & Scope of Coverage - Base Regulatory Insurance Policy |
1. Coverage must extend to all final awards of the default Arbitration Service Provider (awards of Próspera Arbitration Center LLC). Must cover arbitration awards that arose from any proceeding filed during the policy term; such coverage, once obtained, cannot be discontinued by termination of policy. |
2. Policy must be issued by insurer of last resort (GSP-affiliate) or, alternatively, Qualified Insurer (or its duly authorized agent), which: a) is a Resident or e‐Resident in good standing; b) is complying with industrial Regulation Statute (i.e. has made a regulatory election or is operating under enhanced liability under common law); c) has secured mandatory insurance required for Finance and Insurance Industry Person (see first column).; d) has secured and maintained reinsurance coverage of 50% of policy liabilities from either Próspera‐qualified insurance company or any reinsurance company authorized under Honduran or Best Practice Peer Countries law; and e) maintains 12% of all premiums received in a capital reserve account at a Próspera‐qualified financial institution or any financial institution authorized under Honduran or Best Practice Peer Countries law. |
3. Subject to policy limits, and legislative liability limits, annual cap on noneconomic damages arising from negligence as to Health Industry Persons, policy must include coverage for award liability arising from the following risks (which are cumulative): a) Liability for actual damages arising from common law causes of action of all types (tort, contract, agency, business law, property; including those arising from residency agreement); b) Liability for punitive damages of up to 10x actual common law damages for intentional torts of battery, theft, trespass, intentional interference, and fraud (i.e. quasi‐criminal torts); c) Liability under Industrial Regulation Statute (if not operating under regulatory standards of Honduras, Best Practice Peer Countries or optimal regulations, then 3x actual common law damages for injuries caused and personal liability for officers, directors and shareholders (to extent of equity investment/past year compensation) and attorneys’ fees shifting); d) Liability for abuse of process under Mortgage Foreclosure Sale Statutes and Landlord‐Tenant Statute (2x/3x amount due plus attorneys’ fee shifting); e) Liability under Coral Reef Protection Statute (cost of remediation/restoration plus attorneys’ fees shifting); f) Liability under the Próspera Financial Responsibility Statute (if mandatory insurance not obtained, liability for a fine of 3x the mandatory premium limit and attorneys’ fee shifting); g) Liability for tax obligations under Prospera Tax Statute; h) Liability under Hazard Precaution Statute (if not operating under regulatory standards of Honduras, Best Practice Peer Countries or Próspera-tailored regulations, strict liability for actual damages caused by hazardous condition or activity plus attorneys fees shifting); and i) Ancillary enforcement or administration liabilities under the Próspera Arbitration Statute, Próspera Entity Registry Statute, Próspera Land Title Law, Próspera Personal Registry Statute (such as fees, fines or equivalent). |
4. Policy Limits shall increase or decrease annually to correspond to relevant currency gold price inflation or deflation. |
5. Policy must have automatically renewing term, subject to affirmatively-exercised termination. |
6. Policy must not be terminable by Qualified Insurer without at least 60 days prior notice to insured, Próspera Technical Secretary and GSP. |
7. If issued to a Regulated Industry Person, policy must include a requirement that insurer consent to at least one annual safety or regulatory compliance inspection by the insurer as a condition of maintaining coverage. Compliance auditor costs may be shifted to insured. |
8. Qualified Insurer must furnish a Certificate of Insurance for public registration with the Próspera Personal or Entity Registry by the insured, including: a) Contact info of insurer and insured; b) Describing the covered losses; c) Stating policy limits; d) Stating reinsurance and capital reserve backing of policy; e) Furnishing contact information of reinsurer and financial institution holding reserves. |
For those operating in traditionally-regulated industries, the standard regulatory insurance policy will have a supplemental endorsement that contains operational restrictions and requirements in your Regulated Industry. This endorsement is often called "Regulated Industry Insurance" and, in the case of policies issued by the insurer of last resort, can either be an “interim” endorsement or a “final” endorsement.
The interim endorsement is a preliminary set of operational requirements and restrictions conditioning your coverage under the regulatory insurance policy, intended to create a regulatory “sandbox” environment in which you can operate. The upside of an interim endorsement is that you can obtain it quickly and start operating. The downside is that it typically authorizes highly discretionary compliance inspections and empowers the regulatory insurer to suspend your regulated industry operations or terminate coverage on a wholly discretionary basis. The purpose of the interim endorsement is to fill a gap to allow you to operate while inspections of your operations by the regulatory insurer's auditor generate more information about your operation's particular strengths and weaknesses, as well as the nature of the risks entailed by it. Based on that information, a final endorsement will be eventually drafted that will be tailored to your unique operational details and risks; and which will also place more objective standards on the compliance enforcement and inspection authority of the regulatory insurer; essentially adopting a "for-cause" standard for identifying and enforcing policy violations, which should enhance the reliability of regulation in your industry.
The premium for regulatory insurance offered by the insurer of last resort is capped at an amount that is determined by rule, and unique for each regulated industry. Mandatory minimum coverage limits can be adjusted by the insurer of last resort to "make the market" for Qualified Insurers. What follows is a chart that details the premium caps and mandatory minimum (but adjustable as aforesaid) coverage limits applicable to various entities required to obtain regulatory insurance.
Entity Mandated to Secure Regulatory Insurance | Minimum Coverage Limit for Mandatory Policy (Insurer of Last Resort can reduce to make market) | Maximum Annual Premium for Mandatory Policy issued by Insurer of Last Resort (no cap for Qualified Insurers) |
Full-time Residents (natural persons and legal entities) | $20,000.00 USD/496,500 Lempira (or Qualifying Cryptocurrency equivalent) | $260.00 U.S./6,000 Lempira |
Agricultural Industry Person, Construction Industry Person, Food Industry Person (only applicable to operations involving at least 10 personnel or gross revenues in excess of $1 million USD) | $60,000.00 USD/1,489,500 Lempira (or Qualifying Cryptocurrency equivalent) | $780.00 USD/18,000 Lempira |
Finance and Insurance Industry Person | Lesser of $500,000.00 USD/ 12,412,500 Lempira or 7% of annually-handled funds (or Qualifying Cryptocurrency equivalent) | The lesser of (a) 1% of reasonable projection of aggregate funds to be handled in a fiscal year or (b) $390,000 USD/9,000,000 Lempira |
Health Industry Person | $500,000.00 USD/12,412,500 Lempira (or Qualifying Cryptocurrency equivalent) | $7,080.00 USD/180,000 Lempira |
Energy Industry Person and Manufacturing Industry Person | $500,000.00 USD/12,412,500 Lempira (or Qualifying Cryptocurrency equivalent) | $14,160.00 USD/360,000 Lempira |
Mining and Subsurface Industry Person and Waste Management Industry Person | $3,000,000.00 USD/ 74,475,000 Lempira (or Qualifying Cryptocurrency equivalent) | $390,000 USD/9,000,000 Lempira |
Private Security | [Negotiated case-by-case] | [Negotiated case-by-case] |
Frequently Asked Questions
What happens if I don’t get Regulatory Insurance?
What happens if I don’t get Regulatory Insurance?
Failure to obtain Regulatory Insurance within sixty (60) days of Residency* start date may result in the following:
Termination of the Agreement of Coexistence.
Prohibitory or mandatory injunctive relief until violation is remedied.
Financial penalty. The amount of this fine will be three times higher than the insurance or bonding amount required. This is to cover any potential damages caused by the violation.
Further explanation of this is discussed in the Próspera ZEDE Code of Rules under the Próspera Financial Responsibility Statute Section 5: Penalties.
* Regulatory Insurance is only mandated for full-time Residents and optional for eResidents, whether they are natural persons or legal entities, unless the eResident is operating in a "Regulated Industry".