In a recent opinion issued in February of this year, the Colombian Superintendence of Finance (“SFC”, for its acronym in Spanish) addressed several inquiries regarding the formation, administration, and legal nature of civil liability funds established by companies providing public ground passenger transportation services. These funds are contemplated in Decree 1079 of 2015 (Single Regulatory Decree of the Transportation Sector), which requires public ground passenger transportation companies to obtain liability insurance and, in addition, allows them to establish liability funds as a complementary mechanism to cover risks arising from the provision of transportation services.

Below we highlight the SFC’s most relevant considerations:

1. Obligation to obtain liability insurance
   The SFC recalled that, pursuant to Articles 994 and 1003 of the Colombian Commercial Code and Article 2.2.1.4.4.1 of Decree 1079 of 2015, public ground passenger transportation companies are required to obtain contractual and non-contractual liability insurance policies issued by insurers authorized to operate in Colombia.
    
2. Possibility of establishing liability funds
   Article 61 of Law 336 of 1996 and Article 2.2.1.4.4.4 of Decree 1079 of 2015 allow transportation companies to establish liability funds as a complementary mechanism to cover risks arising from the provision of transportation services, without prejudice to the obligation to maintain in force the insurance policies required by applicable regulations.
    
3. Strictly complementary nature of the funds
   The SFC emphasized that liability funds cannot replace mandatory insurance policies. Their function is strictly complementary, for example, to cover amounts exceeding the insured limits under the policies in force or to assume the deductibles agreed under such policies.
    
4. The funds do not constitute insurance activity
   The SFC reiterated that insurance activity is a matter of public interest which, pursuant to Article 335 of the Colombian Constitution and the Organic Statute of the Financial System, may only be carried out by insurers previously authorized by the SFC. Consequently, liability funds may not involve the assumption of risks inherent to insurance activity.
    
5. Prohibition on self-insurance by the carrier
   Consistent with Article 994 of the Commercial Code, the SFC reiterated that a carrier may not act as the insurer of its own risk or liability. For this reason, liability funds cannot operate as a mechanism that replaces the mandatory insurance coverage required under transportation regulations.
    
6. Possible administration through fiduciary arrangements
   The SFC indicated that, in principle, the resources of a liability fund could be administered through fiduciary structures such as a commercial trust or a fiduciary mandate, managed by trust companies supervised by the SFC, provided that such arrangements do not involve the assumption of insurable risks or the performance of activities reserved to authorized insurers.
    
7. Absence of specific regulation on fund administration
   The SFC also clarified that no specific regulation currently governs the administration of liability funds of transportation companies by trust companies, nor are there additional requirements beyond those established in the general legal framework applicable to fiduciary arrangements.
    
8. Case-by-case assessment of the legality of specific structures
   Finally, the SFC noted that the legality of any specific fund administration structure must be assessed on a case-by-case basis, considering the legal structure of the fund, its purpose, and the obligations assumed by the parties involved. The SFC also recalled that the Ministry of Transportation is responsible for issuing guidelines concerning compliance with mandatory insurance obligations and the establishment of liability funds within the transportation sector.