The Faroese insurance (both life and non-life) and pension funds market has yet to be fully opened to foreign companies both when it comes to establishment and cross-border provision of services. This was partially changed with the Treaty signed on the 30'th of August 2005 between the Governments of the Faroese and Iceland establishing a economic zone covering the territories of Iceland and the Faroese. The treaty did come into power on 1 November 2006.
This agreement also covers the insurance and pension funds market. In order to implement the Treaty the insurance act was modified with act no. 55 dated 16 May § 4. which changes § 9, 2 to include that the share capital or the security capital may also be obtained from Icelandic sources, beside Faroese sources.
With act no. 55 dated 9 June 2008 which took effect on 1 September 2008 the Faroese got a new insurance legislation similar to the legislation in the European countries opening up for cross-border service provision and removes the restrictions on the nationality of the share capital.
The Faroe Islands have entered into agreements on mutual recognition with Iceland and Denmark.