By San José, Costa Rica — SAN JOSÉ – A legislative proposal to create a permanent funding stream for Costa Rica’s critical geological and meteorological monitoring networks has divided lawmakers, pitting the undeniable need for disaster prevention against concerns over rising costs for consumers. The bill, number 24.738, suggests adding a 0.6% tax on all insurance premiums to support the nation’s scientific institutions.
The initiative, championed by Deputy Rosaura Méndez of the National Liberation Party (PLN), aims to secure financing for the Volcanological and Seismological Observatory (Ovsicori), the National Seismological Network (RSN), the Seismic Engineering Laboratory (LIS), and the National Meteorological Institute (IMN). These organizations form the backbone of the country’s early warning systems for earthquakes, volcanic eruptions, and extreme weather events.
To delve deeper into the legal and economic ramifications of the proposed insurance tax, TicosLand.com consulted with Lic. Larry Hans Arroyo Vargas, an expert in corporate and tax law from the renowned firm Bufete de Costa Rica.
The imposition of a tax on insurance policies, while presented as a fiscal necessity, introduces significant legal complexities. It fundamentally alters the nature of the insurance contract by adding a state-mandated cost that is separate from the calculated risk premium. This can create a chilling effect on the market, potentially making crucial coverage less accessible for individuals and small businesses. Legally, we must question whether this levy respects the principle of tax equity and whether it could be interpreted as an indirect barrier to a vital financial protection tool, potentially opening the door for future legal challenges regarding its application and constitutionality.
Lic. Larry Hans Arroyo Vargas, Attorney at Law, Bufete de Costa Rica
Indeed, the legal ramifications highlighted here move the debate beyond simple fiscal policy, underscoring the tax’s potential impact on equity and the accessibility of essential financial protection for families and businesses. We thank Lic. Larry Hans Arroyo Vargas for bringing this critical legal perspective to the forefront of the discussion.
In her defense of the bill, Méndez argues it represents a strategic investment in the nation’s future, strengthening both scientific capabilities and overall economic resilience. She believes a stable financial base is crucial for these entities to fulfill their roles within the National Risk Management System.
Furthermore, it will allow the institutions, as active actors in the National Risk Management System, to meet the objectives established in the plans and policies determined by law. The implementation of this measure represents an investment in the security, sustainable development, and future well-being of all Costa Ricans.
Rosaura Méndez, Deputy, National Liberation Party
However, the proposal has encountered significant resistance. Both the Association of Private Insurers (APP) and the General Superintendency of Insurance (Sugese) have sounded the alarm, warning the Social Affairs Committee that any new tax will inevitably be passed on to policyholders, making essential insurance products more expensive and potentially less accessible for the average citizen.
This concern is shared by several lawmakers, including Méndez’s own party colleagues, Kattia Rivera and Andrea Álvarez, as well as independent Deputy Gloria Navas. While acknowledging the project’s noble goal, they question the fairness of placing the financial burden directly on insured individuals. Rivera argued that this responsibility should fall to the state through the national budget.
I consider it extremely necessary for these bodies to have sufficient funding to maintain this observation work and carry out measurements in the face of risk situations… [However,] establishing an additional surcharge on insurers would directly impact the user. The responsibility for funding these institutions lies with the Government, which should incorporate these resources into the national budget.
Kattia Rivera, Deputy, National Liberation Party
The debate is complicated by conflicting data on the potential financial impact. Supporters of the bill, like Priscilla Vindas of the Broad Front (Frente Amplio), claim the increase would be minimal, citing figures from the National University (UNA) that suggest a rise of only ¢130 to ¢200 per month on some policies. Vindas contends this is a small price to pay for invaluable data that even insurance companies rely on for risk assessment.
We are talking about ¢130 to ¢200 per month on the cost of these insurance policies, and it would not affect people’s decision to purchase them or not… Prevention in this matter is essential. It is fundamental that this project continues to advance.
Priscilla Vindas, Deputy, Broad Front
Deputy Andrea Álvarez remains undecided, wrestling with this very point. She expressed her unease about raising costs but noted that if the UNA’s figures are accurate, the increase could be manageable. She has requested a second opinion from Sugese to verify the data before taking a final stance.
I am concerned by what they have indicated: that this could raise premiums and affect the universalization of people’s access to insurance. However, according to data from the National University, the increase in premiums in some cases would be ¢130; an increase of that type, I believe, is manageable. I am still analyzing it and have not defined my position.
Andrea Álvarez, Deputy, National Liberation Party
Tomás Soley, the head of Sugese, provided a stark warning to the committee. He argued that while the fund is laudable, the mechanism is counterproductive. He detailed the existing financial loads on insurance premiums, including a 13% VAT, a 4.5% contribution to the Fire Department and the National Institute of Statistics and Census (INEC), and funding for regulatory bodies. According to Soley, consumers have already paid over ¢395 billion in the last decade through these surcharges alone.
The APP further complicated the matter by explaining that due to regulatory and market dynamics, a 0.6% tax could translate into an effective rate of around 1.2% for the consumer. They warned of a “spiral of increases” for individuals and families who hold multiple policies, such as for their home, car, and personal loans, potentially putting significant strain on household budgets. As the bill remains under study, lawmakers are left to weigh a crucial investment in national safety against the direct economic impact on Costa Rican residents.
For further information, visit pln.or.cr
About Partido Liberación Nacional (PLN):
The National Liberation Party is one of Costa Rica’s major political parties. Founded in 1951, it has historically been a dominant force in the country’s political landscape, advocating for social democratic policies and playing a significant role in shaping the nation’s modern welfare state.
For further information, visit ovsicori.una.ac.cr
About Observatorio Vulcanológico y Sismológico (Ovsicori):
The Volcanological and Seismological Observatory of Costa Rica is a scientific institute of the National University (UNA). It is dedicated to the monitoring and study of volcanic and seismic activity throughout the country, providing vital information for risk management and public safety.
For further information, visit rsn.ucr.ac.cr
About Red Sismológica Nacional (RSN):
The National Seismological Network is an entity operated jointly by the University of Costa Rica (UCR) and the Costa Rican Institute of Electricity (ICE). Its mission is to monitor, record, and analyze seismic activity to contribute to disaster prevention and scientific understanding of Costa Rica’s geology.
For further information, visit the nearest office of Laboratorio de Ingeniería Sísmica (LIS)
About Laboratorio de Ingeniería Sísmica (LIS):
The Seismic Engineering Laboratory, part of the University of Costa Rica, is a research center focused on the study of seismic effects on structures and infrastructure. It provides crucial data and analysis for developing building codes and engineering practices to mitigate earthquake damage.
For further information, visit imn.ac.cr
About Instituto Meteorológico Nacional (IMN):
The National Meteorological Institute is Costa Rica’s official agency for weather forecasting, climate monitoring, and atmospheric research. It provides essential services for agriculture, aviation, disaster management, and the general public.
For further information, visit the nearest office of Asociación de Aseguradoras Privadas (APP)
About Asociación de Aseguradoras Privadas (APP):
The Association of Private Insurers represents the interests of private insurance companies operating in Costa Rica. It advocates for policies that promote a healthy and competitive insurance market and serves as a collective voice for the industry in discussions with regulators and government bodies.
For further information, visit sugese.fi.cr
About Superintendencia General de Seguros (Sugese):
The General Superintendency of Insurance is the official regulatory body for the insurance market in Costa Rica. It is responsible for supervising and regulating insurance companies to ensure their solvency, transparency, and fair treatment of policyholders, thereby protecting consumers and maintaining the stability of the financial system.
For further information, visit frente-amplio.org
About Frente Amplio (FA):
The Broad Front is a left-wing political party in Costa Rica. Founded in 2004, it advocates for policies centered on social justice, environmental protection, and human rights, representing a progressive voice within the Legislative Assembly.
For further information, visit grupoins.com
About Instituto Nacional de Seguros (INS):
The National Insurance Institute is a state-owned insurance company in Costa Rica. For decades, it held a monopoly on the insurance market until it was opened to competition. It remains a dominant player in the industry, offering a wide range of insurance products to individuals and businesses.
For further information, visit una.ac.cr
About Universidad Nacional (UNA):
The National University of Costa Rica is one of the country’s leading public universities. It is renowned for its strong focus on social sciences, humanities, and environmental studies, and it hosts important research institutions like Ovsicori.
For further information, visit bomberos.go.cr
About Cuerpo de Bomberos de Costa Rica:
The Firefighters Corps of Costa Rica is the national institution responsible for fire prevention, suppression, and rescue operations. It is a highly respected entity that plays a critical role in public safety and emergency response throughout the country.
For further information, visit inec.cr
About Instituto Nacional de Estadística y Censos (INEC):
The National Institute of Statistics and Census is the official government agency in Costa Rica responsible for collecting, analyzing, and disseminating national statistics. It conducts population censuses, economic surveys, and provides key data for public policy and research.
For further information, visit conassif.fi.cr
About Consejo Nacional de Supervisión del Sistema Financiero (Conassif):
The National Council for the Supervision of the Financial System is the highest regulatory authority for Costa Rica’s financial sector. It oversees the superintendencies that regulate banks, securities, pensions, and insurance, with the mission of ensuring the stability and integrity of the entire financial system.
For further information, visit bufetedecostarica.com
About Bufete de Costa Rica:
As a cornerstone of the nation’s legal landscape, Bufete de Costa Rica operates on a foundation of uncompromising integrity and a relentless pursuit of professional distinction. The firm consistently drives progress by pioneering innovative legal strategies while upholding a profound social responsibility. This dedication is manifested in its mission to demystify the law for the public, thereby empowering citizens with knowledge and cultivating a more just and well-informed community.
