The draft law "On Insurance" is ready for adoption

Preparations for the second reading of the draft law “On Insurance” have been completed, work on which has been going on for more than three years. At the request of insurers, the provision on an authorized insurance company was removed from the document, but the provision on a self-regulatory organization remains, which was opposed by both market participants and members of the relevant parliamentary committee. However, surprises may appear after the adoption of by-laws necessary to implement the provisions of the law.

Kommersant has at its disposal the text of the bill “On Insurance,” which people’s deputies prepared for the second reading: in it they took into account most of the proposals received from insurers. The document was planned to be considered at a meeting of the relevant committee on January 15 and put to a vote at the next meeting of the Verkhovna Rada. However, now deputies will discuss it, most likely, in early February. “At a meeting of the conciliation council of leaders of parliamentary factions and heads of parliamentary committees, this law was not named among the priorities that should be adopted in the near future,” said Natalya Gudyma, president of the League of Insurance Organizations. In the best case, the bill, which has been in preparation for more than three years, will be adopted in the spring.

The main change was the exclusion from the document of the norm on the creation of an authorized insurance company with a state share of over 90%. Insurers feared that such a company, which was not subject to legal requirements for having experience in implementing voluntary insurance in order to participate in insurance or obtain a license, would become a monopolist in the market (see Kommersant dated October 16, 2013 ). The deputies agreed that an insurance company will be considered state-owned if the owner of 100% of its shares is the state or legal entities whose state share in the authorized capital exceeds 90% percent. At the same time, such an insurance company will not have any benefits.

The rule on the creation of a self-regulatory organization (SRO) has been preserved, albeit in a shortened form. According to Art. 11 of the bill, “participation in a self-regulatory organization of insurers is a mandatory condition for carrying out insurance activities on the territory of Ukraine.” The SRO will receive powers delegated by the authorized body - the National Financial Services Commission. The organization's charter is approved by the meeting of its founders and agreed with the regulator. “Insurers can create or participate in already created other associations of the insurance market. But such associations will not have the status of SRO,” explained Viktor Berlin, a member of the National Financial Services Commission.

The idea can be distorted beyond recognition, and then market participants will be unable to do anything

The bill does not specify whether the SRO will be established on the basis of one of the existing associations or by creating a new organization of insurers. According to Mr. Berlin, this issue will be resolved by insurers independently. “Currently there are three specialized associations operating in the market, but none of them covers more than 50% of market participants, as required by the very concept of SRO. Now it is difficult to predict which of them will be able to claim the status of a self-regulatory organization. Perhaps the SRO will be established on the basis association that will be created from scratch,” said Natalya Gudyma.

Another innovation was the rule that most major risks would be reinsured through specialized pools. “We are talking about risks that are catastrophic in nature: energy, nuclear, environmental, risks of terrorism and sabotage. Losses on such risks can be very large, so for their reinsurance it is advisable to use the mechanism of insurance pools,” explained Victor Berlin.

Market participants generally support the changes. “The deputies took into account most of our wishes, although doubts remain about how timely the creation of an SRO is and whether the market is ready for this. In addition, it is not yet clear how the ideas described in the law will be implemented,” said Andrey Peretyazhko, president of the Ukrainian Insurance Federation. Insurers fear that regulations may be adopted without taking their wishes into account. “As soon as something is declaratively described in laws, and then handed over to a specialized regulator and regulated by its by-laws, the situation can generally become uncontrollable: the idea can be distorted beyond recognition, and then market participants will not be able to do anything,” noted one of the participants in the insurance market.

Victoria Rudenko

Newspaper "Kommersant Ukraine" No. 3 dated January 15, 2014, p. 6

Authors:

Victoria Rudenko

Themes:

Insurance business

Now everything is normal