The NBS Insurance supervision

1
The NBS Insurance supervision

• Radovan Jelasic
• Belgrade, June 24, 2004

2
The passing of the new Law on Insurance was a
necessary condition for the restructuring of the
sector, but that alone is not sufficient

• The Law passed on May 21, 2004, came into effect
  8 days later
• The public dispute lasted for 2 years, the Law
  complies with the EU directives and the
  international standards
• The most important novelties are
• -Stricter requirements for founding insurance
  companies
• -Protection of shareholders interests, rights of
  insurance holders and insurance beneficiaries
• -Monitoring of business transactions and
  allocation of funds
• -Regulation of intermediacy and representation
• -Supervision regulations
• -Manner of privatization
• -Introduction of 4 new criminal offences
  increased accountability

3
The Law introduces considerable novelties in
terms of founding and demarcation

• Founding
• Control of the companys standing, i.e. fit and
  proper
• Census increase
• -EUR 1 million accident and voluntary health
  insurance
• -EUR 2 million life insurance and other
  property insurance
• -EUR 2.5 million motor vehicles insurance
  full coverage, railway vehicles and obligatory
  traffic liability insurance
• -EUR 3 million voluntary superannuation
  insurance
• -EUR 4.5 million reinsurance

• Demarcation
• A basic demarcation of insurance activities into
  life and non-life insurance in accordance with
  the EU directives has been introduced
• New companies cannot perform both life and
  non-life insurance activities at the same time
  the already existing companies need to demarcate
  these activities by December 31, 2005.
• Insurance and reinsurance activities shall be
  demarcated as well by December 31, 2005.

A 123 census increase relative to the current
state
4
Insurance supervision was entrusted to the NBS
for several reasons

• Relations between banks and insurance companies
• Need for consolidated supervision
• Pace of implementation of legal regulations
• Institutional framework

• This is the first step towards
  establishing an integrated supervision of the
  entire financial sector

5
Institutional advantages of entrusting this
authority to the NBS are numerous

• Independence and autonomy of the central bank
• Developed information technology and equipment
• Use of well-trained and qualified bank
  supervision staff
• Infrastructure and logistics
• No funds from the budget are required

6
Supervision measures envisaged by the Law are
numerous, but the manner of their enforcement
shall depend on the case in hand

• Temporary measures (against companies) and
  measures against the management, Supervisory
  Board, persons with special authorizations and
  qualified holders
• Assuming control over the companys business
• Withdrawal of a license for performing individual
  or all insurance-related activities
• Transfer of the insurance portfolio to another
  insurance company

7
Many additional issues related to this field of
activity are regulated under this Law

• Consumer Protection Department
• -is established with the aim of protecting
  insurance holders and other insurance
  beneficiaries
• -reviews insurance holders complaints
• -acts as a mediator in solving disputes arising
  on the grounds of insurance contracts with a view
  to preventing litigation
• Privatization of insurance companies
• -General privatization regime shall be applied,
  in accordance with valid regulations
• -The Ministry of Finance is authorized to
  initiate the process of privatization of state
  capital in insurance companies

8
In its new supervisiory role, the NBS shall
perform several activities

• Under the Law on Insurance (RS Official
  Gazette, no. 55/04) the National Bank of Serbia
  shall
• -perform insurance supervision
• -issue the license for performing insurance,
  reinsurance, mediation and representation
  activities in insurance and for activities
  directly related to insurance activities,
• -issue approval of operations and activities
  prescribed by the law
• -pass regulations prescribed by this Law,
• -process statistical and other relevant data
• -keeps records in accordance with the Law
• -review complaints of insurance holders and other
  insurance beneficiaries

9
Internal organization of the NBS shall be adapted
to its new assignment

• Setting up of an Insurance Supervision Sector
  with 5 departments
• -Off-site supervision
• -On-site supervision
• -Actuarial activities and statistics
• -Legal issues
• -Consumer protection and market control
• 62 incumbents have been systematized, vacancies
  shall remain open until August 1, 2004
• The employment of 25 people has been planned, on
  an open competition basis exclusively including
  the General Manager and all other key managers

10
The NBS work plan September 1
December 1
Preparation
Analysis
Measure-taking

• -Technical and organizational -Implementation
  of -Taking legally
• equipping of the sector indirect
  analysis prescribed measures
• -Employment and training of with the help of
  foreign
• new personnel experts
• -Indirect analysis of data -Analysis of
  financial
• as at December 31, 2002 2003 data of all
  Serbian insurance
• -Technical assistance companies
  (intermediaries)
• organization -Analysis of authorized
• actuaries opinions
• -Passing by-laws

11
Basic work principles of the NBS related to
insurance companies

• Transparency in
• -Decision-making
• -Taking measures
• Orientation towards the future
• -You cannot grow out of the present problems
• -Good money should not be wasted with the bad
  money

• Objective
• Implementation of
• financial sector reforms