Part 2. Changes in the insurance market. What you should know!
From January 01, 2024, the new Law of Ukraine "On Insurance" comes into force. To bring activities in line with the new requirements of the law, the legislator provides the Insurers operating before the entry into force of this Law, a six-month period.
At the same time, the National Bank of Ukraine, as a regulator, is still developing a number of regulatory documents that will describe and regulate requirements in more detail, establish deadlines, procedures and rules for compliance with the requirements of the new Law of Ukraine “On Insurance”.
The main changes that must be taken into account by insurance companies in the first place are:
Ownership structure and significant participation in the Insurer.
The ownership structure must meet the requirements of transparency and other legal requirements. Numerous actions have already been taken by insurance companies to bring their ownership structure in line with legal requirements. Insurance companies must continue to comply with the procedures for providing and disclosing information on the ownership structure, acquisition and increase in significant participation in the insurer will take place with the agreement of the National Bank, taking into account the specifics of the new Law.
The minimum amount of the authorized capital of the Insurer, the solvency of the Insurer.
The law establishes a differentiated approach to the minimum authorized capital of insurance companies: UAH 32 million for non-life insurers and UAH 48 million for life insurance companies, insurers with a license for classes of liability insurance, loans, guarantees and for reinsurance activities .
Insurance companies whose charter capital is less than the minimum amount stipulated by the Law will be required to increase the amount of their charter capital.
Insurers are obliged on a permanent basis to have a regulatory capital sufficient to support solvency, to ensure compliance with the requirements for solvency capital, for the minimum capital. The capitalization of the insurer (increase in the authorized capital) is carried out in compliance with the procedures for preliminary approval of the National Bank.
Also, an important role is given to the solvency of the owners of the significant participation of the Insurer, which in turn will be controlled by the National Bank.
Changing the types of insurance to classes of insurance, requirements for the conclusion and execution of insurance contracts.
The law instead of types of insurance distinguishes five classes within the framework of life insurance (life) and 18 classes in the direction of non-life insurance. Insurance companies should review their business lines and decide on the content of licenses. Insurance companies, by submitting an application and relevant documents to the National Bank, will be able to change the scope of the license - add new classes or, conversely, narrow the scope of the license.
Insurers should also review their insurance rules, insurance products, insurance contracts, procedures for concluding and executing insurance contracts and bring them in line with the new Law and other regulatory documents. Insurers must develop and approve an information document on a standard insurance product separately for each insurance product and post it on their own website.
Corporate governance system of the Insurer.
The law provides for the obligatory presence for the Insurer of such management bodies as the general meeting of shareholders (participants) - the highest management body, the supervisory board, the board or directorate - the executive body. The Law also defines the competence of the Insurer's management bodies, the requirements for the quantitative composition of the management bodies, as well as the requirements for members of the Insurer's management bodies.
Consequently, Insurance companies must verify compliance or establish appropriate controls. Check for compliance with the new Law, update or develop and approve documents regulating the activities of each management body of the company. Companies must also make appropriate changes to their Articles of Association.
The heads of the Insurer are obliged to meet the qualification requirements, i.e. requirements for business reputation and professional suitability. Insurance companies must check managers for their compliance with qualification requirements, must comply with the procedures for notification and approval by the National Bank of persons appointed by managers.
Management and internal control system of the Insurer.
Insurers are required to have an effective management system, taking into account the size, characteristics of their activities, the nature and volume of insurance services they provide, the risk profile, the significance of the insurer and the activities of the financial group to which the insurer belongs.
In addition to management bodies, Insurers, depending on whether they are significant or not, are required to create permanent risk management, compliance control (compliance) and internal audit units or appoint and entrust the performance of functions to the chief risk manager, chief compliance manager, chief internal auditor, responsible actuary. With the help of these key functions, Insurers should introduce and implement a comprehensive, adequate and effective system of internal control.
Insurance companies must ensure the implementation of key functions, appoint appropriate persons, develop and implement internal documents regulating their work, develop and implement a system for monitoring and reporting on these functions and activities of the company. Also, the owners of key functions are required to meet the qualification requirements, i.e. requirements for business reputation and professional suitability. Insurance companies must check the owners of key functions for their compliance with the qualification requirements, must comply with the procedures for notification and approval of persons by the National Bank appointed by the owners of key functions.
So, the new Law of Ukraine "On Insurance" contains many innovations and requires insurance companies to both take actions to bring their structure, activities and documents in line with the new Law, as well as constantly maintain their documents up to date, comply with reporting procedures, informing and obtaining approvals from the National Bank. That is, the interaction between insurance companies and the regulator is becoming closer, continuous and legally regulated, which in turn requires additional professional resources.
