KOSOVO: CBK limits non-life insurers expenses to 24% of GWP

11 February 2020 — Cosmin CONCEATU
In order to improve the financial strength of local insurers, Central Bank of Kosovo (CBK) introduced at the beginning of February 2020 a set of rules that will limit the overall commissions and operational costs of non-life insurers to a maximum amount of 24% of all non-life gross written premiums volume.

The amendments to the sectoral law mention that, in order to keep the general administrative expenses below 24% of non-life GWP, insurers will need to cut the costs with the brokers' commissions, hired staff, services, advertisement, depreciation and provisions accounts, if needed.

CBK also limits the brokers' commissions from MTPL to a maximum of 8% of GWP (free of VAT). Insurance brokers won't be able to receive payments in advance from insurance companies anymore.

"Limiting the spending on brokerage commissions and operating expenses will directly contribute to improving the financial performance of the (insurance) sector, and consequently to increasing insurers' capacity to pay the claims of injured parties. The adoption of this regulation is in line with other activities recently undertaken by CBK to strengthen the sustainability of the insurance sector," CBK stated.

Additionally, CBK introduced new reporting procedures to insurers. Insurers need to report to CBK on a monthly basis, until the last day of the month, all bank transactions related to written premiums, claims paid, expenses and other activities. Insurers also need to monthly report the ratio between expenses and premiums of MTPL for the previous quarter together with their calculation, detailed reporting over MTPL claims payments and the compensation fund payments and detailed reporting over voluntary insurance sales together with the related commissions and expenses.

Kosovar insurers ended 2019 with a net loss of EUR 2.8 million (compared to EUR 3 million profit at the end of 2018).

Source: bqk-kos.org
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