According to the National Bank of Serbia, the Law will be compliant with Acquis communautaire and will facilitate Serbia's negotiations with the World Trade Organization. It will also create a platform for the development of insurance as a filed resting at a quite low level in Serbia and advancing at a very slow pace.
As of 2012 Serbia has been a candidate for EU membership and pre-accession negotiations have started in 2013. The process for "preparing" the insurance sector for full membership will imply freedom to establish the branch and freedom to provide insurance services from other countries. Pursuant to the applicable Insurance Law (2004), foreign insurance companies may operate in Serbia, solely under the national laws, provided they have at least 1% of local ownership.
Gradual liberalization in the provision of insurance and reinsurance services creates the basis for encouraging competition and, according to the NBS, will have a positive impact on Serbia's negotiations to join the World Trade Organization.
As of 2004, the supervision over the insurance activities in Serbia rests within the competence of the National Bank of Serbia and will remain therein. However, stricter measures in the field of supervision have been envisaged to better protect the insured. According to the NBS, this will imply a streamlined system of supervision over the accounting and financial reporting and innovations in calculating capital adequacy, which is harmonized with the EU standards. Thus, this will help control solvency of insurance companies more reliably and "avoid adverse fluctuations in business operations".
However, what has left the strongest impression on the insurers is final resolving of the composite companies' status. Of the total number of 24 insurance companies on the Serbian market, 6 of them are composite companies, i.e. those dealing with both life and non-life insurance. The applicable Insurance Law, passed in 2004, envisaged separation thereof, but on more than 5 occasions the deadline was postponed for a year or two. This created quite uncertainty for insurers: separation costs would be extremely high, so a decade long anticipation distracted them in planning regular activities. The draft of the new law stipulates that a newly established companies have to decide whether to deal with life and non-life insurance, while those already operating as a composite companies may continue in said form but with obligation to demarcate assets, liabilities and equity, for which they will be provided with a deadline of one year as from the date of entry into force of the new Law. Moreover, the companies which have been separated in the meantime (those which perform the activities on life and non-life insurance separately and have a joint majority owner) are allowed to jointly perform certain related activities.
In all likelihood, insurers could benefit from another important fact: pursuant to the applicable Law, in order to engage insurance agents the insurance companies were forced to conclude employment relationship with them, which required great expenses; however, this issue will be addressed more flexibly in the future.
"We have intended to make the new Law compliant with the EU directives, from which many solutions were taken over as well as many obligations in order to facilitate Serbia's accession to the World Trade Organization as soon as possible", said Dorde JEVTIC, Director of the NBS Administration for Supervision of Financial Institutions, and further added that the insurers would certainly be provided with "transition period" in order to adjust their business operations to the new Law.
Given that the Serbian market has been developing at a rather slow pace over 10 years - total premium has revolved around half a billion euros and insurers have long awaiting a streamlined Law to enable them "to take off", it will might be this very change in regulation that will contribute to strong boost of the Serbian insurance market.
XPRIMM Correspondent Journalist in Serbia