Nearing the end of 2014, the Serbian parliament adopted the new Insurance Law that will take effect upon expiry of six months - at the end of June 2015. This finally put an end to the dilemma about the status of composite companies that will not be obliged to separate, strengthened the protection of rights and interests of the insured, and regulated sales channels more flexibly.

The European Commission also gave positive opinion on the Draft Law. As early as mid- last year, upon adoption of the Draft Law, the National Bank of Serbia announced that the Law "will be harmonized with the EU regulations, will facilitate Serbia's negotiations with the World Trade Organization and will, at the same time, create the platform for development of insurance as a field which has remained at the quite law level in Serbia and which has demonstrated very slow progress".

The new Law solved the dilemma that has "tortured" Serbian insurers for the past ten years - the status of the composite companies (those that deal simultaneously with both life and non-life insurance). Of the total 23 companies operating in the Serbian market, there are 6 of the said composite ones.

The previous Insurance Law, adopted in 2004, envisaged separation of the composite companies within the deadline which was postponed more than five times, for a year or two. This imposed considerable uncertainty on insurers: separation costs would be extremely high, thus a ten-year expectation has prevented them from planning regular activities.

The new Law stipulates that the newly founded companies have to opt for either life or non-life insurance, and that the companies already operating as composite may continue operations in the same regime, but with an obligation to demarcate assets, liabilities and equity. At the same time, the companies that have already been separated (those that separately perform life and non-life insurance activities, but have a joint majority shareholder), are allowed for the possibility to jointly perform certain supporting activities.

The new Law improved the provisions relating to establishment, business operations and corporate governance in joint-stock insurance and reinsurance companies, and also simplified the criteria for issuing the NBS permits and approvals, while increasing to the maximum the protection of rights and interests of the insured. The obligation to inform the policyholders on all issues relating to the exercise of their rights under the insurance was also regulated.

The current model of engaging insurance sales agents changed as well - the option according to which only the persons employed under full-time employment contracts may deal with brokerage and sales was waived and, as announced, the new solution should be the incentive to reduce shadow economy.

Back in 2004 Serbia has started adapting to the EU standards by the adoption of the previous Insurance Law which the professional community considered "transitional" since it allowed foreign companies to establish national insurance companies and to be majority shareholders thereof: the requirement was to have at least one percentage of national ownership, and to do business under the national laws - primarily with the aim of preserving equity, solvency and liquidity. In order to prevent "capital outflow from the country, unfair competition, violation of other national laws or fiscal fraud, as well as disturbance of the country's balance of payments", the Law on Insurance of property and persons, which was previously in effect, did not allow foreign insurers to establish companies in personal ownership or to invest in national insurance companies.

The solutions, envisaged pursuant to the new Law, are harmonized with the EU directives: considering the fact that Serbia has been a candidate for EU membership since 2012 and that pre-accession negotiations have started in 2013, gradual liberalization in provision of insurance services will be implemented in accordance with the commitments, while market competition and competitiveness will be encouraged and strengthened. In this way, the insurance market in Serbia will gradually approach the way of functioning which governs the open EU market.

Participants in the Serbian insurance market generally have positive attitude towards the new Law: they expect the Law to enable growth of the market which has remained, for ten years already, at almost the same level of around half a billion euros.