UKRAINE: NBU plans to transform the insurance market to meet international practices

28 May 2020 — Marina MAGNAVAL
The current legislation of the Ukrainian insurance market leaves it far behind when compared to other European countries. Its insurance penetration degree is roughly around 1.3%, while in Europe the average sits at a solid 5%. At the same time, the Ukrainian market saw a stable annual growth of about 20% in the latest years, according to the Lexology portal.

In September 2019, the so-called "split law" was adopted in Ukraine, prescribing the liquidation of the National Commission for Regulation of Financial Services Market and division of its functions between the National Bank of Ukraine (NBU) and the National Securities and Stock Market Commission. Based on that document, the regulatory function was transferred to the NBU.

In April 2020, the NBU published the White Paper with its view on the current problems of the insurance market and plans to transform the market to in a way that it meets international practices. For now, the licensing procedure is quite complicated and companies need to obtain a license for each insurance type. The NBU will combine them into life and non-life classes to simplify entering in the market for new participants. At the same time, the NBU plans to evaluate the companies' business plans from the point of implementation.

Also, to ensure stable functioning of the market and to protect its consumers, the NBU plans to establish new capital requirements and insurers will be obliged to meet minimum capital and solvency requirements that will ensure their ability to fulfill contractual obligations for 12 months. In addition, the NBU plans to increase requirements for insurers' assets and liquidity, as well as evaluate their reserves.

Besides these changes, the NBU will review the mandatory insurance segments and will remove those which are outdated, while also lifting state regulation of insurance tariffs to let the market function in a more efficient way. In order to make the market more transparent, the NBU plans to establish some criteria for ownership structure and companies will have to disclose information about their owners. In addition to that, the NBU plans to sharpen requirements to insurers' management and to analyze the management suitability and their abilities to cope with their tasks, the Lexology portal said.

The plans of NBU for the market transformation are quite ambitious. Insurers will have a transitional period to meet new requirements. It is still not clear when the NBU will implement all of these plans, but market experts agree that this reform will obviously make the insurance market more efficient, transparent, stable and sound.

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