GEORGIA: Bank of Georgia is creating its insurance company, while insurers demand to limit access of the banks to the insurance market

19 December 2018 — Marina MAGNAVAL
According to Devi KHECHINASHVILI, Chairman of the Board, Georgian Insurance Association, Bank of Georgia is creating its own insurance company. The new insurer already received a permission from the National Bank and is going to apply to the State Insurance Supervision Service.

Since the Bank of Georgia is one of the two main banks of the country, creation of an insurance company requires an appropriate permission from the National Bank. However, at this moment representatives of the Bank do not provide any details about the start of the new company's operation, its name or segment of its planned insurance activity.

Regarding creation of the new insurer, the representatives of the National Bank explained that commercial banks are allowed to participate as mediators on the financial market, banks have the right to create financial subsidiaries, including insurance companies. This is not considered as their non-core business and does not contradict the existing legislation.

At the same time 12 insurers of Georgia protest against banks' interference into insurance business. According to representatives of those insurers, banks, that have their own insurance companies, do not give loans to other market participants due to competition while providing unlimited financial support to theirs insurance companies.

On December 12 representatives of the mentioned insurers announced that "insurance business must be equal to non-core activity, thus commercial banks should have no access to this sector". Insurers require restriction of the rights of banks to conduct insurance activity. "We demand that the law on competition to be extended to the banking sector. Consumers, taking loans and dealing with banks, should keep options open", said the Head of ALDAGI, Giorgi BARATASHVILI.

"The situation in the insurance is getting more and more uncontrolled, and the line between the banking and insurance businesses is gradually erasing. The number of companies, controlled by the banks, is increasing and this limits the competition on the market. The National Bank provides commercial banks with an opportunity to create insurance companies, and if this continues, independent players will have no more room in this area of business activity", pointed out the director of UNISON, Vasil AKHRAKHADZE.

According to KHECHINASHVILI, one of the main problems is sale of insurance policies via banks. "It often happens that banks offer their clients insurance products of their own insurance companies, and this should be stopped. Relations between the banking and insurance businesses must be regulated. In particular, such issues as access to the market, conditions to access the market, etc. All that must be regulated within the law on competition", he added.

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