XPRIMM: How do you comment on the 1H2016 overall results of the insurance market in your country? What are the main trends recorded during the period?
NBS: Serbian insurance market recorded a healthy 9.9% y-o-y premium growth rate in H1 2016. This development was driven by the life segment, recording a double digit growth rate and increasing the share of life insurance in total premium which is still dominated by non-life business. MTPL insurance had the top spot with a market share of 32.4% of total premium, followed by property insurances, life and motor insurance casco. All major non-life lines recorded positive trends. Most notably, motor insurance casco, after a prolonged period of premium contraction, started a revival in 2015, which it kept in H1 2016. A very dynamic segment of the non-life market was the voluntary health insurance recording premium growth of 46.6% y-o-y to reach a market share of 3.2% of total premium. Life premium which increased by 13.0% y-o-y was dominated by traditional endowment insurance which increased at a healthy pace, and first unit-linked policies were sold in the market this year.

XPRIMM: What are your expectations for the end year results?
NBS: Insurance market has a strong solvency ratio indicating a high level of capital adequacy and stability, which we expect will be the case in the following period. Positive premium dynamics in H1 2016 are an encouraging sign to expect a successful year, especially in the life segment as the more dynamic part of the market. These premium developments were followed by an increase of technical provisions, giving policyholders a strong sense of safety that the promise given by the insurance market will be kept, and we expect technical provisions to continue on this path in the rest of the year.

XPRIMM: Has the market seen any legal changes of some relevance in the first part of 2016? Are any in preparation?
NBS: In the first part of 2016 there were no legal changes in the insurance market. The Executive Board of the National Bank of Serbia adopted the Strategy for implementation of Solvency II Directive in the Republic of Serbia in July 2016. By this Strategy, the acquis from Solvency II Directive will be implemented in domestic regulation, although some provisions of the mentioned directive will be implemented following accession of the Republic of Serbia to the European Union. During the process of EU integrations further enhancement of insurance legislation is foreseen in the next two years regarding MTPL, insurance intermediaries, and the annual accounts and consolidated accounts of insurance undertakings.

XPRIMM: As the statistical data show, a significant increase in the indemnities paid for life insurance was seen in 1H. Can you please provide more details on this trend?

NBS: Life insurance has gained a more significant role in the Serbian in the last decade. The first period of growth of life insurance was followed by increase of the benefits paid, thanks to maturing of previous contracts. In the last couple of years life insurance benefits paid have kept increasing y-o-y, to reach 41.7 million EUR in 2015. The continuation of this trend is also evident in the half year data, as is seen in 23.8 million EUR paid in H1 2016. Positive developments when it comes to increase of life insurance benefits paid were accompanied by continuous growth of number of policyholders, life premium and technical provisions.

XPRIMM: How would you comment on the development stage of your market in terms of sophistication, harmonization with the EU legislation, profitability etc.? What are the market priorities from your perspective?
NBS: Domestic insurance framework can be described as Solvency 1½, with Solvency I requirements topped off by some Solvency II requirements (Pillar 2 key functions and ORSA, with risk-based supervision), which is in line with the level of development and sophistication of the market. In light of Serbia's accession process to the EU National bank of Serbia has adopted a Strategy for implementation of Solvency II in Serbia, envisaging gradual convergence of the regulatory framework. This in turn would positively influence the market dynamics, increasing the stability of the market and policyholder protection. Insurance companies will have to further develop their risk management capabilities and reassess their strategies in light of Solvency II requirements and increase focus on market conduct issues. National bank of Serbia has given a priority to enabling development of insurance risk management and we have performed the first insurance stress test in 2016. The results indicate that the insurance sector would remain stable and highly capitalized and that the capital adequacy would not be threatened even in the event of extreme and unlikely shocks, such as a big write down of less liquid assets, default of a reinsurer, or a pandemic and reserve deficiency.