INSURANCE MEDIATION (BROKERS AND AGENTS) IN SERBIA National Bank of Serbia Insurance Supervision June 2008

1 INSURANCE MEDIATION (BROKERS AND AGENTS)  According to the Insurance Law (the “Official Gazette of the RS”, No. 55/2004, 61/2005 и 101/2007) and the Law on Supplementing the Law on the National Bank of Serbia (the “Official Gazette of the RS”, No. 55/2004) oversight of insurance activity has been entrusted to the NBS. Thereby the first step was taken towards introducing an integral supervision of the entire financial sector.

2 INSURANCE MEDIATION (BROKERS AND AGENTS)  Insurance Law was adopted in 2004, and amended in  Insurance activities include: insurance, coinsurance and reinsurance as well as activities directly related to insurance.  Activities directly connected to the insurance business are: insurance brokerage and agency, determining and assessment of risks and claims, brokerage in sale and the sale of the remains of the insured damaged objects and rendering other intellectual and technical services relating to insurance activities.

3 INSURANCE MEDIATION (BROKERS AND AGENTS)  One of the tasks of the NBS is to issue and revoke licenses to insurance companies, insurance brokerage companies, insurance agencies and insurance agents, and to keep data records of those licenses, and records of licenses granted to certified brokers and agents.  Today, insurance market of RS includes: - 21 insurance companies - 57 legal persons (agents and brokers) natural persons - over 5000 certified brokers and agents

4 PERSONS ENGAGED IN INSURANCE BROKERAGE AND AGENCY ACTIVITIES  Brokerage companies licensed for such activities by the competent body engage in brokerage activities.  Insurance agencies or agents licensed to perform such activities by the competent body perform agency activities.

5 PERSONS ENGAGED IN INSURANCE BROKERAGE AND AGENCY ACTIVITIES  Insurance companies, insurance brokerage companies, insurance agencies are subject to the law regulating the legal status of companies, unless certain issues are regulated differently by Insurance law.  Insurance brokerage companies and agencies are incorporated in the form of a joint stock (min. core capital 25,000 EUR) or limited liability companies (min. core capital 12,500 EUR).  The insurance agent– contractor must have on his account at least 1,500 EUR (calculated by the National Bank of Serbia median exchange rate on the day of payment).

6 I. Brokerage In Insurance  Insurance brokerage activities include activities related to connecting the insured and/or policyholder with an insurance company, in order to negotiate the conclusion of an insurance contract, based on the order of the insurance company or of the insured, and/or policyholder.  Insurance brokerage activities, as the sole type of activity, are conducted by an insurance brokerage company licensed by the NBS.

7 Brokerage In Insurance  In addition to the brokerage activities, an insurance brokerage company can conduct consultancy activities and assist in processing claims and assessing risks and claims.  Exceptionally, insurance brokerage company can engage in insurance agency activities for certain class of insurance, provided that it meets the stipulated conditions and is licensed by the NBS, with the condition that it cannot represent one and broker the other contracting party in the same legal proceeding.

8 Brokerage In Insurance  Insurance contracts and insurance brokerage and agency contracts are subject of the Law on Contracts and Torts and other laws regulating contracts in certain classes of insurance.

9 APPLICATION FOR AN INSURANCE BROKERAGE ACTIVITIES LICENSE  Necessary documentation for issuing the Insurance Brokerage Activities License: 1) Incorporation Act 2) Evidence that the pecuniary part of the core capital has been deposited in the temporary account 3) List of shareholders and/or stake owners with the stipulated data 4) Business plan 5) Evidence that persons proposed for management members and members of the supervisory board meet the stipulated conditions 6) Evidence of adequate personnel and technical equipment capacity 7) Professional liability insurance, not less than the 100,000 EUR 8) Evidence of relatedness based on capital or in another way with the insurance companies, insurance agencies or insurance brokerage companies

10 APPLICATION FOR AN INSURANCE BROKERAGE ACTIVITIES LICENSE  The NBS specifies detailed conditions and methods of proving the conditions are met for the persons as defined in item 2),3),5) and 6) -(Decision on the implementation of the provisions of the Insurance Law relating to the issuance of licenses and approvals of the NBS)  The NBS decides on the request to issue a license to engage in insurance brokerage activities within 60 days from the date of receipt.

11 WITHDRAWING LICENSE FOR ENGAGEMENT IN INSURANCE BROKERAGE ACTIVITIES  The NBS shall withdraw the license to engage in insurance brokerage activities in the following cases: 1) If the insurance brokerage company no longer meets one of the stipulated requirements 2)If the business activities of the insurance brokerage company jeopardize the interest of the insured, or it is determined that the company failed to abide by the law and other regulations 3) If the insurance brokerage company renders brokerage services to an insurance company not licensed to engage in insurance activities.

12 AUTHORIZATION TO ENGAGE IN INSURANCE BROKERAGE ACTIVITIES  Insurance brokerage operations shall be conducted only by the employees of the company who are authorized by the NBS (authorized brokers).  The NBS shall issue an authorization for an individual to engage in insurance brokerage activities provided they fulfill the following conditions: 1)They reside in the territory of the Republic 2)They are of age and fully capable of conducting business 3)They have passed the expert examination for engaging in insurance brokerage activities 4)A safety measure or a protective measure of prohibition from engagement in the activities has not been declared against them by a valid court decision

13 AUTHORIZATION TO ENGAGE IN INSURANCE BROKERAGE ACTIVITIES  The NBS prescribes in detail the content and method of passing the exam –(Decision on the content and method of taking the professional exam for insurance brokerage and/or agency services.)  A foreign physical person meeting the requirements of their country of residence law to engage in insurance brokerage activities can engage in such activities.

14 WITHDRAWING THE AUTHORIZATION  The NBS shall withdraw the authorization to engage in insurance brokerage activities from the person who: 1)Has obtained the authorization on grounds of false and inaccurate information 2) Ceases to fulfill the stipulated conditions 3) Violates the provisions of the Insurance Law

15 SPECIAL OBLIGATION OF AN INSURANCE BROKERAGE COMPANY  Insurance brokerage company engaging in conducting insurance brokerage activities on behalf of the insured must advise the insured of the circumstances relevant to the conclusion of the insurance contract, especially: 1) Draft an appropriate risk analysis and suggest appropriate coverage 2) Draft a solvency analysis of the ins. company 3) Mediate in the execution of insurance contracts with the ins. company 4) Inform the ins. company that the insured wants to conclude the insurance contract, offer to the insured the insurance conditions and provide them with information on the method for calculating the premium 5) Check the wording of the insurance policy 6) Offer assistance to the insured during the validity term of the insurance contract, both prior and after the occurrence of the insured case 7) Monitor the execution of the insurance contract and draft proposal to amend the closed insurance contract for the purpose of ensuring a higher level of safety to the insured

16 II. INSURANCE AGENCY ACTIVITIES  Insurance Agency activities are regulated by the Insurance act, Law on entrepreneurs, Company law, Law on contracts and torts and the Banking Law  Insurance agency activities are conducted by a legal entity or physical person engaged in insurance agency activities according to a contract on insurance agency activities, on behalf and for an insurance company

17 Insurance Agencies And Agents  Insurance agency activities, as the sole type of activity, are conducted by an insurance agency and physical person – contractor (or insurance agent) licensed to engage in insurance agency activities  In addition to the agency activities, the insurance agency and/or agent can engage in the activities of consultancy and assistance in processing claims and assessing risk and damages  The insurance company keeps a list of insurance agencies and insurance agents that provide insurance agency services for this insurance company

18 Limitation to Insurance Agency and Company name  Insurance agencies and/or agents can engage in agency activities for one insurance company only. Insurance agencies and agents can represent more than one insurance company based on their written consent.  Insurance agencies and agents are obliged to have the name of the insurance company they represent placed in a prominent position in their office.  The company name of the insurance agencies and agents must also include an indication of the type of activity - “insurance agency”.

19 Application for an Insurance Agency License (legal entity- JSC or LLC) Application for a license to engage in insurance agency activities shall be attached with the following:  Incorporation Act;  Evidence that the pecuniary part of the core capital has been deposited in the temporary account  List of shareholders and/or stake owners with the data as defined in the Law and Bylaw  Business plan of the company  Evidence that persons proposed for management members and members of the supervisory board meet the conditions as defined in Law and bylaw;  Evidence of adequate personnel and technical equipment capacity of the insurance agency  Insurance preliminary contract or contract on representing the insurance company with the provision of the insurance company’s right to consistent monitoring of the execution of the contract  Evidence of relatedness based on capital or in another way with the insurance companies, insurance agencies or insurance brokerage companies

20 Request for Granting a License to an Insurance Agent (natural person-entrepreneur) I The following documents shall be attached to the application for this license:  Incorporation Act  Evidence of the identity of the insurance agent  Evidence of the residency of the agent  Evidence of the bank account with paid in amounts as defined in the Law and bylaw  Evidence of agent’s qualifications  Evidence that for the past three years the agent has not been a management member, member of the supervisory board or individual endowed with special authorizations in a legal entity which is subject of initiated liquidation and/or bankruptcy proceedings, or which has undergone forced liquidation and/or bankruptcy proceedings  Evidence that the agent has not been unconditionally sentenced to imprisonment for more than three months

21 Request for Granting a License to an Insurance Agent (natural person-entrepreneur) II  Evidence from the competent administration body on the amount of paid taxes, not more than 6 months old  Certified photocopy of the resolution of the competent administration body on tax amount determination and payment of taxes for the current and/or previous year  Evidence that the insurance agent is authorized for insurance agency  Business plan  Preliminary contract or contract on representing the insurance company with the provision of the company’s right to consistently monitor the execution of the contract  Evidence of personnel and technical equipment capacity of the insurance agent  Evidence of relatedness, based on capital or in any other way with the insurance companies or insurance agencies or brokerage companies Fit & Proper Criteria for Agencies and Agents

22 Authorization to Conduct Insurance Agency Activities  Insurance agency activities through insurance agencies and through insurance agents may be performed only by individuals employed at these entities, who are authorized by the National Bank of Serbia (same conditions as for certified brokers)  Decision on the content and method of taking the professional exam for insurance brokerage and/or agency services

23 Responsibility for the Insurance Agency  The insurance company shall be liable for the actions performed within the insurance agency activities  The insurance agency or agent is liable to the insured for any damage caused by false representation or negligence of the insurance agency or agent, or for the damage caused due to the fact that the insurance agency or agent did not disclose their acting as an agency or agent  The general manager of the insurance company and/or the individual endowed with special authorizations who signed the contract on agency is liable to the insurance company for the damage to the company arising from such contract

24 Application of the Provisions on Insurance Brokerage Company  The provisions of the Insurance Law on an insurance brokerage company are appropriately applicable to the issuing and revoking of the license and approval of the insurance agency and agent, to the authorization for conducting insurance agency activities, as well as the evidence of registration

25 III. DECISION ОN THE CONTENTS AND MANNER OF KEEPING OF A REGISTER OF DATA ON INSURANCE COMPANIES AND OTHER REGISTERS  This Decision prescribes the contents and manner of keeping of the National Bank of Serbia’s registers of data on insurance companies licensed to engage in insurance business, insurance brokerage companies, insurance agency companies, natural persons – contractors (insurance agents) licensed to perform insurance agency activities, certified insurance brokers and agents licensed by the National Bank of Serbia, licenses granted to provide other insurance services, legal entities performing insurance brokerage and agency activities pursuant to a separate law, and certified actuaries licensed by the National Bank of Serbia  The National Bank of Serbia shall keep registers as a single, centralized and publicly accessible electronic database, into which data are entered and kept in accordance with the Law. Registers are available on NBS's website

26 Register of Insurance Brokerage/Agency Companies I Register of Insurance Brokerage / Agency Companies shall contain:  reference number;  number and issue date of license to engage in insurance brokerage, and group and/or class of insurance activities;  business name and seat of the company;  identification number of the company, assigned by the Statistical Office of the Republic of Serbia, and tax identification number (TIN);  name and address, and/or business name and seat of the company’s founder;  name and address, and/or business name and seat of qualified stakeholders and/or stake owners and the percentage of stake in the company’s capital or voting rights;

27 Register of Insurance Brokerage/Agency Companies II  name of the general manager and the number and issue date of approval for carrying out the function of a general manager;  business name and seat of the audit firm which audited the company’s financial statements for the past business year, if the company is subject to audit pursuant to the accounting and auditing law;  balance sheet and income statement;  number and date of resolution on the revocation of license to engage in insurance brokerage. Register shall also contain: telephone and fax numbers, e- mail and website of the insurance brokerage company.

28 Register of natural persons – contractors (insurance agents) Register of natural persons – contractors (insurance agents) shall contain:  reference number;  number and issue date of license to engage in insurance agency activities, and group and/or class of insurance activities;  business name and seat of the insurance agency;  identification number, assigned by the Statistical Office of the Republic of Serbia, and tax identification number (TIN) of the insurance agency;  name, personal identification number, ID card number and address of the natural person – founder of the agency, and/or name, passport number, passport country of issue and place of residence, and/or place of temporary residence of a foreign natural person – founder of the agency;  balance sheet and income statement;  number and date of resolution on the revocation of the natural person’s license to engage in insurance agency activities. Register shall also contain: telephone and fax numbers, and website of the natural person – contractor acting as insurance agent.

29 Register of legal entities performing insurance brokerage and agency activities pursuant to a separate law Register of legal entities performing insurance brokerage and agency activities pursuant to a separate law shall contain:  reference number;  number and issue date of approval confirming that the legal entity meets the personnel and technical equipment capacity requirements for performing insurance brokerage and agency activities;  business name and seat of the legal entity;  balance sheet and income statement;  number and date of resolution on the revocation of approval confirming that the legal entity meets the personnel and technical equipment capacity requirements for performing insurance brokerage and agency activities. Register shall also contain: telephone and fax numbers, and website of the legal entity performing insurance brokerage and agency activities pursuant to a separate law.

30 Register of certified insurance brokers/agents Register of certified insurance brokers/agents shall contain:  reference number;  name, personal identification number and address of a certified insurance broker;  license number and date of issue;  type of issued license;  number and date of license revocation. Register shall also contain data on a foreign natural person meeting the requirements for performing insurance brokerage activities in the territory of the Republic of Serbia: name, passport number and country of issue, place of residence and/or temporary residence, and license number, type and date of issue.

31 Challenges  To amend the existing regulation on Insurance mediation (Law and Bylaw) in accordance with the EU Directive (IMD) and Best international practice  To improve and advance the insurance sales network in order to provide improvement of safety and soundness of insurance market and to promote insurance in Serbia

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