INSURANCE SUPERVISION IN THE NATIONAL BANK OF SERBIA INSURANCE SUPERVISION IN THE NATIONAL BANK OF SERBIA NATIONAL BANK OF SERBIA BELGRADE JUNE, 2008

1 Market Participants  21 Insurance Companies  18 insurance activities only  2 reinsurance only  1 in both insurance and reinsurance  In Greenfield investments  1 life insurance company  3 non-life insurance companies  1 greenfield investment in 2008

2 Market Participants (cont.)  Insurance brokers and agents  57 legal entities  115 insurance agents/ entrepreneurs  5002 authorized individuals engaged in insurance agency activities  7 banks

3 Insurance companies  Number by ownership  majority foreign 5 15  majority domestic 37 6  Participation in total premium  majority foreign (14 IC)  majority state and public (4 IC)  majority domestic private (1IC+ 1Re-IC)

4 Insurance market in Serbia - significant improvements are obvious trend Total premium 22,634,738,344,7  Life ins. Premium 1,7 (7.4%) 3,3 (9.5%) 4 (10,6%) 4,9 (10,96%)  Non life ins. Premium 20,931,434,339,8  Insurance density € 38€ 55€ 65€ 78  Life insurance premium per capita € 3€ 5€ 7€ 8  Total assets 30,846, ,6  In bilion RSD

5 Insurance market in Serbia - significant improvements are obvious

6 Total premium

7 Structure of liabilities

8 Movements in total premium and technical reserves

9 Premium, technical reserves and claims Claims Technical Reserves Premium

10 Financial Supervision in the National bank of Serbia  National bank of Serbia is supervising Insurance companies, Banks, Leasing companies and Voluntary pension funds  Financial Services Consumer protection Department in the NBS  Insurance supervision department is supervising and licensing insurance companies, insurance intermediaries and other legal entities  4 divisions  35 employees all with a university background

11 Development of Insurance supervision I  Adoption of the Insurance Law, May 2004, Establishment of the ISD  Industry Stabilization: Insurance companies, Sales network, Consumer Protection function established  Development: Adequate legal framework and strengthening of the Insurance supervision function  On-going education of NBS staff and industry

12 Development of Insurance supervision II  Introduction of electronic reporting system (annually, quarterly, monthly basis), electronic output (CARMEL, balance sheet, IS, other ratios)  Process of Establishing Loss Reserving Method based on Triangulation  Transparency of NBS & IC (statistical data, audit reports …)  Examination report form improved (based on CARMEL)  Actuarial education in line with international practice (supported by USAID & BP- 5 levels) – started in IV/2005.  Strategic Plan of ISD Development for prepared & published  NBS Guidelines: Transparency ALM Corporate governance Market risk controls Prevention on AML & CRTF Prevention on fraud

13 After 4 years of reforms - significant improvements are obvious as much as growing potential  Insurance industry – stabilized  The most problematic companies are closed  Network –stabilized, quality improved, new channels (banks) allowed, individuals – obliged to pass the exam  Reporting system on regular basis - established  Structure & quality of technical reserves investments improved (related transactions reduced significantly)  Structure of management – improved (fit & proper)  Reliability of financial statements – increased (fin. Statements for prepared in line with IFRS)  Quality of audit & actuarial opinions- improved  Transparency of IC operations – increased

14 Insurance regulation / Bylaw  Decision on internal controls system and risk managment in IC  Decision on specifying elements of data that IC submit to the NBS and manner and deadlines for submission of such data  Ruls on the chart of accounts and content of account within the chart of accounts for IC  Rules on the forms and content of items in the forms of financial statements for IC  Decision on the conditions for acquiring the title of certified actuary  Decision on terms of granting approval to banks to act as insurance agents  Decision on the content and method of taking the professional exam for insurance brokerage and agency services

15 Insurance Regulation 2007/2008  Insurance Law Amendments in 2007 :  Branches of foreign insurance companies, Direct reinsurance and Reciprocity condition  Separation of composite insurance companies  MTPL  Expected to be adopted during 2008  NBS decisions:  Decision on specific criteria and manner of calculating outstanding claims  Decision on restrictions to certain forms of deposits and investments of technical reserves  Harmongram of alignment with Acquis/ NPI:  Short-term and medium-term priorities

16 Insurance brokers and agents  Insurance brokers:  Only Licensed Insurance Brokerage Companies, incorporated as a joint stock company or a limited liability company  Insurance Brokers cannot provide insurance agency services. Exceptionally, the brokerage company can engage in insurance agency activities for a certain types of risk  Authorization of individual brokers working in a Insurance Brokerage Company  Tourist agencies may provide brokerage activities  Insurance agents:  Only Licensed Insurance Agencies, incorporated as a joint stock company or a limited liability company or Licensed Contractors (insurance agents/ entrepreneurs)  Authorization of individuals engaged in insurance agency activities  Banks may provide insurance agency services

17 New challenges  Further improvement of safety & soundness of insurance market  To advance the system of internal controls and risk management  To advance and strenghten the sales network  To improve transparency & corporate governance and publish Guidelines  To establish risk based supervision on permanent basis  Separation of composite IC  Improve Insurance regulation  To establish strong actuarial profession  To attract foreign investors to invest in Serbia and promote insurance

18 Insurance Law introduced consumer protection first time in the financial sector  Consumer Protection function  is established with the aim of protecting insurance holders and other insurance beneficiaries  reviews insurance holders’ complaints  acts as a mediator in solving disputes arising on the grounds of insurance contracts with a view to preventing litigation

19 First integrated Supervision Function – Consumer protection (Legal frame)  Cover all financial institutions supervised by NBS  National Bank of Serbia is Supervisory Authority of 95% Financial Sector Legal frame:  Insurance Law, Article 144.  Law on Banks, Article 45.  Law on Voluntary Pension Funds introduced in November 2005  Bylaw on Consumer Protection  Bylaw Specifying Condition and Manner of Dealing With Bank Customer Complaints  Bylaw on Minimum Contents of the “Know Your Client” Procedure  Bylaw on Uniform Manner of Calculating and Disclosing of Effective Interest Rate on Loans and Deposits  Statements from Governors’ Office in order to warn consumers

20 Increase of number and complexity of financial products  NBS started with campaign of various financial products in order to create a culture of saving and investing  The aim of NBS is not promotions of financial institutions  Providing financial education on a variety of topics through a variety of distributions channels (brochures and newspapers’ inserters, billboards)  Increasing awareness of the importance of personal financial education – larger confidence in making financial decisions  Financial educated consumers help financial market operate more smoothly  Financial educated consumers can budget and manage their income, save and invest efficiently, and avoid becoming victims of fraud

21 How are the consumers of financial services protected? Call-center Complaints Меdiation Financial institutions report about complaints The stimulation of financial institutions to give prompt and adequate information I Support III Тransparency II Education Through the NBS web site Through the media Leaflets and brochures Suggestions and guidelines REACTIVEPROACTIVE

22 Challenges Financial institutions  Recommendations  Guidelines Consumers  Youth education  Brochures and Leaflets  Organization of seminars, round tables  Improvement of the NBS web site NBS  Financial literacy improvement  Organization of seminars, round tables  Improvement of the NBS web site

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