1. The NBS Insurance supervision Radovan Jelasic Belgrade, June 24, 2004

2. The passing of the new Law on Insurance was a necessary condition for the restructuring of the sector, but that alone is not sufficient The Law passed on May 21, 2004, came into effect 8 days later The public dispute lasted for 2 years, the Law complies with the EU directives and the international standards The most important novelties are: -Stricter requirements for founding insurance companies -Protection of shareholders interests, rights of insurance holders and insurance beneficiaries -Monitoring of business transactions and allocation of funds -Regulation of intermediacy and representation -Supervision regulations -Manner of privatization -Introduction of 4 new criminal offences – increased accountability

3. The Law introduces considerable novelties in terms of founding and demarcation Founding: Control of the companys standing, i.e. fit and proper Census increase: -EUR 1 million – accident and voluntary health insurance -EUR 2 million – life insurance and other property insurance -EUR 2.5 million – motor vehicles insurance – full coverage, railway vehicles and obligatory traffic liability insurance -EUR 3 million – voluntary superannuation insurance -EUR 4.5 million – reinsurance Demarcation: A basic demarcation of insurance activities into life and non-life insurance in accordance with the EU directives has been introduced New companies cannot perform both life and non-life insurance activities at the same time; the already existing companies need to demarcate these activities by December 31, 2005. Insurance and reinsurance activities shall be demarcated as well by December 31, 2005. A 123% census increase relative to the current state

4. Insurance supervision was entrusted to the NBS for several reasons Relations between banks and insurance companies Need for consolidated supervision Pace of implementation of legal regulations Institutional framework This is the first step towards establishing an integrated supervision of the entire financial sector

5. Institutional advantages of entrusting this authority to the NBS are numerous Independence and autonomy of the central bank Developed information technology and equipment Use of well-trained and qualified bank supervision staff Infrastructure and logistics No funds from the budget are required

6. Supervision measures envisaged by the Law are numerous, but the manner of their enforcement shall depend on the case in hand Temporary measures (against companies) and measures against the management, Supervisory Board, persons with special authorizations and qualified holders Assuming control over the companys business Withdrawal of a license for performing individual or all insurance-related activities Transfer of the insurance portfolio to another insurance company

7. Many additional issues related to this field of activity are regulated under this Law Consumer Protection Department -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 Privatization of insurance companies -General privatization regime shall be applied, in accordance with valid regulations -The Ministry of Finance is authorized to initiate the process of privatization of state capital in insurance companies

8. In its new supervisiory role, the NBS shall perform several activities Under the Law on Insurance (RS Official Gazette, no. 55/04) the National Bank of Serbia shall: -perform insurance supervision -issue the license for performing insurance, reinsurance, mediation and representation activities in insurance and for activities directly related to insurance activities, -issue approval of operations and activities prescribed by the law -pass regulations prescribed by this Law, -process statistical and other relevant data -keeps records in accordance with the Law -review complaints of insurance holders and other insurance beneficiaries

9. Internal organization of the NBS shall be adapted to its new assignment Setting up of an Insurance Supervision Sector with 5 departments: -Off-site supervision -On-site supervision -Actuarial activities and statistics -Legal issues -Consumer protection and market control 62 incumbents have been systematized, vacancies shall remain open until August 1, 2004 The employment of 25 people has been planned, on an open competition basis exclusively – including the General Manager and all other key managers

10. The NBS work plan September 1 December 1 -Technical and organizational-Implementation of-Taking legally equipping of the sectorindirect analysisprescribed measures -Employment and training ofwith the help of foreign new personnelexperts -Indirect analysis of data -Analysis of financial as at December 31, 2002 – 2003data of all Serbian insurance -Technical assistance companies (intermediaries) organization-Analysis of authorized actuaries opinions -Passing by-laws PreparationAnalysis Measure-taking

11. Basic work principles of the NBS related to insurance companies Transparency in: -Decision-making -Taking measures Orientation towards the future: -You cannot grow out of the present problems -Good money should not be wasted with the bad money Objective: Implementation of financial sector reforms