1. Santiago, 11 October, 2002 To Regulate or Not To Regulate Thoughts to the discussion on regulated versus non-regulated markets Nóra Kiss Hungarian Financial Supervisory Authority

2. Santiago, 11 October, 2002 To Regulate or Not To Regulate Legislative background How it works in practice - everyday problems Dilemmas of the HFSA Final decision

3. Santiago, 11 October, 2002 Legislative background The Act on Insurance: Act XCVI of 1995 (modified several times)

4. Santiago, 11 October, 2002 Scope of the Act/1 Covered by the Act: Insurance and directly related activities Insurance mediation and consulting activities Representation of an insurer seated abroad Outsourced activities Insurance contracts with foreign insurers Motor TPL Guarantee Fund

5. Santiago, 11 October, 2002 Scope of the Act/2 Not covered by the Act: Social security Services depending on means + membership fee on lumpsum basis Quasi pay-as-you-go system Export credit activity with state guarantee Voluntary mutual insurance funds and private pension funds Green Card

6. Santiago, 11 October, 2002 Types of insurer Company limited by shares Co-operative Mutual insurance company

7. Santiago, 11 October, 2002 Mutual insurance companies Non-profit organisations set up voluntarily and operating on the basis of the principle of mutualism which, if insurance events specified in the conditions of the insurance occur, provide predetermined services on the basis of insurance technical principles exclusively for their members against the contributions by their members.

8. Santiago, 11 October, 2002 Rules pertaining to mutual insurance companies Material conditions „Lightened rules” Guarantee fund Auditor Supervisory inspections

9. Santiago, 11 October, 2002 Guarantee fund - life (total of premium income + members’ contribution)/year of the last three years security capital < USD 600,000USD 120,000 USD 600,000 USD 1,200,000USD 240,000 USD 1,200,000 USD 1,800,000USD 360,000 USD 1,800,000 USD 2,400,000USD 480,000 USD 2,400,000 USD 3,000,000USD 600,000

10. Santiago, 11 October, 2002 Guarantee fund – non-life (total of premium income + members’ contribution)/year of the last three years security capital < USD 200,000USD 10,000 USD 200,000 USD 300,000USD 20,000 USD 300,000 USD 400,000USD 40,000 USD 400,000 USD 1,200,000USD 60,000

11. Santiago, 11 October, 2002 Rules pertaining to mutual insurance companies Material conditions „Lightened rules” Guarantee fund Auditor Supervisory inspections

12. Santiago, 11 October, 2002 Practice Everyday problems Assistance to mutuals: HFSA Association of Hungarian Non-profit Insurers Reinsurer

13. Santiago, 11 October, 2002 Dilemmas of the supervisor Small agricultural mutuals: Mutuals represent less than 1% of the market Lasting problems in their operation High level of dependence on their reinsurer Motor TPL mutual: Systemic risk

14. Santiago, 11 October, 2002 Why to regulate? Importance of cover for agricultural small entrepreneurs No other possible „umbrella” Danger of merging insurance with subvention Consumer protection

15. Santiago, 11 October, 2002 To regulate or not to regulate? Conclusion: To regulate