Current legislative situation and description of the insurance sector in the Slovak Republic. October 2002

Transcription

1 Current legislative situation and description of the insurance sector in the Slovak Republic October 2002

2 Major changes in legislation Important changes to the insurance market commenced with Act No.101/2000 Z. z. containing amendments to the Insurance Act, which, with effect from 1 st April 2000, further liberalised the provision of insurance services and enhanced the powers of the supervisory authority. The Act allowed insurance services to be provided in the Slovak Republic by foreign insurance companies which have set up an organisational unit in Slovakia. A more exact definition of insurance intermediaries was given. In the field of supervision, stricter requirements for the submission of information to the supervisory body were laid down. The new re-codified Insurance Act No. 95/2002 Z. z., which entered into effect on 1 st March 2002, sets new licensing conditions for insurers, reinsurers and insurance intermediaries. The Act describes and defines relations in respect of the activities of branches of foreign insurance companies in Slovakia. The power and authority of the supervisory body are enhanced by giving it an effective influence on the development of the insurance market, and enabling it to monitor this market and become involved in the event of deficiencies. The Act improves the level of protection of authorised policyholders and investors interests. The new Insurance Act specifies the requirements for the provision of insurance services, and mainly the technical reserves, which must be in line with the scope of the permitted activities. The reserves can be invested in assets as stipulated by law, reflecting the principles of security, profitability, liquidity, and diversification. Like the other above-mentioned acts covering activities in the financial market, the new Insurance Act too introduces supervision on a consolidated basis. The Act also modifies the measures which can be taken by the Financial Market Authority (hereinafter FMA ) when insurance companies breach their obligations or become insolvent. The Act sets the conditions for intermediary activities and increases the responsibility of actuaries, so that they may have a more effective impact on financial management of insurance companies. The new Insurance Act should ensure a high degree of compatibility of insurance law in Slovakia with EU directives, and it should bring about a consequent liberalisation of insurance services. Demonopolisation of mandatory (legal) insurance Legal third party liability insurance for motor vehicles (MTPL) The insurance industry in the Slovak Republic has passed through a successful transformation process in compulsory contractual insurance of motor vehicles. A comprehensive programme of measures has supported the creation of conditions for a market mechanism in the insurance sector, and enabled a transition to be made from the monopoly of Slovenská poisťovňa [Slovak insurance company] to the establishment of a competitive environment. This process has had a positive impact in improving the quality of insurance services and products. In September 2000, the Government approved a Privatisation Concept for Slovenská poisťovňa, under which the privatisation process was to be completed in the first half of Act No. 381/2001 Z. z. on compulsory contractual civil liability insurance in respect of use of motor vehicles became effective on 1 st October It aims to comply with international standards as well as to remove the monopoly on this insurance product. The Act has led to the establishment of a Slovak Insurers Bureau responsible for registration of insurance. page 2 of 9

3 A further important function of this bureau is the operation of a Green Card System, as well as insurance abroad. A Guarantee Insurance Fund has been set up to compensate victims of road accidents where damage was caused by the use of an unknown or uninsured motor vehicle or by a foreign motor vehicle insured upon entering the Slovak Republic, or if the insurer cannot pay damages due to insolvency. This fund is administered by the Slovak Insurers Bureau. Compulsory contractual insurance can only be provided by an insurance company in compliance with the required conditions and following the issue of an approval by the FMA. After careful investigation and with full documentary support, the FMA has issued licenses to provide this type of insurance to 8 insurers. According to data submitted, written premiums for compulsory contractual motor vehicle insurance by 30 th June 2002 amounted to 4,863,068,000 SKK (109,162,000 EUR), (1 EUR = SKK). The written premiums were split between the major insurers as follows: Slovenská poisťovňa obtained a 45.92% share, KOOPERATIVA poisťovňa 23.58% and Allianz poisťovňa 20.98%. The remaining five insurance companies each obtained less than a 6% share of written premiums for compulsory contractual motor vehicle insurance. In the following tables we can see the development of compulsory contractual motor vehicle insurance (written premium, claim payments and loss ratio) at Slovenská poisťovňa during the years : Year Compulsory contractual motor vehicle insurance at Slovenská poisťovňa (in 000 SKK) MTPL written premiums (MTPLWP) Total written premiums at Slovenská poisťovňa (TWP) Share of MTPLWP in written premiums in non-life insurance Share of MTPLWP in TWP ,46 % 16,99 % ,82 % 21,75 % ,83 % 22,41 % ,10 % 25,47 % ,62 % 31,98 % MTPL claim payments Year (in 000 SKK) MTPL loss ratio ,73 % ,54 % ,33 % ,37 % ,72 % 100% 90% 80% 70% 60% MTPL loss ratio in years ,73% 94,33% 87,54% 77,34% 68,72% Legal liability insurance for damage caused by an accident at work or an occupational disease The obligation to conclude this type of insurance is stipulated in Article 205d of the Labour Code. The insurance covers an employer's liability for industrial injuries suffered and occupational diseases contracted by its employees during their work. This insurance covers the cost of medical treatment, the difference between sickness benefits and the employee's income, benefit as the difference between pension and expected income in case of invalidity resulting from industrial injury or, as the case may be, funeral costs in the event of the employee's death as a result of industrial injury. This type of insurance was provided and administered exclusively by Slovenská poisťovňa, but, under the social reform concept prepared by the Ministry of Labour, Social Affairs and the Family of the Slovak Republic, the page 3 of 9

4 way is now open for demonopolisation and handover. Since 1 st April 2002, legal liability insurance for damage caused by an accident at work or an occupational disease has been transferred as a particular type of insurance to the Social Insurance Institute. In the next table we can see the development of liability insurance for employees in the event of accidents at work or occupational disease (written premiums) at Slovenská poisťovňa during the years : Year Liability insurance for employees to cover accidents at work or occupational diseases (LI) at Slovenská poisťovňa (in 000 SKK) LI written premiums (LIWP) Total written premiums in Slovenská poisťovňa (TWP) Share of LIWP in written premiums in non-life insurance Share of LIWP in TWP ,63 % 6,97 % ,75 % 6,38 % ,54 % 6,01 % ,85 % 6,07 % ,96 % 6,28 % Compulsory contractual insurance of travel agencies against bankruptcy Act No. 281/2001 Z. z., dealing with terms of business for travel agencies, which came into effect on 1 st October 2001, stipulated that travel agencies had a duty to conclude compulsory contractual insurance against travel agency bankruptcy within six months of this Act entering into effect. Compulsory contractual insurance of travel agencies against bankruptcy gives the policyholder power and protection in cases where the bankruptcy of a travel agency has a negative impact. At present, 10 insurance companies can provide this particular type of insurance in Slovakia. Insurance Supervision The FMA was newly constituted by Act No. 96/2002 Z. z. on Supervision of the Financial Market and on Alterations and Amendments to Certain Acts, effective as of 1 st April 2002, as a legal entity which will act in the sphere of public administration and be entitled to carry on surveillance of the capital market and the insurance industry. The Authority is to perform its surveillance fairly and independently from state authorities, local government bodies, other public authorities and other legal entities or natural persons. The Act authorises the FMA to carry on supervision of the capital market and the insurance industry, to take decisions on the legally-protected rights, interests and duties of legal entities and natural persons in the capital market and insurance industry field, to co-operate with the Ministry of Finance on the drafting and implementation of financial policy, to co-operate with international supervisory bodies in the capital market and insurance industry sphere, and to maintain and publish a list of entities to which the authority has issued licences. The FMA is obliged to present to the Government an annual report on its activities and biannually an analysis of the current state of the capital market and insurance industry in the Slovak Republic. The Act also modifies procedures at the FMA. Further authorisation is given to the FMA by special acts regulating the capital market and insurance industry sphere. The granting of licences and the function of supervision of the insurance industry are also assigned to the Authority by the provisions of the Insurance Act No. 95/2002 Z. z. and Act No. 381/2001 Z. z. on compulsory contractual civil liability insurance relating to the use of motor vehicles. page 4 of 9

5 By the end of June 2002, the FMA was supervising 27 insurance companies, 142 insurance intermediaries/natural persons, and 250 intermediaries in insurance/juridical persons. The FMA is a member of the international organisation of supervisory bodies in the capital market sphere (IOSCO) and the insurance industry (IAIS). The FMA became a member of IAIS on 9 th January The principle aim at present is to complete the transformation of the FMA into an institution which will be financially and operationally independent. The way in which the FMA is financed has fundamentally changed. The principal income to the state from the FMA comprises contributions made by entities holding a licence from the FMA issued pursuant to special regulations on enterprise in the capital market or insurance sphere, fees for FMA procedures and the FMA profit from previous accounting periods. Contributors are obliged to pay an annual contribution to the FMA. The income of the FMA can include resources granted from the state budget, if stipulated by the State Budget Act for the relevant financial year. Apart from the independence of the FMA, the main tasks remaining are to ensure high quality standards for performance of supervision of the capital market and the insurance industry in compliance with IOSCO and IAIS principles. Following unification of the level of regulation in the individual segments of the financial market, the intention to establish an integrated supervisory body will have been put into effect. In the medium term, there are two possible alternative ways of establishing an integrated supervisory body. The first alternative is integration under the aegis of the National Bank of Slovakia; the second alternative is to have an independent integrated regulator similar to the existing FMA. ORGANISATION CHART OF THE FINANCIAL MARKET AUTHORITY (by May 17 th, 2002) Supervisory committee COUNCIL Internal inspection and complaints office General director Deputy chairman of council (CM supervision) Chairman of council Deputy chairman of council (I supervision) Secretariat of the GD Section of information technologies and analysis Section of internal services Section of legal services Capital market section Insurance Section economic services Secretary of control committee Secretary of the council Consultative commission of council for the CM Consultative commission of council for the I licencing permissions supervision I.* supervision II.** licencing supervision *) for the field of collective investment, securitiy traders and intermediaries of investment services **) for the field of declarer of public offer, public markets and central depositary Development of the insurance market in figures The direct impact of the transformation process in the insurance sector is reflected in the increase in the number of insurance companies from 3 in 1991 to 28 in There is foreign capital involvement in 20 insurance companies. Of these, 17 have a dominant or 100 per cent page 5 of 9

6 share of foreign capital. An overview of the share of foreign capital in the insurance sector as well as the share of individual countries in foreign capital is listed in the table and figure below. Country Structure of foreign shareholders in insurance companies at Share of foreign shareholders in share capital (in 000 SKK) Share of foreign shareholders in total foreign capital Share of foreign shareholders in the insurance market Austria ,06 % 12,89 % Holland ,45 % 8,02 % Germany ,63 % 7,18 % Czech Republic ,41 % 6,16 % Cyprus ,73 % 5,39 % USA ,76 % 3,57 % United Kingdom ,01 % 1,38 % France ,68 % 0,77 % Switzerland ,26 % 0,58 % Total % 45,93 % Structure of the foreign share holders of the insurance companies by ,73% 13,41% 7,76% Austria 3,01% 1,68% 1,26% Holland 28,06% Germany Czech Republic Cyprus USA United Kingdom 17,45% France 15,63% Switzerland Total written premiums, including mandatory insurance, amounted to 32,117,934,000 SKK (720,955,000 EUR) in 2001, meaning an annual (year-on-year) increase of per cent. According to preliminary data for 30 th June 2002, total written premiums increased to 20,554,233,000 SKK (461,385,000 EUR), meaning an annual increase of per cent, while in life insurance written premiums increased to 7,748,342,000 SKK (173,929,000 EUR) and to 12,805,891,000 SKK (287,456,000 EUR) in non-life insurance. The following table provides an overview of premiums written in 2001 for particular insurance companies. page 6 of 9

7 Insurance company Written premiums at (in 000 SKK) At Life insurance Market share (in %) Non-life insurance Market share (in %) Total Market share (in %) Total Market share (in %) Index 2001/2002 Slovenská poisťovňa, a. s , , , ,80 1,40 % Slovenská poisťovňa, a. s. -mandatory ins , , ,11 36,38 % KOOPERATIVA poisťovňa, a. s , , , ,12 22,52 % UNIQA poisťovňa, a. s , , , ,089 15,16 % ERGO, a. s , , , ,38 28,47 % QBE poisťovňa, a. s , , , ,15-7,23 % UNION, poisťovacia a. s , , , ,39 21,72 % Allianz poisťovňa, a. s , , , ,35 32,52 % Česká poisťovňa - Slovensko a. s , , , ,96 17,77 % Komunálna poisťovňa a. s , , , ,96 15,84 % POISŤOVŇA GERLING Slovensko, a. s , , ,36 45,22 % VZÁJOMNÁ ŽIVOTNÁ POISŤOVŇA a. s , , , ,13-0,68 % Univerzálna banková poisťovňa, a. s , , , ,25 22,88 % Prvá česko-slovenská poisťovňa, a. s , , ,70 19,31 % Hasičská poisťovňa a. s , , ,61-65,01 % First American Slovak Insurance Company - Prvá americko-slovenská poisťovňa a. s. /AMSLICO/ , , , ,94 20,87 % Európska Cestovná Poisťovňa, a. s ,071 - Dopravná poisťovňa, a. s , , ,42-23,87 % Nationale-Nederlanden poisťovňa a. s , , ,98 14,32 % Poisťovňa TATRA a. s , , , ,21 15,81 % Generali Poisťovňa a. s , , , ,70 93,08 % KONTINUITA - Slovenská životná poisťovňa, a. s , , , ,030 3,54 % D.A.S. poisťovňa právnej ochrany, a. s , , ,12 41,90 % Wüstenrot, životná poisťovňa a. s , , ,15 79,49 % R+V Poisťovňa, a. s , , , ,41 104,15 % Poisťovňa AIG Slovakia a. s , , ,45-24,83 % Zurich Poisťovňa, a. s , , ,13 144,85 % VICTORIA-VOLKSBANKEN Poisťovňa, a. s , , , , ,36 % Poisťovňa Cardif Slovakia, a. s , , , , ,22 % Poisťovňa DRUKOS a. s , ,17 0 0,00 - Total ,85 % A trend towards a gradual increase in the proportion of life insurance in total insurance also became evident in 2001, while the proportion of non-life insurance is decreasing in line with the world-wide trend. In 2001, the proportion of life assurance amounted to 42.9% of total premiums written. The annual increase in premiums written in life insurance was 22.93%. The considerable rise in life insurance is due to the introduction of new products on the insurance market, especially the introduction of investment life assurance. In the next table and figures we can see an overview of the development of market share in life and non-life insurance in terms of written premiums from 1993 up to 30 th June page 7 of 9

8 Year Life Market Annual Non-life Market Annual Annual Total insurance share growth insurance share growth growth ,48 % ,52 % ,43 % 9,23 % ,57 % 9,52 % ,45 % ,79 % 18,48 % ,21 % 16,11 % ,66 % ,20 % 38,64 % ,80 % 28,51 % ,92 % ,94 % 30,10 % ,06 % 18,86 % ,69 % ,40 % 36,82 % ,60 % 21,16 % ,38 % ,13 % 24,80 % ,87 % 4,91 % ,75 % ,78 % 42,62 % ,22 % 2,58 % ,84 % ,90 % 22,93 % ,10 % 12,66 % ,85 % ,70 % 11,97 % ,30 % 10,13 % ,82 % mill. SKK 100% 90% 80% 70% 60% 50% 40% 30% 20% 10% 0% Per cent share of life and non-life insurance in years Non-life Life Even though the written premium/gross domestic product (GDP) ratio is continuously growing, and reached 3.33 per cent in 2001, it lies a long way below the international average value (3.10 per cent in 2000). The following table and figure provide information on the development of the ratio of written premium to GDP over the years Year GDP in current prices * Written premium Share of written (in bln SKK) (in bln SKK) premiums to GDP ,6 8,399 2,07% ,1 9,193 1,89% ,9 10,732 1,89% ,6 14,041 2,23% ,6 17,087 2,41% ,0 21,424 2,76% ,7 23,727 2,84% ,8 27,487 3,02% ,3 32,118 3,25% * source: Statistical Office of the Slovak Republic Share of the written premium to GDP 3,5% 3,0% 2,5% 2,0% 1,5% 2,07% 1,89% 1,89% 2,23% 2,41% 2,76% 2,84% 3,02% 3,25% 1,0% page 8 of 9

9 The insurance companies have built up total reserves (not including the proportion attributable to reinsurers) amounting to 46,136,662,000 SKK (1,035,639,000 EUR) in 2001, meaning a year-on-year increase of 18.24%. Of these reserves, reserves in life insurance came to 36,359,167,000 SKK (816,161,000 EUR) and reserves in non-life insurance amounted to 9,777,495,000 SKK (219,477,000 EUR). There was a year-on-year increase of 19.94% in life insurance, and of 12.34% in non-life insurance. The amounts of reserves for the years are listed in the following tables. Amount of reserves in life insurance (in 000 SKK) Unearned premium reserve Claims outstanding reserve Life insurance premium reserve Reserve to cover liabilities derived from financial placement on behalf of the insured persons Other reserves Total Amount of reserves in non-life ins. (in 000 SKK) Unearned premium reserve Claims outstanding reserve Bonus and discount reserve Reserve to balance special risks Other reserves Total The accumulated reserves, except for the reserve to cover liabilities derived from financial placement on behalf of the insured persons, were covered by assets corresponding to the reserves in 2001 in the sum of 39,679,596,000 SKK (890,696,000 EUR), representing 90.61% of total reserves. These reserve resources have been placed in the following way: Type of Reserve Placement at % share of reserves at % share of reserves Bank deposits * ,79 % ,37 % Government bonds and treasury notes ,79 % ,31 % Publicly traded bonds ,35 % ,53 % Shares and share certificates ,70 % ,45 % Foreign securities ,26 % ,44 % Real estate ,96 % ,44 % Loans from life insurances ,004 % ,07 % Total ,84 % ,61 % Total reserves without reserve to cover liabilities derived from financial placement on behalf of the insured persons % % * including deposit papers, certificates of deposit, and bonds issued by the bank page 9 of 9