ACTUAL STATE AND PERSPECTIVE OF MTPL INSURANCE MARKET IN BiH

Insurance Agency of Bosnia and Herzegovina

Samir Omerhodžić

The International Insurance Forum

3-4 March, 2013 Istanbul

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BiH INSURANCE SECTOR

• -

Institutions:

Insurance Agency of BiH FBiH and RS Insurance Supervisory Agencies BiH Green Card Bureau FBiH and RS Insurance Protection Funds FBiH and RS Association of Insurance Companies BiH Actuarial Association Actuarial Association in RS • -

25 Insurance Companies

14 with the seat in FBiH 11 with the seat in RS •

1 Reinsurance Company

•

Insurance Intermediaries (agents and brokers)

MTPL INSURANCE MARKET IN BiH

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MTPL INSURANCE MARKET IN BiH

REVIEW OF MACROECONOMIC INDICATORS IN BiH

Macroeconomic indicators in BiH (in €)

Indicators

Nominal GDP (in EUR mln) GDP per capita (in EUR) Real GDP (growth rate in %) Retail prices growth rate (%) Population (estimate in thousands) Number of unemployed Number of employed Average gross salary (in EUR) Average net salary (in EUR) Import-Export Ratio (%) Government Sector’s Foreign Debt (in EUR mln) Foreign debt (as percentage of the GDP)

2008

12.637

3.290

5,42 15,72 3.842

493.405

694.416

569 384 41,2 2.144

16,7

2009

12.268

3.193

-3,2 15,28 3.843

510.534

686.044

616 404 44,71 2.659

21,71

Year 2010

12.654

3.293

0,9 3,1 3.843

522.080

683.399

622 408 52,1 3.213

25,4

2011

13.025

3.392

1,26 3,7 3.840

536.728

687.917

650 417 52,96 3.398

25,6

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MTPL INSURANCE MARKET IN BiH

STRUCTURE OF THE BiH FINANCIAL SERVICES SECTOR

Structure of the BiH Financial Services Sector (in €)

Segments of the Financial Services Sector (financial institutions)

Banks Investment funds Insurance and re-insurance companies Micro-credit organizations Leasing companies

Total for the sector Assets (in EUR mln)

10.535

2009 Share (%)

82,07 452 477 556 817

12.838

3,52 3,72 4,33 6,36

100 Assets (in EUR mln)

10.457

2010 Share (%)

84,34 459 479 438 567

12.399

3,7 3,86 3,53 4,57

100 2011 Assets (in EUR mln)

10.713

Share (%)

84,71 409 552 385 587

12.646

3,23 4,37 3,04 4,65

100 Assets growth index 10/09

99,26 101,47 100,32 78,75 69,34

96,58 Assets growth index 11/10

102,45 88,98 115,38 87,97 103,7

102,00

2011 2010 2009 0% 20% 40% 60% 80% 100% Banks Investment funds Insurance and re-insurance companies Micro-credit organizations Leasing companies

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MTPL INSURANCE MARKET IN BiH

OWNERSHIP STRUCTURE

Ownership structure and types of insurance operations of BiH insurance companies in 2012

Ownership Domestic Foreign TOTAL Non-life 12 1 13 Life 1 1 2 Life and non-life 1 8 9 Re-insurance 1 0 1 Total 15 10 25 Domestic Foreign

Non-life Life Life and Non-life Re-insurance Non-life Life Life and Non-life Re-insurance

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MTPL INSURANCE MARKET IN BiH

TOTAL PREMIUM IN BIH AND THE ENTITIES

Total premium in Bosnia and Herzegovina and the Entities (in €)

2009 Share (%) 2010 Share (%) 2011 Share (%) BiH FBiH RS 234.495.630

173.150.649

61.344.981

100

73,84 26,16

241.334.104

178.645.592

62.688.512

100

74,02 25,98

249.567.620

182.415.829

67.151.791

100

73,09 26,91

2012 258.274.499

186.834.271

71.440.228

Share (%) 100

73,09 26,91

Premium growth Index 10/09 11/10 12/11 102,92

103,17 102,19

103,41

102,11 107,12

103,49

102,42 106,39 100% 90% 80% 70% 60% 50% 40% 30% 20% 10% 0% 2009 2010 2011 2012 RS FBiH

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MTPL INSURANCE MARKET IN BiH

TOTAL PREMIUM IN LIFE AND NON LIFE INSURANCE IN BiH

Total premium in life and nonlife insurance in Bosnia and Herzegovina (in €)

Non-life Life

TOTAL 2009 Share (%) 2010 Share (%) 2011 Share (%) 2012 Share (%)

198.990.447

35.505.183

234.495.630

84,86 15,14

100

203.219.732

38.114.372

241.334.104

84,21 15,79

100

208.633.911

40.933.709

249.567.620

83,60 16,40

100

214.221.108

44.053.391

258.274.499

82,94 17,06

100 Premium growth index 10/09 11/10 12/11

100,53 105,31

101,22

102,12 107,35

102,92

102,68 107,62

103,49

300 000 000 250 000 000 200 000 000 150 000 000 100 000 000 50 000 000 0 Life Non-life TOTAL 2009 2010 2011 2012

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MTPL INSURANCE MARKET IN BiH

PREMIUMS PER INSURANCE TYPE IN BiH

Premiums per insurance type in BiH (in €)

No Insurance Type

1 2 3 4 5 6 7 8 Accident Health Motor Casco Railway Rolling Stock Casco Aircraft Hull Damage Sea, Lake and River Vessels Hull Damage Goods in Transit Fire and Other Natural Perils 9 10 11 12 13 14 15 16 17 18 19 Other Damage to Property Motor TPL (Third-Party Liability) Aviation TPL Marine TPL General Liability Credit Surety Financial Loss Legal Protection Assistance – Other Insurance Types

Total Non - Life Insurance Types

Life (Life Insurance and Annuity Insurance) Additional Insurance with Life Insurance

Total Life Insurance Types Grand Total (Insurance Types 1-19) 2009 Share (%) 2010 Share (%) 2011

16.920.195

4.299.144

30.709.323

180 189.860

13.521

2.603.783

13.783.709

11.486.678

115.700.881

253.696

8.639

2.045.439

142.186

50.724

780.168

0 2.320

198.990.447

35.153.634

351.550

35.505.183

234.495.630

7,22 1,83 13,10 0,00 0,08 0,01 17.510.698

3.829.347

29.965.353

113588 229.762

15.573

1,11 5,88 2.347.790

14.914.380

4,90 13.152.199

49,34 117.855.005

0,11 336.846

0,00 0,87 0,06 17.142

2.043.650

122.529

0,02 0,33 0,00 76.692

687.427

0 0,00 1.752

84,86 203.219.732

14,99 37.719.878

0,15

15,14

394.495

38.114.372

100 241.334.104

7,26 1,59 12,42 0,05 0,10 0,01 18.639.737

2.966.759

30.266.413

0 658.924

14.834

0,97 6,18 2.595.000

15.175.046

5,45 13.110.993

48,83 121.362.359

0,14 368.305

0,01 0,85 0,05 13.123

2.619.946

180.803

0,03 0,28 0,00 77.514

577.817

2.876

0,00 3.461

84,21 208.633.911

15,63 40.483.856

0,16

15,79

449.853

40.933.709

100 249.567.621

Share (%) 2012

7,47 1,19 12,13 0,00 0,26 0,01 18.217.736

3.019.274

29.476.383

0 105.804

27.753

1,04 6,08 2.682.018

14.127.259

5,25 16.124.502

48,63 125.175.868

0,15 143.466

0,01 1,05 0,07 13.600

2.807.430

1.689.188

0,03 0,23 0,00 37.624

564.025

3.077

0,00 6.101

83,60 214.221.108

16,22 40.801.910

0,18

16,40

3.251.481

44.053.391

100 258.274.499

Share (%)

7,05 1,17 11,41 0,00 0,04 0,01 1,04 5,47 6,24 48,47 0,06 0,01 1,09 0,65 0,01 0,22 0,00 0,00

82,94

15,80 1,26

17,06 100 8

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MTPL INSURANCE MARKET IN BiH

Percentage of the various types of the insurance in total premium in BiH for 2009, 2010, 2011 and 2012

100% 90% 80% 70% 60% 50% 40% 30% 20% 10% 0% 2009 2010 2011 2012 Other Accident Health Motor Casco Fire and Other Natural Perils Other Damage to Property Motor TPL (Third-Party Liability) Life

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MTPL INSURANCE MARKET IN BiH

PREMIUMS PER INSURANCE TYPE OF INSURANCE COMPANIES IN FBiH WITH BRANCHES IN RS

Premiums per insurance type of FBiH insurance companies‘ branches in RS (in €)

No

7 8 9 10 11 12 13 14 15 16 17 18 1 2 3 4 5 6 19

Insurance Type

Accident Health Motor Casco Railway Rolling Stock Casco Aircraft Hull Damage Sea, Lake and River Vessels Hull Damage Goods in Transit Fire and Other Natural Perils Other Damage to Property Motor TPL (Third-Party Liability) Aviation TPL Marine TPL General Liability Credit Surety Financial Loss Legal Protection Assistance – Other Insurance Types

Total Non - Life Insurance Types

Life (Life Insurance and Annuity Insurance) Additional Insurance with Life Insurance

Total Life Insurance Types Grand Total (Insurance Types 1-19) 2011

481.963

119.148

1.823.225

0 0 5.671

226.327

587.721

311.627

4.829.817

649 621 123.672

19.409

1.432

11.803

0 0

8.543.087

2.582.470

229.791

2.812.261

11.355.348

Share (%)

4,24 1,05 16,06 0,00 0,00 0,05 1,99 5,18 2,74 42,53 0,01 0,01 1,09 0,17 0,01 0,10 0,00 0,00

75,23

22,74 2,02

24,77 100,00 2012

530.820

113.711

1.816.652

0 0 3.988

331.972

699.374

580.609

6.308.143

488 1.500

66.693

33.133

4.942

14.658

10.506.682

3.092.050

267.490

3.359.540

13.866.222

Share (%)

3,83 0,82 13,10 0,00 0,00 0,03 2,39 5,04 4,19 45,49 0,00 0,01 0,48 0,24 0,04 0,11 0,00 0,00

75,77

22,30 1,93

24,23 100,00 Index

110,14 95,44 99,64 122,98 119,73 116,41

119,46 122,11

70,32 146,68 119,00 186,32 130,61 75,18 241,40 53,93 170,71 345,06 124,19

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MTPL INSURANCE MARKET IN BiH

PREMIUMS PER INSURANCE TYPE OF INSURANCE COMPANIES IN RS WITH BRANCHES IN FBiH

Premiums per insurance type of RS insurance companies‘ branches in FBiH (in €)

No

7 8 9 10 11 12 13 14 15 16 17 18 1 2 3 4 5 6 19

Insurance Type

Accident Health Motor Casco Railway Rolling Stock Casco Aircraft Hull Damage Sea, Lake and River Vessels Hull Damage Goods in Transit Fire and Other Natural Perils Other Damage to Property Motor TPL (Third-Party Liability) Aviation TPL Marine TPL General Liability Credit Surety Financial Loss Legal Protection Assistance – Other Insurance Types

Total Non - Life Insurance Types

Life (Life Insurance and Annuity Insurance) Additional Insurance with Life Insurance

Total Life Insurance Types Grand Total (Insurance Types 1-19) 2011

183.863

29.570

436.566

0 0 0 31.983

61.410

789.090

4.265.842

0 0 7.597

0 0 0 0 0

5.805.922

Share (%)

3,17 0,51 7,52 0,00 0,00 0,00 0,55 1,06 13,59 73,47 0,00 0,00 0,13 0,00 0,00 0,00 0,00 0,00

100,00 0 5.805.922

0,00 2012

282.327

49.716

622.995

0 0 41 36.511

91.236

836.311

5.068.946

0 0 5.675

0 0 0 0 0

6.993.758

4.536

175

4.711

6.998.469

Share (%)

4,03 0,71 8,90 0,00 0,00 0,00 0,52 1,30 11,95 72,43 0,00 0,00 0,08 0,00 0,00 0,00 0,00 0,00

99,93

0,06 0,00

0,07 100,00 Index

153,55 168,13 142,70 114,16 148,57 105,98 118,83 74,70 120,46

120,54 11

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MTPL INSURANCE MARKET IN BiH

SHARE OF PREMIUM IN BRANCHES IN PREMIUM OF ENTITIES

Share of premium in branches in premium of Entities (in €)

2009 2010 2011 2012 Insurance companies from one Entity with registered branches in other Entity Premium in branches Share of premium in branches in total premium in Entity Premium in branches Share of premium in branches in total premium in Entity Premium in branches Share of premium in branches in total premium in Entity Premium in branches Share of premium in branches in total premium in Entity Insurance companies from FBiH with registered branches in RS Insurance companies from RS with registered branches in FBiH

5.034.018,81 478.933,75 8,21 0,28 9.507.513,43 3.203.485,48 15,17 5,11 11.355.347,86 5.805.922,29 16,91 3,18 13.866.222,08 6.998.469,45 19,41 3,75

Insurance companies from FBiH with registered branches in RS in 2009

8%

Insurance companies from FBiH with registered branches in RS in 2012

19% Premium in branches Total premium in Entity Premium in branches Total premium in Entity 81% 92%

Insurance companies from RS with registered branches in FBiH in 2009

0,28%

Insurance companies from RS with registered branches in FBiH in 2012

4% Premium in branches Total premium in Entity Premium in branches Total premium in Entity 96% 99,72%

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MTPL INSURANCE MARKET IN BiH

SHARE OF MTPL INSURANCE PER COUNTRIES IN CEE, SEE AND CIS

Share of MTPL insurance per Countries in CEE, SEE and CIS in first half of 2012

50,00% 45,00% 40,00% 35,00% 30,00% 25,00% 20,00% 15,00% 10,00% 5,00% 0,00% Share of MTPL insurance

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MTPL INSURANCE MARKET IN BiH

SHARE OF LIFE AND NONLIFE INSURANCE PER COUNTRIES IN CEE, SEE AND CIS

Share of Life and Nonlife Insurance per Countries in CEE, SEE and CIS in first half of 2012

100% 90% 80% 70% 60% 50% 40% 30% 20% 10% 0% Nonlife Life

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MTPL INSURANCE MARKET IN BiH

COMPARISON OF INDICATORS OF SOME EUROPEAN COUNTRIES AND BiH

Comparison of indicators of some European countries and BiH (in $)

2009 2010 2011 Country

Great Britain Germany Spain Switzerland Sweden Austria Russia Poland Turkey Czech Republic Ukraine Slovenia Croatia Bulgaria Serbia

BiH Premium (USD mln) Premium as % of GDP Premium per capita (in USD) Premium (USD mln) Premium as % of GDP

309.241

238.366

82.775

48.470

32.768

22.660

39.576

16.286

7.853

7.328

2.624

2.895

1.781

1.195

792

336

12,9 7,0 5,7 9,8 8,2 6 2,5 3,8 1,3 3,9 2,1 6 2,9 2,5 1,8

1,91

4.579

2.878

1.802

6.258

3.540

2.743

281 430 105 723 57 1.420

402 158 108

87,5

310.022

239.817

76.082

52.118

38.218

22.232

41.644

17.763

9.220

7.914

2.463

2.775

1.682

1.150

727

320

12,4 7,2 5,4 9,9 8,4 5,9 2,3 3,7 1,3 4,0 1,9 5,9 2,8 2,5 1,8

1,91 Premium per capita (in USD) Premium (USD mln) Premium as % of GDP Premium per capita (in USD)

4.497

2.904

1.650

6.634

4.082

2.651

297 466 122 753 54 1.353

379 153 100

83

319.553

245.162

79.987

63.576

42.111

23.051

43.257

19.107

10.051

8.764

3.084

3.008

1.711

1.131

781

323

11,8 6,8 5,4 10,0 7,9 5,5 2,4 3,7 1,3 3,9 2,0 5,9 2,7 2,1 1,7

1,92

4.535

2.967

1.729

8.012

4.455

2.740

303 500 136 832 68 1.464

389 151 107

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MTPL INSURANCE MARKET IN BiH

Ratio of the amount of premium and GDP expressed in percents for some European countries and BiH for 2009, 2010 and 2011

14% 12% 10% 8% 6% 4% 2% 0% 2009 2010 2011

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MTPL INSURANCE MARKET IN BiH

Premiums per capita for some European countries and BiH for 2009, 2010 and 2011

BiH Serbia Bulgaria Croatia Slovenia Ukraine Czech Republic Turkey Poland Russia Austria Sweden Switzerland Spain Germany Great Britain 0 1.000

2.000

3.000

4.000

5.000

6.000

7.000

8.000

9.000

2011 2010 2009

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MTPL INSURANCE MARKET IN BiH

CLAIMS PAID PER INSURANCE TYPE IN BiH

Claims paid per insurance type in BiH (in €)

No

10 11 12 13 14 15 16 17 18 1 2 3 4 5 6 7 8 9 19

Insurance Type

Accident Health Motor Casco Railway Rolling Stock Casco Aircraft Hull Damage Sea, Lake and River Vessels Hull Damage Goods in Transit Fire and Other Natural Perils Other Damage to Property Motor TPL (Third-Party Liability) Aviation TPL Marine TPL General Liability Credit Surety Financial Loss Legal Protection Assistance – Other Insurance Types

Total Non - Life Insurance Types

Life (Life Insurance and Annuity Insurance) Additional Insurance with Life Insurance

Total Life Insurance Types Grand Total (Insurance Types 1-19) 2011

9.798.197

1.017.355

20.739.369

5.412

0 0 149.044

3.639.319

4.235.715

45.119.238

0 0 406.906

151.991

107.061

31.748

0 907

85.402.262

8.703.472

806.687

9.510.159

94.912.421

Share (%)

0,03 0,00 0,00

89,98

9,17 0,85

10,02 100,00

10,32 1,07 21,85 0,01 0,00 0,00 0,16 3,83 4,46 47,54 0,00 0,00 0,43 0,16 0,11

2012

10.528.896

705.719

20.659.204

1.559

281.191

0 0 3.208.427

4.616.911

44.726.743

0 33.629

488.151

317.290

6.484

342.128

0 594

85.916.925

9.430.645

856.495

10.287.140

96.204.065

Share (%)

0,36 0,00 0,00

89,31

9,80 0,89

10,69 100,00

10,94 0,73 21,47 46,49 0,00 0,03 0,51 0,33 0,01 0,00 0,00 0,00 0,29 3,34 4,80

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MTPL INSURANCE MARKET IN BiH

Claims paid per insurance type in BiH in 2011

Life 10% Motor TPL (Third-Party Liability) 48% Other 1% Accident 10% Health 1% Motor Casco 22% Fire and Other Natural Perils 4% Other Damage to Property 4%

Claims paid per insurance type in BiH in 2012

Life 11% Motor TPL (Third-Party Liability) 46% Other 2% Accident 11% Health 1% Motor Casco 21% Other Damage to Property 5% Fire and Other Natural Perils 3%

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MTPL INSURANCE MARKET IN BiH

IMMATERIAL CLAIMS PAID IN BiH

Immaterial claims in BiH (in €)

Insurance Companies Protective Funds

TOTAL 2011

11.948.250

671.069

12.619.319

2012

13.007.107

899.380

13.906.487

Index

108,86 134,02

110,20

14 000 000 12 000 000 10 000 000 8 000 000 6 000 000 4 000 000 2 000 000 0 2011 2012

Immaterial claims paid by insurance companies (in €)

2011 2012

Immaterial claims paid MTPL Claims paid Immaterial in MTPL Claims paid (Share) 11.948.250

45.119.238

26,48 13.007.107

44.726.743

29,08 50 000 000 40 000 000 30 000 000 20 000 000 10 000 000 0 2011 2012 Insurance Companies Protective Funds Immaterial claims paid MTPL Claims paid

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MTPL INSURANCE MARKET IN BiH

HHI INDEX FOR THE MARKET OF LIFE INSURANCE

HHI index for the market of life insurance in Bosnia and Herzegovina

Market share of the first four companies HHI 2009

79,89% 1.838

2010

78,82% 1.786

2011

80,35% 1.817

2012

79,94% 1.790

95% 90% 85% 80% 75% 70%

1 838

79,89%

1 786

78,82%

1 817

80,35%

2009 2010 2011 Market share of the first four companies

1 790

79,94%

1 900 1 850 1 800 1 750 1 700 1 650 1 600 2012 HHI

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MTPL INSURANCE MARKET IN BiH

HHI INDEX FOR THE MARKET OF NONLIFE INSURANCE

HHI index for the market of nonlife insurance in Bosnia and Herzegovina

Market share of the first four companies HHI 2009

41,90% 711

2010

42,78% 728

2011

41,24% 718

2012

41,91% 723 800 55% 53% 51% 49% 47% 45% 43% 41% 39% 37% 35%

711

41,90%

728

42,78%

718

41,24%

2009 2010 2011 Market share of the first four companies

723

41,91%

2012 HHI 750 700 650 600

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MTPL INSURANCE MARKET IN BiH

TWINNING PROJECT

• Twinning Project EU Suport for Sustainable Capacity Building of the Insurance Agency of Bosnia and Herzegovina and the FBiH and RS Insurance Supervisory Agencies implemented by Bulgarian Financial Supervision Commission from april 2010 to april 2012 • Proposal for framework of institutions for the purposes of obligatory Motor Third Party Liability insurance in Bosnia and Herzegovina in line with the prevailing best practice in EEA: ▫ ▫ ▫ Single Compensation Body Information Centre Protection (Gurantee) Fund at the BiH Green Card Bureau.

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MTPL INSURANCE MARKET IN BiH

REASONS

• BiH Green Card Bureau is recognised as a representative one for BiH and is a member of the Council of Bureau - fulfils the requirements to be independent and self regulating.

• Cost efficiency – no financial resources will be needed to establish number of different institutions (units) at Entities and State level and to provide expenses for their administrative capacity.

• Single information system needs to be in place, respectively one project needs to be financed and upgraded.

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MTPL INSURANCE MARKET IN BiH

LIBERALIZING MTPL INSURANCE MARKET

• FIRST Initiative,The World Bank • The main objectives of the project are: 1) to assist the Insurance Supervisory Agency of Federation of BiH (ISAF) and the Insurance Agency of Republic of Srpska (ISRS) and Insurance Agency of BiH (IABiH) in the liberalization of the MTPL insurance market in Bosnia and Herzegovina; 2) to develop the regulatory framework and technical tools necessary for actuarially sound setting of premium rates and technical reserves for MTPL insurance; 3) to ensure that the proposed regulatory framework for the MTPL insurance market is in compliance with the EU MPTL insurance legislation, specifically with the commitments of Stabilization and Association Agreement with European Union and that it properly accounts for the best international practices in liberalizing the MTPL market.

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THANK YOU FOR YOUR ATTENTION!

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