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Aspects of the implementation of
insurance rules and ensuring insurance
supervision after enlargement
Marcin Kawiński
The Insurance Ombudsman Office
Poland
Seminar on Financial Services (INT MARKT 20590 )
Sofia, 14-16 September 2005
The Insurance Ombudsman
Office
• Founded to protect the interests of the
weakest market participants - insurance
consumers, vis-a-vis Insurance Companies
equipped with much greater resources and
qualified staff
• The Insurance Ombudsman takes part in the
meetings of The Insurance and Pension
Funds Supervisory Commission
The Insurance Ombudsman’s
statutory tasks
The Insurance Ombudsman was founded:
• to represent and protect consumer interests of the
insured and beneficiaries under insurance contracts;
• to advise the supervisory body of any irregularities
found in the operation of insurers, pension funds
and vocational pension plans;
• to initiate and engage in educational and
information activities in the scope of insurance,
pension funds and vocational pension plans.
The process of implementation
• How exact?
– Implementation  translation
– Implementation  variation
• How fast?
– Where is the market?
– Waiting for the market
– Directives for market not market for directives
Legislation – common problems
in the new Member States
• Full participation in the ‘green card’ system for
third party liability insurance
• Further transposition/fine-tuning needed
– prudential standard not aligned to acquis and
international standards
– minimum solvency and guarantee fund
– administrative and legal restrictions the freedom to
provide the right of establishment and service
– out-of-court redress schemes
There is always something to implement.
Road to accession
Act of 28 July 1990 on Insurance Activity
• Basic act for a new insurance market
• Simulation plan; minimal guarantee fund, solvency
margin and own funds.
• Generally consistent with present EU directives
1990
Road to accession
Amendment of Act of 28 July 1990 on Insurance Activity
• More precise and higher criteria for new insurance company.
• Implementation of security norms (one risk < 25% of the fund)
• Foundation of supervisory office
• Regulation of insurance intermediaries
• Foundation of The Insurance Guarantee Fund
• New bankruptcy regulation
• Foundation of Insurance Ombudsman
• Foundation of actuary
1990
1995
Road to accession
Amendment of Act of 28 July 1990 on Insurance Activity
• Regulations for branch of foreign insurance company
o Obligation
o Principle of mutuality
• New definitions some of security norms
1990
1995
1998
Road to accession
Amendment of Act of 28 July 1990 on Insurance Activity
• Regulations on trade of insurance company shares
• Regulations for branch of foreign insurance company
• Modification of investment limits for an insurance fund
1990
1995
1998 2000
Missing elements
• full freedom of cross-border services
• single license
• supplementary supervision of insurance
undertakings in insurance group
• insurance intermediares
• third party liability insurance
Road to accession
• Act of 22 May 2003 on Insurance Activity (Official Journal
No 124, Item 1151, as amended)
• Act of 22 May 2003 on Compulsory Insurance, Insurance
Guarantee Fund and Polish Motor Insurance Bureau
(Official Journal No 124, Item 1152, as amended)
• Act of 22 May 2003 on Insurance Mediation (Official
Journal No 124, Item 1154, as amended)
• Act of 22 May 2003 on Insurance and Pension Supervision
and The Ombudsman for the Insureds (Official Journal No
124, Item 1153, as amended)
1990
1995
1998 2000 2003
Act on insurance activity
Main issues:
• performing the profession of actuary
• change in the list of assets covering the
technical provisions
• change of the value of the guarantee capital and
the amounts when calculating the solvency
margin
• strengthen position of the insurance supervision
• supplementary supervision of insurance
undertakings in insurance group
Act on insurance activity
- reorganisation and liquidation of the
insurance companies
- organisation and functioning of the
economic insurance self-government
- community co-insurance
- freedom to provide services, right of
establishment and single license
Solvency
Solvency – ability of an insurer to meet its
obligation (liabilities) under all contracts at
any time.
– circumstances the appropriateness of the assets
to cover
– time horizon
– acceptable degree of probability of becoming
insolvent
(International Association of Insurance Supervisors)
Polish regulation concerning
insolvency
• Indicators
• Mechanisms
• Institutions
Polish regulation concerning
insolvency – indicators
• Own funds - not lower than solvency
margin
• Guarantee fund - one-third of the solvency
margin, but not less than minimum amount
of guarantee fund dor each class of
insurance and for reinsurance business
• Solvency margin – based on reserves or
premiums
Polish regulation concerning
insolvency - mechanisms
• own funds > solvency margin
• solvency margin > own funds > guarantee fund
• guarantee fund > own funds
Polish regulation concerning
insolvency – institutions
• Insurance and Pension Funds Supervisory
Commission
• The Insurance Guarantee Fund
Supervisory authority – common
problems in the new Member States
•
•
•
•
•
(administrative) capacity is insufficient
additional staff recruitment
staff qualification improvement
dependency in political and budgetary terms
operational dependence (the lack of power to issue
its own regulations)
• cross border co-operation between supervisory
authorities
• low quality of the monitoring
• mergers of supervisory authorities
Insurance and Pension Funds
Supervisory Commission
The body performing the supervision is the
Insurance and Pension Funds Supervisory
Commission. This is a body of central State
administration. The Commission was established
on 1st April 2002 on the basis on the Act of 1
March 2002 on changes in organisation and
carrying out the duties of central State
administration /.../. (Law Gazette No. 25/2002,
pos. 253). The Commission was created due to
merger of PUNU and UNFE.
Insurance and Pension Funds
Supervision Commission
•
•
•
•
Under Insurance and Pension
Supervision shall be the activity of:
insurance undertakings;
insurance mediation,
pension funds;
occupational pension programs.
Funds
Insurance and Pension Funds
Supervision Commission
• commission gives authority for permitting, withdrawal
of permitting, acquisition of shares and operating
supervision (articles 6, 35, 36, 92, 101, 107, 119, 239
of Act on insurance activity)
• commission may grant and receive from Banking
Supervision Commission, the Polish Securities
Commision and Exchange Commission and other
financial supervisors information’s required by such
bodies to perform their statutory duties in the field of
supervision (article 16 Act on insurance supervision
and Insurance Ombudsman)
Insurance and Pension Funds
Supervision Commission
• commision may enter into agreements of co-operation
and exchange of information in the field of insurance
supervision with insurance supervision bodies (article
17 of Act on insurance supervision and Insurance
Ombudsman)
• commission may submit a request to the competent
body of the insurance company for the removal of
members of board (directors of branch) and suspend
members of the board of the insurance company
pending consideration of the request for their removal
(article 212 of Act on insurance activity)
Insurance and Pension Funds
Supervision Commission
• commission may request that management of an
insurance company convene an extraordinary
general meeting and include particular matters on
the agenda of the next general meeting and
delegate a representative to participate in the
general meeting (article 211 of Act on insurance
activity)
• commission may convene meeting of the board or
supervision board of insurance company and
include particular matter on the agenda (article 212
of Act on insurance activity)
Insurance and Pension Funds
Supervision Commission
• commision may request from insurance company
explanations and information on the company and
its financial standing (article 207 of Act on
insurance activity)
• commission may inspect the activities and
financial position of an insurance company and
entities which carry on insurance actions on behalf
and in the name of insurance company, within the
scope in which they are carried out (article 208 of
Act on insurance activity)
Insurance and Pension Funds
Supervision Commission
• commission may pass recommendations for an
insurance company to ensure compliance of
business of an insurance company with rules of
the law, sets and the operating plan to ensure
permanent capability of the insurance company
to carry out its obligations and to prevent or
eliminate faults in activities of the insurance
company which may violate interest of the
insured (article 209 of Act on insurance activity)
The Insurance Guarantee Fund
The Fund settles claims in the event of bankruptcy
of an insurance company, dismission of the
application for the adjudication of bankruptcy of
an insurance company when the assets of the
debtor cannot cover even the costs of the
proceedings in bankruptcy and ordering the
obligatory liquidation of an insurance company
when the claims cannot be covered by the assets
covering the technical and insurance reserves.
The Insurance Guarantee Fund
Compensations and benefits due under
compulsory third party liability insurance of
holders of motor vehicles, third party
liability insurance of farmers and insurance
of farm buildings are paid in the amount of
100%
The Insurance Guarantee Fund
Compensations and benefits due under life
insurance and other insurance which are
compulsory under the provisions of the
internal law or international agreements
ratified by the Republic of Poland - in the
amount of 50% of liability, not more
however than equivalent of 30 000,00 EUR.
The Insurance Guarantee Fund
The Insurance Guarantee Fund is allowed (under art. 99 of
the Act) to grant a repayable financial aid to the insurance
company which takes over the portfolio of compulsory
insurance contracts (i.e. TPL insurance of holders of motor
vehicles and TPL insurance of farmers) if the own
financial means of that company, at least amounting to
solvency margin and assets covering the technical and
insurance reserves do not guarantee in full the solvency of
this company. The aid is a kind of repayable jean and the
Fund may acquire the receivables of the insurance
company taking avail of such financial aid, up to the
amount of the granted aid.
Expanses of the Fund (in PLN)
Expanses of the Fund
Claims by way of basic activity
Claims by way of bankruptcy
Operational costs
Administrative costs
Others operational costs
Others financial costs
TOTAL
31.09.2003 31.09.2004 Dynamics
in %
52,7%
13,2%
8,9%
24,9%
0,2%
0,0%
100%
53,1%
9,0%
6,9%
30,8%
0,2%
0,0%
100%
112,52
76,18
86,8
138,21
77,13
7,16
111,75
Problems?
No insolvency no cry
Polish case
Polish market overview –
life insurance
• Premium
• Concentration
• Products
Polish market overview –
premium
Dynamics (in %)
2004/2003
Value (in EUR)
2003
2004
Total gross written premiums per an
inhabitant (in EUR)
Life
Non-life
Total gross written premiums share in GDP
(in %)
Life
Non-life
147
160
108,24
66
81
74
86
110,69
106,24
3,04
3,13
102,87
1,37
1,67
1,44
1,69
105,20
100,96
Share in life branch premiums (in
Change
2003
2004
(in % pts)
Specification
Insurance companies
PZU Ży cie S.A.
Commercial Union Polska - TUnŻ S.A.
PAPTUnŻiR Amp lico-Life S.A.
TUnŻ ING Nationale-Nederlanden Polska S.A.
Nationwide TUnŻ S.A.
TU Allianz Ży cie Polska S.A.
TUnŻ WARTA VITA S.A.
Credit Suisse Life & Pensions TUnŻ S.A.
TUnŻ Cardif Polska S.A.
Nordea Polska TUnŻ S.A.
TUnŻ EUROPA S.A.
45,917
15,095
9,380
8,124
1,723
2,597
4,323
1,387
1,396
0,399
1,518
)
0,940
Generali Ży cie TU S.A.*
Gerling Polska TUnŻ S.A.
0,665
Pramerica Ży cie TUiR S.A.
1,739
Skandia Ży cie S.A.
0,902
STUnŻ Ergo Hestia S.A.
0,992
TUnŻ Comp ensa S.A.
0,603
CitiInsurance Polska TUnŻ S.A.
0,383
TUnŻ Polisa-Ży cie S.A.
0,522
FinLife S.A.
0,250
Roy al Polska TUnŻ S.A.
0,318
UNIQA TUnŻ S.A.
0,056
Samp o TUnŻ S.A.
0,227
BENEFIA TUnŻ S.A.
0,125
TUW Rejent Life
0,084
Universum-Ży cie TU S.A.
0,096
TUnŻ INTER-ŻYCIE Polska S.A.
0,049
TUnŻ SKOK S.A.
0,026
SIGNAL IDUNA Ży cie Polska TU S.A.
0,013
ASPECTA ŻYCIE TU S.A.
0,019
WTUŻiR Concordia Cap ital S.A.
0,015
M ACIF Ży cie TUW
KU Filar-Ży cie S.A.p ołącz.z UNIQA TUnŻ S.A.
0,036
Generali Ży cie TU S.A. p rzed p ołączeniem z Zurich TUnŻ0,077
S.A.
Garda Life S.A. w likwidacji
0,001
Wüstenrot Ży cie TU S.A. w likwidacji
0,004
43,019
13,806
8,143
7,131
5,035
2,678
2,382
2,180
2,172
2,091
1,736
1,373
1,314
1,276
1,115
0,994
0,680
0,667
0,438
0,422
0,398
0,362
0,192
0,108
0,075
0,061
0,053
0,033
0,026
0,020
0,019
0,000
-
-2,899
-1,289
-1,236
-0,992
3,312
0,081
-1,941
0,793
0,776
1,692
0,218
0,433
0,650
-0,463
0,213
0,002
0,078
0,284
-0,084
0,172
0,080
0,306
-0,034
-0,017
-0,009
-0,035
0,004
0,007
0,013
0,000
0,003
x
x
x
x
x
Polish market overview –
products
Accident and
sickness insurance
if supplemental to
the insurance
referred to in
classes 1-4
18,0%
Life insurance
48,8%
Annuity insurance
0,2%
Life insurance
linked to capital
investment fund
31,8%
Marriage insurance,
birth insurance
1,2%
Polish market overview –
products
7 000 000
Gross w ritten premiums
Gross claims paid
6 000 000
5 000 000
4 000 000
3 000 000
2 000 000
1 000 000
0
Life insurance
Marriage insurance, birth
insurance
Life insurance linked to
capital investment fund
Annuity insurance
Accident and sickness
insurance if supplemental
to the insurance referred
to in classes 1-4
Polish market overview –
insurance agents
Specification
31.12.2004
Registered agents
Exclusive agents*
of which: life insurance companies
non-life insurance companies
Multiagents**
28 765
14 080
14 685
13 428
*Insurance agents perf orming activ ities on behalf of one insurance company .
**Insurance agents perf orming activ ities on behalf of more than one insurance company .
Potential problems
• Macroeconomic situation
• New products
Macroeconomic situation
• Capital market
• Technical rate
Capital market - structure of assets
covering technical provisions [%]
Specification
The State Treasury securities
Bank deposits
Debtors from reinsurers, ceding undertakings,
policyholders, insurance intermediaries and budget
Participation units and investment certificates
Other fixed-income debt securities
Shares admitted into public trading on regular market
Other assets
Total
Total life
Life insurance
of which:
insurance where insurance where
the investment
the investment
risk is not borne risk is borne by
by policyholders
policyholders
73,50
5,11
80,99
6,47
57,53
2,21
0,31
0,46
0,00
8,81
2,45
7,94
1,88
1,20
2,29
6,18
2,42
25,03
2,79
11,69
0,75
100,00
100,00
100,00
Capital market - structure of assets
covering technical provisions [%]
Specification
The State Treasury securities
Bank deposits
Debtors from reinsurers, ceding undertakings,
policyholders, insurance intermediaries and budget
Participation units and investment certificates
Other fixed-income debt securities
Shares admitted into public trading on regular market
Other assets
Total
Life
Non-life
insurance insurance
Total
73,50
5,11
67,56
4,39
71,29
4,84
0,31
4,05
1,70
8,81
2,45
3,76
1,22
6,93
1,99
7,94
6,69
7,47
1,88
100,00
12,33
100,00
5,77
100,00
Capital market - structure of
insurance companies' investments by
place and maturity dates
Specification
Life
Non-life
Total
by place
Domestic investments
Foreign investments - EU countries
Foreign investments - nonEU countries
97,35
2,45
0,20
97,31
2,37
0,32
97,39
2,56
0,05
Liquid investments
85,88
92,07
78,76
Other investments
14,12
7,93
21,24
by maturity dates
New products
• Old data
• No data
Insolvency before and after
the accesion
•
•
•
•
Cases
Causes
Effects
Conclusions
Old regulation –
What went wrong?
• Dumping
• Illegal investment
• Risky business
Real problems
• Market situation
• Main products
• Others
Polish market overview –
non-life insurance
•
•
•
•
Premium
Concetration
Products
Profits
Specification
PZU S.A.
TUiR WARTA S.A.
HDI SAM OPOM OC TU S.A.
STU Ergo Hestia S.A.
TU Allianz Polska S.A.
UNIQA TU S.A.
TU Compensa S.A.
Tryg Polska TU S.A.
PTU S.A.
Generali TU S.A.
BENEFIA TU M ajątkowych S.A.
TUiR CIGNA STU S.A.
Link4 TU S.A.
TU Filar S.A.
TUW TUW
M TU M oje Towarzystwo Ubezpieczeń S.A.
TUW Concordia Wielkopolska
TUW Florian
TUwRiGŻ Agropolisa S.A.
TUW TUZ
Pocztowe TUW
Gerling Polska TU S.A.
TU INTER Polska S.A.
AIG Polska TU S.A.
TU EUROPA S.A.
SIGNAL IDUNA Polska TU S.A.
Commercial Union Polska-TU Ogólnych S.A.
Credit Suisse Life & Pensions TU S.A.
TUiR Partner S.A.
Total
Structure by insurance companies
casco
liability
Total
Insurance companies
60,735
56,130
11,338
9,560
1,320
8,207
6,999
2,809
6,126
2,792
2,161
3,207
2,275
3,035
1,901
3,327
1,864
2,936
0,585
2,861
1,529
0,607
1,010
0,973
0,495
0,996
0,625
0,674
0,168
0,562
0,124
0,456
0,170
0,248
0,247
0,134
0,032
0,297
0,082
0,050
0,103
0,024
0,032
0,036
0,058
0,007
0,019
0,035
0,000
0,037
0,001
0,000
0,000
0,000
0,000
0,000
0,000
100,00
100,00
Share in premiums of insurance
casco
liability
Total
58,306
10,400
4,953
4,789
4,367
2,713
2,676
2,653
2,429
1,786
1,043
0,990
0,759
0,651
0,376
0,299
0,211
0,187
0,172
0,065
0,062
0,034
0,031
0,027
0,020
0,001
0,000
0,000
0,000
35,924
28,966
10,876
32,383
31,069
27,567
30,513
24,642
30,597
8,717
58,571
16,363
29,335
13,187
10,960
18,031
16,469
52,685
6,123
36,935
26,155
1,492
7,851
0,679
0,002
0,218
0,004
0,006
3,493
37,071
27,273
75,495
14,511
15,813
45,690
45,457
48,153
53,811
47,641
25,984
17,598
65,866
15,876
40,883
73,805
26,929
31,847
62,563
25,216
6,930
1,880
0,991
1,355
3,048
0,068
0,001
24,746
72,995
56,239
86,370
46,894
46,882
73,257
75,970
72,795
84,409
56,358
84,556
33,961
95,201
29,063
51,843
91,836
43,397
84,532
68,687
62,151
33,085
3,372
8,841
2,033
3,050
0,286
0,005
0,006
28,239
100,00
29,730
33,197
62,926
Share in life branch
Change
Specification
2003
2004
(in %
pts)
Insurance companies
PZU S.A.
53,088
50,263
-2,825
TUiR WARTA S.A.
12,834
11,637
-1,197
STU Ergo Hestia S.A.
6,896
6,426
-0,470
TU Allianz Polska S.A.
5,109
5,862
0,754
HDI SAMOPOMOC TU S.A.
2,793
3,609
0,816
UNIQA TU S.A.
2,420
2,330
-0,090
Tryg Polska TU S.A.
2,234
2,293
0,059
TU Compensa S.A.
1,506
2,217
0,711
Generali TU S.A.
0,596
1,994
1,398
TUiR CIGNA STU S.A.
1,592
1,835
0,243
PTU S.A.
1,559
1,811
0,252
PTR S.A.
1,574
1,647
0,073
TU Filar S.A.
1,548
1,409
-0,138
AIG Polska TU S.A.
0,726
0,851
0,124
BENEFIA TU Majątkowych S.A.
0,711
0,776
0,065
Gerling Polska TU S.A.
0,723
0,632
-0,092
Commercial Union Polska-TU Ogólnych S.A.0,528
0,542
0,014
Link4 TU S.A.
0,327
0,502
0,175
TUW TUW
0,390
0,456
0,066
TU EUROPA S.A.
0,308
0,406
0,098
TU Euler Hermes S.A.
0,001
0,348
0,348
TUW Concordia Wielkopolska
0,271
0,306
0,035
TUW SKOK
0,242
0,251
0,009
TU INTER Polska S.A.
0,279
0,219
-0,060
MTU Moje Towarzystwo Ubezpieczeń S.A. 0,025
0,205
0,180
KUKE S.A.
0,264
0,202
-0,062
SIGNAL IDUNA Polska TU S.A.
0,009
0,162
0,154
TUwRiGŻ Agropolisa S.A.
0,638
0,158
-0,481
TUW Florian
0,038
0,139
0,102
TUW CUPRUM
0,135
0,135
0,001
Pocztowe TUW
0,119
0,117
-0,001
Credit Suisse Life & Pensions TU S.A.
0,082
0,117
0,035
TUW TUZ
0,014
0,066
0,052
D.A.S. TU Ochrony Prawnej S.A.
0,035
0,039
0,004
TU PZM S.A.
0,035
0,038
0,003
TUiR Partner S.A.
-0,002
0,000
0,002
IF TU S.A. w likwidacji
0,000
x
Zurich TU S.A.
0,355
x
Total
100,00
100,00
x
Polish market overview –
non-life insurance
Specification
The three biggest insurance companies
The five biggest insurance companies
The ten biggest insurance companies
Share in life branch premiums (in
Change
2003
2004
(in % pts)
72,818
80,719
90,098
68,325
77,796
88,465
-4,492
-2,923
-1,632
6 000 000
Polish market overview –
non-life insurance
5 000 000
Gross w ritten premiums
0
1 000 000
2 000 000
3 000 000
4 000 000
Gross claims paid
Accident
Sickness
insurance
insurance insurance
Casco
Casco
Casco
Insurance
insurance
insurance
of vessels
Goods-in- Insurance
of land
of railway
of aircraft
in sea and insurance and natural
vehicles
rolling
inland
stock
navigation
transit
against fire
forces
Insurance
Motor
Aircraft
Liability for
General
Credit
Suretyship Insurance Insurance
Insurance
against
vehicle
liability
ships in
liability
insurance
of various
of
other
liability
damage or
loss
property
sea and
financial
inland
risks
navigation
of legal
protection assistance
and
benefits for
travelers
Comparison – old vs. new situation
• Inexperience
• Lack of early warning
system
• Lack of power - slow
path
• Experience
• Lack of early warning
system
• Centralised power –
quick path
Would new ragulation had helped?
Others problems
• Cross-border insurance
• Mother vs. doughter companies
• Globalisation
Thank You
Marcin Kawiński
[email protected]