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Last year saw a significant development bound to have major political and economic effects on the welfare of Ukraine. That is signing EU-Ukraine Association Agreement that was carried out in two stages – one in March 2014, another – in June 2014. To enjoy the benefits agreement promises to our country’s long-term development Ukraine assumed responsibility to undertake a number of structural reforms and implement certain legislation in order to harmonize the legislation in several spheres of economy with that of the EU.
Insurance industry was not left out in this regard. Ukraine is expected to introduce major improvements to the market which would lead it to the higher level of stability. There are a couple of directives essential for association Ukraine is to implement.
Principal regulations regarding EU’s insurance business are consolidated in Directive 2009/138/EC. It stipulates the main requirements for insurers’ and reinsurers’ operations, their solvency and the regulatory bodies they report to. Directive 2002/92/EC is another directive which is focused on insurance intermediaries and their operations.
Though not a single act has been adopted as yet, the working process has been going on for some time now. Current Act on Insurance of Ukraine was adopted as long as ago as in 1996. Naturally enough, there is a great number of clauses that are outdated and call for amendments in accordance with market trends and structure.
Let’s take a closer look at the changes proposed by the bills to evaluate the possible consequences they will bring about.
First and foremost is the amended Insurance Act which is to impose major changes that would bring us closer to meeting of Solvency II requirements recently adopted by the EU Countries. Obviously, a lot of insurance companies which lack solvency will in the end be forced to exit the market. Currently out of 374 insurers registered in Ukraine only ¼ is actually conducting insurance business. Unfortunately better half of them have issues with liquidity due to significant share of junk securities in their portfolios. It’s safe to assume that approaching Solvency II standards will ultimately clean the market of shady players and invigorate operations of the survivors.
Finally, it should be added that Agreement on Association Ukraine has signed with EUis beneficial for our county in the long run, but we must be ready for lengthy and painstaking process of reforming the insurance market to meet the set standards.