Changes to insurance law are being considered by the State Duma to improve the financial stability of insurers and bring their regulation and financial reporting into line with international practice and international financial reporting standards.
If implemented in its current form, the draft law would greatly improve regulation of the insurance market; but it remains to be seen how the draft will evolve as it progresses through the legislature. It may be adopted later this year and come into force by the end of 2010 or early 2011.
The current draft:
- would allow insurers to include subordinated loans when calculating solvency margins, facilitating an immediate increase in their capitalisation
- provides for monitoring of the financial condition of insurers on the basis of financial indicators to be approved by the regulator
- clarifies the procedure for transferring insurance portfolios, including requirements for a portfolio transfer agreement with further details to be provided in special regulations published by the regulator
- suggests that a portfolio transfer does not require explicit consent from the policyholder and/or the beneficiary, merely that the insurer must send a written request for consent to at least one of the policyholder or beneficiary
- specifies that the request must be sent by registered mail asking for a response within 10 days, as well as being published on the internet and in three newspapers. The portfolio may be transferred if no response is received within 45 days of the date the request was sent to the policyholder or the beneficiary
- contains special rules for the transfer of a portfolio which consists of compulsory insurance policies, or where the licence has been revoked, or where the insurer is insolvent
- uses such terms as “own capital” (instead of “own assets”), “subordinated loans”, “internal control” and “internal audit” to bring it into line with international financial reporting standards
- defines the list of persons who may carry out internal controls for an insurer, and outlines their authority and responsibility
- outlines rules for organising and implementing internal audits, which are to be approved by the insurer and submitted to the regulator
- requires an insurer’s internal auditor (head of internal audit) to have a university degree in law, economics or finance recognised in Russia and more than 2 years’ experience in Russian insurance, financial or audit companies
Law: draft law “On amendments to the Law “On the organisation of insurance business in the Russian Federation”
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