Organizational and law aspects of the development of the insurance market in Ukraine

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Organizational and law aspects of the development of the insurance market in Ukraine

Kuzmak Olena, Doctor of Economic Sciences, Professor Lutsk National Technical University

Svereda Yurii, Lutsk National Technical University

Кузьмак Олена, д.е.н., професор Луцький національний технічний університет

Свереда Юрій, аспірант Луцький національний технічний університет

Insurance is an integral element of the financial system of any state. Changes taking place in society, Ukraine's strategic course for integration into the European Union, and the world community are becoming a determining factor of organizational and legal transformations in the country, including issues of further development of the insurance market. The main goal of the study is to assess the organizational and legal aspects of the development of the insurance market in Ukraine. The systematization of literary sources and approaches to solving this problem showed that the issue of the development of the insurance market in Ukraine is relevant. The urgency of solving this scientific problem lies in the fact that updating the legislation that will regulate the insurance market will bring positive changes in the development of the insurance market of Ukraine. The study of the problem was carried out in the following logical sequence: first, the main problems and perspectives of the introduction of new legislation regulating the insurance market of Ukraine were analyzed. The methodological tools of the research were the following approaches and methods: a systematic approach, logical generalization, and comparison, methods of analysis and synthesis - to assess the main aspects of changes in legislation. Based on the analysis of the regulatory regulation of the insurance market of Ukraine, one of the main goals of the law and the future activity of the insurance market is to ensure its financial stability and transparency, as well as to regulate the activities of its subjects (insurers, insurance intermediaries, providers of auxiliary services), to reduce the risk of non-compliance financial obligations assumed by them. It should be noted that by the agreement between Ukraine and the European Union, the new law takes into account the main requirements of EU directives. The results of the study can be useful in terms of developing methods for improving the organizational and legal aspects of the development of the insurance market of Ukraine. It is proposed to introduce an insurance or financial ombudsman institute to protect the rights of consumers of insurance services. insurance market insurance service

Keywords: insurance market, insurance services, insurance intermediaries, insurance activity, insurance compensation.

ОРГАНІЗАЦІЙНО-ПРАВОВІ АСПЕКТИ РОЗВИТКУ СТРАХОВОГО РИНКУ В УКРАЇНІ

Ключові слова: страховий ринок, страхові послуги, страхові посередники, страхова діяльність, страхові відшкодування.

Statement of the problem in a general form and its connection with important scientific and practical tasks

Insurance companies play an important role in the economic life of the country. The main function of insurance is to protect individuals and legal entities from possible losses in the event of insured events. At the same time, insurance companies are exposed to the potential negative impact of risks that may threaten their solvency and have negative consequences for consumers of insurance services. The confidence of consumers in the reliability of the insurance company is one of the main foundations of the development of the insurance market. Effective regulation and market supervision make this confidence and trust in insurers possible. However, to date, market development is restrained by several factors, in particular, several insurance companies have problems with solvency and liquidity, there is no clear business model, and the level of risk management and corporate governance is low. All this makes the market opaque and non-competitive. The above-mentioned systemic problems in the insurance market in Ukraine are primarily caused by inadequate legal regulation, as well as imperfect regulatory policy and lack of proper supervision of its implementation. Therefore, the development of a stable and reliable market of insurance services requires significant efforts from both the regulator and the participants of the insurance market.

Analysis of the latest studies, in which the solution to the problem was initiated

The problems of improving the insurance market were dealt with by scientists and researchers both in the field of insurance activity and in other areas. The works highlight certain aspects of the development of the insurance market of Ukraine, innovative development, the role of insurance services in the economy of Ukraine, and insurance of risks from the implementation of various types of activities (Zhuravka O. S., Bukhtiarova A. G., Pakhnenko O. M. 2020; Botvina N. O., 2019; Zavoloka Yu.M., Yefremenko A.G., Malashenko Yu.A., 2020; Podra O.P., Petryshyn N.Ya., 2020; Hunt J., 2022). The conducted studies are diverse, but they do not consider the impact of the new legislation on the insurance market of Ukraine in modern conditions.

Whole articles

The purpose of the article is to study the organizational and legal aspects of the development of the insurance market in Ukraine.

Research methodology and methods

The methodological tools of the research were the following approaches and methods: a systematic approach, logical generalization, and comparison - to evaluate and compare legal aspects of insurance market regulation for the purpose of insurance development, methods of analysis and synthesis - to assess problems and planned changes in the regulation of the insurance market of Ukraine.

Presentation of the main material of the study with a full justification of the obtained scientific results

In November 2021, the new Law of Ukraine "On Insurance" (hereinafter - the Law) was adopted and published on December 18 of the same year [8]. The new Law will serve as a foundation for ensuring the functioning of the insurance industry of Ukraine. The main part of the law enters into force on January 1, 2024, and introduces some updates to today's legislation that concerns the insurance market. The law regulates relations in the field of insurance, defines the general legal principles for the implementation of insurance activities, and the provision of intermediary services, and is aimed at strengthening the protection of the rights and legitimate interests of clients, including consumers, by establishing requirements for the management system, solvency of insurers, branches of non-resident insurers on the territory of Ukraine and their disclosure of information, establishes requirements for the procedure for the conclusion, maintenance, and execution of insurance and reinsurance contracts, regulates the issue of information provision of insurance and reinsurance contracts and actions preceding their conclusion, as well as state regulation and supervision in the field of insurance." [8]. New concepts and terms have been introduced, such as: additional insurance agents, significant insurers, managers and employees of sales of insurance and reinsurance products, key functions of the insurer, independent members of the supervisory board (independent director), standard insurance products, and others. The National Bank of Ukraine distinguished between insurance activity and activity of providing accompanying services, previously only intermediary activity was stipulated. This division will make it possible to apply separate and clearer norms and qualification requirements to each area, as well as to understand to which category the participant of the insurance market belongs. According to the new law, the exclusive activity of an insurer is insurance activity, including the activity of providing guarantees and the activity of providing accompanying services in the insurance market. As for types of insurance, today there are more than 65 of them, of which 41 are mandatory, with the introduction of the new law they will be replaced by 23 classes of insurance, and the concept of mandatory insurance will also change to the mandatory existence of an insurance contract. Therefore, life and non-life insurance are divided into more understandable classes, and the risks within each class will be determined by special laws and regulations. The new law defines the right of insurers to carry out insurance activities on the territory of foreign countries, which will open up foreign insurance markets for Ukrainian insurers. New approaches to obtaining a license include submitting the strategy and business plan of the insurer for the next three years, assessing the business reputation of the founders, assessing compliance with the qualification requirements of the insurer's managers, the chief risk manager, the chief compliance manager, the chief internal auditor, the responsible actuary, assessing the compliance of the supervisory the board and the executive body of the insurer, requirements for collective suitability, information about the management system, copies of policies and internal regulations, etc. As for the activity of providing accompanying services, a mandatory norm of authorization of the persons providing them is established, and laws and other normative legal acts establish the requirements and supervision of them. Therefore, insurance companies have the right to carry out the activity of providing accompanying services, without additional authorization, within the limits of those classes for which they have a license. An insurance company is obliged to create an internal control system, which includes a risk management system, compliance control, an actuarial function, and an internal audit. That is, to ensure the performance of its key functions.

Станом на 1 вересня 2022 року на ринку працює 140 страховиків, 13 з яких - компанії зі страхування життя. З початку війни з ринку пішло 5 страховиків-учасників сегменту non-life.Трьом страховикам ліцензії були анульовані як захід впливу, один страховик добровільно залишив ринок та один страховик, хоча й був включений до реєстру, не отримав жодної ліцензії на здійснення страхової діяльності [9, 10]. Загальний обсяг активів страховиків порівняно з початком року (до військово агресії) майже не змінився і становив 65,7 млрд грн. Не зменшився ні розмір прийнятних активів, ні обсяг сформованих страхових резервів (36,6 млрд грн). Протягом дії воєнного стану страховики те тільки не зменшили, але й наростили обсяги ліквідних активів - з 14,9 млрд грн до 17,2 млрд грн. [11]. Драйвером підтримки страхового бізнесу стала «Зелена картка». За період війни цей вид страхування зріс на 76%. Якщо станом на 1 липня 2021 року у структурі страхового портфеля цей вид страхування становив 0,9 млрд грн, то на 1 липня 2022 року - 1,5 млрд грн. Загалом у першому півріччі 2022 року в Україні 44% (7,6 млрд грн) страхових премій становило автострахування («автоцивілка», «Зелена картка», КАСКО). Цікаво, що за зменшення обсягів наданих послуг частка цих видів страхування в портфелі навіть збільшилася. У першому півріччі 2021 року вона становила 36% (8,9 млрд грн) [11].

In the future, we will have a clear procedure for reorganizing the insurer through division, merger, or merger, under the supervision of the National Bank of Ukraine, which will provide new opportunities for the development of the insurance market. Insurance companies are allowed to outsource the performance of their functions, individual tasks, and processes such as: actuarial functions, individual tasks or processes within the functions of risk management and compliance, and other functions, individual tasks or processes within these functions. It is forbidden to outsource internal audit functions. Nor can risk management and compliance functions be delegated.

Conclusions, discussions, and recommendations

Based on the conducted research, one of the main goals of the Law and the future activity of the insurance market is to ensure its financial stability and transparency, as well as to regulate the activities of its subjects (insurers, insurance intermediaries, providers of auxiliary services), to reduce the risk of failure to fulfill their financial commitments obligations. It should be noted that by the agreement between Ukraine and the European Union, the new law takes into account the main requirements of EU directives. It is also necessary to state the fact that some important aspects have not been taken into account. The main goal of insurance activity is to ensure the protection of the insurance interests of individuals and legal entities, which is ultimately reflected in the realization of insurance compensation in the event of a certain insurance event, but, unfortunately, with this approach, the possibility of insurance compensation is not equal to the "desire" of its implementation, that is, the insurer is tempted to get more income by reducing the level of insurance payments. It would be worthwhile to introduce the institution of an insurance or financial ombudsman to protect the rights of consumers of insurance services. Since the scope of settlement of insurance cases is generally omitted in this normative act, this issue remains open.

Список бібліографічного опису:

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