Ukraine: new insurance law adopted

Прослухати онлайн Зупинити   On 18 November 2021, the Verkhovna Rada (the parliament) of Ukraine adopted the Law of Ukraine On Insurance (New Insurance Law), which amends and restates in full the current version of the insurance law (Current Insurance Law). The New Insurance Law aims to modernize the existing regulation of insurance services in Ukraine, in particular, in line with EU Directive 2009/138/EC and the Insurance Core Principles of the International Association of Insurance Supervisors. Background In 2008, when Ukraine joined the World Trade Organization (WTO), no commitment was made with respect to the cross-border supply of insurance services, except for a few niche service lines. [1] Foreign insurance companies were permitted to provide insurance services via branches in Ukraine five years after Ukraines accession to the WTO. Given this, until today, foreign insurers could carry out their activities in Ukraine primarily through either (i) local subsidiaries (a local insurance company controlled by the foreign insurer) or (ii) branches (a representative commercial office of the foreign insurer). In brief The New Insurance Law retained the above structure as far as foreign insurers are concerned, as reflected in the table below, but subject to certain adjustments as discussed in the next section. Regime Allowed activities Licensing requirements 1) Commercial presence (via a Ukrainian branch of a foreign insurer) Direct insurance (all classes) Reinsurance (all classes) Management of the insurers assets Sale of insurance products License for each class is required 2) Cross-border (without opening a branch in Ukraine) Direct insurance (classes 5, 6, 7, 11 and 12) [2] Reinsurance (all classes) License is not required In more detail. Commercial presence The New Insurance Law provides a revised list of conditions that must be fulfilled prior to launching a branch of a foreign insurer in Ukraine. Among the most notable policy changes is a dramatic reduction of minimal solvency capital requirements for a branch offering life insurance from EUR 10 million under the Current Insurance Law to approximately EUR 1.5 million. Cross-border services The New Insurance Law clarifies that a foreign insurer, without a license, may: (i) render a limited number of insurance services listed in the table above; and (ii) enter into and perform under related insurance and reinsurance contracts with Ukrainian residents and insurance companies, respectively, regardless of where the insured events occur (subject to compliance with the applicable legislative requirements). Notably, the New Insurance Law replaced the earlier existing general prohibition for foreign insurers to render services in Ukraine cross-border, with the general permission for such activities with respect to insurance classes listed in the table above subject to compliance with the applicable conditions and requirements. However, the practical implementation of this change (i.e., whether a foreign insurer would be permitted to sell any other insurance products cross-border on another basis (e.g., pursuant to a license)) remains unclear. Local subsidiaries The New Insurance Law substantially revises and updates the requirements for the activities of a Ukrainian insurance company (as the case may be, a subsidiary of a foreign insurer). In particular, the New Insurance Law provides for: (i) the conduct of business rules; (ii) insurance contract execution and performance requirements; (iii) management system requirements; (iv) solvency and investment activity requirements; (v) assets transfer rules; and (vi) insolvency and exit from the market rules. Insurance brokerage services According to the Current Insurance Law, foreign insurance brokers are only allowed to provide certain types of insurance services. [3] The New Insurance Law does not contain such a restriction; however, the practical implementation of this change (i.e., whether a foreign broker would be permitted to sell any insurance products cross-border) remains unclear. [4] Key takeaways The New Insurance Law became effective on 19 December 2021. However, the market was given a two-year period (i.e., by 1 January 2024) to align with the new requirements. Insurers and insurance intermediaries are encouraged to have a closer look at the New Insurance Law requirements and its potential implications for their insurance business in Ukraine well in advance of the expiration of the transitional period. [1] Insurance of risks relating to maritime shipping, commercial aviation, space launching and freight (including satellites), with such insurance to cover any or all of the following: the goods being transported, the vehicle transporting the goods and any liability arising therefrom; reinsurance; and services supplementary to insurance. [2] Aircraft insurance; insurance of water vessels (sea vessels, inland waterway vessels and other self-propelled or non-self-propelled floating structures); insurance of the transported property (including cargo, luggage (cargo luggage), liability insurance arising from the use of the aircraft (including the liability of the carrier) and liability insurance arising from the use of the watercraft (including the liability of the carrier)). [3] I.e., reinsurance, insurance of risks relating to maritime shipping, commercial aviation, space launching and freight (including satellites), with such insurance to cover any or all of the following: the goods being transported, the vehicle transporting the goods and any liability arising therefrom; reinsurance; and services supplementary to insurance. [4] Under the transition provisions of the New Insurance Law, the National Bank of Ukraine will adopt an additional regulation concerning the activities of insurance intermediaries, which may shed some additional light on this matter. For more information, please contact: Serhiy Chorny Managing Partner Baker McKenzie   Maksym Hlotov Counsel Baker McKenzie