INSURANCE OF CREDITS TO BE AT EUROPEAN LEVEL IN 2004
By the year-end amendments shall be made to the Insurance Act in order to bring Bulgarian legislation in compliance with European laws and apply three EU directives on the insurance business. Currently the draft is still being prepared by experts and should be moved to Parliament in October. This became known at a seminar in Bankya, organized by the Finance Ministry. The first directive to be included in the amendments concerns coinsurance - the distribution of liability for a certain policy between several companies with a view to reducing the risk. This is practiced at present, too, but the activity has not been regulated by law. The term coinsurance is used only in one instruction of the former Agency for Insurance Supervision and is only defined as a concept. Thus, when the amendments in question are passed, this practice shall be adequately controlled by the supervisory body.Under another directive of the EU, the required minimum guarantee capital when insuring credits shall be increased. A considerable part of this directive's stipulations were introduced in Bulgarian legislation by the Ordinance on Insurance and Healthcare Insurance Reserves, approved last February. Therefore, only the application of the Insurance Act shall be changed. Article 48, which was amended in the end of 2002, required the guarantee capital to amount to 30% of the insurers' solvency threshhold, but not less than indicated in the application. (The solvency threshhold is the minimum amount of own funds after deducting the immaterial assets, needed by the insurer to fulfill its obligations to clients.) Joint-stock companies and branches of foreign insurers are presently required guarantee capital in the range of BGN200,000 - 900,000. European levels are between EUR400,000 and 1.4MN. According to the directive, a provision of EUR1.4MN is required for any insurance under which the annual amount of premium in the last three fiscal years exceeds EUR2.5MN or equals 4% of the aggregate policy premium.The third amendment will concern the Assistance when Traveling insurance. Again this is a matter of regulating an already existing practice. As it is known, many of the companies apply this product but it has not been legally regulated.
The insurance related legislation will be supplemented by three new laws by the year 2005. An act on the insurance contract will be passed. Currently, this issue is regulated only by the Commercial Code. Laws on insurance enterprises and on obligatory insurances shall be also drafted. There is a peculiarity here - EU directives do not oblige us to introduce new manadatory insurances, but neither do they forbid that. Therefore, these legislative regulations will entirely depend on the draft, prepared by the experts and on the MPs. Regarding the Civil Liability insurance, the BANKER weekly has already written that its price will inevitably go up as early as during the 2003 campaign, as it will be combined with the Green Card insurance for abroad. Till Bulgaria's accession to the EU its liability levels should become equal to the European ones, and this will certainly reflect on the tariffs. In the EU the ceiling for compensation of property damages is EUR100,000 and EUR300,000 for non-property damages. In Bulgaria the increase of both the mandatory limits (which are administratively set by the head of the Insurance Supervision department) and of the premiums will be effected gradually each year. And as 2005 the insurers will be able to set their own tariffs, estimaiting themselves their policy and the risks they undertake. Probably, the driver's experience and behaviour will be considered in the pricing, as well as the period when the vehicle will be used and the territory through which it will drive. This means that the size of the premium could vary considerably.