The National Bank of Moldova (NBM) has identified the insurance supervision priorities for 2024.
According to the NBM report, in particular, the National Bank, which became the supervisory authority for the insurance sector as of July 1, 2023, will continue to strengthen its prudential supervision capabilities over professional participants in the insurance market, aiming to prevent and limit the risks specific to this sector. In 2024, the NBM's supervisory efforts will focus on 3 key areas: internal management of insurance companies, underwriting risk, asset coverage of technical reserves and minimum capital requirements. As noted by the NBM, sound corporate governance is key to ensuring that insurance companies' operations are properly and prudently managed. Therefore, in 2024, the NBM will assess whether insurance companies have a sound and robust governance system, including a clear organizational structure with well-defined, transparent and consistent lines of responsibility and effective processes for identifying, managing, monitoring and reporting the risks to which the insurer is or may be exposed. The NBM will also monitor whether insurance companies have an internal risk and solvency assessment process and adequate internal controls, including the existence of sound administrative and accounting procedures. In addition, within the framework of continuous supervision, the National Bank will ensure that the management system of insurance companies, including the internal control mechanisms in place, is appropriate to the nature, scale and complexity of their activity. The NBM emphasizes that underwriting risk assessment is particularly important in the process of monitoring and determining the actual level of risk to which the insurance sector is exposed. Given the direct impact of this risk on the business and financial position of insurers, the supervisory authority will pay increased attention to how insurance companies define, measure and control underwriting risk, in order to make sure that they are reliable and in compliance with the applicable regulations and risk profile. The National Bank noted that effective management of insurance risk requires that insurance companies establish and maintain, in accordance with their activities, sufficient technical reserves to fulfill all insurance obligations arising under insurance contracts. Accordingly, the NBM will ensure that insurers calculate technical reserves prudently, reliably and objectively, taking into account information provided in the financial markets and publicly available underwriting risk data. In this context, insurance companies' compliance with the provisions of the Regulation on Insurance Technical Reserves will be examined, in particular with regard to the recently introduced rules on the quality of data used to calculate technical reserves and the adequacy of internal rules on the establishment and maintenance of technical reserves. At the same time, the NBM will pay attention to the fact that insurance companies should set the level of premiums for insurance products on the basis of reasonable actuarial assumptions, so that these premiums are sufficient to cover liabilities and create technical reserves, especially in the context of partial liberalization of insurance premiums for compulsory motor third party liability insurance. As part of the supervisory process, the NBM will seek to ensure that insurance companies have sufficient assets to cover technical reserves and the minimum capital requirement necessary to cover future liabilities of insurance companies arising from policies written and possible losses from insured risks. In this regard, the NBM should ensure that assets covering technical reserves and minimum capital requirements are invested in a manner that ensures the safety, profitability and marketability of the investments. This is necessary in order to comply with the regulatory requirements for assets to cover technical reserves and minimum capital requirements, including in terms of the maturity, diversity and dispersion of these investments. // 16.01.2024 - InfoMarket.
