Funds are created, funds guarantee...
The Guarantee insurance fund will be created in Moldova. The relevant bill has already been submitted to the Parliament. In the recent times this problem was raised when the Deposit guarantee Fund in the banking sector was founded- so the insurance market is lagging behind the bank, but remains sensitive to the consumers.
The law on the guaranteeing deposits of individuals was adopted in late 2003. In July 2004 a separate legal entity has appeared- the Deposit insurance Fund. Currently, 25 million lei in the budget to ensure financial stability and another 25 million lei in the Deposit Insurance Fund were paid. This ensures that in case of problems with the Bank the deposit refund of each depositor will make up 6000 lei.
The Fund has already paid money to the depositors. In 2011, it transferred to individuals 48,1 million lei and in 2012-2013 - 2 million lei to Investprivatbank, respectively.
In 2004 (when the Fund was established) the volume of individuals' deposits in the banking system of Moldova amounted to 3.8 million lei; in 2013 this figure had increased more than eight times up to 31,35 million lei. At the same time, the amount of guaranteed deposits during this time grew by 740,5 million lei in 2004- up to 2 billion 604,1 million lei, and by 3.5 times more in 2013. The analysts believe that the existence of such Fund increases people's trust in the banking system, primarily by the confidence of individuals. In order not to make the investors less crushed of their deposits by the parts of the guaranteed amount - up to 6,000 lei, in June, the Parliament adopted changes to the law that will increase the limit of the guarantee up to 15 thousand lei. For this, the payment amount in the Fund will be doubled up to 50 million lei. This bill was not adopted in the second reading so far.
The document assumes that all the companies will pay to the Fund 0.5% of premiums collected and subsequently this amount may be increased up to 2%.
This means that if such fund existed since the beginning of this year, by the end of the I half of the year, its size will amount to 2.9 million lei, and the maximum rate will make 11.5 million lei.
If the banks in Moldova faced bankruptcy, as it happens very often, in the insurance field it occurs very rare. Although quantitatively liquidated insurers in the Republic of Moldova were three times more than the banks.
According to the Chairman of NCFM Artur German, there is only one insurer in Moldova which has not coped with the process of the financial recovery. Otherwise, there were no reported cases of bankruptcy in such insurance companies.
Artur German: "The NCFM competence, among other things is the prevention of such situations, and we do that by conducting continuous monitoring of the operators of the insurance market of Moldova concerning the adequacy of the assets covering insurance reserves".
Indeed, if we compare the bankruptcy and insolvency of the insurance company, first of all the investor automatically loses his money, which within the legal limit, will be returned to him. When we deal with the bankruptcy of the company - the number of those who can claim for this money: the company pays compensation only when the insured case (and those in average is 20-30 percent of compensation); in addition, all insurance contracts for the limited period - maximum one year and which are renewed annually. It turns out that the social risks in the insurance field are lower than in the banking sector. But, nevertheless, they exist.
But if the banking sector guarantees a partial refund on the deposits to only individuals; in the insurance it would be more correct to speak about legal entities because they account for the large share of insurance premiums collected.
And so, the Guarantee Insurance Fund of Moldovan companies is required.
Artur German: "The Guarantee insurance fund is very important for our country in the event of the insolvency of any insurers. It is therefore necessary to establish a Fund at the national level that will protect the interests and rights of the policies’ holders".
Insurers are in favor that such Fund should have been created a long time ago. But now, in the conditions of recession and crisis, it is dangerous, as the criteria for payments from this Fund were not defined. Under the current conditions, some insurers accuse others of dumping, and if so, the unscrupulous insurers tempt to raise money to bankrupt the company, and to cover losses from the total spike. It is therefore very important at the legislative level in advance to prevent such practices.
Not so long ago we noted that in the first half of the year the insurance market of Moldova has decreased its performance, especially considering the losses from some major strategic market operators. The analysts say that this is largely due to the control model, currently used by the regulator.
Today NCFM operates as a supervisory authority on the model of economic analysis. The regulator collects statistical data, analyzes it, identifies possible problems and optionally specifies a particular market participant, for example existing violations and in extreme cases introduces a system of the financial recovery.
However, this system has its drawbacks and differs from the modern international practice. By the way, in February of this year the World Bank and the IMF has conducted program evaluation of the financial sector - FSAP - which resulted in the 26 proposed changes to the current Moldovan legislation to bring it into line with the international standards.
The National Commission has committed itself to switch to a more powerful model system oversight – risk-oriented.
This surveillance system is a repeating cycle, which looks as follows:
- Preparation of possible risks by the regulator;
- Identification of the market participants subject to this profile (based on the reporting data);
- Identification of number of participants those who require priority attention by the regulator;
-As a consequence, verification and update of the risk profile.
- Comparison of the initial and final results;
- Preparation of plans of measures and methods of interaction between the regulator and the market operator
-Return to the remote risk analysis.
The experts say that the risk-based model allows the early detection of the possible problems for the insurance companies to effectively intervene and stop the deterioration in the financial condition falling market operator to the point of no return.
After publication of the insurance market list for I half of this year, when drawdown became obvious and problems of a number of companies were revealed, NCFM spouted charges and accusations that the Commission has made and had not prevented before.
But perhaps, including the currently applied by the Supervisory authority model of economic analysis - this is only so called post-factum effect. Now, when in a year or two a risk-based model of supervision will be introduced and NCFM promises to enter the controller, it will more quickly respond to the potential threats. Taking into account the foundation of the Guarantee Fund insurance trust to this segment from the insured, will undoubtedly increase, which will benefit the whole economy.