Bank insurance: concept, legal framework, types, prospects. Bank insurance in Russia

2024 Author: Howard Calhoun | [email protected]. Last modified: 2023-12-17 10:16

A stable banking system is the basis of the overall security of the state. One of the levers to maintain such stability is the introduction of compulsory banking insurance. This system traditionally provides for work in two directions: general insurance and insurance of bank risks directly.

Bank insurance in Russia

Under the general concept is considered emergency insurance of buildings in which banks are located, property of banks, vehicles belonging to financial institutions, civil liability of property owners in case they cause losses to third parties. This type also includes employee social insurance (medical, pension, accident, etc.).

The concept of bank insurance is quite extensive. If we consider this includes the protection of bank values, computer equipment, electronic equipment. This also refers to computer fraud. Specialists should also foresee the risks associated with the use of plastic cards and loans,including insurance of banking products themselves and their security.

Thus, the concept of bank insurance includes the whole range of types of insurance in the field of interaction between banking and insurance institutions.

Reasons for cooperation between banks and insurance companies

The need to involve insurance companies in the banking sector is due to several reasons:

• the possibility of reducing the reserve funds of banks to ensure risks;
• the ability to form an objective pricing policy of banks;
• reducing the level of expenses of financial institutions associated with the implementation of internal controls;
• reducing the reputational risks of the banks themselves.

Involvement of insurance companies in the banking sector is logical as long as the cost of services of insurance companies does not exceed the economic benefit from their work. In addition, unscrupulous firms can create additional risks for the bank.

Russian legislation and banking insurance system

The legal foundations of bank insurance in Russia were laid with the adoption of the Civil Code of the Russian Federation. The main regulatory act regulating the issues of insurance and bank insurance in particular in the Russian Federation is the Civil Code. The second legislative act in this area is the 1992 law "On Insurance", which defines concepts, puts forward requirements for participants in transactions, forms the legal field of insurance andoverseeing him.

Important are the laws governing the relationship in he alth and pension insurance. A special place in this series is occupied by the laws of 2003 and 2004, which regulate issues of purely bank insurance: on insurance of deposits of individuals and on payments by the Bank of Russia to individuals whose deposits were in bankrupt banks.

Thus, we can say that the legal foundations of banking insurance in the Russian Federation are based on a sufficient regulatory framework that regulates the legal relationship between the insured and the insurer. This is how it turns out to build civilized partnerships between financial institutions and insurance companies in Russia.

Peculiarities of bank insurance in Russia

In the Russian Federation, the formation of the banking sector took place in the 90s of the last century, which led to the emergence of some features in the cooperation between banks and insurance companies. The primary reason for the emergence of such cooperation was the need to work with problem loans issued by financial institutions. During this period, banks began to insure the loans themselves, shifting the responsibility for the return of problem loans, the share of which in the total loan portfolio was about seventy percent, to insurance companies.

Peculiarities of banking insurance in Russia do not cancel the most important provisions on the protection of the most profitable area of banking - lending. Todaybanking risk insurance in Russia is associated with mortgage lending, which is due to the interest of banks as beneficiaries. Indeed, in the event that the client cannot cope with its debt obligations, the financial institution receives the entire loan amount. This also applies to those cases when, when insuring the life of the borrower, his death occurs, and the insurance company pays the debt to the bank at a time. In addition, the financial institution receives a commission from the number of contracts concluded with the insurance company by the bank's customers.

Deposit insurance is one of the most important. After all, every depositor wants to be sure that his money will be returned. Prospects for the development of banking insurance should lie in the plane of the development of deposit transactions. This aspect of the financial system directly affects social stability. This approach of guaranteed return on investment, regardless of force majeure circumstances, contributes to a greater attraction of public finances to the economy, which provides for its further development.

For Russia, this type of insurance is the most productive way to develop the banking, insurance systems and the economy as a whole. The creation of the Deposit Guarantee Fund and its functioning is a big step towards restoring the confidence of the population.

Insuring the risk of a depositor in case of bankruptcy of a financial institution is a service that is popular in Europe. This area is also developing in Russia. After all, not only banks that trust their money to customers are at risk, but alsopeople who invest their savings in a financial institution. Insurance in this area has its own characteristics. The bank can protect itself from financial claims if, for a number of reasons, it is not possible to return the money on the deposit. People, in turn, may not worry that their savings will be lost.

The circle of bank customers will be much larger if the financial institution insures the concluded deposit agreements in case of bankruptcy. Unfortunately, today not all banks are members of the Deposit Insurance Fund for Individuals. In addition, not all clients are aware that such an organization exists. Financial illiteracy is a huge problem for many people who work with banks.

One of the most actively developing areas is the insurance of plastic card issuers. The main risks in this area are forgery, fraudulent changes, loss, theft.

Bank insurance against so-called computer offenses is no less in demand, which involves the protection of computer systems, electronic data and their media. Valuables that financial institutions accept for storage are subject to bank insurance: cash, securities, precious stones, metals, art values and more.

Professional liability insurance for bank employees has also become widespread, which allows indemnifying clients for losses incurred as a result of the actions of economists of a particular financial institution. The most common contracts are forcashiers and operators. An insured event can be a human factor, which manifests itself in causing damage to the client due to arithmetic errors in the calculation of the exchange rate, payout percentages, bank commissions, damage to property, etc.

Types of bank insurance are diverse and depend on the volume of activity of a financial institution. A firm with professional insurance partners enjoys great credit credibility.

What is Bankers Blanket Bond?

The United States of America is the founder of the introduction of banking risk insurance and the development of its basic standards. The first insurance policy for banking risks was drawn up there back in 1911. The global practice of banking insurance has contributed to the emergence of comprehensive banking risk insurance.

Bank insurance abroad is carried out under the system of comprehensive banking risk insurance called Bankers Blanket Bond. What does it imply? Comprehensive insurance of bank risks combines the types of bank insurance described above into a single policy. The most developed countries of the world also adhere to the canons introduced by the American Guarantors Association for the banks of the United States of America. The fact that gave rise to the development of comprehensive insurance was an insurance policy issued in the comprehensive insurance system of America before World War I, which provided bank capital from losses. Currently only in the US every yearat least two thousand comprehensive bank insurance policies are being issued.

Bankers Blanket Bond applied to Russia

Despite the global recognition of comprehensive banking risk insurance ВВВ in Russia, unfortunately, it is far from being used to the full extent and has great potential for development. This type of insurance is supported by the fact that the use of such a system will allow the banking sector of the Russian Federation to comply with international standards. This, in turn, will attract additional investment from abroad.

However, there is bancassurance in Russia that does not belong to the BBB package. This is the protection of property, delicate and contractual liability. This procedure is due to the need for a more detailed settlement of many issues and allows for effective risk control.

In addition, the loy alty of bank employees is insured, that is, the protection of a financial institution from losses that its specialist can intentionally or unintentionally inflict. Despite the demand for this insurance product, one hundred percent exclusion of the human factor is a priori impossible. It is quite difficult to prescribe in the documents all the possibilities of human intervention in the work of a banking institution. This type of insurance obliges the banking institution to undergo an audit, which will allow you to more specifically monitor the possibility of incurring losses.

One of the components of the complexBBB insurance is the property insurance of banks: interior, movable property, art, money, securities.

ВВВ also provides for insurance against losses incurred by banks in the course of transactions with forged documents. Such operations are divided into two types: fraud with checks and equivalent documents; securities fraud (counterfeiting).

Requirements for insurance counterparties under BBB

Based on the foregoing, you need to understand that the BBB policy is a combined type of insurance for financial, judicial and property risks of banks. Thus, the legal field of the Russian Federation regulates that this type of insurance puts forward certain requirements for a credit institution that has a license to provide banking services. Required:

• indicate in the insurance contract all branches covered by this type of insurance;
• take into account that this agreement will not be extended to banking organizations that are partially owned by the insured;
• take into account that the right to claim payment upon the occurrence of an insured event belongs exclusively to the policyholder.

In turn, the insurer must have a license to insure the property of legal entities and individuals, as well as financial and business risks.

Characteristics of bank risks when drawing up an insurance policy ВВВ

Separate main and additional risks. Traditionally, the main risks aretheft, damage to the property and interior of the bank as a result of vandalism or deliberate damage by third parties. This also includes shipping damage.

Additional consider the risks associated with the detection of forgery by a third party of the documents of the insured. An exception to the payment of compensation under a comprehensive insurance policy is problems associated with damage to computer equipment, computer programs, computer data. In this regard, Russian banks practice the acquisition of an additional policy designed to cover the losses of the insured from electronic crimes. Such an action is justified. The policy covers almost all damages caused to electronic systems and their data. Cases of incurring losses from fires, terrorist acts are not covered by insurance.

The duration of an insurance contract for BBB ranges on average from one to five years.

Problems of banking risk insurance

Due to the economic crisis, domestic bank insurance has some peculiarities. Problems can be solved. The first thing that was reflected in the crisis changes is the price of insurance policies. With regard to financial risks, the cost of concluding a transaction has increased significantly. At the same time, it is possible to insure movable and immovable property very cheaply today.

Traditionally, the crisis had a positive impact on the reduction of the market, but at the same time allowed him to recover. Insurance companies are not flexible enoughpolicy regarding the need to develop individual policies, which should take into account certain nuances of each policyholder.

The development of banking insurance in Russia is possible with the study and elimination of the above problems.

Choosing an insurer for banks

The organization of bank insurance involves a careful selection of insurers for this type of activity.

The main criteria for choosing a reliable partner for banks is their stable solvency, the presence of an extensive regional network, affordable pricing policy, the ability to form flexible contractual conditions, and a positive experience in problem-free conflict resolution. For cooperation, a time-tested company is perfect. Only in this case the banking insurance system will be set up correctly.