State regulation of insurance activity in the Russian Federation

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

In the process of establishing social institutions in the Russian Federation, much attention was paid to the regulation of insurance activities. This is due to the high level of social significance of this type of work. The occurrence of an insured event can harm the entire national economy. State regulation of insurance activities occurs through reporting, checking the compliance of information with actual results and regulatory regulation.

Surveillance

State regulation and supervision of insurance activities are divided into preliminary, current and subsequent. In the first case, we are talking about checking the compliance of companies with the requirements under which a license is issued, registration of insurers. Current supervision consists in checking compliance with the legislation by market participants: analysis of reporting, revocation of licenses,exclusion of brokers from the registry, etc. They will be discussed in more detail below.

State legal regulation of insurance activities is carried out by the Law of the Russian Federation "On the organization of insurance business" and the Ministry of Finance. It applies to professional market participants, their intermediaries and beneficiaries.

Goals, functions, tasks

Goals of state regulation of insurance activities:

• ensuring the stable functioning of the market;
• observance by subjects of regulations;
• ensuring the fulfillment of obligations by the parties to the transaction;
• protecting the domestic market from foreign companies;
• transfer of taxes and fees to the state.

Directions of state regulation of insurance activities:

• adoption of laws and regulations, control over their observance by state bodies;
• regulating the solvency of insurers and ensuring that they fulfill their obligations;
• control over the payment of taxes by market entities;
• imposition of sanctions on market participants.

Supervisory authorities perform the following functions:

• issue a license to operate;
• make entries in the State Register of Insurers and Brokers;
• control tariff setting;
• set the rules for the placement of reserves, indicators of accounting operations;
• develop normative and methodological documents;
• develop andprovide proposals for the development of the legislative framework.

Rights of state supervision bodies

• Receive from insurers, reporting on activities, from their clients and banks - information about the financial situation.
• Perform checks on the compliance of the information provided with the real financial situation.
• In case of violations of legal requirements by companies, give instructions to eliminate problems. If they are not met, then suspend the licenses until the violations are completely eliminated.
• Submit a lawsuit to liquidate an insurer and companies operating without licenses.

Financial regulation

In the world practice, insurance companies are regularly audited in this area. In Russia, this issue is still under consideration.

State regulation of the activities of insurance companies in terms of their solvency and financial stability consists in the calculation of tariffs for certain services, the formation of reserves, the evaluation of investment projects. Insurers annually evaluate the assumed obligations. Its results are reflected in a separate conclusion, which is submitted to the state agency.

The lack of an established audit system has a negative impact on the entire industry. Provisioning methodologies quickly become obsolete, but are rarely reviewed. The steps for the implementation of audit are built only at the legislative level, but the goals, objectives, program and mechanismsnot defined in practice.

Insurance unions

State and regional associations of insurers operate on the Russian market. They are formed by type of activity: medical, auto insurance, etc. Such unions are a resource for self-regulation of the market. Their main task is related to the preparation of proposals for legislative acts, the formation of protection funds, the development of rules and programs, methodological support for activities, training of personnel, etc.

Under the development of the Union of Consumer Protection of the Russian Federation. Its main task is to identify unscrupulous companies, protect the interests of consumers, develop rules, insurance programs, etc.

The activities of unions on both sides should be carried out in cooperation. Taking into account the interests of insurers and their clients is an important prerequisite for the development of the market.

World practice

Insurance contracts are legally complex documents. It is difficult for a person without special education to understand all the formulations. In Western countries, state regulation of insurance activities for transactions with individuals is much tougher than for contracts with legal entities. The latter can involve qualified lawyers to determine the compliance of the terms of the document with regulations.

In the regions of the Russian Federation, state regulation of insurance activities is carried out by local supervisory authorities. To the extent possible, they are assisted by the taxservice, the Central Bank and the Antimonopoly Cabinet. In most European countries, a single system of supervision is used. In Canada, some aspects are regulated by the federal authorities, while the main powers are transferred to local authorities in the province. There is no global state regulation of insurance activity in the USA. Each state has its own rules.

Systems

State regulation of insurance activities when using the public system is that companies must publish reports on the results of activities in open publications and provide to supervisory authorities. Consumers of services can use this information to form an idea about the organization and decide on the advisability of concluding an agreement.

This is a liberal system. A person without special education will not be able to understand financial reports. The interests of persons who entered into contracts before the insurer had problems are not insured in any way. State control over the execution of transactions is not carried out.

The normative system of regulation consists in the fact that the state additionally establishes the same requirements for all organizations involved in insurance activities. They may be related to financial security (correspondence of the amount of capital to the assumed obligations), forms of ownership of insurers, reporting deadlines, etc. In case of failure to comply with these requirements, sanctions are imposed on companies. This scheme has long and successfullyoperates in the UK, and has recently appeared in the EU countries.

Features of state regulation of insurance activities in the material supervision system is that insurers publish reports on the results of their activities, and supervisory authorities control the implementation of contract terms, rates, and the procedure for creating reserves. In theory, with such a scheme of activity, the interests of all parties to the transaction are observed, and there is no price dumping. In this way, state regulation of insurance activities in the Russian Federation is carried out.

The material system is wider than the normative one in terms of the number of covered objects. Its main principle is that all actions must be previously coordinated with state authorities. On the one hand, such a system severely limits the activities of insurers. Companies that develop a new product must have it approved by regulatory authorities. The loss of time will be reflected in lost profits. On the other hand, the interests of service consumers are protected.

Insurer registration

In the Russian Federation, a license to carry out insurance activities is issued by the Ministry of Finance. To receive it, you need to form and pay the authorized capital, depending on the chosen type of activity:

• minimum 25 thousand minimum wage - all services except life insurance;
• minimum 35 thousand minimum wage - all types of insurance;
• more than 49 thousand minimum wages - only life insurance.

Within the specified meansmust be paid in cash. In excess of these values, contributions are accepted in the form of property, rights of use, results of intellectual activity, etc.

Additionally, you need to provide the following documents to the Ministry of Finance:

• statement;
• constituent documents (charter, minutes of the meeting, extract from the state register).
• payment for the transfer of funds to the account of the authorized capital;
• business case;
• insurance rules, sample contract forms;
• calculation of tariffs with a detailed breakdown of the methodology used;
• data about the head and his deputies.

The following is accepted as a business case:

• annual business plan;
• reinsurance plan in case the maximum risk liability is more than 10% of own funds;
• algorithm for the formation of reserves and a plan for their placement;
• balance sheet, income statement.

The supervisory authority takes a decision on issuing a license within 60 days after receiving the documents. The reason for refusal may be the non-compliance of documents with legal requirements. The state agency informs the legal entity about this in writing.

Stages

State regulation of insurance activities in the Russian Federation is carried out in three stages: preliminary, current and subsequent. Let's consider each of them in more detail.

Preview

First, there is a selection among companies that want to get a license. Not every organization can carry out insurance activities.

Admission to the market can be done in two ways. In the first case, the company is simply registered in the register of insurers, after which it can begin to operate. Such explicit admission is inherent in the system of publicity.

If the concession method is used, then the supervisory authorities must issue a license to carry out activities. It is necessary to provide documents confirming the possibility of fulfilling financial requirements. This scheme is used in most countries of the world.

Ongoing supervision

Government authorities analyze the submitted accounting and management reporting. If necessary, additional information is requested. Their competence also includes consideration of applications with proposals, complaints, and the implementation of inspections. That is, the state regulation of the insurance activity of an insurance company is reduced to timely assessment of the financial capabilities of the company according to the risks taken, to check the rules for the formation of reserves, the compliance of the availability of funds with the established standards.

Follow-up control

At this stage, decisions are made regarding insurers whose performance does not meet any requirements (reorganization, liquidation). State regulation of insurance activities in the Russian Federation at this stageis to minimize the losses of clients of unscrupulous companies. Supervisory authorities can impose restrictions on the conclusion of new contracts, change tariff rates, and adjust activities in other aspects. This is done in the form of instructions, that is, written orders obliging the insurer to eliminate violations within the specified period.

The grounds for imposing restrictions are:

• carrying out activities in areas not covered by the license;
• implementation of activities prohibited by law;
• violation of the order of formation of reserves;
• unjustified tariff cuts;
• non-compliance with the established asset-liability ratio;
• reporting, other requested documents in violation of deadlines or order;
• inconsistency of the information provided with the actual data;
• violation of the deadlines for notification of amendments to the charter, rules for the provision of services, rate structure;
• transferring a license to another organization;
• issuing a policy without application of rules;
• conclusion of contracts on more extended terms than those prescribed in the rules.

In case of non-compliance with the prescription, the supervisory authority may restrict the validity of the license. This can be expressed both in a ban on the conclusion of new agreements, and in the extension of the validity of old ones for certain types of activities or in a specified territory.