Slovak Financial Law News 2004

Amendment to the Insurance Act

Act No. 186/2004 Coll., supplementing the Act No. 95/2002 Coll. on Insurance Industry and amending and supplementing certain acts as amended by Act No. 430/2003 Coll. and on amendment and supplement of certain other acts

The amendment to the Act on Insurance Industry harmonises the Slovak legal regulation with the European Community law, namely with Directive No. 73/239/EEC on the coordination of laws, regulations and administrative provisions relating to the taking-up and pursuit of the business of direct insurance other than life assurance, Directive No. 88/357/EEC on the coordination of laws, regulations and administrative provisions relating to direct insurance other than life assurance and laying down provisions to facilitate the effective exercise of freedom to provide services, Directive No. 17/2001/EC on the reorganisation and winding-up of insurance undertakings.

The amendment introduces the principle of mutual recognition of permits and audit systems so that it is permitted to carry out the insurance business within the member states of the EU on the basis of one permit issued in the territory of the member state where the particular insurance company has its registered office. However, if an insurance company of another member state is in breach of legal regulations of the Slovak Republic, following non-compliance of the call of the Financial Market Authority (the ``FMA'') a licence to conclude insurance contracts may be limited or even suspended.

Under the amendment to the Insurance Act, the subject of legal regulation includes (i) certain relationships related to the incorporation, organisation, management, performance of activity and dissolution of the insurance companies and reinsurance companies, (ii) certain relationships related to the activity of insurance companies from other member states and their branch offices in the territory of the Slovak Republic, (iii) certain relationships related to the activity of foreign insurance companies and their branch offices and foreign reinsurance companies and their branch offices in the territory of the Slovak Republic, (iv) mediation of insurance, and (v) supervision over the insurance industry.

Due to the necessity of sufficient security of obligations of the insurance company, the minimum amount of the registered capital of the insurance company was increased depending on the type of performed insurance activity.

A licence to carry out the insurance activity may be granted to a foreign insurance company only for one type of insurance and only within the scope of activities to which an authorisation was granted to it in the country of its registered office.

The amendment extends the right of an insurance agent to carry out the insurance activity not only on behalf of the insurance company, but also on behalf of the branch office of the foreign insurance company, while the insurance agent is entitled to carry out such an activity for more than one insurance company or more than one branch office of the foreign insurance company, or simultaneously for the insurance company and branch office of the foreign insurance company only if he/she was granted a licence to act as an insurance agent by the FMA.

The insurance companies, reinsurance companies, branch offices of a foreign insurance company and branch offices of a reinsurance company must place the resources of technical reserves pursuant to the amendment into the territory of the member states, if they decided to carry out insurance activities in these territories.

The amendment defines the required and actual insolvency rate of the insurance company and branch office of the foreign insurance company. The required insolvency rate shall mean the minimum value of the actual insolvency rate determined on the basis of the scope of insurance activities carried out by the insurance company and the actual insolvency rate shall mean the value of free unpledged assets of the insurance company, which constitute its own capital and reserves, reduced by the value of intangible assets of the insurance company and the value of own shares which belong to the assets of the insurance company.

The insurance company and branch office of the foreign insurance company are obliged to determine the amount of insurance premium based on the insurance and mathematical methods in such a way that the amount of insurance premium ensures the permanent fulfilment of all its obligations, including creation of sufficient technical reserves and the method of their placement.

The insurance company or branch office of the foreign insurance company is entitled to transfer the insurance stock or its part to the insurance company from any other member state or to the branch office established in any other member state. However, FMA is obliged to discuss this transfer with the particular supervisory body of the member state where the transferee has its registered office and with the particular supervisory body of the liability member state and request these bodies for a statement on this transfer.

This Act came into force on 1 May 2004.

---

Next: Amendment to the Act on
Up: April 2004
Previous: Act on European Economic Interest