New Insurance Act

The main reason for adoption of the new Insurance Act (the ``Act'') was to create a standard, internationally accepted legislation of the insurance market. The Act was passed according to the requirements of the Organisation for Economic Co-operation (the ``OECD'') and harmonisation with the law of the European Communities (the ``EC''). The main goals of the Act are: to provide further liberalisation of insurance activities, to regulate requirements of granting licences for performance of insurance activities, to strengthen powers of the supervising authority in the area of insurance system, to create a legal frame of consolidated supervision over insurance companies in a group and to improve the protection level of insured persons and investors in the insurance market.

The directives of the European Union No. 92/49/EEC and No. 92/96/EEC relating to the commercial insurance business, were implemented by the Act in the conditions of the Slovak Republic. The Act sets out the terms of effective functioning of the supervising authority - The Financial Market Office (the ``Office''). The Act introduces so-called ``principle of one licence''. Pursuant to this principle a foreign insurance company with its registered seat in the territory of a member state of the EC is allowed to perform insurance services in the territory of the Slovak Republic without a Slovak insurance licence, either through its branch office or through provision of cross-border services.

The Act newly regulates some relations connected with establishment, organisation, management, performance of insurance business and termination of insurance or reinsurance companies with its registered seat in the territory of the Slovak Republic, and some relations with respect to operation of branch offices of foreign insurance and reinsurance companies in the territory of the Slovak Republic, mediation of insurance and executing supervision over the insurance industry. The Act expressly stipulates that it does not cover performance of fundamental health, sickness, pension insurance and other public insurance.

The insurance company shall mean a joint stock company with its registered seat in the territory of the Slovak Republic, which performs insurance activities on the basis of the licence for performance of insurance activities (the ``Insurance Licence'') granted by the Office.

The conditions, which have to be fulfilled by insurance companies or branch offices of foreign insurance companies in order to obtain the insurance licence, are newly and more strictly regulated by the Act. Terms of fulfilment will be stipulated in a generally binding regulation issued by the Ministry of Finance of the Slovak Republic (the ``Ministry''). All conditions necessary for the issue of insurance licence have to be observed permanently throughout the validity of the insurance licence.

With respect to the scope of activities restricted in the Act compared to the former act, an insurance company or a branch office of foreign insurance company may not perform for third persons any other activity than insurance activities, reinsurance activities or mediation of insurance.

The insurance activity shall mean conclusion of insurance contracts by an insurance company or a branch office of foreign insurance company, administration of insurance contracts, lump-sum settlement of insurance contracts and claim settlement. The insurance activity also includes generation and use of the technical reserves and the guaranty fund of an insurance company or a branch office of foreign insurance company, conclusion of reinsurance contracts between an insurance company and a reinsurance company to cover liabilities of the insurance company toward the insured, concluding contracts on mediation of insurance with an insurance broker or an insurance agent and activity oriented to prevent damages.

Under the Act, an insurance company and a branch office of foreign insurance company are now obliged to request a proof of identity from their clients before conclusion of life insurance contracts. A client is liable to satisfy such request, otherwise the insurance company and the branch office of foreign insurance company, the insurance broker or the insurance agent are liable to refuse to conclude an insurance contract.

In accordance with protection from so-called money laundering, an insurance company and a branch office of foreign insurance company are newly liable to ascertain the ownership of funds used by a client in every conclusion of the life insurance contract, if annual premium is exceeds SKK 40,000 (or is increased to SKK 40,000 and more) or single premium exceeds the amount of SKK 100,000. A client is liable to declare in a binding written statement whether these funds are his property and whether he is concluding the insurance contract for his own account. In the opposite case the client's statement must specify the person who is the owner of the funds or for whose account the contract is being concluded. The client is also liable to deliver to the insurance company a written approval from the person concerned to use his funds and to execute the contract for his account. If the client fails to meet these duties, the insurance company and the branch office of foreign insurance company are liable to refuse to conclude such insurance contract. In the interest of transparency of ownership relationships, the Act clearly stipulates that an insurance company, a branch office of foreign insurance and an reinsurance company may issue shares only as book-entered registered (au nom) securities, whereas a change of their face or form is expressly prohibited.

The business name of an insurance company must include the indication ``poist'ovna'' (in English: ``insurance company''). No other entity may use in its business name indication ``poist'ovna'', with the exception of a public insurance company established pursuant to special regulations.

No other entity apart from an insurance company and a branch office of foreign insurance company may perform insurance activities without obtaining an insurance licence granted by the Office, unless this Act or a special act stipulates otherwise (e.g. the Banking Act).

In connection with liberalisation of insurance activities, the provision of the former act under which life insurances of persons with a permanent address in the Slovak Republic, insurance of property located in the territory of the Slovak Republic and insurance of responsibility for damage caused by activities of individuals and legal entities in the territory of the Slovak Republic, may be arranged only in the insurance company having a licence for the Slovak Republic, was cancelled by the Act.

Provisions of the former act regarding the minimum amount of the registered capital, which has to be achieved for granting a licence for life insurance (at least SKK 80,000,000), for particular branches of non-life insurance, duty to pay up the registered capital only by monetary contributions, and ban on simultaneous execution of life and non-life insurance by one insurance company with exceptions stipulated in the Act, remain unchanged.

An insurance licence is granted by the Office based on applied activities and for the following classes:

a)

life insurance according to particular insurance areas stipulated by an annex to the Act, and

b)

non-life insurance according to particular insurance areas stipulated by an annex to the Act.

Pursuant to the Act, an insurance licence is granted to establish an insurance company or a branch office of foreign insurance company as well as performance of insurance activities of the given entity in the extent specified in this licence.

The Act stipulates that a licence is granted for an indefinite period of time and is not transferable to another person and does not pass to a legal successor.

No insurance licence is required for establishment of a branch office of insurance or reinsurance company in the territory of a foreign state. The insurance company is only liable to notify the Office of the establishment of the branch office and of the granting of an insurance licence by the foreign state authority.

The basic condition on which the insurance licence is granted is the proof of payment of the registered capital of insurance company. The Office shall examine origin of the registered capital and other financial resources, eligibility and suitability of persons who should become shareholders with a qualified interest, transparency of their relations with other persons, transparency of closely connected group, which includes also the insurance company's qualified shareholder.

Pursuant to the Act, professional qualification and trustworthiness of persons nominated as members of the Board of Directors, as well as procurists, managers, responsible actuary and persons responsible for internal control are reviewed by the Office.

Another condition is that the registered seat shall be located and principal activity of an insurance company shall be carried out in the territory of the Slovak Republic, which is essential in terms of mutual recognition of insurance licences and supervision within the EC.

The Act introduces conditions, with the effects from the validity date of the Agreement on Accession of the Slovak Republic to the EC, under which an insurance company with its registered seat in the Slovak Republic is allowed to perform insurance activities in the territory of a member state of the EC pursuant to ``principle of one licence'' and conditions under which a foreign insurance company with its registered seat in the territory of a member state of the EC is allowed to provide insurance services in the territory of the Slovak Republic.

An insurance company and a branch office of foreign insurance company are liable to submit a petition for registration of permitted insurance activities in the Commercial Registry, upon an insurance licence, with a relevant court within ten days from the effective date of the insurance licence, and are liable to deliver an extract from the Commercial Registry to the Office within ten days from the effective date of a court's decision on registration or a change of the registration in the Commercial Registry.

The foreign insurance company shall mean a legal entity, with its registered seat outside the territory of the Slovak Republic, which performs insurance activities and holds an insurance licence granted in the state of its registered seat.

The branch office of foreign insurance company shall mean an organisational unit of the foreign insurance company located in the territory of the Slovak Republic performing insurance activities.

The foreign insurance company may perform insurance activities in the territory of the Slovak Republic through its branch office after the granting of an insurance licence by the Office, unless Act stipulates otherwise.

Before the granting of an insurance licence to the branch office, the Office shall examine similar conditions as in case of granting an insurance licence to an insurance company with its seat in the territory of the Slovak Republic.

An application for an insurance licence is submitted to the Office by a foreign insurance company, the extent of applied activities is limited by the activities permitted in the state of its registered seat.

The branch office of foreign insurance company is obliged to observe another condition, permanently throughout its existence, on which its assets in the territory of the Slovak Republic may not be less than one half of the guaranty fund pursuant to Section 31 of the Act, and its financial resources in the amount of one forth of the guaranty fund shall be deposited in a special account in the bank with its registered seat in the territory of the Slovak Republic.

The Office shall decide on an application for granting an insurance licence within three months from the delivery of complete application. At the latest, it has to decide within a period of twelve months, after deciding on the application and its annexes, material, personnel and organisational preparedness with respect to the activities applied.

Under the new regulation, an insurance licence may also contain conditions that must be fulfilled before commencement of the licenced activity or must be observed during performance of the licenced activity by an insurance company or a foreign insurance company. An insurance licence may also restrict performance of a certain insurance activity within the given insurance area.

Upon a request of an insurance company or a foreign insurance company, an insurance licence may be changed or extended by the decision of the Office.

An insurance company is liable to notify the Office without undue delay on changes of its business name, registered seat, identification number, amount of the registered capital, and changes in the list of shareholders with a qualified interest. The qualified interest shall mean a direct or indirect interest or their sum representing 10% of the registered capital of a legal entity or voting rights in a legal entity, or the ability to exercise an influence on management of this legal entity comparable to the influence corresponding to such interest.

An insurance company and a foreign insurance company are liable to notify the Office without undue delay on changes of material, personnel and organisational preparedness with respect to performed activities. In addition to the above, a foreign insurance company shall notify the Office on changes of names, surnames, domiciles, professional qualifications or residences in the territory of the Slovak Republic of the director of its Slovak branch office, his deputy, responsible actuary, if it may affect the ability of the insurance to perform insurance activities.

An insurance company and a reinsurance company are liable to set out in its Articles of Association relations and co-operation among its Board of Directors, Supervisory Board, responsible actuary, managers and internal control department. The Articles of Association shall assign and define the powers and responsibility inside the given insurance or reinsurance company in accordance with the Act No. 367/2000 Coll. on Protection against Legalisation of Incomes from Criminal Activities.

In order to monitor decisive organisational changes within an insurance or reinsurance company in the Articles of Association effectively, the insurance and reinsurance company are liable to deliver copies of the Articles of Association and their changes to the Office without undue delay.

The Act expressly stipulates cases when an insurance licence is terminated:

a)

as of the day of the winding-up of an insurance company for a reason other than withdrawal of its insurance licence,

b)

as of the day of declaration of bankruptcy over insurance company's assets pursuant to a special regulation,

c)

in case of a branch office of foreign insurance company as of the day of declaration of bankruptcy over assets of the foreign insurance company pursuant to a special regulation, or as of the day of winding-up of the foreign insurance company for a reason other than withdrawal of its insurance licence,

d)

in case of an insurance company or a branch office of foreign insurance company, as of the day of return of its insurance licence to the Office; the return is subject to a prior approval of the Office,

e)

as of the day of expiration of a ten day's period from the effective date of the insurance licence, provided that the insurance company or the foreign insurance company failed to submit a petition for registration of itself in the Commercial Registry,

f)

as of the day of sale of an enterprise of an insurance company or of a branch office of insurance company,

g)

in case of a branch office of foreign insurance company also as of the day of termination of its activities by a decision of a foreign insurance company. The insurance company, foreign insurance company or branch office of foreign insurance company are liable to notify the Office in writing and without undue delay after arising of the above stated facts, except for the letter d).

The Act specifies the definition of reinsurance activity in more details, which shall mean conclusion of reinsurance contracts between an insurance company or a branch office of foreign company and a reinsurance company or a branch office of foreign reinsurance company, administration of reinsurance contracts, payments under reinsurance contracts. The reinsurance activity also includes generation and use of technical reserves of a reinsurance company or a branch office of foreign reinsurance company.

Under the new definition of the reinsurance contract, a reinsurance company or a branch office of foreign reinsurance company undertake to provide compensation in the agreed extent to an insurance company or a branch office of foreign insurance company, if an event defined in the reinsurance contract arises. On the other hand the insurance company or the branch office of foreign insurance company undertake to pay to the reinsurance company or the branch office of foreign reinsurance company the agreed part of the premium insurance contracts entered into by the insurance company or the branch office of foreign insurance company, which are subject to the reinsurance contract.

The reinsurance company shall mean a joint stock company with its registered seat in the territory of the Slovak Republic, which performs reinsurance activities on the basis of a licence for performance of reinsurance activities (the ``reinsurance licence'') granted by the Office.

Pursuant to the Act, a reinsurance licence authorises to:

a)

incorporate a reinsurance company and perform reinsurance activities,

b)

establish a branch office of foreign insurance company and perform reinsurance activities by such branch office,

c)

perform reinsurance activity by an insurance company,

d)

to perform reinsurance activities by a branch office of foreign insurance company.

The business name of a reinsurance company must include indication ``zaist'ovna'' (in English: ``reinsurance company''). No other entity may use in its business name the indication ``zaist'ovna''.

A reinsurance company or a branch office of foreign reinsurance company may not perform for third persons any other activities than the reinsurance activities.

No other entity apart from a reinsurance company and a branch office of foreign reinsurance company may perform reinsurance activities without obtaining a reinsurance licence granted by the Office, with the exception of a foreign reinsurance company.

For the first time the Act stipulates the minimum amount of the registered capital of a reinsurance company, with its seat in the territory of the Slovak Republic, which must be at least SKK 1,000,000,000. In case of foreign reinsurance companies, the above stated financial resources shall be deposited and kept in a special account in the bank with its registered seat in the territory of the Slovak Republic, permanently throughout the existence of its branch office in the territory of the Slovak Republic. The registered capital of the reinsurance company must be fully paid up exclusively by monetary contributions.

In case of simultaneous execution of insurance and reinsurance activities, the amount of the registered capital must be at least SKK 1,000,000,000. A reinsurance company with the licence granted also for performance of insurance activities shall be considered as an insurance company and its business name must contain the indication ``poist'ovna'' (in English: ``insurance company'').

Provisions of the Act regarding conditions and procedure of granting an insurance licence shall be applied mutatis mutandis on granting of reinsurance licence. The way of proving of fulfilment of conditions necessary for the issue of a reinsurance licence will be stipulated in a generally binding legal regulation issued by the Ministry.

Provisions of the Act regarding termination of an insurance licence shall be applied mutatis mutandis on termination of a reinsurance licence.

Provisions of the former act regarding a duty of an insurance company and a branch office of foreign insurance company to generate technical reserves for performance of insurance activities in compliance with the scope of permitted activities remain unchanged. Provisions of the Order of the Ministry No. 136/1996 Coll. on Methods of Generation, Use and Placement of Technical Reserves as amended, are mostly incorporated into the Act, and the Order itself is cancelled as of the effective date of the Act.

Statements on generation, use and placement of technical reserves shall be submitted to the Office within 30 days from the end of each calendar quarter. Technical reserves must be generated separately for life and non-life insurance and must be maintained in accounting records separately from other liabilities of the insurance company or the branch office of foreign insurance company, the reinsurance company or the branch office of foreign reinsurance company.

An insurance company, branch office of foreign insurance company, reinsurance company and branch office of foreign reinsurance company are obliged to observe the rules of security, rentability, liquidity and diversification of placing technical reserves. The binding methods of placement of technical reserve resources, are expressly stipulated in the Act.

Provisions of the former act regarding a duty of an insurance company, which performs mandatory contractual insurance of responsibility for damage caused by operation of a motor vehicle, to transfer 8% of the premium collected in the previous calendar year to a special account of the Ministry of Interior of the Slovak Republic, by the end of February of the relevant year, remain unchanged.

Pursuant to the Act, solvency of insurance company or branch office of foreign insurance company is understood as ability to permanently procure the coverage of liabilities relating to the concluded insurance or reinsurance contracts by using only own resources.

An insurance or a reinsurance company is liable to maintain at least the minimum solvency rate throughout the performance of its activities, and this duty shall be demonstrated to the Office according to its status as at 31 December always till 31 March of the next year. One third of the minimum solvency rate shall be composed of the guaranty fund, with the minimum amount of SKK 40,000,000 for life insurance, and of the amounts stipulated by the Act for particular branches of non-life insurance.

The Act introduces a new term ``adjusted solvency'', which means a permanently maintained ability of an insurance consolidated unit, using only own resources, to cover liabilities relating to insurance or reinsurance contracts concluded by an insurance company or a branch office of insurance company, which are members of the above stated unit.

An insurance consolidated unit is liable to maintain at least the minimum adjusted solvency throughout the performance of activities of its members, and this duty shall be demonstrated to the Office by the insurance company or the branch office of insurance company controlling the insurance consolidated unit.

An insurance and reinsurance company, a branch office of foreign insurance and reinsurance company are obliged to keep accounting books on status of and changes in assets and liabilities, costs and revenues, profit and loss in compliance with the Act No. 563/1991 Coll. on Accounting, as amended.

The financial statement shall be audited by an auditor. The auditor's appointment approved by the Supervisory Board of an insurance or reinsurance company shall be announced to the Office in writing, till 30 June of the calendar year for which the audit is to be carried out. If the Office uses its right to reject the appointed auditor for the second time, it will be empowered to designate the auditor, which shall be in charge of the annual financial statement of an insurance or reinsurance company.

Pursuant to the new regulation, insurance and reinsurance companies are liable to prepare interim financial statements as of the last day of each calendar quarter and submit a mid-year report and annual report on their business operations to the Ministry and the Office. The annual report also includes the financial statement audited by an auditor, the report on financial situation, information on expected economic and financial situation, proposal on distribution of profit and report of the responsible actuary.

An insurance and reinsurance company, a branch office of foreign insurance and reinsurance company are liable:

a)

to convert assets and liabilities denominated in a foreign currency to Slovak crowns on a daily basis using the exchange rate announced by the National Bank of Slovakia valid on that particular day,

b)

to notify the Office without undue delay on any changes of its financial situation, which may affect its ability to cover liabilities relating to the performed insurance or reinsurance activities,

c)

to submit to the Ministry and the Office data from its accounting and statistical records and other data in the form of returns, reports and reviews using the prescribed methods and meeting the deadlines.

An insurance company and a reinsurance company are liable to prepare the list of its shareholders as at 31 December, which shall be submitted to the Office always by 31 March of the following year.

The Act also regulates duties of a legal entity or an individual which wishes to dispose of its share in the registered capital or voting rights in an insurance or a reinsurance company in such extent that its share will for the first time decrease below 66%, 50%, 33%, 20% or 10% by a direct or concerted action. Such person has to notify the Office in writing and in advance of such intention.

Under new powers vested to the Office by the Act, the Office may suspend the right to attend and vote at the General Assembly meetings and the right to request the convention of an extraordinary General Assembly meeting of an insurance and reinsurance company to a person who has acquired or exceeded a share in the registered capital of the insurance company or reinsurance company without a prior approval of the Office, or who has acquired a prior approval on the basis of false data.

Insurance and reinsurance companies are liable to notify the Office on each change of the registered capital or voting rights in the insurance and reinsurance company, if a share of one person or more persons acting in concert exceeds 10%, 20%, 33%, 50% or 66% or decreases for the first time below 66%, 50%, 33%, 20% or 10%, after it has learned of this.

A prior approval of the Office under the consequence of invalidity of legal act is required for:

a)

the first acquisition or excess of 10%, 20%, 33%, 50% or 66% of share in the registered capital or voting rights in the insurance or reinsurance company, by direct or concerted action,

b)

decrease of the registered capital of the insurance or reinsurance company, other than decrease to cover its losses,

c)

appointment of persons nominated as members of the Board of Directors, procurists of the insurance or reinsurance company and the director of the branch office of foreign insurance or a foreign reinsurance company,

d)

split, merger or amalgamation of insurance company with other insurance or reinsurance company or other legal entity, or merger or amalgation of reinsurance company with other insurance or reinsurance company or other legal entity,

e)

return of an insurance or reinsurance licence,

f)

sale of an enterprise of the insurance or reinsurance company, branch office of foreign insurance or reinsurance company or the parts thereof.

Not only the legal act mentioned above is invalid, if performed without a prior approval of the Office, but also, any legal act performed upon the prior approval of the Office granted on the basis of false data shall be invalid.

The Office shall decide on a prior approval with appointment of members of the Board of Directors and procurists of an insurance or reinsurance company and of director of a branch office of foreign insurance or a foreign reinsurance company within 15 days from the delivery of application. Otherwise, the Office shall decide within 3 months from the delivery of a complete application for commencement of proceedings.

The Act introduces a new definition of ``responsible actuary'', who is an individual authorised to perform activities of the actuary and is registered in the list of actuaries maintained by the Office.

The Office shall decide on registration into the list of actuaries within 30 days from the delivery of petition, if the following requirements expressly stipulated by the Act are satisfied by an individual:

a)

completed university study in economics, natural science or engineering,

b)

at least three years of practise in the area of insurance mathematics,

c)

successful pass of an exam for an actuary,

d)

full legal capacity,

e)

trustworthiness.

The Office shall delete the name of an actuary from the list of actuaries, if the actuary is in serious breach of his duties or if requirements for the actuary as stipulated by the Act are not observed. The Office shall publish the list of actuaries in the Bulletin of the Office every six months.

An insurance company, a branch office of foreign insurance company and in specific cases also a branch office of foreign reinsurance company are liable to have the correctness of data expressly stated by the Act verified by the responsible actuary (e.g. premium calculation and its adequacy, calculation of technical reserves and its placement, calculation of solvency and the minimum solvency rate).

If the responsible actuary finds out deficiencies in economy of an insurance company, reinsurance company, branch office of foreign insurance or reinsurance company, while acting in his capacity under the Act, he is liable to propose measures for remedy to the Board of Directors or to the director of the branch office of insurance or reinsurance company. If these measures for remedy are not adopted and further development of economy threatens the ability to cover liabilities related to the performance of insurance or reinsurance activities, the responsible actuary is liable to inform the Office about this fact without undue delay.

The responsible actuary is liable to submit to the Office the statement regarding activities of the insurance and reinsurance company, branch office of foreign insurance and reinsurance company for the previous calendar year, by 31 March of the following year. Contents term of the statement will be stipulated in a generally binding regulation issued by the Ministry.

The Act generally defines basic duties of an insurance company, a branch office of insurance company and an insurance broker as follows:

a)

to conduct its activity with the minimum risk and the maximum possible profit,

b)

to conduct its activity with professional care and in the interest of its clients,

c)

to provide a client with important information concerning conclusion of insurance contract and to inform a client about important facts and risks connected with this activity,

d)

not to use untrue and misleading information in advertising of its activities, not to withhold important information and not to offer advantages, the reliability of which may not be guaranteed.

A member of the Board of Directors of an insurance company and a reinsurance company is responsible for the actual damage caused at performance of its office, in case of breach of the duties arising from acts, other generally binding legal regulations, the Articles of Association of the insurance and reinsurance company and other internal rules of management. The Act stipulates the duty of an insurance company and a reinsurance company to regulate legal relations with members of the Board of Directors by a written service agreement to which Section 66 of the Commercial Code applies and which enables to exercise claims for the actual damage against them.

A director of a branch office of foreign insurance or reinsurance company is liable to regulate his legal relations with the foreign insurance company and the foreign reinsurance company by a written service agreement, to which Section 66 of the Commercial Code applies and which enables to exercise claims against him for the actual damage, caused at performance of his office, in case of breach of his duties arising from generally binding legal regulations and internal rules of management.

The Act stipulates in a new provision regarding the conflict of interests, persons, which may not become members of the Board of Directors and the Supervisory Board or procurists of the insurance or reinsurance company. The Act expressly excludes the following persons: members of the Board of Directors and the Supervisory Board, procurists or employees of other insurance companies, reinsurance companies, supplementary pension insurance companies, banks or securities dealers, members of bodies of companies mediating insurance pursuant to this Act, however this principle does not apply if such legal entity is a part of the consolidated unit. From the positions mentioned above also the following persons are excluded: insurance agents, insurance brokers, responsible actuaries, employees of the central depositories and employees of stock exchanges.

The Act introduces a new definition of mediating activity in the insurance industry, as the mediation of insurance, which includes the following activities:

a)

activity to afford an opportunity to a person interested in conclusion of an insurance or reinsurance contract to conclude such contract,

b)

provision of services related to the activity under the letter a) above,

c)

co-operation in insurance claims settlements,

d)

detection and evaluation of insured risks,

e)

provision of professional advice in the field of insurance.

Only an insurance broker and an insurance agent may perform mediation of insurance in the territory of the Slovak Republic.

An insurance broker shall mean a natural person or a legal entity, with the licence to perform activities of the insurance broker granted by the Office and which performs mediation of insurance in all activities concerned on the basis of a written brokerage contract, to a person interested in conclusion of an insurance contract.

The Act introduces a new requirement for the insurance broker to conclude a compulsory contractual insurance of the responsibility for damage caused at performance of mediation of insurance by itself, with the minimum amount of lump-sum settlement of SKK 5,000,000. The insurance broker shall submit a copy of the insurance contract to the Office within 15 days from its conclusion.

An insurance agent shall mean a legal entity or a natural person, with the licence to perform the following activities:

a)

activity to afford an opportunity to a person interested in conclusion of an insurance or reinsurance contract to conclude such contract,

b)

provision of services related to the activities under the letter a) above, and

c)

co-operation in insurance claims settlements.

An insurance company shall be responsible for damages caused by the insurance agent at performance of mediation of insurance.

With respect to the scope of activities restricted by the Act compared to the previous act, the insurance agent may not provide a professional advice in the field of insurance, but now he is able to perform permitted activities for more than one insurance company, if the licence was granted to him by the Office. The Office shall decide on granting a licence to the insurance broker or insurance agent within 30 days from the delivery of application. Contents of the application, its annexes and requirements are stipulated by the Act. The Act introduces a new requirement to pass a professional exam by an agent and broker, if the agent and broker did not reach three or five years of experience in the area of insurance, depending on the highest completed education.

Activities of an insurance broker and insurance agent are subject to the Office's supervision pursuant to the Act. An insurance broker and insurance agent shall notify the Office on changes of its identification data, trustworthiness and capacity for legal acts.

Provisions of the Act regarding termination of an insurance licence shall be applied mutatis mutandis on termination of a licence to perform activity of an insurance broker or agent.

An insurance and reinsurance company, a branch office of foreign insurance and reinsurance company are liable to prepare the list of insurance agents which perform mediation of insurance in their names as at 31 December, which shall be submitted to the Office always by 31 March of the following year.

One of the forms to protect insured persons is the state supervision over persons acting in the insurance industry. The Act has vested the execution of supervision to the Office, so that licensing and supervising powers are merged into one state authority. Powers and duties of the Office and supervised persons, procedures in exercising control are stipulated by the Act No. 96/2002 Coll. on Supervision over the Financial Market and amending and supplementing certain other acts, which becomes effective as of 1 April 2002 (the ``Act No. 96/2002 Coll''.). The Act No. 96/2002 Coll. with effects as of 1 April 2002 repeals and replaces provisions of the first part of the Act No. 329/2000 Coll. on the Office for Financial Market and on changes and amendments to certain other acts, regulating the establishment, operations and organisation of the Office for Financial Market and procedures in exercising state supervision in the insurance industry.

The Act stipulates performance of supervision by the Office on an individual basis, as well as a consolidated basis.

The supervision on an individual basis is performed over activities of an insurance and reinsurance company, branch office of foreign insurance and reinsurance company, activities of other persons connected with the activities of the subjects stated above, insurance broker and agent, the Slovak Office of Insurers, and under conditions stipulated by the Act also over insurance activities of a foreign insurance company, with its seat in the territory of a member state of the EC in the extent stipulated by the Act.

The subject of supervision is:

a)

observance of provisions of the Act and special acts in the extent resulted therefrom and observance of generally binding regulations issued for execution of the above stated acts,

b)

observance of conditions stipulated in licences granted under the Act.

The supervision on a consolidated basis shall mean monitoring of fulfilment of the duties pursuant to Section 31 of the Act (especially fulfilment of the adjusted solvency rate of parts by a consolidated unit) and monitoring of business and financial relations for the purpose of limitation of risks to which an insurance and reinsurance company are exposed due to their participation in an insurance consolidated or financial consolidated unit. The supervision on a consolidated basis does not substitute supervision over particular persons involved in the given consolidated unit.

In connection with the introduction of provisions on performance of supervision on a consolidated basis, the Act contains definitions such as consolidated unit, insurance consolidated unit and financial consolidated unit. The Act also stipulates duties of a person controlling a consolidated unit, especially to prepare and submit returns, reports and reviews to the Office regarding the consolidated unit, and to notify the Office on auditors in charge of auditing the legal entities involved in the consolidated unit.

If the Office finds out deficiencies in activities of an insurance and reinsurance company, branch office of foreign insurance and reinsurance company, consisting in failure to satisfy conditions stipulated in an insurance licence or in a decision on a prior approval of the Office, requirements or obligations arising from other decisions of the Office, the Office may, depending on importance, extent of responsibility and nature of the found deficiencies, impose:

a)

call on adoption of measures for remedy

b)

preparation of recovery plan,

c)

submission of special returns, reports and reviews,

d)

termination of unauthorised activity,

e)

penalty up to the amount of SKK 20,000,000,

f)

limitation or suspension of performance of certain insurance activities,

g)

transfer of portfolio or parts thereof to a different insurance company,

h)

limitation of free disposal with assets,

i)

withdrawal of a licence in a particular insurance branch, restriction of the scope of insurance activities in the particular branch, withdrawal of a licence in life or non-life insurance in case of their simultaneous execution,

j)

reconciliation of accounting books or other records,

k)

publication of correction of incomplete, incorrect or untrue information that was published under a disclosure duty stipulated by the Act,

l)

settlement of a loss from business operation using the registered capital, after using retained earnings and funds created from profit,

m)

establishment of compulsory administration,

n)

withdrawal of an insurance or reinsurance licence for the reasons expressly stipulated by the Act.

If the Office finds out deficiencies in activities of an insurance broker or agent, it may impose sanctions stipulated by the Act or withdraw the licence to perform the activity of an insurance broker or agent.

In cases expressly stipulated by the Act, the Office may, depending on importance, extent of responsibility and nature of found deficiencies, impose a penalty up to the amount of SKK 20,000,000 on a legal entity involved in a consolidated unit which is supervised by the Office on a consolidated basis.

The Office may, depending on importance, extent of responsibility and nature of breach, impose a penalty up to the amount of twelve times the monthly average of total earnings on a member of the Board of Directors, member of the Supervisory Board of an insurance and reinsurance company, the director of the branch office of foreign insurance and reinsurance company or his deputy, administrator for performance of compulsory administration or his deputy, responsible actuary, procurist, employee of an insurance and reinsurance company responsible for performance of internal control and manager, for breach of their duties arising from the Act, other generally binding legal regulations, the Articles of Association and other internal rules of management, or for breach of requirements or duties imposed by a decision issued by the Office. The Office may impose a penalty on a manager up to 50% of the amount of twelve times the monthly average of his total earnings. The insurance and reinsurance company or the branch office of foreign insurance and reinsurance company are liable to recall the person, who became an untrustworthy person under the Act by effective imposition of a penalty, without undue delay.

The Act further contains detailed provisions on reasons, purpose, conditions and progress of compulsory administration, which shall be registered in the Commercial Registry. The possibility of establishment of compulsory administration over a branch office of foreign insurance or foreign reinsurance company is excluded. Specification of operation of the insurance or reinsurance company after the compulsory administration in established is regulated by the Act in details. Furthermore, the Act regulates a procedure at and after withdrawal of an insurance or reinsurance licence, as well as a procedure of liquidation of an insurance or reinsurance company.

If an insurance or reinsurance company is wound up by liquidation, only the Office is authorised to file an application for appointment and recall of its liquidator. The Act expressly specifies persons that may not become a liquidator and which have or had a special relationship to the insurance or reinsurance company.

Provisions of the Commercial Code shall apply on an insurance or reinsurance company, branch office of insurance or reinsurance company, unless the Act stipulates otherwise.

Provisions of the Act No. 71/1967 Coll. on Administrative Proceedings shall not apply to proceedings of the Office due to the fact that these proceedings are too specific. The Office is not a body of state administration, however its decision-making process belongs to the sphere of public administration, and thus legality of its effective decisions may be reviewed by the Supreme Court of the Slovak Republic.

The Office is a legal entity established by law, with its seat in Bratislava, which is not registered in the Commercial Registry. The Office is empowered in the area of public administration to perform state supervision over financial market in the field of capital market and insurance, as stipulated by the Act No.96/2002 Coll. and related acts (e.g. this Act).

The Office performs state supervision over activities of an insurance company, branch office of foreign insurance company, insurance broker and also over activities of other persons, group of persons and entities on which the Act imposes duties, in the extent stipulated by the Act or the Act No. 96/2002 Coll.

The Office shall submit to the Government of the Slovak Republic a mid-year and annual report on the status of the insurance industry and publish it in the Bulletin of the Office within 30 days after it is discussed by the Government.

The bodies of the Office are:

a)

the Council - a statutory and executive body, deciding on appeals against decisions of the General Director of the Office,

b)

the General Director of the Office - who manages the organisational department which performs supervision by direct inspection or by requesting information and statements from a supervised entity and decides in proceedings in the first instance,

c)

the Supervisory Committee - a supervisory body of the Office.

In accordance with the temporary provisions of the Act, an insurance company and a branch office of foreign insurance company, which performed their activities in compliance with the previously valid regulations, are considered, from the effective date of the Act, to be the insurance company and the branch office of foreign insurance company with the insurance licence granted under this Act. Legal entities and natural persons, which performed activities in compliance with the previously valid regulations, are liable to harmonise their legal relations with provisions of the Act not later than by 1 March 2003.

In connection with adoption of the Act, the former Act No. 24/1991 Coll. on Insurance as amended, and the Order of the Ministry No. 136/1996 Coll. on Methods of Generation, Use and Placement of Technical Reserves as amended, issued for execution of the former act are cancelled.

Provisions of the former act regarding the approval of insurance conditions by the Office were cancelled by the Act, and also deleted from the Act No. 40/1964 Coll., the Civil Code, as amended, the Act No. 381/2001 Coll. on Mandatory Contractual Insurance of Responsibility for Damage Caused by Operation of a Motor Vehicle and the Act No. 281/2001 Coll. on Collective Tours, Business Conditions for the Travel Offices and Agencies.

This Act is in force from 1 March 2002, save for the provisions of Sec. 8, Sec. 15 to 21, Sec. 36 (7) which will become effective on the effective date of the Agreement on Accession of the Slovak Republic to the European Communities.

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