CBK and KCA Present Newly Introduced Insurance Industry Development Measures

The Deputy Governor for Financial Supervision at the Central Bank of the Republic of Kosovo (CBK), Sokol Havolli and the President of the Kosovo Competition Authority (KCA), Valon Prestreshi presented to the media the measures taken regarding the newly introduced compulsory insurance costing model.

Deputy Governor Havolli mentioned a number of reforms undertaken by the CBK in order to improve the situation in this sector, which remains underdeveloped, is concentrated on compulsory insurance products (auto liability), and faces non-fulfilment of conditions related to capitalization and provisioning regulatory requirements.

Deputy Governor Havolli further underlined that the problems of this industry have resulted in an unstable performance of this sector affecting its ability to meet obligations towards the insured.

“The results of the reforms undertaken by the CBK have brought a very positive and intensive response from the insurance industry. During this period, over EUR 11 million of capital has been added by insurance company shareholders to meet the capital and provisioning needs of their companies. During the last week of this month we also expect an increase of at least EUR 3 million. Over the past year the CBK has taken the necessary actions to ensure full compensation of damages to the injured parties. This has included, but without being limited to, tariff increases and drastic reductions in costs for insurance companies regulated by the CBK. In addition, the CBK is determined to ensure that all companies reach full compliance with regulatory requirements during this year,” said Deputy Governor Havolli.

Among other things, Deputy Governor Havolli mentioned that this industry has been a priority in the agenda of the Governor and the CBK. The latter decided, in cooperation with international financial institutions, that the issue capitalization be resolved once and for all. The process was planned to be completed in June, but had to be postponed for a short period due to the pandemic.

“During the last year, but also during this year, we had continuous institutional communication with the President of the Kosovo Competition Authority, in an effort to find the most advanced modalities for addressing the TPL product in the Kosovo market. In this context, the CBK has undertaken the necessary preparations guided by the conclusion that the pricing model for compulsory products should be advanced in order to provide coverage of potential risk for each insured and, at the same time, allow variation in cost based on individual characteristics of insured risk. In other words, prices should be set based on the market and on risk. Therefore, through this conference, we would like to inform you that as a result of close cooperation with the KCA, we have come to the conclusion that the model of compulsory policy costing should be based on the individual risk of the insured. Our goal as CBK is to move in the short term from the model which has been applied for a period of about 20 years to a model which can be considered as a liberal costing model, respecting the individual insurance risk factors. The move towards liberalization will certainly be supported by our partners from international financial institutions, but capitalization of the industry was the absolute precondition for moving in this direction. I consider that the conditions are now being met for us to take these actions,” Deputy Governor Havolli elaborated.

On the other hand, the KCA President Valon Prestreshi described the actions of the CBK in regulating this industry as extraordinary.

"The KCA and the CBK have been working on this issue from last year, and in the professional recommendations we provided to the CBK we emphasized the need to liberalize this market and not to have unified TPL premium prices, thus paving the way for competitive pressure among insurance companies operating in the market. The KCA recommended to the CBK as a market regulator to begin preparations in order to move from the current market regulation to a range of permitted tariffs, to which we refer as ceiling and floor tariffs, before moving to fully liberalized market prices. We recommend moving to the second phase of premium setting at the beginning of next year,” stated Prestreshi.

Both sides expressed their readiness to continue cooperation.