State regulation of insurance activity in the Russian Federation

In the process of establishing social institutions in Russia, great 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 whole national economy. State regulation of insurance activities occurs through reporting, checking the compliance of information with actual results and regulatory regulation.

Supervision

State regulation and supervision of insurance activities are divided into preliminary, current and subsequent. In the first case, it is about checking the compliance of companies with the requirements under which a license is issued, registration of insurers. The current supervision is to check compliance with the legislation by market participants: analysis of reporting, revocation of licenses, exclusion of brokers from the register, etc. They will be considered in more detail later.

The state legal regulation of insurance activity is carried out by the Law of the Russian Federation «About the organization of insurance business» and the Ministry of Finance. It applies to professional market participants, their intermediaries and beneficiaries.

Goals, functions, tasks

Objectives of state regulation of insurance activities:

• Ensuring the stable functioning of the market;
• Observance by the subjects of normative acts;
• Ensuring the fulfillment of obligations by the parties to the transaction;
• Protection of the domestic market from foreign companies;
• Transfer to the state of taxes and fees.

Directions of state regulation of insurance activity:

• The adoption of laws and regulations, monitoring their compliance with government agencies;
• Regulation of the insurers' solvency and ensuring fulfillment of their obligations;
• Control over the payment of taxes by market participants;
• Imposing sanctions on market participants.

Supervisory bodies perform such functions:

• Issue a license to conduct business;
• Make entries in the State Register of Insurers and Brokers;
• Control the formation of tariffs;
• Establish rules for the allocation of reserves, accounting records of transactions;
• Develop normative and methodical documents;
• Develop and submit proposals on the development of the legislative framework.

The rights of state inspection bodies

• Receive from insurers, reporting on activities, from their customers and banks - information about the financial situation.
• To carry out checks on the compliance of the information provided and the real financial situation.
• In case of revealing of infringements by the companies of legislative requirements to give instructions on elimination of problems. If they are not met, then suspend the licenses until the violations are completely eliminated.
• To apply to the court with a claim for the liquidation of the insurer and companies operating without licenses.

Financial regulation

In the world practice in this area, a regular audit of insurance companies is carried out. In Russia, this issue is still at the stage of consideration.

State regulation of the activities of insurance companies on 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 assess the commitments undertaken. Its results are reflected in a separate conclusion, which is transmitted to the state agency.

The lack of an established audit system negatively affects the entire industry. The methods of forming reserves quickly become obsolete, but are rarely revised. Steps to implement the audit are built only at the legislative level, but the goals, objectives, program and mechanisms are not defined in practice.

Insurance Unions

On the Russian market there are state and regional associations of insurers. They are formed according to the types of activity: medical, auto insurance, etc. Such unions are a resource of market self-regulation. Their main task is connected with the preparation of proposals for legislative acts, the formation of protection funds, the development of rules and programs, the methodological support of activities, the training of personnel, and so on.

The Union of Consumer Protection of the Russian Federation received a weak development. Its main task is to identify unscrupulous companies, protect consumer interests, develop rules, insurance programs, etc.

The activities of the 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 complex documents from a legal point of view. A person without special education is difficult to understand all the formulations. In Western countries, state regulation of insurance activities for transactions with individuals is much tougher than under contracts with legal entities. The latter can attract qualified lawyers to determine the compliance of the terms of the document with normative acts.

In the regions of the Russian Federation, state regulation of insurance activities is carried out by local supervisory authorities. Within their capabilities, they are assisted by the tax service, the Central Bank and the antimonopoly cabinet. In most countries in Europe, a single system for supervision is used. In Canada, some aspects are regulated by federal authorities, and 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 should report on the results of activities in open publications and provide supervisory authorities. Consumers of services can, according to this information, compose an idea about the organization and decide on the expediency of concluding a contract.

This is a liberal system. A person without special education can not understand the financial statements. The interests of persons who have concluded contracts before the insurer has problems, are not insured in any way. State control over the execution of transactions is not carried out.

The regulatory system of regulation is that the state additionally establishes the same requirements for all organizations engaged in insurance activities. They can be related to financial security (compliance of the size of capital with accepted obligations), forms of ownership of insurers, the timing of reporting, etc. If these requirements are not met, sanctions are imposed on companies. This scheme has long and successfully operated in the UK, and has recently appeared in the EU.

The specifics of state regulation of insurance activity in the system of material supervision is that insurers publish reports on the results of their activities, and supervising authorities monitor compliance with the terms of contracts, the size of rates, the procedure for the formation of reserves. In theory, with this 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 broader than the normative by the number of objects covered. Its main principle is that all actions must be previously agreed with the state authorities. On the one hand, such a system severely limits the activities of insurers. Companies that develop a new product must approve it in supervisory bodies. The loss of time will be reflected in the lost profit. On the other hand, the interests of consumers of services are protected.

Insurer registration

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

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

Within these limits, the funds must be transferred in cash. Above these values, contributions are taken in the form of property, rights of use, the results of intellectual activity, and so on.

In addition, you need to submit the following documents to the Ministry of Finance:

• statement;
• Constituent documents (charter, minutes of the meeting, extract from the state register).
• Payment for transfer of funds to the authorized capital account;
• Business case ;
• Rules of insurance, sample forms of contracts;
• Calculation of tariffs with detailed interpretation of the methodology used;
• Data on the leader and his deputies.

As an economic justification, it is accepted:

• Annual business plan;
• Plan for reinsurance in case the maximum risk liability is more than 10% of own funds;
• An algorithm for the formation of reserves and a plan for their placement;
• Balance sheet, statement of financial results.

The decision to issue a license to the supervisory authority takes within 60 days after the receipt of the documents. The basis for refusal may be not compliance of documents with legislative requirements. The state body informs the legal entity in writing about this.

Stages of

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.

Preliminary control

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

Access to the market can be carried out in two ways. In the first case, the company simply registers in the insurer's register, after which it can start operating. Such a clear admission is inherent in the system of publicity.

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

Current supervision

The state authorities analyze the presented accounting, management reporting. In case of necessity, additional data is requested. Also in their competence is the consideration of applications with proposals, complaints, the implementation of inspections. That is, the state regulation of insurance activities of an insurance organization is reduced to timely assess financial capabilities of the company on the risks accepted, check the rules for the formation of reserves, compliance of the availability of funds with the established standards.

Follow-up control

At this stage, decisions are made with respect to insurers whose performance results do not meet any requirements (sanation, liquidation). The state regulation of insurance activity in the Russian Federation at this stage is to minimize the losses of clients of unscrupulous companies. Supervisors may impose restrictions on the conclusion of new contracts, change tariff rates, adjust activities on other aspects. This is done in the form of prescriptions, that is, written orders that oblige the insurer to eliminate violations within the specified period.

The grounds for imposing restrictions are:

• Activities in areas not covered by the license;
• Implementation of activities prohibited by law;
• Violation of the order of formation of reserves;
• Unjustified tariff reduction;
• Non-compliance with the established ratio of assets and liabilities;
• Reporting, other requested documents in violation of time or order;
• Inconsistency of the information provided to actual data;
• Violation of the terms of notification of changes in the charter, rules for the provision of services, the structure of rates;
• Transfer of a license to another organization;
• Issuance of a policy without application of rules;
• The conclusion of contracts on more extended terms, rather than those that are prescribed in the rules.

In case of non-compliance with the requirement, the supervisory authority may limit the validity of the license. This can be expressed both in the ban on the conclusion of new contracts, and in the extension of the old for certain activities or in the specified territory.