NBU Governor expects insurers to fully bring their activities to new requirements by late 2024

Insurers will fully bring their activities to the requirements of the new legislation by the end of 2024, primarily in matters of solvency, disclosure of information and proper functioning of the management system, Governor of the National Bank of Ukraine (NBU) Andriy Pyshnyy expects.

"We positively assess the work of the insurance market, which fulfills its obligations to consumers, despite the martial law and all the difficulties associated with it. Upon completion of the transformation, the insurance market may be very interesting for attracting private capital," he said in an interview with Interfax-Ukraine.

"We clearly see such a prospect, perhaps even next year," Pyshnyy added.

He recalled that by July 1, 2024, insurance companies had to meet the requirements for financial standing, most of them did and today they are transparent and solvent, and some insurers that have not yet brought their activities into compliance are following this path.

"A number of companies are now implementing plans for resuming activities and financing agreed upon with the National Bank, and some have decided to leave the market. This, again, is about the maturity of the market and the awareness that the business model and the ability to compete effectively in this segment require either large investments or responsible decisions," the governor of the National Bank noted.

The efficiency of those market entities that have focused on transparency, competitiveness, and building a market model is growing, he believes.

In general, commenting on the significant reduction in the number of participants in the non-bank financial market over the past two years, Pyshnyy noted that the assets of financial companies and the insurance market have grown, although the assets of pawnshops and credit unions have decreased.

According to him, the non-bank financial market is currently undergoing the same stage of recovery that the banking sector once went through: disclosure of the ownership structure, application of new requirements for capital, reporting, financial monitoring, formation of an internal control system, construction of accounting and registration systems, and a corporate governance system.

"This evolutionary process should make the market more stable, attractive, transparent, understandable, and safe. It should not be an infrastructure for servicing shadow turnover and a tax optimization system," the governor of the NBU emphasized.

He added that issues related to the ownership structure are important for the regulator, because systematic work is underway to implement the vision of the concept of zero tolerance for the presence of Russian influence in the financial sector, and this is a logical continuation of sectoral sanctions against the Russian financial sector.

"We set the goal of revealing ownership structures, eradicating the phenomenon of nominal ownership, investigating the sources by which participants created the company and maintain its capital. Given the initial market volumes – about 2,000 participants – these are difficult challenges, but we have no other option for acclimating this 'wild field' to international standards," Pyshnyy noted.

As reported, the National Bank of Ukraine became the regulator of non-bank financial institutions from July 1, 2020. It took over the functions of the liquidated National Commission for State Regulation of Financial Services Markets. After that, two regulators remained on the market – the National Bank and the National Securities and Stock Market Commission.