Financial sector news

On June 17, 2024, the President of Ukraine signed the new Law "On Compulsory Insurance of Civil Liability of Owners of Land Vehicles". This law aims to improve the motor insurance market and adapt it to European standards. This was reported by the press service of the NBU.

The main objective of the new legislation is to introduce a qualitatively new model of market regulation that meets European standards and takes into account the interests of policyholders and victims. This will help to increase confidence in motor insurance and further develop the market. The legislative changes developed by the National Bank of Ukraine are aimed at gradual implementation of the requirements of Directive 2009/103/EC of the European Parliament and of the Council.

The law provides for several important innovations. First of all, the quality of insurance coverage will be improved. This includes a gradual increase in the maximum amount of insurance payments to the level of EU countries, the introduction of annuity payments in case of serious injury to health or life of victims, and the calculation of insurance payments without taking into account the wear and tear of vehicle parts.

In addition, European principles of motor insurance pricing are being introduced. The use of electronic technologies will make it possible to determine a fair price for each policyholder, taking into account their personal history. It also provides for the transition to an electronic form of contracts through a centralized database.

The law also aims to improve customer service. This includes simplifying the mechanism for settling insurance claims, introducing mandatory direct settlement of losses, and abolishing the limit on maximum payments when using the European protocol.

Special attention is paid to improving the management of the MTIBU. It is envisaged to form new management and control bodies, create a balanced decision-making system, and improve the MTIBU supervision system.

"The NBU has held detailed discussions with the market on the innovations and is ready to continue the dialogue for successful approximation to civilized European rules," said Kateryna Rozhkova, First Deputy Governor of the NBU. "The law provides for a one-year transition period for the MTIBU to bring its activities in line with the new requirements. According to our preliminary estimates, the bureau will successfully cope with this."

Before the Law comes into force on January 1, 2025, the National Bank plans to assess the quality of insurers' assets to identify potential weaknesses and avoid systemic problems. The NBU will also develop regulations to implement the Law, in particular for the functioning of the Unified Centralized Database of Motor Third Party Liability Insurance Contracts. In addition, procedures will be defined to complete the transformation of the MTIBU, including the introduction of a two-tier corporate governance system, the formation of the Council and the Management Board, the organization of an internal control system, etc.