Proportional regulation and risk-based supervision over insurers: market discussion outcomes

Small insurers that are not engaged in mandatory or socially important insurance will submit certain reporting forms to the regulator less often. These are the outcomes of the public discussion of the Concept for Proportional Regulation and Risk-based Supervision over Insurance Market Participants.

The document presented by the Bank of Russia for discussion in July described approaches to proportional regulation and risk-based supervision over different kinds of non-bank financial institutions, including insurers.

Discussion participants raised such questions, among other things, as the impact of the Concept's provisions on the competition level and the affordability of insurance services; softening of requirements for investing capital and insurance reserves; requirements for corporate governance in small and medium enterprises; and transition to proportional regulation with regard to AML/CFT and business reputation.

As a result of the Concept discussion with insurers, it was considered reasonable to differentiate the requirements for corporate governance, including internal control and risk management systems, depending on the company category.

According to the resulting document, the requirements for insurance companies will differ based on the level of risk that is specific to each company and its activity. At the same time, the criteria based on which companies will be assigned to each category (large, medium and small) as well as the differentiated requirements for companies of each category are yet to be approved and discussed with the business community and experts.

To sum up the discussion, the Bank of Russia has prepared a road map with the timeline coordinated with Solvency II implementation. Thereby, these changes may come into force by 2022.