The National Bank of Ukraine (NBU) together with international partners, in particular the World Bank and the European Bank for Reconstruction and Development (EBRD), are preparing a new mechanism for settling military risks, which they plan to present no later than the first quarter of 2024.
As noted on the NBU Facebook page, during the meeting of the regulator’s management with participants of the insurance market, the head of the National Bank Andriy Pyshnyy emphasized the importance of the introduction of insurance of political-military risks, which should be fully operational next year.
It was also noted that one of the priorities of the National Bank in 2024 is the development of a competitive, adaptive and cost-effective insurance market.
“New requirements for insurance companies bring us closer to European standards of regulation and supervision. Therefore, the implementation of new norms is a priority, and integration into the European community is task No. 1. We will have to move as fast as possible, but you can count on comprehensive support and mature constructive dialog,” Pyshny said, speaking about the importance of such changes for domestic insurance.
It was noted that in 2024, in particular, will begin the application of risk-oriented prudential supervision and improvement of requirements for the solvency of insurers, as well as a new type of supervision of market behavior of insurers to control compliance with the rules and standards of financial services.
“The National Bank is strengthening its staff with specialists who will evaluate insurers’ business models using a risk-based approach. Special attention will be paid to the assessment of insurers’ assets – property and securities, the value of which should be market-based,” Deputy Head of the NBU Dmytro Oleinik said during the meeting.
Separately, emphasis was placed on the importance of the work of financial monitoring units of insurers as a safeguard to attract companies to money laundering schemes, in particular for the purpose of tax evasion, and to limit ties with Russia.
At the same time, it was noted that the work continues in the Parliament to finalize the text of the new law “On compulsory insurance of civil liability of owners of land vehicles,” which should be adopted under the IMF program by the end of May next year.
Now insurance companies will have to prepare for the renewed field inspections by the National Bank in order to eliminate possible violations of the law in advance, emphasized representatives of the regulator.
Andriy Pyshnyy, EBRD, European Bank for Reconstruction and Development, NATIONAL BANK OF UKRAINE, NBU, WORLD BANK
Net sales of dollars by the National Bank of Ukraine (NBU) increased to $977.3 million last week from $862.5 million a week earlier, the last time the NBU sold more in the first week of the transition to managed exchange rate flexibility in early October.
In the first half of the week, according to the central bank, purchases of foreign currency by bank clients grew, reaching $475 million on Wednesday and exceeding sales by $260 million.
As a result, the NBU on Wednesday weakened the hryvnia by 0.6%, or 23 kopecks, and in total for the first three days of the week – by 1.4%, or 53 kopecks.
On Thursday, however, the depreciation was very slight, and on Friday the NBU even strengthened the exchange rate by 4 kopecks to 37.5525 UAH/$1.
Overall, since November 26, when the national currency began to weaken, the dollar has risen by 4.3%, or UAH 1.54. At the same time, due to the strengthening of the hryvnia in the first time after the National Bank switched to a managed flexibility regime on October 3, the dollar rose by 2.7%, or 98 kopecks, against the fixed exchange rate that had been in effect for more than 14 months.
On Friday, the dollar also fell slightly on the cash market – by 11 kopecks, to about 38.10 UAH/$1.
As reported, the National Bank’s net sales in November fell to $2.46 billion from $3.34 billion in October and $2.69 billion in September. However, the reduction in external financing to $2.04 billion led to a decrease in international reserves for the fourth consecutive month – by 0.5%, or $187.8 million, to $38 billion 785.2 million.
The portfolio of domestic government bonds (government bonds) of Ukrainian banks increased by UAH 4.355 billion (by 0.7%) – to UAH 632.116 billion, legal entities – by UAH 2.404 billion (by 1.8%) – to UAH 135.172 billion, individuals – by UAH 0.321 billion (by 0.6%) – to UAH 51.515 billion.
According to the NBU, the total portfolio of government bonds increased by UAH 7.087bn (by 0.5%) – to UAH 1554.292bn from UAH 1547.205bn a day earlier, in the ownership of the National Bank and therobschina remained unchanged, non-residents – changed slightly.
The official exchange rate for December 21 – 37.5516 UAH/$1
The National Bank of Ukraine’s (NBU) net sales of dollars in November, the second month after the country switched from a fixed exchange rate regime to a managed flexibility regime, fell to $2.45 billion from $3.34 billion in October, even less than the $2.69 billion in September.
According to the central bank’s website, its purchases of foreign currency remained minuscule at $4 million, compared to $14 million in October and $1 million in September.
For its part, the Ministry of Finance reported that in November, the budget received $2 billion in grants and external concessional financing, compared to $2.8 billion in October. In particular, $1.6 billion was provided by the European Union and $0.4 billion by the World Bank with a guarantee from the UK.
In November, the hryvnia exchange rate on the interbank market weakened by only 0.2%, or 7 kopecks, to UAH 36.3535/$1 at the beginning of December, while from the end of July 2022 to October 3 this year, the National Bank maintained the official exchange rate of UAH 36.5686/$1.
In the cash market in November, the dollar fell by about 35 kopecks to 37.40 UAH/$1.
In total, since the beginning of this year, the NBU has purchased $217.1 million in the market, while selling $24 billion 811.9 million.
The National Bank of Ukraine (NBU) has developed a regulation on the transition of the Ukrainian insurance market to European standards to bring insurers’ activities in line with Directive 2009/138/EC of the European Parliament and of the Council of 25 November 2009 on the establishment and conduct of insurance and reinsurance activities (Solvency II).
According to the NBU’s website, the regulation on establishing requirements for insurer solvency and investment activities has been developed and proposed for public discussion and consists of two main blocks.
The first block includes requirements for ensuring solvency, in particular, establishes the procedure for calculating regulatory capital and eligible regulatory capital, taking into account restrictions on the composition and structure of eligible assets for their calculation, as well as the procedure for calculating solvency capital. Thus, the minimum capital under the simplified approach for certain categories of insurers, in particular, life insurers and non-life insurers with significant volumes of activities, is set at the level of at least UAH 48 million, and for others – UAH 32 million.
Insurers will apply a simplified approach to calculating solvency capital based on insurance premiums, insurance claims, technical reserves, etc. until 2027.
The second block includes requirements for the insurer’s investment activities, including assets to cover technical reserves and restrictions on investment.
The NBU notes that the regulation will come into force on January 1, 2024, and will provide for a six-month period for insurers to bring their activities in line with the new requirements. After that date, the NBU will not apply any enforcement actions to insurers for violating solvency requirements if they implement their recovery and/or financing plans.
Comments and suggestions on the draft are accepted until December 18, 2023.
The EU Solvency II Directive primarily concerns the amount of capital that insurance companies must hold to reduce the risk of insolvency. The next steps to strengthen the solvency requirements for insurers in Ukraine, according to this directive, will be to determine the procedure for assessing certain categories of eligible assets and to introduce requirements for calculating solvency capital and minimum capital under the basic approach for certain categories of insurers from 2027.
The National Bank of Ukraine (NBU) has revoked the licenses of six financial institutions and removed two from the State Register and two from the Register of persons that are not financial institutions but have the right to provide certain financial services.
According to the regulator’s website, based on their own applications and submitted documents, all existing licenses were revoked and they were excluded from the State Register of Financial Institutions: Lombard “Capital Credit” Shevchenko and Company, LLC, A.T. Finance, LLC, FC Euro Premier Finance.
In addition, all existing licenses were revoked at the request of Lombard Regional PA, Zlatodar 585 PE and Company, and FC Fly Finance LLC, and FC Atlanta LLC was excluded from the State Register of Financial Institutions and Leasing Company Agrofund LLC was excluded from the Register of Persons that are not financial institutions but have the right to provide certain financial services.
They were also excluded from the State Register of Financial Institutions: Instant Lending Service LLC – due to the NBU’s decision to revoke all existing licenses and FC Sun-Rise Financial LLC – due to the absence of financial services licenses for three months.
Due to the fact that SE “Spetsagroleasing” does not have a valid license to provide financial services, the company was excluded from the Register of persons that are not financial institutions but have the right to provide certain financial services.
The NBU Committee on Supervision and Regulation of Non-Banking Financial Services Markets made these decisions at a meeting on October 20, 2023.
