PARTICIPATION OF REPRESENTATIVES FROM DUNAV INSURANCE COMPANY IN THE 21 ST ANNUAL CONFERENCE ORGANISED BY THE INTERNATIONAL ASSOCIATION FOR INSURANCE LAW AND THE ASSOCIATION OF SERBIAN INSURERS
The 21 st annual conference organised by the International Association for Insurance Law
and the Association of Serbian Insurers entitled "Modern Aspects of the Legal and Regulatory
Insurance Concept" was held at Hotel Sloboda in Šabac from September 25 to 27. This year
about sixty participants from our country attended the conference, since the pandemic of
coronavirus prevented the arrival of lecturers from abroad. However, they participated via Skype
or by video presentations shown at the conference. Thus, attendees did not miss interesting
lectures and valuable experiences from the EU countries, and on this occasion from China and
the United States of America.
Participants from various insurance companies, universities, the Association of Serbian
Insurers and other institutions were greeted by Slobodan Jovanović, PhD, the President of the
International Association for Insurance Law.
‒ This year's conference organised by the International Association for Insurance Law of
Serbia is held in the circumstances of legal and regulatory dynamics in insurance law and
adjustment to increasingly extensive legal framework that creates a greater number of
obligations for participants in the insurance market. Regulations concerning protection of
financial service consumers also affect the insurance business in terms of its relationship with
insureds and other persons with legal interest in insurance. On the other hand, technical and
technological development imposes the need to create new insurance services, which inevitably
opens numerous questions regarding civil liability in general, and in insurance brings dilemmas
regarding the manner and scope of coverage ‒ said professor Slobodan Jovanović, PhD.
‒ All of the above stated continuously affects the study of theoretical issues and practical
effects of certain solutions in the supervisory and regulatory, and contractual domain of
insurance business. In terms of the solution from the Preliminary Draft of the Civil Code of the
RS presented in May 2019, it seems that the reform of the insurance contract law will ignore
some useful proposals made by members of the International Association for Insurance Law
regarding legal regulation of insurance contracts. Having in mind the insurance dynamics and the
need for occasional improvement and modernization of the contractual insurance law, I believe
that our initiatives from 2004 and 2005 should be considered so that the contractual insurance
law becomes the subject of a special law on insurance contracts - said professor Jovanović and
thanked the organisers, sponsors, friends of the Association, as well as everyone who took the
time to attend and participate in the conference.
Dragica Janković, PhD, a member of the Executive Board of Dunav Insurance Company,
was honoured to open the Conference with an introductory speech on the topic "Current issues
and trends in the Serbian insurance market". Firstly, she presented data on the situation and
results on the Serbian insurance market, pointing to the growth of the premium of less than 4
percent, which was achieved in the first half of this year, despite the coronavirus pandemic.
However, she emphasized that in order to reach the premium of one billion Euros, it is necessary
to achieve growth of nearly 9 percent, which is a difficult goal to achieve this year, having in
mind all the obstacles faced by the economy and individuals affected by the coronavirus
pandemic.
‒ Situation on the insurance market has not changed for many years. With the share of a
bit over 27 percent in the total premium, the leader is Dunav Insurance Company followed by
Generali with 20.39 percent, then by DDOR "Novi Sad" with 12.24 percent and Wiener
Städtische with 11.79 percent. Non-life insurance premium increased by 4.15 percent, while in
2019 the growth was 8.23 percent compared to 2018. In non-life insurance, Dunav leads with the
share of 31.5 percent, followed by Generali with 18.13 percent and DDOR "Novi Sad" with
13.51 percent. Growth of life insurance in relation to last year's first half of the year amounted to
3.38 percent, and in 2019, compared to the previous year, was 5.36 percent. Four companies
have as much as 75.18 percent share in the total life insurance premium, and leaders are foreign-
owned companies - Generali with 28.56 percent, Wiener Städtische with 21.39 percent and
Grawe with 14.12 percent, while Dunav is slowly but surely progressing, reaching a share of
11.11 percent - said Dragica Janković, PhD.
Dragica Janković, PhD, believes that the reason for such market schedule in life
insurance was a broken trust of insureds in national companies at the time of hyperinflation.
‒ At the beginning of 1994, prices grew by an average of 62.2 percent per day, that is, 2
percent per hour, we had a banknote of 500 billion Dinars, and in one day as many as 16 zeros
were erased. Life insurance premiums paid for several years disappeared. They disappeared for
insureds who experienced it as theft, and in fact they also disappeared for the insurers. Insureds
who used to insure their lives turned to foreign companies that emerged on the national market
with new services and thus made a step forward that was difficult to achieve until recently -
explained Dragica Janković, PhD.
In the period from 2005 to 2019, since the National Bank of Serbia took over the
supervision of the insurance market, life insurance had tendency to grow steadily. Starting with
38.58 million it reached 213.14 million Euros, i.e. five and a half time bigger than 15 years ago.
Contrary to that, non-life insurance recorded ups and downs. From 2005 to 2008, non-life
insurance was on the rise, and then global economic crisis affected the reduction of non-life
insurance premium, which only in 2016 exceeded the level reached in 2008. In 15 years, non-life
insurance increased only by 1.9 times.
‒ Despite that, what is particularly good and achieved in the mentioned fifteen-year
period, is the strengthening of technical reserves, which were 264 million and reached the
amount of one billion and six hundred million Euros, that is, they increased more than six times.
Technical reserves of non-life insurance increased from 217.71 to 706.18 million Euros or over
3.2 times, while technical reserves of life insurance increased from 46.84 million to as much as
900.66 million Euros or 19.23 times, which is a consequence of different manner of calculating
technical reserves for life and non-life insurance, but also the increase in life insurance - Dragica
Janković, PhD, explained.
Despite the reported growth, data from the report of the National Bank of Serbia indicate
insufficient development of the Serbian insurance market compared to European countries. This
is primarily evidenced by the premium share in gross domestic product, and premium per capita,
where data have been unchanged for several years or have changed slightly. Nevertheless, the
insurance sector in Serbia employs more than 10,000 people; 17 banks, 7 financial leasing
providers, a public postal operator, 95 legal entities - brokerage and agency companies, 80
representatives – natural persons and entrepreneurs and 4,696 active authorised persons
participate in the sale of insurance services, i.e. insurance representation or brokerage.
Dragica Janković, PhD, then quoted Čedomilj Mijatović, a founder of the National Bank
of Serbia, a diplomat and the Minister of Finance and Foreign Affairs of the Principality of
Serbia and then the Kingdom of Serbia, the president of the Serbian Royal Academy, a man who
named our current currency the Dinar, and who is credited with the establishment of the
Insurance Department within the Belgrade Cooperative, which is considered the first Serbian
insurance company. In his paper "Opinions on Insurance", published in the "Trade Gazette"
exactly 123 years ago, he expressed hope that one day, in the 20 th century, everyone in Serbia
would realise the importance of insurance and insure themselves, members of their family, their
property. Dragica Janković, PhD, pointed out that hopes of Čedomilj Mijatović did not come
true, not only because people did not understand the importance of insurance, but also because of
numerous wars and socio-economic upheavals that left a deep mark on the living standard of our
population.
In addition to education that is important for raising awareness of the population about
the importance of insurance, Dragica Janković, PhD, pointed out the importance of trust in
insurance companies, which was shaken at the time of inflation. Apart from the collapse of the
national currency, at the time, due to a very low initial capital, the number of insurance
companies in our market grew uncontrollably. At the end of 1996, there were 82 companies with
extremely poor financial and personnel potential. They collected the premium, soon after the
incorporation they wound up and left insureds without the option to recover damages or with the
option to recover damages with great complications.
‒ Gradual regulation of the market came with the adoption of the Law on Insurance of
Property and Persons in 1996, and it continued in 2004, when the supervision of insurance
companies was taken over by the National Bank of Serbia. Number of insurance companies has
been reduced to 16 up to the present time - said Dragica Janković, PhD, pointing out that market
regulation continued with the adoption of the Insurance Law in 2014, which entered into force in
2016 and which introduced elements of European regulations in our insurance.
‒ In 2018, guidelines on minimum standards of conduct and good practice of insurance
market participants were adopted in connection with the Insurance Distribution Directive, which
aimed to protect insureds, and the Law on Personal Data Protection passed in compliance with
the General Data Protection Regulation of the European Union (GDPR - General Data Protection
Regulation) is significant for insurance - said Dragica Janković, PhD.
She also said that preparations for the implementation of the International Accounting
Standard (IFRS 17) are being carried out in the EU, which should come into force in 2021. It is
believed that it will start in a new era in the accounting practices of insurance companies.
The National Bank of Serbia adopted a strategy for the implementation of the Solvency 2
Directive, which consists of three pillars - quantitative, qualitative and transparency. It conducted
a GAP analysis that confirmed the readiness of insurance companies in our country to implement
the Directive. Preparation for the first pillar of Solvency 2, which refers to technical reserves and
capital adequacy, was carried out in 2016 and 2017 through two stress tests made in accordance
with the EIOP methodology and the Solvency 2 Directive. They included a scenario of
unmarketable investments, a retrocession scenario, an actuarial scenario, and natural catastrophe
scenarios - earthquakes and floods. Results of stress tests showed that the insurance sector in
Serbia is stable and that it would remain stable even in case of extreme and unlikely shocks that
would not jeopardize capital adequacy. In 2018 and 2019 two quantitative impact studies were
conducted, QIS 1 and QIS 2, and this year consolidated balance sheets of Dunav Insurance
Company were planned to be done, and QIS 3 was prepared and planned to be conducted by the
NBS, but due to the epidemic of Covid-19 everything was stopped. Quantitative studies are
conducted to determine the solvency ratio under the Solvency 2 Directive and the weaknesses of
insurance companies in order to address them during preparations for the introduction of the
Directive, and to ensure an adequate ratio. These are rather complex actuarial calculations that
should quantify the total risk for an insurance company as the sum of many risks and sub-risks,
such as non-life insurance risks, life insurance risks, voluntary health insurance risks, all market
risks, risk of counterparty default and many others. Based on that, the amount of capital an
insurance company needs to provide in order to be able to bear the risk is calculated, i.e.
solvency capital requirement is calculated. On the other hand, available adequate funds of a
company are determined in order to cover the capital requirement. The ratio between these two
quantities is the solvency ratio. In the EU, in 2018 the solvency ratio was 236%, Slovenia had
237%, while Germany with 337% had the maximum solvency ratio. The solvency ratio is a
counterpart to the capital adequacy that we have in Serbia under the Solvency 1 Directive, which
is 218% for life insurance and 263% for non-life insurance. QIS 2 showed that the solvency ratio
of Dunav Insurance Company is at 60 percent in relation to the capital adequacy that is good -
said Dragica Janković, PhD.
Noting that due to requirements imposed by the Solvency 2 Directive, companies are
forced to have bigger capital than needed if realistic scenario and projection models are taken
into account, Dragica Janković concluded that there is never sufficient premium or sufficient
technical reserves, and that the higher the level of solvency ratio of a company, the greater the
possibilities for its development. Insureds are more certain that the company will be able to fulfil
any obligations regardless of any unexpected scenario, i.e. realisation of risk.
The company was also represented at the conference by Sarita Olević, a Master of Law, a
Senior Advisor in the Property and Legal Relations Service and a member of the Supervisory
Board of Dunav Insurance Company, who presented a paper on "Legal aspects of protection of
financial service consumers and personal data protection in distance contracts". She presented
and analysed provisions of current regulations governing these contracts through a number of
current issues related to the need and importance of protection of financial service consumers in
distance contracts, which are increasingly present in our daily lives,
‒ Legal framework of distance contracts in the Republic of Serbia is regulated by the
Law on Protection of Financial Service Consumers in Distance Contracts, the Law on Consumer
Protection, and bylaws passed by the NBS. Provisions of the Insurance Law, as well as the Law
on Contracts and Torts, apply to insurance contracts concluded at a distance. These are contracts
concluded without the direct presence of a provider and consumer of insurance services at the
same place and at the same time. Directive 2002/65/EC defines distance contracts as contracts
that are negotiated at a distance and involve the use of means of distance communication used as
part of a distance sales or service-provision scheme not involving the simultaneous presence of
the supplier and the consumer. Therefore, distance contracts are those the offer, negotiation and
conclusion of which are carried out at a distance - said Sarita Olević, explaining that the Law on
Consumer Protection prescribes stricter formal conditions for concluding distance contracts,
which imply that the service consumer or user within a reasonable time, and at the latest at the
time of service provision, must be handed the contract, the notice and the waiver form on a data
carrier.
Sarita Olević pointed out that the National Bank of Serbia, which supervises operations
of insurance companies, based on the Insurance Law, passed a Decision on the manner of
protecting the rights and interests of insurance service consumers. The decision prescribes the
right of insureds to be informed, as well as that the NBS, in order to protect the rights and
interests of insureds and other insurance beneficiaries, inter alia, mediates in resolving claims for
damages to prevent disputes, acts on complaints of insurance service consumers and protects the
rights and interests of such persons. Obligation to inform a service consumer implies that a
service provider, i.e. an insurance company, before concluding a distance contract, is obliged to
provide a consumer with information on a service provider, financial service, distance contract
and the manner of resolving disputes, which are clear and understandable so that the insurance
service consumer is not misled. The stated obligation was established in order to eliminate the
danger of depriving a service consumer of insurance coverage due to insufficient information.
Therefore, it is important that the information is understandable, precise and clear, and that it
indicates the essential characteristics of a service from the offer.
One of the basic measures of consumer protection is the right to waive a contract. A
consumer or an insured has the right to change his mind and waive a contract without additional
costs or penalties. In case of distance insurance contracts, a policyholder has the right to waiver
within 14 days from the day of concluding the contract. If the subject of a distance contract is life
insurance, the deadline for waiver is 30 days from the day of delivery of the notification on a
concluded contract, which also applies to contracts on voluntary pension insurance - said Sarita
Olević.
She also added that legal theory and practice, taking into account the fact that insurance
is a complex legal business, indicate that internet is not a suitable channel for selling all types of
insurance services, but only some, and therefore it is less represented in insurance than other
financial services. She particularly emphasised legal aspects of personal data protection and the
obligation of insurance companies to inform the insured that they process personal data
exclusively for the purpose of fulfilling contractual obligations, as well as that the company is
not able to meet them without collecting and processing data. The company must keep the
collected data as a business secret, and if it is established that the data processing was not legal, a
service consumer has the right to revoke the consent to data processing that he gave when
concluding the contract.
The Conference included thematic round tables dedicated to insurance contracts, life
insurance contracts, non-life insurance contracts, MTPL insurance contracts, insurance
management and competition, sale of insurance services and consumer protection, which were
followed by our experts from the Legal Affairs Function, the Function for Actuarial Science and
Solvency Risks Management and the Insurance Sales and Indemnity Department.
This year, members of the International Association for Insurance Law of Serbia and
insurance experts gave their proposals for modernization and improvement of the legal
framework of insurance through papers published in the Proceedings, which bore the same title
as the general topic of this year's conference.
Lj. Lazarević Davidović
Translated by: Jelena Rajković