Credit-Rating: Liberalization of rules for insurers` reserves placement may negatively affect solvency of a number of insurers
Starting from 24 December 2007 insurers has a right of placing their reserves in attractive assets to their discretion with no diversification. Thereat, the groups of assets remain the same: bank deposits, current accounts, real estate property, securities, right for claim to reinsurers and others. The given decision has been made by the regulator of the national insurance market (State Commission for Regulating of Markets of Financial Services) following a court decision on sue filed by one of insurance companies.
In Credit-Rating`s view, these changes will not have impact on market players engaged with classical insurance. Diversification of reserves placement remain inherent for these companies, which operate in the framework of the approved strategies. Apparently, these insurers continue to adhere to prudent and consistent investment policy, considering that the regulator pledges to reestablish norms previously cancelled by the court.
At the same time, the insurers involved in so-called `scheme insurance`, now may place up to 100% of their reserves in both risky instruments and non-liquid securities, which may affect their capacity to meet their commitments towards the customers.
Considering the fact that the national insurance market is rather infant and is not able to withstand the problems associated with liquidity and solvency, the liberalization of rules of reserves placement in the environment of liquidity crisis and volatility on international and national financial markets may have negative impact on the development of insurance market.
Credit-Rating subscribes to the opinion that the insurance market still remains relatively opaque. A major part of statements of a certain institution (including those regarding the nature of reserves placement) are confidential and the regulator is not allowed to make it public. Under these conditions the role of independent and open sources of reliable information, which may help customers to make a right decision in choosing insurance company becomes even more important.
Information on all credit ratings assigned in accordance with the National Rating Scale may be found in REUTERS and BLOOMBERG information systems.
For more information, please contact:
Information and Communication Department
Sergey Rozumyak +38 044 490 25 50
SRozumyak@credit-rating.com.ua
