Long awaited amendments to the Ukrainian insurance regulations that have been adopted with the aim of liberalizing foreign insurers' access to the Ukrainian market are now effective. Relevant changes to the Law of Ukraine "On Insurance" were introduced back in 2005 as part of the country's accession to the World Trade Organization and thus enforced on 17 May 2013 (the "Amendments"). Now, local branches of foreign insurers can also qualify as insurers under Ukrainian law, subject to certain conditions. Foreign insurers are authorized to operate on the country's insurance market via their permanent establishments ("філії" in Ukrainian), which are registered with the regulator (the National Commission for Regulation of Financial Services Markets of Ukraine) and have obtained the relevant insurance license(s).

Briefly, the Amendments establish the following pre-requisites for a foreign insurer to open a branch in Ukraine:

  • The country of registration of such foreign insurer must participate in the international cooperation to fight money laundering and cooperates with FATF;
  • An agreement on the exchange of data has been concluded between the insurance market regulator of the foreign insurer's country of registration and the Ukrainian Regulator;
  • Insurance activities in the foreign insurer's country of registration are subject to state monitoring or regulation;
  • A treaty between Ukraine and the foreign insurer's country of registration on the prevention of tax evasion and avoidance of double taxation exists;
  • The foreign insurer's country is not included in the OECD's list of offshore countries;
  • The financial strength rating of the foreign insurer complies with requirements established by the Regulator (which are "В+" by A.M.Best" or "Baa" by "Moody's Investors Service" or "BBB" by "Standard & Poor's" or "BBB" by "Fitch Ratings");
  • The branch maintains a so-called guarantee deposit placed with a Ukrainian bank that is not subject to either bankruptcy or financial rehabilitation procedures; in addition, the amount of such guarantee deposit should be no less than the minimum amount of share capital established for Ukrainian insurers (currently EUR 1 million for non-life and EUR 10 million for life insurers);
  • A foreign insurer should execute an irrevocable commitment on an unconditional performance guarantee regarding obligations arising out of activities of its branch on the territory of Ukraine; and
  • The laws of the foreign insurer's country of registration allow Ukrainian insurers to open branches on the territory of the foreign insurer's country of registration.

It should be emphasized that the Amendments provide for the foreign insurer's unlimited liability for the debts of its Ukrainian branch.

Several comprehensive regulations that detail the Amendments are also effective now. These regulations establish detailed procedures for the registration and liquidation of foreign insurers' branches; the relevant licensing conditions for insurance activities; requirements re. the branches' guarantee deposit, as well as procedures for imposing fines for violations of the financial services legislation.

The market perceives enforcement of the Amendments as a positive sign for the integration of the Ukrainian insurance market. However, many questions regarding the Amendments' implementation in practice remain open and we expect the Regulator to issue further clarifications on these issues.

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