Local insurers are helped to shift to prudential supervision

Clea McElwain
May 27, 2021

The transition to prudential supervision is no longer a prospect that confuses local insurers. Thanks to the trainings organized by FSTA, insurance companies have gained a much clearer understanding of what this concept entails, but also of the steps they should follow to comply with the new provisions.

The Association Agreement with the European Union requires Moldova to meet several conditions, including alignment with international standards in the field of insurance. The transposition of the EU’s “Solvency II” Directive into the new draft law on insurance and reinsurance activity has led the sector players to start preparations for compliance with the new regulatory framework. The new provisions, however, have created a certain state of confusion, since prudential supervision is a novel field for all parties.

The solution was to turn to international expertise. As of fall 2020, the USAID Financial Sector Transparency Activity (FSTA) is supporting several activities aimed at aligning Moldova’s insurance sector with international norms. With a proactive approach in its activities, FSTA has developed a holistic training program that meets all sector’s needs. And one of the objectives is to support Moldovan insurance companies in the transition to prudential supervision, by conducting the necessary trainings involving international experts.

The subject of prudential supervision sparked enormous interest among local insurers. The latest training workshop for executive directors, actuaries, underwriters, and risk managers brought together representatives from all local insurance companies. The training event provided a great opportunity for them to learn more about the elements of prudential supervision such as risk management, corporate governance, and ORSA (own risk and solvency assessment).

At the same time, the theoretical presentations were alternated with interactive discussions, during which the participants had the possibility to debate the measures they would take in different hypothetical situations. “The practical exercises allowed us to exchange views on the challenges we anticipate in the implementation of prudential supervision and, at the same time, to find out what are the recommendations of an international expert with extensive experience in this field“, said Cristina Mardari, Head of Internal Control and Risk Manager at a Moldovan insurance company.

Another novelty of the training workshop was the Instruction for preparing the ORSA Report, developed by FSTA experts. The document includes a series of guidelines that will help both the regulator and the insurance companies to ensure the correctness and completeness of the data contained in the report. “Both, the materials presented on each of the prudential supervision’s elements and the separate Instruction for preparing the ORSA Report will serve as a guide in the complex process of implementing the new regulatory framework“, Cristina Mardari pointed out.

A screenshot of the online training session on prudential supervision

The helpfulness of the presented materials was also noticed by other participants, who considered it necessary to share them with other colleagues. “These guidelines answer many of the questions we had about prudential supervision, especially with reference to the ORSA Report, which is a first for our country. I have shared these materials with my colleagues as well, as they would help them significantly raise the efficiency of their activity and be better prepared for the coming changes”, mentioned Lilian Barbier, Head of Insurance and Underwriting Department at a local insurance company.

The requirement to prepare reports on own risk and solvency assessment is set out by the new draft law on insurance and reinsurance activity. The deadline for starting the presentation of this report by insurance market participants is 12 months from the entry into force of the new regulatory framework. In the future, FSTA experts will also support NCFM in developing an ORSA reporting template, which could be used by reporting entities.