On 16 October 2012 the Parliament of the Republic of Lithuania adopted the Law on Amendments to the Law on Insurance (No. XI-2277), which amended the Law on Insurance as of 18 September, 2012 (No. IX-1737). The actual wording of the Law on Insurance was harmonised with directives of the European Union. Solvency requirements for insurance companies have been strengthened by Directive 2009/138/EC of the European Parliament and of the Council dated 25 November 2009 on the taking-up and pursuit of the business of Insurance and Reinsurance (Solvency II Directive). This Directive provides for the business of insurance and maintenance governing system based on a three-tier system: quantitative requirements, qualitative requirements and maintenance, disclosure requirements.
Quantitative requirements are set out in Article 40 of the newly adopted law, which states a minimum capital for insurance and reinsurance companies that is greater than stated in the previous wording of the law. Minimum capital requirements were increased by 200,000 euros up to 2.2 million euros for insurance companies carrying out general insurance activities and up to 3.2 million euros for companies engaged in life insurance business, as well as involved in land vehicles, aircraft and ship management-related liability insurance, general liability insurance, credit and surety insurance. Insurance or reinsurance company noting its failure or realising that there is a risk of not being able to comply within the next 3 months with the minimum capital requirements, must inform on this matter the supervisory authority, the functions of which in Lithuania are carried out by the Bank of Lithuania.
Qualitative requirements and maintenance is implemented by providing risk management and internal control requirements for insurance and reinsurance companies. The new Law on Insurance provides that an insurance or reinsurance company must have adopted a written policy on risk management, internal control, internal audit and, where applicable, the contracting activity areas.
It was stated that the insurance or reinsurance undertaking must have an effective risk management system comprising of strategies, processes and reporting procedures necessary for permanent detection, evaluation, monitoring, managing and reporting on risks and interaction of risks, arising or likely to arise.
Insurance or reinsurance undertaking must implement an effective system of internal control. The internal control system must include at least the administrative and accounting procedures, internal control structure, appropriate reporting arrangements at all levels of the company and the compliance function, which includes compliance and evaluation of the process of implementing legislative and internal requirements in accordance with this Law and the Solvency II Directive.
The disclosure requirement established in Directive is implemented in Article 54 of the new Law. It provides that an insurance or reinsurance undertaking, complying with the requirement to disclose information publicly, must prepare and publish a report on its solvency and financial condition.
Harmonizing the new wording of the Law with the Council Directive 2004/113/EC of 13 December 2004 implementing the principle of equal treatment between men and women in the access to goods and services and the supply of goods and services, Article 95 paragraph 2 states that while assessing the insurance risk the insurer is prohibited from taking into consideration the gender of a person being insured as a factor for calculating insurance premiums and payments.
The law provides that an insurer investigating the circumstances of an accident insured against or an event that could be recognised as an insured one under the life insurance, health insurance or liability insurance contracts, shall be entitled to receive and continue to manage information available at the personal health care or other state or local agencies, or managed by registers, informational systems or other data files concerning the health condition, provided treatment, detected illnesses, injuries and death reasons of the insured and/or the injured third person.
The new Law on Insurance will enter into force as of 1st January 2014 (with the exception of Article 3 of the Law, which lists the entities authorised to carry out insurance business activities in Lithuania).
The full text of the new wording of the Law on Insurance can be found here
Back to the news list