The Law "On Insurance" dated March 7, 1996 (the "Insurance Law"), sets forth general provisions regulating insurance activity in Ukraine. The Insurance Law provides for inter alea, the list of entities/persons which may conduct insurance activities, forms and kinds of insurance, objects of insurance, requirements to and procedures for reinsurance, execution, performance under and termination of insurance contracts, state control over insurance activity in Ukraine.
According to the Insurance Law, an insurer may not be established by less than three founders in the form of a joint-stock company, general partnership, limited partnership or additional liability company.
The insurer is not allowed to begin operating on the market until it obtains "a license on carrying out insurance activity". Under the Commercial Code, such licenses are issued for the purpose of conducting specific kinds of insurance activities determined in such licenses (e.g. life, health insurance, investment insurance). The insurer is entitled to perform only those kinds of insurance which are covered by the respective licenses. An insurer, which obtained a license for life insurance activity is not entitled to perform any other kinds of insurance. The licenses on insurance activities are issued by State Commission for Regulation of Financial Services Markets (the "Financial Services Commission") for a fixed term (except for life insurance licenses, the validity term of which is not indicated).
The Law "On Financial Services and State Regulation of Financial Services Markets" dated July 12, 2001 (the "Law On Financial Services") and the Insurance Law states that insurers are deemed as financial institutions, a status that imposes certain requirements on them. In particular, financial institutions are required to be registered with the State Register of Financial Institutions maintained by the Financial Services Commission, and such registration is proved by the Certificate on Registration of Financial Institution.
The Insurance Law establishes that the amount of chartered capital of an insurer performing life insurance should be not less than Euro 1.5 million, and an insurer performing other kinds of insurance - Euro 1 million. The chartered capital of an insurer is required to be exclusively in monetary form (in-kind contributions are prohibited). The Insurance Law further prohibits chartered capital with bills of exchange, insurance reserve assets, loans, secured funds as well as other intangibles. Specific rules apply to the possibility of insurers investing into the chartered capital of other insurers. In particular, the total amount of contribution to the chartered capitals of other Ukrainian insurers may not exceed 30% of the company's own chartered capital and the limit of investment into one insurer constitutes 10% of internal chartered capital.
According to the Insurance Law, an insurer may be engaged exclusively in the following activities: (a) insurance, (b) reinsurance, (c) financial activities related to the attraction, investment and management of insurance funds.
The Insurance Law provides for two forms of insurance in Ukraine: voluntary and mandatory. The Insurance Law sets forth an exhaustive list of more than forty kinds of mandatory insurance and a list indicating the types of voluntary insurance. Any mandatory type of insurance becomes effective only after adoption of the specific regulation on such type of insurance by the Cabinet of Ministers.
According to the Insurance Law, insurance contracts should comply with insurance rules, which are elaborated by the insurer and should be registered with the Financial Services Commission. The Insurance Law stipulates the list of essential elements of any insurance contract, which include the object of insurance, insured accidents, amount of insurance payments, and insurance tariff.
The Insurance Law sets forth general regulatory framework for and requirements for reinsurance activities in Ukraine. According to the Insurance Law, the insurer remains fully liable before the insured under the insurance contract after entering into a reinsurance contract with a re-insurer. The resolution of the Cabinet of Ministers "On Approval of Procedures for and Requirements for Performance of Re-insurance with Non-Resident Insurer (Re-insurer)" dated February 4, 2004 (the "Re-insurance Resolution") provides for specific requirements for performance of reinsurance activities between a resident insurer and non-resident re-insurer. The Re-insurance Resolution stipulates that Ukrainian insurers are permitted to enter into reinsurance agreements only with foreign re-insurers which correspond to the following criteria: the re-insurer performed insurance activities for not less than three years and did not violate the insurance legislation of the relevant jurisdiction; the resident country of the re-insurer has enforced legislation envisaging state control over insurance activities, as well as anti-money laundering and anti-terrorist legislation. Ukrainian insurers are required to inform the Financial Services Commission within a ten-day period about the conclusion of reinsurance agreements with non-Ukrainian re-insurers.
Prepared in accordance with the materials of DLA Piper Ukraine LLC