New act on insurance activities; strengthening the insurance supervision
On 18 February 2015 the draft of the new act on insurance activities was published. One of the areas that was regulated in the project is strengthening of the insurance supervision and entitlements of the Polish Financial Supervision Authority (here in after “PFSA”).
Article 331 assigns the supervisory authority the right to inspect the activities of any branch of any foreign insurance or reinsurance company conducting business in the Republic of Poland, with the exception of the inspection of its financial management, upon preliminary notification from the competent authority of the European Union member state in which it has its registered office.
A fairly significant modification is the introduction of the inspection visits institution within the principles of insurance supervision. The draft bill provides the legal possibility to perform inspection visits to inquire into a matter and evaluate individual cases appearing under the supervised entity`s activities. The substantiation for the introduction of the inspection visits institution is primarily intended to unify the PFSA`s competences with regard to the supervision of the financial market. The inspection visits institution currently operates on the banking and capital market. In contrast to inspection proceedings, inspection visits are characterized by a limitation of the objective scope of study for the individual cases, a time limitation for the duration of the inspection visits to 1 month, and a limitation of the formal requirements related to the commencement of inspection visits.
Another new feature is that the draft of the amendment to the act gives the Polish supervisory authority the ability to issue recommendations addressed to insurance and reinsurance undertakings, including granting of rights to issue recommendations to the supervisory authority, to ensure compliance of the insurance and reinsurance undertakings with the law, reduce the risk inherent in the activities of the insurance or reinsurance undertaking, ensure the permanent capacity of the insurance company to perform its obligations and prevent the violation of the interests of policyholders, the insured, beneficiaries or entitled entities of insurance contracts. A statutory obligation exists for the PFSA to consult the draft act with interested entities and institutions prior to the act`s implementation.
As a result, in the new act the PFSA will be equipped with the power to regulate the market in an unlimited way and currently no legal mechanism exists to appeal any PFSA decision. Despite current acts and regulations the PFSA`s guidelines and recommendations have created de facto new legal system. However, despite the opinions of some experts that the PFSA`s recommendations are not written into law, and because they are not possible to comply with, no insurer or bank will take the risk of open conflict with the PFSA in regard to non-compliance with such recommendations.