New insurance act

Hungary is introducing a new insurance supervisory act. Although the act is effective from December 25, 2014 the substantial rules shall enter into force only on January 1, 2016. The purpose of the act is twofold: on the one hand it implements the Solvency II Directive; on the other hand it aims to upgrade the present Hungarian insurance market regulation by utilizing the experiences of the supervisory authority collected over the last decade and the recent experiences of the global financial crisis. Despite of these aims the new insurance act shall not bring a radical and historic dismantling of the actual insurance law of Hungary. The implementation of the Solvency II Directive, of course, changes the capital adequacy and reserve requirements. The new act introduces separate rules on the supervisory of financial groups carrying on cross border activity in Hungary. Besides, the act intends to improve the areas of customer protection, financial stability and effectiveness of the insurance market participants. The regulation of the insurance intermediaries is regulated in a separate book indicating the growing importance of this sector within the insurance market. One of the most significant changes on the regulation of the insurance intermediaries is that multiple-insurance agents mediating competitive insurance products of several insurance companies shall be deemed as ‘dependent agent’ that will result in different operation and liability requirements. The new act also aims to optimize the administrative burdens of the market participants.

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