The Ukrainian Parliament has adopted the draft Law of Ukraine “On Insurance” (hereafter – “The Draft Law”) in the first reading. The revised version of the Law of Ukraine “On Insurance” is aimed to create the institute of professional reinsurers, more precisely define the conditions of entering the insurance market of Ukraine for non-residents and to simplify those conditions. The options available to non-residents for doing the insurance business in Ukraine are the following.
Offering insurance services by the way of company establishment
A non-resident company will be allowed to run insurance business in Ukraine by establishing a new company.
According to the Draft Law the insurance companies could be established only in the form of a joint stock company. The establishment and state registration of a company is conducted in accordance with the Law of Ukraine “On State Registration of Legal Entities, Individual Entrepreneurs and Non-Governmental Organizations”. In order to have the right to provide insurance services a company needs to obtain a special license. The procedure requires the submission of some documents to the State Commission for Regulation of Financial Services Markets of Ukraine, the list of which is prescribed by Article 39 of the Draft Law (an application, a copy of the articles of association, registration forms, etc.).
In case the holders of substantial interest are foreign companies, some additional documents should be provided to the Commission for Regulation of Financial Services Markets of Ukraine. They particularly include:
- a copy of a ruling of the regulatory body of a foreign investor on making a contribution to the insurer in Ukraine;
- a written consent of the governmental body of the state of domicile of this company [if it is obligatory according to the legislation of this country];
- a document confirming the registration of the company; and
- a copy of an audit opinion regarding the financial status of the investor for the last calendar year.
The State Commission for Regulation of Financial Services Markets of Ukraine makes a decision on whether to grant a license or not within a three-month period. This time may be prolonged for up to six months by the decision of the head of the mentioned State Commission.
A fee for obtaining a license depends on the type of license requested (approx. EUR 1,200 or EUR 1,800). There are three types of licenses prescribed: 1) license for a particular class of insurance; 2) license for associated risks of classes of insurance; and 3) license for reinsurance. A company can obtain a license for providing either the insurance or reinsurance services (a company cannot hold these two types of licenses concurrently).
The advantage of running a business by establishing a new company is a possibility to provide the whole range of insurance services in accordance with the type of license granted.
Establishing a branch office for providing insurance services
A non-resident insurance company will be able to do the insurance business in Ukraine by establishing a branch office. The branch office shall offer its services on the basis of a power of attorney from its controlling company and a statute approved by the State Commission for Regulation of Financial Services Markets of Ukraine.
The director of the branch office should hold a Master’s degree in Law or Economics and have at least three years of relevant professional experience.
The license for the branch office is issued by the State Commission for Regulation of Financial Services Markets of Ukraine upon the application of a controlling company. The license for the branch office can be issued for classes of insurance only, which the foreign company is entitled to carry on in the territory of its country of domicile. Moreover, branch offices can acquire the license for:
- reinsurance services;
- insurance of risks associated with sea traffic, commercial aviation, takeoff of space rockets in case the object of insurance is a property interest associated with transported wares and/or mode of transport.
In addition, the branch office is allowed to provide accessorial services such as consulting or assessment of insurance risks.
Running a business without any new establishments
A non-resident company will be allowed to run the insurance business in Ukraine without any new establishment. In order to have the right to provide insurance services in the territory of Ukraine, a foreign company has to provide the State Commission for Regulation of Financial Services Markets of Ukraine with a confirmation of the following information:
- the state of domicile of the company is a member of the World Trade Organization [it is not required if the company is intended to provide reinsurance services] and collaborates with FATF;
- the authorized body of the state of domicile of the company concluded a special agreement with the State Commission for Regulation of Financial Services Markets of Ukraine;
- the non-resident company has been carrying on its business for at least three years in the territory of its country of domicile;
- Ukraine and the country of domicile of the company concluded an agreement for the avoidance of double taxation and the prevention of fiscal evasion;
- the country of domicile of the company is not an offshore zone; and
- the non-resident company is financially stable.
The State Commission for Regulation of Financial Services Markets of Ukraine shall, within the period of seven days, verify the authenticity of the information and documents submitted and publish the information about this company on its official website. After that, the company is allowed to do its business.
Non-resident companies are allowed to insure only risks associated with sea traffic, commercial aviation, takeoff of space rockets in case the object of insurance is a property interest associated with transported wares and/or mode of transport.
Additionally, non-resident companies may provide reinsurance services and accessorial services such as consulting or assessment of insurance risks.
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The Draft Law envisages new possibilities for foreign investors to conduct the insurance business in Ukraine. The prescribed options would significantly promote the investment attractiveness of Ukraine in this sphere.