The Polish Parliament has just finalized its work on changes in law granting the Polish Financial Supervisory Authority (“KNF”) extended supervisory powers towards the foreign (re)insurers performing activity in Poland and on extending the scope of information submitted to the Polish Insurance Guarantee Fund (“UFG”).
On 18 June 2020 the Parliament accepted the Act dated 28 May 2020 on the Amendments to the Act on Compulsory Insurance, the Insurance Guarantee Fund and the Polish Motor Insurers' Bureau and the Act on Insurance and Reinsurance Activity (“New Act”). Currently the New Act is waiting for the President’s signature. The New Act will come into force within 14 days of its announcement in the Journal of Laws.
The main issues included in the New Act are as follows:
a) introduction of urgent procedure allowing the KNF to take extraordinary actions towards foreign (re)insurers without prior notification of irregularities to home state supervisory authority,
b) clarification of sanctions for exceeding deadlines for the payment of compensation from compulsory insurance (such as MTPL insurance) by foreign insurers,
c) introduction of a new obligation towards foreign insurers offering compulsory insurance in Poland to submit information about gross written premium value from insurance contracts of Section II, Group 10 to UFG.
The proposed law amendments are intended to allow the KNF to apply immediate and extraordinary intervention directly towards foreign (re)insurer, without the requirement of prior using the standard procedure (briefly described in paragraph below), including notification towards home state supervisory authority. In urgent case, in order to immediately eliminate or prevent occurrence of further irregularities, the KNF will be authorised to directly apply towards foreign (re)insurers respectively all powers, to which it is entitled under Act on Insurance and Reinsurance Activity ("IRAA") in relation to domestic (re)insurers. Among others, the KNF will be allowed to forbid foreign (re)insurer from pursuing (re)insurance activity in Poland. Once these powers are applied, the KNF will inform the home state regulator and EIOPA about this.
Currently, the KNF's supervisory powers towards foreign (re)insurers pursuing activity in Poland are limited. In particular, under standard procedure, in case the KNF finds that foreign (re)insurer does not comply with Polish law, the KNF may oblige foreign (re)insurer to remove such irregularity (firstly in a way of instruction, and if the instruction is not followed in a way of decision). If foreign (re)insurer does not undertake the necessary measures, the KNF may inform home state supervisory authority of foreign (re)insurer about this. And only in case of applying the relevant measures towards foreign (re)insurer by its domestic regulator, these measures appeared to be insufficient or measures were not applied, and foreign (re)insurer continues to violate Polish law, the KNF, after having informed the home state regulator, may apply all powers, to which it is entitled under the IRAA in relation to Polish (re)insurers to prevent further violations of the law or apply for help of EIOPA.
Sanctions for exceeding deadlines
The proposed law amendments introduce a provision based on which if foreign insurer, fails to pay the compensation from compulsory insurance (such as MTPL products) within a statutory deadline or fails to inform the claimant in writing that the compensation is not due or is due in a different amount than the amount specified in the submitted claim, the KNF imposes:
a) a financial penalty on a member of the management board of foreign insurer up to the amount of three times the average monthly remuneration for the last 12 months, in case such remuneration for that period cannot be determined – up to PLN 100,000 (approx. EUR 23,000), or
b) a financial penalty on foreign insurer up to the amount of 0.5% of gross premium written from insurance contracts of Section II, Group 10 of the Annex to the IRAA, excluding carrier's liability, concluded within the scope of activity in Poland, obtained by the foreign insurer in the previous calendar year and if the insurer has not performed activities or obtained gross premium written below PLN 20 million – up to PLN 100,000 (approx. EUR 23,000).
As to the statutory deadlines for compensation payment, please note that under Polish law as a rule, insurance companies have 30 days from the date of notification about damage to settle a claim covered by compulsory insurance. If this deadline is not enough to clarify all relevant circumstances of the case, compensation is paid within 14 days from the day on which it became possible (no later than within 90 days from the date of notification about damage, unless the liability of the insurance company or the amount of compensation depends on the pending criminal or civil proceedings).
However, in relation to COVID-19 pandemic, specific regulations has been adopted in order to mitigate the KNF's supervisory powers. In case the above-mentioned term to pay the compensation or to inform the claimant, (under compulsory insurance contracts), falls during the state of epidemic threat or state of epidemic and the insurer fails to pay such compensation or fails to inform the claimant, the KNF may impose sanction on the insurer (but is not obliged). The state of epidemic threat was declared in Poland from 14 to 20 March 2020 and state of epidemic lasts since 20 March 2020.
Additional information requested from foreign insurers offering compulsory insurances in Poland
According to the New Act foreign insurers will be obliged, within 14 days of the entry into force of the New Act, to submit to UFG data on the value of gross written premium from insurance contracts of Section II, Group 10 (excluding carrier's liability), concluded within their activity in Poland in 2019 and in the period from 1 January 2020 to the day preceding the date of entry into force of the New Act.
Additionally, foreign insurers, within previous standard reporting requirements towards UFG, will be obliged to provide UFG also with information about value of the gross written premium indicated on the document confirming conclusion of the insurance contract of Section II, Group 10 and value of the premium refund for the unused insurance period in the event of termination of the insurance contract before the lapse of the final term of liability indicated in the contract.