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Insurance in Great Britain
Insurance business of Great Britain for many years concentrates in London as world financial center. The largest London insurance market services financial flows of a row of the countries and the companies. The authority of the London international insurance market is reflected on the considerable personnel potential of experts of insurance business, advanced infrastructure of the market, and also presence here insurance corporation "Lloyd" widely known outside Great Britain. In London representations or child structures of all largest insurance companies of the world are located. Here also central offices of all largest international insurance and reinsurance brokers are concentrated. The oldest (it is founded in 1760) works and the most authoritative classification society — the navigation Register "Lloyd". In London headquarters of a row of the international insurance companies, and also some structures of the national insurance market (institute of the London insurers, Institute of the diplomaed insurers, etc.) which activities have the international character is located.
Personal insurance in Great Britain is concentrated in specialized insurance companies, pension funds, and also investment companies (construction societies), realizing real estate sale to the population. The strong growth of collection of insurance payments is over the last ten years marked.
The considerable gain of insurance payments was marked in recent years in connection with change of the pension legislation in Great Britain which created economic incentives to acquisition by able-bodied population of policies (plans) of private pension insurance.
Property insurance among the population is provided by a row of traditional types. Among them insurance of cars in a private property, house property, a civil liability, etc. Property insurance also is characterized by steady rates of development.
The institutional structure of the insurance market of Great Britain is provided by joint-stock companies which belong them to owners — shareholders; societies of a mutual insurance which belong them to insurers; friendly societies; separations and representations of foreign insurance companies. The large independent link of the national insurance market having the international value — insurance corporation "Lloyd". In 1990 in Great Britain it was provided 690 national and 143 foreign insurance companies.
According to EEC directives since 1982 in Great Britain new universal (composite) insurance companies aren't created. Policies of personal and property insurance can be given out within the same group of insurance companies. Insurance companies of Great Britain have no right to be engaged in any other type of business except insurance.
The basic structure of the London international insurance market — Lloyd corporation is provided by 400 insurance syndicates which integrate natural persons — the underwriters who directly are realizing insurance business of corporation. Underwriters bear unlimited responsibility according to the obligations following from conditions of contracts signed by them of insurance within syndicate. Dynamic and mobile structures of the syndicates having expressed specialization in types (classes) of insurance, will form the economic environment of the international insurance market in Lloyd corporation system. Each syndicate is provided in this market through the leading underwriter who directly accepts risks on insurance in syndicate from the intermediary — the broker "Lloyd". Membership of corporate structure of "Lloyd" is opened for all citizens (residents) of Great Britain and foreigners (nonresidents).
Insurance contracts in Great Britain are signed directly by insurance companies, and also with mediation of underwriting agencies and insurance intermediaries (agents and brokers).
Direct sale of insurance policies to potential clients substantially relies on advertizing in mass media, an address mailing group of information materials to the population to sign the insurance contract, and also the appropriate phone calls with a sentence, aiming to come into direct contact with possible future insurers. Forms of direct sale of insurance policies are preferentially used in practice of the inference of contracts of personal insurance. Also growing popularity of commercial banks and construction societies by means of which their clients have opportunity to issue contracts of life insurance and house property is marked.
Agencies of underwriting are created for sale of insurance policies in regions if insurance company is economically unprofitable to create there branch or subsidiary. Insurance policies are written out to clients on behalf of insurance company, however the staff of agency of underwriting isn't personnel composition of this insurer. The agency of underwriting doesn't answer for the obligations following from conditions of signed contracts of insurance which make sure the insurance policies which have been written out by natural and legal entities with their mediation.
The significant role in the insurance market of Great Britain is played by large national international insurance brokers, and also the independent insurance agencies working at the commission beginnings. About 50% of all contracts of insurance and reinsurance consist in Great Britain with mediation of insurance agents and brokers. The legislative base of insurance activities in Great Britain is made by the Law on insurance companies of 1982 taking into account subsequent changes and additions to it. The law contains the rules of law regulating questions of licensing of insurance activities, solvency of the insurer, an assessment of assets and liabilities of insurance company, investments of insurance reserves.
The insurance legislation of Great Britain is generally harmonized with requirements of insurance directives of EU. So, questions of accumulative life insurance are subject to legal regulation by the English law on financial service of 1986 (Financial Services Act, 1986). Activities of friendly societies are regulated by the special law on friendly societies of 1974 (Friendly Societies Act, 1974). The special law on insurance corporation "Lloyd" of 1982 regulates questions of insurance activities of this corporation.
Functions of an organ of the state insurance supervision in Great Britain are laid to trade and industry Department (Department of Trade and Industry, DTI) which is headed by the State secretary on trade and the industry. In practice daily insurance supervision is exercised by Insurance department of Department of trade and the industry.
Insurance companies and natural persons have no right to be engaged in insurance business in Great Britain until then while, won't obtain the license DTI. The exception of the general rule is applied concerning members of insurance corporation "Lloyd", friendly societies and the labor unions which are realizing insurance of the members for the period of strikes. Concerning members of insurance corporation "Lloyd" matters of licensing are referred in competence of the supreme body of this organization (Council of Lloydis). Questions of licensing of insurance activities of friendly societies are carried to competence of the Register of the friendly societies Reqister of Friendly Societies).
Separate licenses need to be obtained for carrying out operations by each type (class) of insurance. For obtaining the license for insurance activities it is necessary to provide to an organ of the state insurance supervision a row of documents. In particular, the staff of board of directors, and also the higher managers of insurance company is reported. Types (classes) of insurance by which it is supposed to obtain licenses are declared. In an organ of the state insurance supervision the business plan, including the expected balance sheet and expected profit is submitted. The number of the documents necessary for licensing, includes the plan of investment of reserves of insurance company, and also the program of reinsurance protection. Proformas of agreements (labor contracts) are transferred to the inference of an organ of the state insurance supervision with managers, insurance brokers and agents.
The insurance company which plans to realize transactions of contracts of personal insurance, for obtaining the state license needs to receive in a preliminary order the special certificate of the actuary, validating methodological approaches to calculation of insurance rates.
By reviewing the state insurance supervision of the project of the program of reinsurance protection of future briefcase of contracts of insurance represented to an organ in attention the following circumstances shall be accepted: The trade and industry department usually allows to be reinsured more than 20% of the obligations taken by the original insurer in system of insurance holding to which the original insurer belongs, more than 10% of obligations in any other insurance company. It is anyway allowed to reinsure more than 25% of the obligations taken by the original insurer in any other country.
The foreign insurance companies functioning in the insurance market of Great Britain, their English competitors perform the operations on the same conditions, as. All insurance companies registered as managing subjects abroad, shall meet DTI requirements regarding existence at them financial resources in Great Britain, adequate to the taken obligations under the signed contracts of insurance and reinsurance. Procedure of licensing for insurance activities usually takes six months. The activities of the insurer connected to implementation of operations of reinsurance and retrocession, also are subject to licensing procedure in accordance with general practice from DTI.
The trade and industry department as an organ of the state insurance supervision is allocated with the broad rights and powers. Main goal of undertaken actions in the field of supervision of insurance activities — protection of interests of insurers. From DTI rigid control over the implementation by the investment program of the insurer coordinated with DTI is among measures of the regular impact on insurance company. The organ of insurance supervision can assign special check of questions of setting of actuarial calculations, demand to carry out independent expertize of programs of reinsurance protection of risks of the insurer. Candidates of again appointed experts to positions of the higher managing directors of insurance company, for example, the chief executive officer, the controler (the chairman of the supervisory board) are subject to approval from a manual of insurance supervision. The insurance company having problems with maintenance of necessary level of solvency, is obliged to make the plan of financial sanitation (improvement) behind which execution an organ of the state insurance supervision sets systematic monitoring.
Special measures of state regulation are applied concerning the insurers who are specializing on operations of accumulative life insurance and long-term pension plans of accumulation of savings to certain age. The legal basis for this regulation is created by the Law on financial service of 1986 (Financial Services Act, 1986).
According to the specified law of society of personal insurance are obliged to be registered by special representatives the organizations — Control on securities and investments (to Securities and Investments Board, SIB) or the Regulating organization of the company for life insurance and share funds (Life Assurance and Unit Trust Requlatory Orqanization, LAUTRO) which Control on securities and investments delegated part of the powers. Control on securities and investments (it is created in 1985) — the central organ regulating securities market in Great Britain.
Within special registration the investment plan of insurance concerning its compliance to operating rules of investment and to authorized tasks of the insurer is exposed to the careful analysis and check.
Activities of insurance syndicates of Lloyd corporation directly aren't subject to supervision from trade and industry (DTI) Department. According to the Law on insurance corporation "Lloyd" of 1982 (Lloyd's Act, 1982) functions of supervision of syndicates are transferred to Lloyd's (Council of Lloyd's) allocated with the broad rights and powers the Council.
As a result in the gradzhansko-legal decree the insurance corporation "Lloyd" is considered as self-regulating structure of the insurance market which activities have pronounced international character.
Lloyd's council is responsible for questions of creation of new insurance syndicates of corporation. Thus the financial guarantee is taken into account from at least two already existing syndicates (250000 pound, sterlings).
Each insurance syndicate of corporate structure "Lloyd", entering insurance legal relationship, bears unlimited property responsibility according to assumed liabilities. In this regard syndicates are obliged to produce on the regular basis in "Lloyd's" Council the evidence of actual position of their property status. To each insurance syndicate from "Lloyd's" Council limits (jobs) on collection of the insurance payments which value depends on the amount of the warranty monetary deposit placed by insurance syndicate in corporation prior to the beginning of insurance operations are set. Proceeding from the amount of the deposit and the set limit of insurance payments. "Lloyd's" council sets qualification level of financial resources of insurance syndicate and by that agrees to certain volumes of a tse-dirovaniye of risks. According to authorized requirements to insurance corporation "Lloyd" annually the report on results of insurance business of syndicates, and also the certificate certifying level of their solvency is transferred to the principal of Department of trade and the industry.
Activities of insurance intermediaries in Great Britain substantially also are subject to regulation and licensing. It first of all belongs in activities of insurance and reinsurance brokers. According to the Law on insurance brokers of 1977 (Insurance Brokers Act, 1977) in Great Britain educated Registration council of insurance brokers (Insurance Brokers Registration Council, IBRC) which was given control and regulatory functions concerning the insurance brokers operating in the English insurance market. Guiding of the state register of insurance brokers is laid to IBRC. Without appropriate registration in IBRC and entering of data in the state register of insurance brokers activities of the insurance intermediary are considered illegal with all that it implies.
The natural persons claiming for obtaining professional qualification "insurance broker", are obliged to pass a qualification examination in the theory and practice of insurance business, and also to show to experts of IBRC that they have the minimum capital of 1000 pounds sterling to start the intermediary broker operations. Besides, as a warranty according to the obligations successfully passed qualification examination the candidate enters the monetary deposit of 1000 pounds sterling in IBRC.
If the share of the broker commission from sale of policies of assurance of life and accumulative pension plans to a certain age of the client exceeds 25% of his cumulative income of insurance activities, the insurance broker shall or enter in members of the special national self-regulating organization — Regulating association of financial intermediaries, managers and brokers (Financial Intermediaries, Managers and Brokers Regulatory Association, FIMBRA) or to transform the status of the managing subject of the insurance market to the so-called "connected" insurance agent or the insurer.
Special structure of the English insurance market — Control on protection of insurers (Policyholders Protection Board) which was created according to the Law on protection of the rights of insurers of 1975 (Policyholders Protection Act, 1975). Besides, the specified law provided necessary conditions for creation of a special indemnification fund to insurers which is created due to monetary assignments of all insurance companies which have licenses and realizing insurance operations in Great Britain. Level of contributions to an indemnification fund is based on value net - the insurance premium collected by the insurer on contracts of insurance, signed with the population. In case of bankruptcy of insurance company of means of an indemnification fund will be used for compensating in whole or in part their losses under contracts of mandatory insurance.
In 1925 the insurance corporation "Lloyd" approved the central warranty fund which means intend for compensation of damage under the contracts of insurance signed by insurance syndicates if they are in serious financial difficulties on the current operations. The amount of annual contributions to the central warranty fund depends on syndicate capacity on placement of risks.
In certain cases insurers can expect monetary compensating from IBRC and FIMBRA organizing activities of insurance intermediaries in the English insurance market. Monetary compensating is paid to insurers in case of financial bankruptcy of insurance broker or established facts of criminal negligence of the insurance agent or the broker in case of service of the insurer which had for it very adverse effects and entailed violation of its legitimate rights.
The law on insurance companies of 1982 sets the minimum requirements to level of solvency of the insurer. The technique of calculations of level of solvency conforms to requirements of directives of EU concerning insurance activities. Continuous monitoring over level of solvency of insurance companies is exercised by trade and industry Department. Especially rigid requirements to level of solvency are set by this law in relation to societies of personal insurance.
In Great Britain mandatory insurance of a civil liability for damage before the third parties, caused by owners of motor transport, air transportations, the persons who are engaged in riding, and also persons who contain in house conditions of animals, dangerous to people around works. Besides, mandatory insurance of professional responsibility for lawyers, accountants, insurance brokers, and also operators of atomic energetic installation is provided. Contracts of mandatory insurance (owing to the current legislation) are signed by the insurance companies which are present in the English insurance market. The state organizations of Great Britain don't deal with issues of mandatory insurance.
The English legislation set requirements to volume and forms of financial statements of insurance companies. All insurance companies having licenses, are obliged to make the annual financial report and to bring it to the attention of shareholders. The financial report without fail undergoes procedure of external audit. The norms set in Great Britain and standards of audit of insurers are thus applied. No later than six months upon termination of fiscal year all insurance companies are obliged to submit the annual financial report in trade and industry Department.
Insurance companies pay a profit tax from insurance activities, and also the property tax. In certain cases insurance operations are assessed with the stamp duty, however the volume of these operations is very limited.
|Category: Insurance history in the different countries of the world | Added by: Chance23 (20.04.2014)