The Bank of Russia has developed legislative amendments intended to establish a guarantee scheme in the life insurance market.
Overall, this guarantee scheme is to be built on the same principles as those in deposit insurance and pension savings. The scope of guarantee will extend to life insurance contracts including those combining life insurance with other types of personal insurance provided by life insurers.
Should the insurer file for bankruptcy, their liabilities to individuals under life insurance contracts within 1.4 million rubles would be met at the expense of a guarantee fund — which is to be formed out of insurance payments. The guaranteed amount of a death benefit would total up to 10 million rubles. No investment income, were it provided for in a life insurance contract, would be safeguarded.
The Deposit Insurance Agency will act as administrator of the guarantee scheme. Insurance payments to the guarantee fund will be paid at the rate of 0.003125% of the insurer’s insurance reserves; in cases its funds are insufficient to cover guarantee payouts, the increased rate of up to 0.3% will apply. The guarantee scheme will cover all life insurance providers, with their membership mandatory.
Life insurance is currently a high-demand product. In the first nine months of 2020 alone, over 3.6 million voluntary life insurance contracts were executed with an almost 300 billion rubles premium; almost 11 million contracts were active as of the end of the third quarter.
A fully operational guarantee scheme will help safeguard the safety of investments of consumers holding life insurance contracts. It will also enhance the level of trust in the institution of long-term savings available as insurance companies’ services.
The Bank of Russia intends to discuss its proposed amendments with stakeholders in sectoral ministries and agencies, as well as with the professional community.
This news item was originally published by the Central Bank of the Russian Federation (CBR RU). For more information, see the Source Link.