FINANCIAL SUPERVISORY AUTHORITY
2018 Annual Report © 2019 Albanian Financial Supervisory Authority
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Address: Str. “Dora D’Istria”, no. 10, P.O.Box. 8363, Tirana Phone: +355 4 2251355 / 6 Fax: +355 4 2250686 E-mail: [email protected] Web: www.amf.gov.al
2 ANNUAL REPORT ‘18 MESSAGE FROM THE GENERAL EXECUTIVE DIRECTOR
Dear Reader,
Contributing to the fulfilment of the legal obligations for transparency and accountability, this Annual Report presents an overview of the activity of the Financial Supervisory Authority during 2018.
I would like to highlight that 2018 represented a remarkable year in the framework of the mission of AFSA as a rigorous and efficient supervisor of non-bank financial markets, anticipating their further development as well as in relation to the decisions undertaken concerning consumer and investor protection.
AFSA’s objective to transform the weakest non-bank financial markets in the Western Balkans into the most consolidated markets was reflected in the Strategy “On the Development of AFSA and of the Markets under Its Supervision 2018- 2022”, presented in May 2018, representing a roadmap envisaging the vision for Ervin Koçi Executive General Director 5-year-term project, closely linked to the process of integration of our country into Financial Supervisory Authority the European Union. AFSA aims to implement this strategy in order to promote the development of a competitive and efficient market, paving the way to long-term stability, as well as providing opportunities for the creation and development of new products.
In quality of the Head of the institution, it is a great pleasure for me to share with you one of the most important accomplishments of AFSA during these last years, and in compliance with the continuous recommendations by the Parliament and other institutions: Problem solving regarding the payments of the Compensation Fund since 2002.
Focusing on consumers, during 2018, AFSA adopted several decisions protecting their interests, from which noteworthy is the amendment of the Regulation “On the settlements of claims covered by the Compulsory Insurance Contract in the Transport Sector”. Pursuant to the approved amendments, starting from July 1, 2018, Albanian consumers will benefit from a significant increase in compensation.
Consumer and investor protection were also achieved through quick and efficient treatment of claims, as well as raising awareness through increased public financial education (through open lectures at universities, or informative leaflets for markets under supervision). During 2018, AFSA increased transparency even further, by means of new publications of a financial and educational character, as well as warning notices for investors and consumers.
In the framework of market supervision and regulation, during 2018, AFSA has carried out almost 4 times more inspections, compared to previous years, following different methodologies and themes. By means of these inspections, recommendations have been issued, but also regulatory measures have been undertaken to protect consumers and enforce laws and regulations in force. AFSA also undertook technological innovations and modernization of platforms and applications, in order to facilitate consumers.
FINANCIAL SUPERVISORY AUTHORITY 3 In 2018, in the insurance market, besides the market growth, some other important indicators also improved. The claims/premiums ratio reached 42%, and the payment of claims by insurance companies increased by more than 26%, compared to the previous year. The investment fund market expanded with a new participant licensed by AFSA. While the number of members in voluntary private pension funds increased by over 20%.
AFSA has complied with and implemented as priorities all the recommendations made by the Parliament of Albania in the Resolution “On Assessing the Activity of the Financial Supervisory Authority for 2017”.
During 2018, AFSA has completed the drafting of three important draft laws on the markets under supervision and submitted them to the Ministry of Finance. In addition, the legal and regulatory framework has been improved, in compliance with the European Union Directives. Globalization and innovation in the financial sector (FinTech) require closer cooperation between regulatory authorities in facing the challenges. AFSA was engaged in increasing international cooperation and this came to life by holding important activities in Tirana, contributing to the exchange of experiences and best supervisory practices.
This report contains comprehensive data on financial markets under AFSA supervision and will give more detailed information about the Authority’s activity during 2018.
Thank you for your interest and I hope you find it satisfactory.
Respectfully,
Executive General Director
4 ANNUAL REPORT ‘18 TABLE OF CONTENTS
Message From The Executive General Director 3 Financial Supervisory Authority 7 AFSA Board 9 Key Developments During 2018 10 Chronology of the Most Important Events in 2018 21 Recommendations of the EU Progress - Report for Albania 23 Information on the Implementation of the Action Plan on Resolution “On Assessment of the Activity Financial Supervisory Authority” 24 Measures Taken by AFSA to Address Recommendations Issued by COE Moneyval Committee 39 Inspections 41 Implementation of Recommendations from other Institutions 43 A Summary of the Progress of the Markets Under Supervision 47
Chapter 1 49 CONSUMER PROTECTION 1.1 Consumer and Investor Protection 49 1.2 Financial Education 51 1.3 Transparency and Public Relations 52
I. INTEGRATED SUPERVISION OF NON-BANK FINANCIAL MARKETS 55
Chapter 2 55 CAPITAL MARKET SUPERVISION AND INVESTMENT FUNDS 2.1 Investment Fund Market 55 2.1.1 Market Structure 55 2.1.2 Financial Position and Market Supervision 56 2.1.3 Inspections 59 2.2 Capital Market 60 2.3 Licensing Activity 64 2.4 Governance 65 2.5 Inspection of the Companies 67 2.6 Enforcement and Legal and Regulatory Framework 67 2.6.1 Corrective and Administrative Measures 69
FINANCIAL SUPERVISORY AUTHORITY 5 Chapter 3 70 Insurance Market Supervision 3.1 Insurance Market Structure 70 3.2 Financial Position 75 3.3 Inspection of insurance companies 81 3.4 Technical Provisions 84 3.5 Groups Supervision 92 3.6 Insurance Companies Governance 92 3.7 Licensing Activity 94 3.8 Insurance intermediaries 97 3.9 Albanian Insurance Bureau (AIB) 98 3.10 Compensation Fund 100 3.11 Enforcement and Legal and Regulatory Framework 101 3.12 Corrective and Administrative Measures 104
Chapter 4 106 Supervision of the Private Voluntary Pension Market 106 4.1 Market Structure 106 4.2 Financial Position 106 4.3 Supervision and Analysis of Market Risks 114 4.4 Legal and regulatory framework 115
Chapter 5 116 Institutional cooperation and projects 116 5.1 Cooperation with State’s Institutions 116 5.2 Regional and International Cooperation 116 5.3 Integration processes for markets under supervision 123 5.4 Projects 127
II. INSTITUTIONAL ORGANIZATION OF AFSA 132 II.1 AFSA’s legal and regulatory framework 132 II.2 Human Resource Policy 134 II.3 Information Technology Systems 137 II.4 Internal Audit 142
III. STRATEGIES AND OBJECTIVES OF THE AUTHORITY 143
IV. ANNEX 146
6 ANNUAL REPORT ‘18 FINANCIAL SUPERVISORY AUTHORITY
AThe Albanian Financial Supervisory Authority (AFSA) was established pursuant to Law no. 9572, dated 03.07.2006 “On the Financial Supervisory Authority” as amended, as a public legal institution, independent in the exercise of its powers, reporting to the Albanian Parliament. AFSA’s activity is based on the following laws:
. Law no. 9572, dated 3.7.2006 “On Protection of Personal Data” and Law no. 5454.20142014;
. Law no. 2014, dated 22.05.2014 “On the activity of insurance and reinsurance”;
. Law no. 10 076, dated 12.02.2009 “On Compulsory Insurance within the Transport Sector”, as amended by Law no. 10455, dated 21.7.2011;
. Law no. 9879, dated 21.02.2008 “On Securities”;
. Law no. 10 198, dated 10.12.2009, “On Protection of Personal Data” and Law no. 36, dated 31.03.2016;
. Law no. 10 197, dated 10.12.2009 “Voluntary Pension Fund” as amended;
. Law no. 10 158, dated 15.10.2009 “On corporate and local government bonds”;
AFSA issues licenses, regulates and supervises the activity of the insurance market and its operators, the securities market and its operators, the voluntary pension fund market and its operators, and other non-bank financial activities.
AFSA’s mission is to contribute in promoting sustainability and the safe development of financial markets under supervision. AFSA accomplishes its mission by carrying out a regulatory and supervisory function. AFSA’s main priority, leading these two functions is Protection of the best interest of Consumers and Investors, as well as contributing to their Financial Education. While exercising the regulatory and supervisory functions, AFSA is guided by the principles and norms of independence, transparency and integrity. Increase of institutional independence and financial independence, provided for by Law no. 54, dated 29.05.2014 “On some amendments and addenda to Law no. 9572, dated 3.7.2006, “On the Financial Supervisory Authority” aims to strengthen the supervisory and regulatory role of the AFSA.
AFSA’s main objectives are promoting and maintaining the stability of the financial system and supervise the legitimacy of the activities of the supervised entities. In its path to achieve its goals, AFSA is guided by the principles of transparency, by creating trust in the financial market participants, protecting and informing the consumer.
FINANCIAL SUPERVISORY AUTHORITY 7 In fulfilling its competencies, AFSA aims to:
. Approve the implementation of regulations pursuant to the Law;
. Issue and revoke licenses, authorize and approve, in accordance with the authorization pursuant to the regulation;
. Encourage, organize and monitor measures targeting the effective functioning of financial markets;
. Initiate the adoption of laws, regulations and administrative provisions and inform the public on the basic principles of how non-bank financial markets operate;
. Approve regulations providing the conditions, manner and continuity of procedures for a uniform supervisory process within its area of expertise and to take other measures and carry out other duties pursuant to its statutory competencies;
. Inform other supervisory, administrative and judicial bodies on all matters related directly or indirectly to their area of expertise, regarding activities related to AFSA’s area of expertise.
Our mission is to achieve the establishment of a contemporary and efficient market that will provide quality services and promote the further development of the non-bank financial sector in the country.
Responsibility: AFSA will answer with a concrete action plan and with a comprehensive commitment to achieve the mission and strategic goals as a supervisory authority for non- bank financial markets.
Competency: AFSA will exercise its authority to ensure the efficient implementation of the strategy and mission pursuant to the highest professional standards and rational costs.
Accountability: For the accomplishment of its activities, AFSA must implement the highest ethical standards regarding communication and co-operation with stakeholders in the supervision process for non-bank financial markets.
Transparency: AFSA will regularly publish information regarding the market as well as regarding services for non-bank financial markets provided in the Republic of Albania.
8 ANNUAL REPORT ‘18 AFSA BOARD
In 2018, AFSA Board consisted of:
Chairman Mr. Pajtim Melani1
Members: Mr. Ervin Koçi, General Executive Director
Ms. Mimoza Kaçi, Deputy Executive Officer2
Mr. Idlir Gjata, Non-Executive Member
Mr. Klodion Shehu, Non-Executive Member
Board of the Albanian Financial Supervisory Authority is the highest governing and decision- making body. Pursuant to Law no. 9572, dated 03.07.2006 “On the Financial Supervisory Authority” as amended, it is a collegial body composed of 5 members, two of whom, the General Executive Director and the Deputy Executive Director are full-time executive members, while the Chairman of the Board and other two members are non-executive members. The members of the Board shall be appointed by the Parliament of the Republic of Albania under a procedure provided for by the Law.
AFSA Board, in order to accomplish its tasks and functions, during 2018 has held 21 meetings and has adopted 261 decisions. The most important decisions of the Board have been undertaken with full transparency, observing at the same time the principle of majority and the collegial spirit.
The highest number of decisions continues to remain the ones regarding the insurance market. Compared to the previous year, the number of decisions on companies operating in the private voluntary pension market and collective investment enterprises has increased considerably by more than double of the decisions about this market.
In order to complete or improve the legal framework regulating the activity of markets and supervised institutions, AFSA’s Board has approved 7 new regulations and 4 guidelines as well as 5 agreements. In addition, during 2018, 19 regulations and 1 instruction were amended. Regarding the administrative and corrective measures, 34 decisions were undertaken.
1 Mr. Pajtim Melani was elected by Parliament of Albania. His term ended on 12 June 2019 2 Mrs. Mimoza Kaçi was elected by Parliament of Albania. Her terms ended on 24 March 2019
FINANCIAL SUPERVISORY AUTHORITY 9 KEY DEVELOPMENTS DURING 2018
1. Problem solving persisting over the years regarding the Albanian Insurance Bureau and the carrying amount of the liabilities of the Compensation Fund for the protection and equal treatment of investors.
For the first time, AFSA has drafted a concrete and specific action plan regarding the well-functioning of the Albanian Insurance Bureau (AIB) and the persisting issue of the Compensation Fund, both in terms of the Compensation Fund’s approved amount and payment performance made by insurance companies.
Some actions of AFSA has undertaken regarding this issue are listed below:
a. For the purpose of not repeating the Compensation Fund’s accumulation phenomenon, AFSA has carried out inspections in insurance companies and AIB during 2018. Concerning the latter, during 2018, the mechanisms regarding the implementation of the legal obligations of the Bureau have increased;
b. As a result of several inspections carried out in May 2018 at insurance companies and several verifications in June 2018 at AIB on the practices adopted with insurance companies, AFSA’s Board, by Decision no. 155, dated 03.07.2018, and Decision no. 219, dated 31.10.2018, approved two additions to the Compensation Fund for 2018;
c. During 2018, the following were monitored: Implementation of the Board’s decisions regarding the settlement of the obligations of companies; Publication of beneficiaries for approved unpaid administrative practices; as well as the control of payments made according to the conclusions of the inspections and the additions to the Compensation Fund. Proposals have been submitted to the Board and measures were taken against companies for cases found to fail to comply with AFSA decisions;
d. Payments to the Compensation Fund only for 2018 are in the amount of ALL 1,009 million, an amount which for the first time indicates significant payments of the Compensation Fund liabilities. In addition to these payments for a considerable amount of Compensation Fund’s practices this year, agreements have been signed with beneficiary parties;
e. With a view to effective management of AIB, actions were undertaken such as: Approval of the new AIB director; Amendments to by-laws; Adoption of some regulations by AIB, regarding the improvement of practice procedures, subject to the Compensation Fund; Attendance at legal proceedings by AFSA, which is notified by the Bureau, and participates as a hearing party in order to verify the proceedings, as well as the audit process by international audit firm, are being conducted pursuant to the applicable legislation;
f. In 2018, for the first time, started the implementation of the amended requirements of Regulation no. 2, dated 28.01.2010 “On the reporting and supervision standards of the Albanian Insurance Bureau”, recently amended by the Board Decision no. 153, dated 30.11.2017, regarding the reporting to the Authority on issuing and providing
10 ANNUAL REPORT ‘18 insurance policies. Furthermore, pursuant to the requirements of this regulation for the accurate reporting of claims, subject to the Compensation Fund, from January 2019, the Albanian Insurance Bureau Electronic Claim Management System is operational, where AFSA has the right to access and identify the status of the file in the framework of consumer protection;
g. AFSA by means of Decision no. 156, dated 30.07.2018, has amended the Regulation no. 36, dated 21.03.2012 “On the establishment, estimation, financing, management of the Compensation Fund and the payment of claims”, amendments that relate to the issues of accumulation of Compensation Fund liabilities at AIB;
h. In May 2018, the draft law “On Compulsory Insurance in the Transport Sector” was sent to the Ministry of Finance and Economy. One of the aims of this draft law is to improve the functioning of the Albanian Insurance Bureau by reorganizing the structure and dividing its functions, as well as increasing the minimum liability limit in line with the countries of the region and in line with the spirit of the Directive 2009/103/CE on insurance.
2. Strengthening AFSA’s supervisory role in the markets under supervision
Several factors have contributed to the strengthening of AFSA’s supervisory role during 2018, such as the following:
a. Pursuant to the Risk-Based Supervision Manual and the implementation of the 2018 Work Plan and the recommendation given in the Albanian Parliament Resolution “On Evaluation of the Financial Supervisory Authority Activity for 2017”, AFSA concluded in 2018 the first cycle of inspections under the supervision methodology focused on the insurance market risk. In addition, considering the risk level that insurers and other elements, such as their size, pose, pursuant to the supervision manual, priorities for allocating supervisory capacities and further inspections will be set;
b. Adoption and implementation of 2 manuals, drafted with the assistance of World Bank in the framework of FIRST project, “Practical Manual for Motor and Property Claim Inspection”, adopted by Board’s Decision no. 97, dated 13.06.2018 and “Manual for Inspecting the Reinsurance Activity”, adopted by Board Decision no. 140, dated 30.07.2018. Risk assessments generated from the inspections, based on these manuals, can be used as a comparative basis for the participating companies in the insurance market, whereas the identified high-risk issues may serve as a focus to guide future inspections;
c. During 2018, pursuant to the “Practical handbook for the inspection of motor and property claims”, thematic inspections on the activity of administering and handling claims were carried out at some of the Non-life insurance market companies. This process extended to the rest of the Non-life insurance market companies in 2019;
FINANCIAL SUPERVISORY AUTHORITY 11 d. Performing on-site inspections in all brokerage companies and brokerage banks for the first time. These inspections resulted in evidencing and prevention of legal violations and irregularities for which measures were taken by the AFSA, issuing short-time recommendations for their correction, in compliance with the legal provisions in force, in order to best protect the consumer;
e. In view of a more effective groups’ supervision, a methodological Directive ‘On insurance groups supervision’, was adopted with Board’s Decision no. 250, dated 28.12.2018 followed by the establishment of a Regional Supervisory Colleges with the participation of 3 regulatory bodies: AFSA, National Bank of Kosovo (NBK) and Insurance Supervision Agency of North Macedonia (ISA). The Directive aims at establishing the rules and specific forms of a co-operation system between supervisory institutions to enable a more effective supervision of the insurance groups and to employ a proactive approach to the problems that may arise from domestic insurance and reinsurance companies’ insurance groups that have their branches in foreign countries;
f. For an effective market coordination and supervision, AFSA has established the necessary structure regarding issues for the prevention of money laundering and financing of terrorism.
The Authority has increased the number of inspections for issues concerning AML/CFT, in almost all the subjects under its supervision. During 2018, full on-site inspections were carried out in the three Life insurance companies, two insurance brokerage companies, and three insurance brokerage banks, part of which was the supervision on money laundering issues, in view of the “Anti Money Laundering Manual”. AFSA supervisory role has been strengthened even in the capital and investment funds market, as expressed in a number of inspections carried out. Therefore, during 2018, on-site inspections were carried out in the three companies, which have been authorised by AFSA to carry on the agent activity on behalf of foreign brokerage companies that administer on-line sales platforms. One on-site inspection was carried in 2018 out at a company (bank), which main object was the activity of custody service for government securities, as well as the observance of the rules on money laundering prevention and the fight against terrorism; other inspections were carried out at a bank that serves as a pension fund deposit and some investment funds, including two investment funds licensed during 2018. The inspections were carried out in cooperation with the General Directorate for the Prevention of Money Laundering (GDPML), but also by AFSA on its own;
g. During 2018, in the framework of SECO project, advisers submitted also the final crisis management report, indispensable for AFSA response to crisis situations of subjects operating in the capital market in the country. In cooperation with the consultants of SECO project and based upon the crisis management report, 2 simulations took place. One of the simulations aimed at testing AFSA internal procedures concerning
12 ANNUAL REPORT ‘18 crisis management, which were approved in December 2017. The second simulation was organised in June 2018 with the participation of the Financial Stability Advisory Group (FSAG).
3. Improvement of the regulatory legal framework in the supervised markets
a. Preparation of the draft-law “On the compulsory insurance in the transport sector”.
During 2017, the Financial Supervisory Authority established a working group for the initiation and drafting of a draft-law ‘On the compulsory insurance in the transport sector’. The preparation of this draft-law was based on the European Union Directive 2009/103/ EC, but also on the laws on compulsory insurance of Serbia and Italy. Further to addressing the issues identified in the existing law no. 10 076, dated 12.02.2009 “On the compulsory insurance in the transport sector”, this draft-law aims to:
. Further approximate and harmonize the laws with the European directives;
. Educate and raise the awareness of the consumer and improve the quality of the service they receive;
. Address Bureau’s issues;
. Avoid potential conflicts rising from the application of the wrong laws;
. Ensure compatibility with the developments and requirements of the insurance market;
. Influence the decrease in number of the vehicle’ drivers that circulate without the compulsory insurance contract;
. Improve the terms and procedures for the treatment of the compensation requests made by the insurance companies;
. Guarantee the application of Bonus-Malus system, a rate mechanism for the compulsory insurance (MTPL), whereby the applied premium for the compulsory motor insurance for liabilities toward third parties depends on the history of the claims/vehicle driving experience of the insured. From a social point of view, the application of the Bonus-Malus system in Albania will raise public’s awareness for a more careful driving of the vehicle, increase the quality of the insurance service and consumer protection.
b. Amending AFSA Regulation no. 53, dated 25.06.2009 “For the treatment of claims covered by compulsory insurance contracts in the transport sector”, adopted with Board’s Decision no. 72, in April 2018, consisting on the updating of the coefficient for the calculation of capitalised amount, an important factor in
FINANCIAL SUPERVISORY AUTHORITY 13 calculating the compensation’s amount. With the amendments to the coefficients, there was a considerable increase in the compensation of the claims parties;
c. Based on the recommendations issued by Council of Europe’s (CoE) MONEYVAL, with Decision no. 214, dated 31.10.2018, on some amendments to the Regulation no. 58, dated 30.06.2015 “On due diligence and enhanced due diligence measures by subjects of law on anti-money laundering and financing of terrorism “, amended, the Directive ‘On money laundering and financing terrorism risk assessment” was added. This directive aims at defining the general level of risk for each subject. The amendments to the Regulation no. 58, were considerate of the risk-based supervising approach with regard to AML/CFT, thus establishing the obligations of the subjects to self-assessing the risk and deposit the data on an annual basis at AFSA, expanding the area of activity and the off-site supervision of AML/CFT. During 2018, work was done on reviewing and amending the “Manual for the Supervision of Money Laundering Prevention”, with a view to incorporating the on-site inspection process, along with insurance companies and other institutions supervised by AFSA;
d. AFSA, in cooperation with the consultants of the project ‘Strengthening the Supervisory Capacities of the Financial Supervisory Authority’: Focus on capital market development”, funded by SECO, conducted an intensive work during 2018 to complete the technical review of the “Collective Investment Undertakings” and “On Capital Markets” draft laws. These draft laws were drafted in compliance with the EU directives and aim at creating a transparent and well-regulated capital market, as well as promoting the development of these markets;
e. 2018 was also characterized by a further improvement in the regulatory framework through the adoption of some necessary regulations in the investment and capital market sector. The regulations are as follows:
. Regulation no.21, dated 06.02.2018 ‘On the administration of liquidity for the investment fund’;
. Regulation no.57, dated 29.03.2018 “On the transactions of connected parties and/or parties’ members to the same financial group’;
. Regulation no.16, dated 31.01.2018 “On the form of request and the content of documentation for the adoption of the prospect on bond issuance”.
4. Increasing Transparency with the Public
. In 2018, the Authority, in the framework of increasing transparency with the public and the implementation of the recommendations of the Albanian Parliament Resolution, has published for the first time on the official website the data for all insurance companies regarding the 2 indicators key solvency and assets to cover technical provisions;
14 ANNUAL REPORT ‘18 . During 2018, the Authority paid attention to the monitoring of the efficient fulfilment of the obligation of information by the companies operating in the insurance market, by conducting periodic checks and communicating with the insurance companies for the fulfilment of the obligation regarding mandatory information;
. During 2018, special importance was focused to providing pre-contractual information to the consumer who knows it with the product and the terms of the insurance. With the aim of verifying consumer behaviour and taking the necessary measures, AFSA has conducted continuous inspections in supervised entities and in cases when it results in failure to provide pre-contractual information it was followed by the relevant supervisory measures. Following is the implementation of the Authority’s measures and has resulted that they have been met in a short time;
. Enhanced with new indicators of AFSA’s Claims and Compensation Fund’s Bulletin, further enhancing transparency in the insurance market;
. In order to protect the investor, the Authority published a series of warnings about the risk of some financial products and the activities of unlicensed companies in the capital market. In this context, the Authority has also requested the support of responsible institutions regarding their intervention in cases of illegal activity of these entities.
5. Increasing Public Financial Education
On the focus of the Authority’s activity has been the increase of public financial education as an important factor for the development of markets under the supervision of the Authority as well as consumer protection and increased confidence in the markets under supervision. Taking this into consideration, AFSA has been engaged in concrete actions in order to increase consumer confidence and education on the markets under supervision. Work has continued with the organization of activities for the implementation of the Strategy “To increase consumer/investor confidence in markets under supervision (2017-2020)”. Among the most important activities undertaken by AFSA in the framework of this strategy are:
. Successful development in May 2018 and a positive impact of the National Conference “Challenges of markets development under AFSA’s supervision and financial education”, attended by students and academic staff from public and private universities in the country who contributed through various works, for matters regarding markets under supervision of the Authority;
. The presence of the Authority in different Universities by introducing the institution, its activity and the markets under supervision, through open lectures and conversations. Activities have been finalized with the signing of Collaboration Agreements with 7 universities to initiate a fruitful cooperation between the
FINANCIAL SUPERVISORY AUTHORITY 15 institutions in order to achieve the common objective of increasing the financial education of the general public and of the students in particular;
. During 2018, associations have been encouraged to increase their role in public financial education, which has started to exercise public and media activities;
. Internships of some students at AFSA, as well as the coordination of this process in order to enable students’ internships at these supervised subjects;
. Collaboration with the Ministry of Education to start talks on inclusion in curricula or in specific subject areas for the markets under supervision.
6. Improving and Further Developing on technological infrastructure
The Albanian Financial Supervisory Authority, in view of its supervisory role, protecting consumer interests as well as the viability and secure development of under supervision markets is committed to technological innovation and modernization of reporting platforms and reporting applications at the Compulsory Insurance Information Centre. During 2018 there have been important developments in the internal information technology infrastructure, applying the most modern methods in building information systems. More specifically:
. The Compulsory Motor Insurance Electronic Registry has been improved by upgrading the Oracle system to version 11G (64 bits), enabling a higher performance of the service offered, automating some manual processes, increasing data quality, and lowering of human errors. New areas were also added to specify real-time compulsory motor vehicles third party liability reporting as well as integration for the first time with the NBC registry;
. Based on international standards, disaster recovery infrastructure was activated at AKSHI linked to AFSA’s information centre. This infrastructure enables the backup of all AFSA information outside its premises when the AFSA server rooms may be out of order due to potential catastrophes;
. An online platform for direct reporting of financial statements or other periodic market reviews of investment and pension funds was established;
. In the service of transparency and creation of consumer facilities, an online complaint reporting platform was established, where every consumer can express his complaint online also via this platform;
. The assessment of IT systems installed at the insurance companies was carried out, through which real-time reporting of policy sales is carried out. Following this assessment, amendments to Regulation no. 23 “On online sales of insurance policy”;
16 ANNUAL REPORT ‘18 . Increased server processing and storage capacity was achieved, increased network security from cyber-attacks and physical server room monitoring.
7. New developments
On February 22, 2018, the Supervision of the Albanian First Securities Exchange (ALSE) began.
. The first Albanian Securities Exchange, ALSE, with private equity and licensed on 03.07.2017 officially started its activity on February 22, 2018. The trading system of the Securities Exchange is aimed at protecting the interests of investors and ensuring a fair and transparent market. During the first year of the Securities Exchange activity, the Authority has also approved several regulations filed by the Albanian Securities Exchange;
. Licensing of a new management company of investment funds and creation of 2 new investment funds;
. During 2018, the Authority licensed a new management company of investment funds to carry out asset management activities of collective investment undertakings and approved the creation of 2 new investment funds.
8. Strengthen cooperation with institutions within and outside the country in the service of effective supervision
Empowerment and cooperation with the counterpart institutions in the region and beyond have been the focus of the work of the Authority during 2018.
. During the year a series of meetings with counterpart authorities from Austria, Kosovo, Italy, the Republic of North Macedonia, Croatia, etc.;
. Thanks to the ongoing cooperation and professional relationship of AFSA with the organizations it adheres to, Albania was selected for the first time by the International Organization of Pension Supervisors (IOPS) as the hosting authority of the global forum that will take place in Tirana in autumn 2019;
. In June 2018, an important meeting was held under the auspices of the AFSA, in the framework of regional cooperation, on the topic “Regional Initiative for the Supervision of the Insurance Market in the Central, Eastern and South-Eastern European” (CESEE ISI). This initiative continues to support the exchange of information and best practices among regulatory authorities’ staff in the insurance market;
FINANCIAL SUPERVISORY AUTHORITY 17 . In September 2018, the European Insurance and Occupational Pensions Authority (EIOPA) in cooperation with the World Bank organized for the first time in Albania an international workshop on “Risk-Based Supervision” organised under the auspices of AFSA, where they exchanged experience and views on global risk-based oversight trends as well as the challenges associated with the implementation of global supervision standards;
. In the framework of cooperation with international institutions, a series of meetings were held with representatives of the World Bank, IMF representatives, and other organizations having their representations in Albania;
. Cooperation with the Bank of Albania has been strengthened by carrying out joint thematic inspections with the object of mainly verifying instead of the insurance policies benefiting banks, the insurance companies’ monetary values and the verification of the pending claims practices with the benefiting banks;
. In the framework of inter-institutional cooperation with the General Directorate of Taxation, AFSA oversaw the process of inventory and demolition of compulsory motor insurance policies by the Albanian Insurance Bureau and insurance companies;
. For the first time in Tirana, the meeting of the Regional Supervisory College at the insurance level was organized, according to the cooperation agreements with Kosovo and the Republic of North Macedonia in accordance with the Methodological Instruction “On the supervision of the insurance group”. These periodic meetings aim at mutual exchange of information and consideration of group-level issues for insurance companies;
. Cooperation has been increased through technical meetings with the insurers’ association on the opportunities for promoting and developing the insurance market. The role of the Authority has been felt in the ongoing demands sent to the responsible institutions, seeking cooperation in order to ensure and enforce the legal acts related to the monitoring of compulsory insurance products;
. In the framework of the expansion of bilateral relations with counterpart authorities and international institutions in 2018, the Authority signed Memoranda of Mutual Understanding respectively with IVASS and FSVC;
. In October 2018, the Cooperation Agreement with the Bank of Albania for the Licensing and Supervision of Securities Clearing and Securities Clearing Houses was signed. This agreement was necessary for the allocation of responsibilities between the two Regulators regarding the licensing and supervision of the Securities Clearing and Settlement System.
18 ANNUAL REPORT ‘18 9. Successful conclusion of projects
During 2018 several projects were successfully completed.
. The “Strengthening supervisory capabilities of the Financial Supervisory Authority” project, for the “Study of the future form of Central Depository of Securities in Albania” (August 2018). The importance of this activity is related to the important role of the creation of a Central Securities Depository in the country as an institution for securities clearing and settlement in the function of investor protection. The recommendations left by this activity also helped in the licensing process in January 2019 of a company for performing the function as Registrar of Securities;
. The “Insurance Initiative Access” micro-insurance project (A2ii), a comprehensive voluntary insurance project (November 2018). The project consisted in supporting and developing micro-insurance products focused on agriculture;
. In 2018 intensive work has also been done towards the completion and delivery of some project products of 3 years duration: “Strengthening supervisory capacities of the Financial Supervisory Authority: Focus on Capital Market Development “.
10. Strengthening Authority Supervisory Capacities and Human Resources Policies for Employee Motivation
. In the framework of the third phase of the SECO project and in view of increasing the supervisory capacities of the Authority, its staff participated in a series of training workshops in the country on the functioning of the capital market, as well as risk-based supervision or abusive practices in the market of securities. The staff also carried out a series of study visits to counterpart authorities and capital market operators in European Union countries, which contributed to the exchange of experiences on capital market activity and supervision;
. Also, in cooperation with GDPML, trainings have been conducted within and outside the country in the field of Money Laundering and Financing of Terrorism;
. An instruction was issued that sets out the rules for staff training and documenting the results from the training or qualifications developed;
. In the framework of the promotion and motivation of employees only in 2018 there have been positive developments in the promotion of employees with very good professional skills and high performance at work. Thus, some internal employees based on their experience and qualification have been enabled higher job positions;
FINANCIAL SUPERVISORY AUTHORITY 19 . Guideline “On the performance evaluation of employees at the Financial Supervisory Authority” was adopted as one of the main directions of human resources management;
. Amendments to Regulation no. 129, dated 26.11.2016 “On employee relations in AFSA”, amended, clearly defining the rules relating to the promotion of experienced employees and the appropriate professional skills in a higher hierarchy category in the Authority’s structure.
20 ANNUAL REPORT ‘18 CHRONOLOGY OF THE MOST IMPORTANT EVENTS IN 2018
Some of the most important events for the Authority during 2018 are summarized in chronological order in the table below.
A new Memorandum of Mutual Understanding between AFSA and the Italian Institute for Insurance Supervision (IVASS) was signed.
January By Board’s Decision no. 13, dated 31.01.2018 was licensed by WVP Fund Management Tirana sh.a. - a management company of collective investment undertakings and was approved the creation of two new investment funds.
On 22 February 2018, the Albanian Stock Exchange, ALSE officially started trading activity. February Adoption of the Regulation “On liquidity management of investment funds” by Board Decision no. 21, dated 06.02.2018.
By the Board’s Decision no.57, date 29/03/2018, the Regulation “On transactions March with related parties and/or parties belonging to the same financial group” was approved.
By Board’s Decision no. 72 was amended Regulation no. 53, dated 25.06.2009 “On the treatment of claims covered by the compulsory insurance contract April in the transport sector”, where the coefficients of calculating the capitalized amount were updated as an important element in calculating the value of the compensation.
A National Conference was organized titled: “Market Development Challenges under the supervision of AFSA and the financial education”.
May The final version of the draft law “On compulsory insurance in the transport sector” was sent to the Ministry of Finance and Economy, for further follow-up of the procedures until the approval.
A Memorandum of Understanding between AFSA and FSVC was signed after approval by the AFSA Board, according to Decision no. 93, dated 13.06.2018.
By decision of the Board of Authority no. 97, dated 13.06.2018, was approved June “Practical Manual for Motor and Property Claim Inspection”.
In Tirana, on June 12, 2016, was organized the 15th Meeting of the Eastern and South-eastern European Insurance Supervision Initiative, CESEE, where the Financial Supervisory Authority was presented with two works.
FINANCIAL SUPERVISORY AUTHORITY 21 By Board’s Decision no. 143, dated 30.07.2018 was approved the establishment of the “Raiffeisen Vision” Investment Fund and its respective prospectus.
July By Board’s Decision no. 140, dated 30.07.2018, “Practical Manual for Inspecting the Reinsurance Activity”, drafted with the assistance of the World Bank was approved.
The project “Strengthening Supervisory Capabilities of the Financial Supervisory August Authority” was successfully completed for the “Study of the Future Form of Central Depository of Securities in Albania” package.
In September 2018, the European Insurance and Occupational Pensions Authority (EIOPA) in cooperation with the World Bank organized for the first time in Albania an international workshop on “Risk-Based Supervision” organised under the auspices of AFSA.
September In the Authority, in the framework of increasing transparency with the public and the implementation of the recommendations of the Albanian Parliament Resolution, has published for the first time on the official website the data for all insurance companies regarding the 2 indicators key solvency and assets to cover technical provisions.
In October 2018, the Cooperation Agreement with the Bank of Albania for October the Licensing and Supervision of Securities Clearing and Securities Clearing Houses was signed.
Successful completion of the “Access to Insurance Initiative” (A2ii) micro- November insurance project for inclusive voluntary insurance.
The organization for the first time in Tirana of the Regional Supervisory Colleges for the supervision of the insurance group, in accordance with the December methodological guideline, approved by the Board’s decision no. 250, dated 28.12.2018.
22 ANNUAL REPORT ‘18 RECOMMENDATIONS OF THE EU PROGRESS - REPORT FOR ALBANIA
In the EU Progress - Report 2018, Chapter 9 “Financial Services” states:
“EU rules aim to ensure fair competition between financial institutions and their stability, specifically in the banking sector, insurance, supplementary pensions, investment services and securities markets. They include rules for the authorization, functioning and supervision of these institutions. Albania is moderately prepared in the field of financial services. Some progress has been made in this area. There has been some progress in banking supervision and further approximation of legislation with the Solvency II Directive.”
In the field of insurance and occupational pensions, amendments to the Law on “Compulsory Insurance in the Transport Sector” have yet to be adopted. AFSA approved a secondary legislation to further align it with the Solvency I and Solvency II Directives and started implementing the consumer strategy and investor trust in supervised markets. AFSA has reorganized its organizational structure and recruited additional staff.
Progress has been made in the financial market infrastructure with the licensing of the first Albanian private equity securities exchange. Public stock exchange remains suspended.
Regarding securities markets and investment services, the issuance of bonds by companies is authorized for private bidding for institutional investors, shareholders or individuals.
Regarding the fulfilment of this recommendation, the Authority in 2017 set up a work group for drafting the Draft Law “On Compulsory Insurance in the Transport Sector”, which was submitted for the follow-up of approval procedures at the Ministry of Finance and Economy with letter protocol no. 1654, dated 08.05.2018. During drafting of the draft law, the Authority continued to cooperate with the Association of Insurers and took into consideration some of their suggestions and comments as well as those of the World Bank.
Draft Law “On some amendments and addenda to Law no. 10 197, dated 10.12.2009 “On Voluntary Pension Funds”. The draft law has been sent to the Ministry of Finance since late 2015 and has gone through all stages of consultation with the ministries and pension market stakeholders. We also clarify that the draft law “On some amendments and addenda to Law no. 10 197, dated 10.12.2009 “On Voluntary Pension Funds” and the draft law “On compulsory insurance in the transport sector”, which at the time of drafting and are currently published on the AFSA website, at the link www.amf.gov.al/legjislacioni/ projektakte/projektligje.
FINANCIAL SUPERVISORY AUTHORITY 23 INFORMATION ON THE IMPLEMENTATION OF THE ACTION PLAN ON RESOLUTION “ON ASSESSMENT OF THE ACTIVITY FINANCIAL SUPERVISORY AUTHORITY”
AFSA according to the recommendations in the Resolution “On Evaluating the activity of the Financial Supervisory Authority”, approved by the Albanian Parliament on 21.06.2018, drafted and approved the Board and the work plan for their implementation. This resolution was forwarded to AFSA through Assembly letter no. 309/3 prot. dated 25.06.2018. Below we provide information on implementing the recommendations.
1. Closing of all risk-focused inspections within 2018 and drafting a clear report on the results of these inspections in all insurance companies.
Entity in charge of: Insurance Market Supervision Department
Term: December 2018
Action Plan: Insurance Market Supervision Department (DMTS) in implementation of the 2018 work plan adopted in January 2018 by AFSA’s Board determined the completion of risk-focused inspections in 3 Life insurance companies. In December 2018, the first cycle of inspections was completed under the supervision methodology with a focus on the risk for the Non-Life and Life insurance market. At the AFSA Board meeting, dated 28.12.2018, a detailed report was presented “On the results of inspections according to the country’s full inspection methodology with risk focus”.
2. Drafting clear scenarios for solving problems related to the Albanian Insurance
Bureau and the Compensation Fund, including identifying the needs for changes to legal and sub-legal acts and drafting relevant amendments with a view to respecting the rights and equal treatment of consumers, with the aim of preventing the repetition of situations such as past events.
Expected legal amendments to compulsory motor insurance ensure the implementation of stabilization measures in the insurance market and the establishment of well-defined standards regarding minimum reserves, liquidity level, capital adequacy, provisioning practices and improvement in reasonable measures of the claim/prime ratio.
Until the adoption of the new law on compulsory motor insurance, AFSA executives will report to the Assembly on the status of the Compensation Fund once every three months.
Entity in charge of: Department of Legal Affairs, Department of Insurance Market Supervision.
Term: During 2018
24 ANNUAL REPORT ‘18 Action Plan:
Albanian Insurance Bureau (AIB)
A special plan was developed for solving the problems of the Albanian Insurance Bureau and the Compensation Fund. It was sent to the Ministry of Finance and Economy in May 2018 the draft law “On compulsory insurance in the transport sector”.
During 2018, the implementation of the Board’s decisions regarding the settlement of the companies’ obligations, the publication of the beneficiaries for the approved outstanding administrative practices, and the control of the payments made following the conclusions of the inspection and the addendum to the Compensation Fund, were monitored. Proposals have been submitted to the Board and measures have been taken against companies in cases where they failed to comply with AFSA decisions;
In implementation of the Regulation No. 2, dated 28.01.2010, as amended, for the correct disclosure of claim subject to the Compensation Fund, in January 2019 the Albanian Electronic Bureau of Electronic Claim Management Security operates to the AIB, where AFSA has the right to view any case, to record the status of the file, to protect the interests and rights of consumers.
With regards to the monitoring of completed cases, AFSA, with decision no. 156, dated 30.07.2018, has amended the Regulation no. 36, dated 21.03.2012 “On the Establishment, Calculation, Financing, Administration of the Compensation Fund and Compensation of Claims”, where Article 6 point 1.1 determines that if the Bureau does not distribute Compensation Fund claims practices to insurance companies, its members according to the respective values of their obligation, the distribution to pay to the insurance companies shall be made by the Authority. The Bureau shall, within 7 days from the date of receipt by the Authority of the practice distribution, forward the authorization and a copy of the practice to the insurance company designated by the Authority.
Other measures taken by AFSA are:
. Follow-up of court proceedings that is informed by the Bureau, participating as a listening party, in order to verify the regular follow-up of the proceedings;
. Approval of the new Director of the AIB;
. Approval of some regulations by AIB related to the improvement of the procedures for following on the cases, subject to the Compensation Fund.
FINANCIAL SUPERVISORY AUTHORITY 25 Compensation Fund
For the Compensation Fund practices, 4 inspections in the country were carried out in all insurance companies and to the AIB. The conclusions of the inspection have served to determine the exact amount of Compensation Fund liability and the payment of claims in order to avoid their accumulation.
AFSA’s structures have monitored the division of Compensation Fund’s completed practices, constantly seeking implementation of the relevant regulation.
For the Economy and Finance Commission starting on September 26, 2018, 2-week information on the Compensation Fund payments were prepared. The payments incurred in 2018 amount to ALL 1,009 million, which are verified through bank payment orders during the inspection performed in January 2019. Also, in this inspection are verified the agreements concluded by the insurance companies, which result in the value of about ALL 205 million. The thematic inspections were carried out in the country across all insurance companies and AIB, for the practices that pertain to the claims with the object of the Compensation Fund, regarding the authorizations issued by AIB and the confirmations of payments by the companies for 2018 regarding the obligations under the decisions of AFSA’s Board.
In December 2018, the Authority approved the value of the Compensation Fund for 2019, a decision that has already introduced the Compensation Fund, by solving the inherited problem since 2002.
AFSA is monitoring the division of practices ending with the Compensation Fund, the final court decisions in pursuance of the deadlines set out in the Regulation on the Administration of this Fund, the payments under the agreements declared by the companies and the implementation of the Authority’s decisions.
The Authority, in pursuance of the request of the Chairman of the Committee of Economy and Finance, has sent 2-week information on the payments of the Compensation Fund until 31 December 2018.
3. The databases of systems and programmes shall be audited, currently used by markets supervised by AFSA, in order to identify and tackle the issues concerning the free, equal access and investor security and to examine the options for installing fiscal cash registers to stop informality in the insurance market and realize the complete fiscal process of the insurance market.
Entity in charge of: Department of Strategic and Operational Developments, Department of Insurance Market Surveillance, Internal Audit Unit. Term: During 2018
26 ANNUAL REPORT ‘18 Action Plan: During June, inspections were carried out at the premises of the companies for the sale of insurance market products. Data deposited and processed in their systems were verified. The collected data were processed and compared on two levels:
. With online reports from companies in AFSA systems to identify potential problems;
. With counterpart agency systems in the region and in the western countries to propose their improvement.
In fulfilment of this point, besides the IT specialists, specialists of the Audit Unit and the Department of Insurance Market Supervision were engaged. Following the final report, the amendment of Regulation no. 23 of the “Electronic Online Sales Register”, which obliges insurance companies to deposit to AFSA the technical documentation related to databases and programs in use, in order to increase the transparency of their systems and security.
Regarding the option of placing fiscal amounts at each point of sale, letter no. 2248 Prot., dated 26.6.2018 in the Ministry of Finance and the General Directorate of Taxation, for information to the Economy Committee and on 04.07.2018 a meeting with representatives of Taxation Directorate for further steps was held. At the same time, the insurance companies have been officially notified of this recommendation. It has been communicated to the Association of Insurers of Albania following the letter sent by the Association No. 380 Prot., dated 22.10.2018. It is the responsibility of the General Directorate of Taxation to further implement this recommendation.
4. Start urgent communication with the Ministry of Justice and the authorities responsible for initiating the implementation of two acts envisaging compulsory insurance according to the Law no.107 / 2014 dated 31.07.2014 “On Territorial Planning and Development”, (Article 42 point 9) and DCM 1109, dated 08.08.2008, which provides for compulsory insurance of employees by employers who engage in mining activities.
To be required by the Ministry of Justice to supplement the necessary sub-legal framework by providing that entrepreneurship contracts or real estate adverts in new constructions provide for conditions and deadlines for compulsory insurance as provided for in Article 42 point 9 of Law no.107 / 2014 dated 31.07.2014 “On the Planning and Development of Territory”.
Request cooperation with the institutions responsible for the supervision of mining and concession licenses and concessions in order to ensure data on mining workers who benefit from the right to insurance and to consider the possibility that this category of policies and, consequently the claims, be directly reported to FSA.
FINANCIAL SUPERVISORY AUTHORITY 27 Entity in charge of: Department of Legal Affairs
Term: During 2018
Action Plan: AFSA to implement this recommendation in order to exercise its functions based on Law no. 9572, dated 03.07.2006 “On the Financial Supervisory Authority” as amended, during 2018 has communicated with the following institutions:
Ministry of Justice
. A letter with no. 3159 Prot. dated 18.09.2018, Ministry of Justice and the Ministry of Infrastructure and Energy for further follow-up of the procedures on the approval of the draft decision “On compulsory insurance of construction risks and control of its implementation”. The draft decision for approval to the Council of Ministers was prepared by AFSA experts and the Association of Insurers of Albania.
Ministry of Justice with letter Prot. no. 9587/1, dated 3.10.2018 requested that the draft decision be forwarded by the Ministry of Infrastructure and Energy as the ministry in charge. The Ministry of Infrastructure and Energy has asked to set up a working group for this draft decision. Also, meetings were held with the Ministry of Justice on this issue.
. A letter with prot. no. 9851, dated 13.07.2018, and prot no. 2422, dated 12.07.2018 to the Ministry of Infrastructure and Energy for the monitoring of the insurance obligation as provided by article 42 point 9 of the law no.107/ 2014 dated 31.07.2014 “On the planning and development of the territory” and DCM 1109 dated 08.08 .2008 which provides mandatory insurance of employees by employers who engage in mining activities.
Concerning the compulsory insurance in the transport sector and the provision of employees employed in the mining activity, from the accidents at work is confirmed by the Ministry implementing the legal acts in force. Obligations of companies that own a mining permit to carry out insurance against accidents at work are continuously followed and monitored by the Ministry’s dependence institutions.
AFSA regarding the recommendation on the possibility of online reporting of insurance policies for mine workers has started implementing the project for the development of this system, which is currently in the market testing phase and will be applied within May 2019. In this project, online insurance of passengers is also added.
Apart from the above, the Authority has also sent letters to other institutions regarding the implementation of legal and sub-legal acts:
28 ANNUAL REPORT ‘18 Municipalities
All Municipalities have been sent letters, with the subject:
. Life Insurance of Fire and Rescue Protection workers (MZSH).
For firefighters, a DCM has not yet been approved with regard to the insurance of their Life. This was the content of municipalities responses to this issue.
. Passengers insurance in public transport.
Municipalities have confirmed that they are constantly exercising control over the insurance of passengers while travelling during the licensing process. (This obligation is foreseen in the law on compulsory insurance).
Ministry of Internal Affairs
Filing of Letter with prot. no. 3461, dated 16.10.2018, Ministry of Interior with the object:
. Life Insurance of Fire and Rescue Protection workers (MZSH).
The first draft decision of Council of Ministers on the Life insurance of firefighters was prepared by the Ministry of Interior and submitted to AFSA in 2016 (remember that the law envisioning the obligation to provide Life insurance has entered into force in 2015).
Currently a DCM with financial effects has been drafted, 1.1.2019.
AFSA addressed a letter to the Ministry of Interior (October 2018) for more rapid support and developments towards the approval of the DCM.
. Life insurance of police officers
The first draft decision of Council of Ministers on the Life insurance of police officers was prepared by the Ministry of Interior and submitted to AFSA in 2015 (remember that the law envisioning the obligation to provide life insurance has entered into force in 2014).
Currently, a DCM with financial effects has been drafted, 1.1.2019.
AFSA addressed two letters to the Ministry of Interior. One letter addresses both life insurance of police officers and fire-fighters (cited above), while the other letter is providing opinions on the draft 2018 DCM.
FINANCIAL SUPERVISORY AUTHORITY 29 Judicial Budget Administration Office Tirana
A letter No. 2438, dated 13.07.2018, was sent to the Judicial Budget Administration Office, with the object:
. Insurance of the Life, health and property of judges of First Instance and Appeal for Serious Crimes
A letter from AFSA was issued and a response was received confirming the application of this insurance on an ongoing basis.
Ministry of Justice
Filing of Letter with prot. no. 2423 dated 12.07.2018 to the Ministry of Justice with object:
. Insuring the notary obligation toward third parties due to notary activity
The Ministry confirmed that, in view of exercising the power to control the legal activity of notaries, it performs periodic checks regarding the exercise of their activity, including compliance with Article 25 of the law, which stipulates that “the notary must conclude an insurance contract on his obligation towards third parties due to notary activity”.
State Technical and Industrial Inspectorate, Ministry of Infrastructure and Energetics
A letter with no.1769/2, dated 12.07.2018, was sent to the State Technical and Industrial Inspectorate, Ministry of Infrastructure and Energetics.
. Insurance by operators of wholesale and retail trade of legal responsibilities for claims that they may cause to third parties
Letters have been sent, regarding:
. Determining the procedures and conditions for issuing licenses and licenses for the trading of gross oil and its by-products;
. Determination of technical conditions for the processing of bottles filled with liquefied gas;
They confirmed the monitoring of all processes in support of the legal acts in force, which oblige all wholesale and retail operators to ensure legal obligations for claims that they may cause to third parties. In addition, they oblige the non-household consumer that use gas tanks to be provided with an insurance
30 ANNUAL REPORT ‘18 contract by an insurance company to ensure the reimbursement of claims caused to third parties.
Ministry of Tourism and Environment
Has been sent letter no. 2867, dated 17.08.2018, the draft directive “On the conditions and procedures for concluding a third-party liability insurance contract” by tour operators as well as the boundaries of these responsibilities.
There is no official response, but there is technical e-mail communication.
Albanian Insurance Association (AIS)
The Association’s letter sent to AFSA has been filed, four letters dated 19 September 2018; 28.9.2018; 02.10.2018; 03.10.2018 with the object:
. Proposal for revision of the premium fee for Non-Life insurance products;
. For the application of insurance products in agriculture;
. On the problem of placing fiscal cash registers near insurance companies.
AFSA following these letters addressed the Ministry of Agriculture for the application of insurance products in agriculture and the Ministry of Finance, the Tax Directorate for placing fiscal cash registers in insurance companies and performing financial transactions only through the banking system.
5. The financial statements of the Insurance Companies and the financial analyses of the Authority should reflect and publish, in a language clear to the public, any review as regards solvency, capital adequacy and other data to help the public identify the insurance companies they chose to contract.
Entity in charge of: Insurance Market Supervision Department
Term: During 2018
Action Plan: For the first time on AFSA’s website, in the section “Publications/ Technical- Financial Data” in September 2018, data on all insurance companies are published, including the total assets of the insurance company , gross written premiums, net financial result, solvency and active coverage of technical provisions. Detailed publication of technical and financial data is provided in the Supervision Report for 2017, while in 2018 they are also reflected in the link: https://amf.gov.al/ts_tekniko_financiare.asp.
FINANCIAL SUPERVISORY AUTHORITY 31 6. To continue with decision-making regarding the three insurance companies that have not regularly met the obligation to contribute to the Compensation Fund. The decision of the Authority to impose administrative penalties cannot be impeded by the refusal of the Directors of the Albanian Insurance Bureau to propose to the Authority the undertaking of these measures.
Authority shall apply the procedures of the Administrative Procedures Code regulating the competence for decision-making by a superior body in cases when the body refuses or with inaction does not meet the legal obligation to issue the administrative act.
Entity in charge of: Department of Legal Affairs, Department of Insurance Market Supervision.
Term: During 2018
Action Plan: In its meeting held July 30, 2018, the AFSA Board analysed the payment performance of the Compensation Fund and the payment agreements concluded by the insurance companies.
Under these conditions, reviewing the performance of payments that were presented at low rates based on point 3 of Article 52 of Law no. 10076, dated 12.02.2009 ,“On compulsory insurance in the transport sector”, as amended, by decisions no. 160 and 161 of 30.07.2018, two insurance companies have been sanctioned for violation of Article 45, paragraph 2 of this law, while a company has won the judicial process against the Albanian Insurance Bureau for the Compensation Fund.
Regarding the use of the provisions of the Administrative Procedure Code for taking the functions of AIB, following several analyses and proposals to the Board has been reached to approve the new director of the AIB, which is currently conducting the activity of this entity.
7. To be completed within July the recommendation regarding verification of the algorithm by referring to the regulation in the relevant regulation approved by the Authority and to take measures to prevent the creation of such schemes for other products of the insurance market. The Financial Supervisory Authority and the Competition Authority should deepen cooperation on this issue in order to restore transparency and competitiveness in the market.
Entity in charge of: Department of Strategic and Operational Developments, Department of Insurance Market Surveillance, Department of Legal Affairs.
Term: July-August 2018
32 ANNUAL REPORT ‘18 Action Plan: The implementation of this recommendation began with inspections of sales systems at each point of sale and was identified if there are installed systems related to the above algorithm. Cooperation with AKSHI was requested with regard to algorithm verification. A letter was prepared and sent to the Competition Authority dated 28.06.2018 for a joint meeting between the two institutions. The Competition Authority has replied that the meeting was not necessary but requested the inspection conclusions.
The final report of the inspections was prepared and sent to the Competition Authority. 2375/2 Prot. dated 31.08.2018 with the identification and respective proposals as well as the following letter no. 3602/2 Prot., dated 14.1.2018 the measures taken were communicated by AFSA. Following such proposals, the amendment of Regulation no. 23 of the “Electronic On-line Sales Register” was drafted and amended, which binds insurance companies to provide to AFSA the technical documentation related to databases and programs in use, in order to increase the transparency of their systems and security.
Given the public sensitivity and concerns that have emerged from time to time and the findings that have emerged from everyday work, the Authority has launched several letters: prot. no. 1416/1 dated 27.04.2018 “On a complaint filed with AFSA”, prot. no. 1725, dated 14.05.2018, and prot. no. 1725/2, dated 22.05.2018 “On Inspecting Insurance Brokers” at the Hani i Hotit border point, as well as prot. no. 1789, dated 18.05.2018 and prot. no. 2143, dated 18.06.2018 “On Inspecting Insurance Brokers” Broker Banks. Following these announcements, the Competition Authority opened investigations and made the relevant decisions.
Pursuant to the Decision of the Competition Authority No. 561, dated 15.10.2018 “On some recommendations and closure of the preliminary investigation into the compulsory motor insurance market for the domestic TPL insurances”, the Financial Supervisory Authority set up a work group for tracking and realizing them and reported near the Competition Authority.
However, in the exercise of the powers pursuant to Article 41 of Law No. 9121/2003 “On Competition protection” AFSA has always required coordination of actions and in our judgment it results that almost all the recommendations of the Competition Authority are exactly the findings that AFSA has referred to this Authority from the inspections carried out and asked to evaluate the insurance market issues for a thorough and exhaustive investigation into the protection of free and effective competition in the market.
8. Auditing the situation of wrongful reports regarding the Compensation Fund, in order to identify responsibilities and to take administrative or other measures for persons who have compiled and allowed the publication and distribution of incorrect or forged tables.
Entity in charge of: The Internal Audit Unit, Department of Insurance Market Supervision.
FINANCIAL SUPERVISORY AUTHORITY 33 Term: During 2018
Action Plan: Upon completion of the AIB audit, which includes auditing the activity of the Bureau with respect to the claims obligations of the Compensation Fund, for the period 01.01.2001-31.12.2017 by the selected audit company, Grand Thornton Ltd, pursuant to the Board Decision no. 218, dated 28.02.2018, the report will be analysed and measures will be proposed for the responsible persons regarding the identified problems. The Authority is still awaiting the submission of the final audit Report. At the same time, we are awaiting the SAI final report on AFSA performance, part to which was the Compensation Fund as well as the final internal audit report on this issue.
However, regarding the situation of the Compensation Fund, AFSA has taken two decisions for the former director of the AIB, respectively: Decision No. 86, dated 07.05.2018, imposing a fine on him, and Decision No. 88, dated 01.06.2018, on the refusal of the request for its approval as director of the AIB.
9. Develop the group supervision methodology, referring to cases of insurance companies having branches or subsidiaries in other countries.
Entity in charge of: Insurance Market Supervision Department
Term: During 2018
Action Plan: The implementation of this recommendation was carried out in cooperation with the FSVC technical assistance (October 22-26, 2018), on the organization of Balkan regional supervisory colleges. It was approved at AFSA’s Board meeting on 28.12.2018, the methodological guideline “On the supervision of the insurance group”. This guidance sets out the specific rules and forms of a cooperation system between supervisory institutions, such as the Supervisory Colleges of the Insurance Group, for the purpose of exchanging information in the function of group-level effective supervision on domestic insurance and reinsurance companies that have their own investments or branches in foreign countries. The colleges meetings will be 4 times a year.
10. Make a decision with regard to the proposed candidacy for the Director of the Albanian Insurance Bureau and to resolve the situation in full observance of law.
Entity in charge of: AFSA’s Board
Term: Within July 2018
Action Plan: By the Board’s decision no. 88, dated 01.06.2018, was rejected the proposal of the General Assembly of the members of AIB for the approval of the former director, as
34 ANNUAL REPORT ‘18 Executive Director of the Albanian Insurance Bureau. With Decision No. 105 of 18.07.2018 was approved the new Executive Director of the AIB.
11. In order to encourage and enhance consumer confidence in AFSA’s role, special measures should be taken to inform and educate the public about investment in securities, with regard to the risk inherent in these types of investments and unlicensed activities or in contrary to the law, to be accompanied by AFSA with decision-making and quick and institutional feedback.
Entity in charge of: Department of Legal Affairs/ Capital and Funds Market Supervision Department
Term: During 2018
Action Plan: An action plan compiled in function of the three-year strategy “To increase consumer/investor confidence in the markets under supervision” was implemented, which contains information activities in the media and not only the inclusion of curricula in pre- university education focusing on the securities market. The cooperation with the Ministry of Education continues in this direction.
Online access to consumer complaints for services received from markets under supervision has been realized.
Also, the public is regularly informed via the official website of the Authority regarding possible risks of investments in the securities market. Recently the Authority has added the Section ALERT, to which the public is informed regularly on the basis of warnings about the risk of activities in the field of securities as well as unlicensed or in violation of the law.
During 2018, in this link were published information and educational materials in the field of securities as follows:
. Investors: pay attention to Fortrade’s activity;
. Warning on investment risk in the “Contract for Differences” (CFD) instrument;
. ESMA sets the ban on binary options as well as the restriction of the Contracts for Differences in order to protect the investor;
. On the risks of using virtual money with initial offer (ICO);
. Investors pay Attention to the activity of the company named FXLider.
FINANCIAL SUPERVISORY AUTHORITY 35 Bearing in mind the importance of increasing financial education, the Authority has engaged in concrete actions. Financial Supervisory Authority continued to work on the organisation of the activities for the implementation of the Strategy “On increasing consumer/investor confidence to the markets under supervision (October 2017–October 2020)” throughout 2018.
Among the most important activities carried out by the Authority are:
In May 2018 was successfully held and also had a positive impact the National Conference with the theme: “Problems and challenges of developing markets under supervision and importance of financial education”. In this conference participated students from different Universities, who contributed with various works, and academic staff on issues related to markets under AFSA supervision.
During 2018, AFSA continued to be present in different universities in the country, introducing the institution, its activity and the markets under its supervision, through open lectures and discussions. Surveys were carried out in universities through questionnaires which enable data collection on the level of students’ knowledge around AFSA and the trades under its supervision. These activities were concluded with the signing of respective MoUs with 7 public and private universities. AFSA has also provided internships for 9 students during 2018, and has coordinated the process to enable internships for approximately 300 students at the subjects under its supervision for 2019.
AFSA has continued its co-operation with and increased its presence in the media with experts in the respective areas.
The following information materials have been prepared and published by AFSA:
. Drafting of information leaflets (Property insurance, Health insurance, Insurance Market);
. Information materials published on AFSA’s website (Insurance Market, “Frequently asked questions”; What should consumers be aware of).
During 2018, associations were encouraged to increase their role in public financial education, which has started to exercise public and media activities;
12. Take appropriate measures to ensure that the new laws regulating the operation of the investment market concerning capital securities do not mitigate the licensing criteria for subjects requesting to obtain the license to exercise activity in the securities market, or to weaken transparency requirements. The new legal framework should aim at limiting or prohibiting the development of investment schemes outside the licensed markets for a
36 ANNUAL REPORT ‘18 five-year period at least, as well as imposing a three to five-year ban on the alternative investment schemes known as high-risk speculative schemes.
Entity in charge of: Department of Legal Affairs/ Capital and Funds Market Supervision Department
Term: During 2018
Action Plan: The new draft-law on the securities, which has been consulted with the public, reflects the non-mitigation of licensing criteria for the investment firms operating in the capital market area. With regard to the second part of the recommendation, in the new draft-law “On collective investment undertakings” concerning investment funds, this recommendation is fully reflected. All collective investment undertakings in transferable securities should invest within the framework of the regulated market.
A transitional provision has been added to Article 240, paragraph 1, with this wording ‘An alternative investment fund cannot be registered by AFSA under this law within five years from the date of adoption of this law’.
13. Review the tariffs due by the licensed subjects to the extent required by the Authority to secure self-financing after completing the indispensable investments in the on-line compulsory motor insurance register.
Entity in charge of: Department of Insurance Market Supervision, Capital and Funds Market Supervision Department, Department of Legal Affairs,
Term: During 2018
Action Plan: A working group for the verification of current tariffs was established, which proposed new tariffs in line with the applicable legal framework as well as the needs for normal conduct of AFSA activity. The changes in these tariffs resulted in their lowering, which was reflected in the AFSA budget.
14. In AFSA internal regulations, it should be clearly described, on the one hand, the responsibility of the Authority in relation to the Education Centre concerning the curricula development and, on the other hand, the financing of the Centre of Education, observing the legal provisions in force with regard to funding and use of the Authority’s funds.
Entity in charge of: Department of Legal Affairs
Term: During 2018
FINANCIAL SUPERVISORY AUTHORITY 37 Action Plan: With respect to the Educational Centre status, we wish to clarify that referring to the organizational structure of the Financial Supervisory Authority, approved in June 2017, the Education Centre is not part of this structure. The trainings are carried out by AFSA itself, which in the future will establish the cooperation directions with the interest groups outside the institution, in order to identify the appropriate institutions and structures that will provide professional training for executives and professionals in areas licensed and supervised by AFSA and meeting of training requests for their delegation.
With Board’s decision no. 164, dated 30.07.2018, the curricula for professional qualification programmes were adopted. On the other hand, with AFSA Board decision no. 163, dated 30.07.2018, fees due by professionals licensed/authorised by AFSA concerning basic and continuous professional trainings, were waived by AFSA. The waving of these fees is done in compliance with the Law ‘On the Financial Supervisory Authority’ regarding the funding and use of the AFSA funds.
38 ANNUAL REPORT ‘18 MEASURES TAKEN BY AFSA TO ADDRESS RECOMMENDATIONS ISSUED BY COE MONEYVAL COMMITTEE
The Financial Supervisory Authority, regarding the issues concerning prevention of money laundering and terrorism financing, has effectively established the necessary structure for the coordination and supervision of markets. This special structure about the AML/CTF, has been established within the Department of Legal Affairs, Directorate of Applicability.
During the period 2016-2018, AFSA has been intensively engaged in the 5th round of the evaluation process of our country by the Council of Europe’s MONEYVAL Committee regarding the measures taken against ML/FT. The process took place in several phases such as: submission and completion of the questionnaires by the country’s authorities; on-site visits by the experts’ assessment team and their meeting with public and private actors responsible for ML/FT issues; meeting with the experts’ group after the first draft- report; continuous submission of comments by the authorities on the various draft reports; the collection of comments from the international ML/FT network and the preparation of written arguments about their findings and, the discussion, at the plenary session of the MONEYVAL Committee, of the report and its approval by this Committee. The evaluation report was adopted at the 56th plenary session of the MONEYVAL Committee, held in Strasbourg on 3-6 July 2018.
The Committee of Experts’ Report on the evaluation of AML/CTF measures, MONEYVAL, issued recommendations for Albania, in which view several measures were taken by the Financial Supervisory Authority.
On 4 September 2018, the Committee on the Coordination of Fight against Money Laundering approved the action plan to address the recommendations of the MONEYVAL Committee and the AFSA was actively committed in addressing and fulfilling these recommendations.
The measures taken were followed by the following amendments to AFSA Regulatory acts:
. Regulation no. 79, dated 31.08.2015 “On the approval/licensing of the persons to carry on the insurance agent activity, and the events of refusal of registration and of issuing a license”, amended by Board Decision no. 215, dated 31.10.2018;
. Regulation no. 165, dated 23.12.2008 “On the Licensing of Brokerage/Intermediary firms, Broker and Investments Adviser”, amended by Board Decision no. 218, dated 31.10.2018;
. Regulation no. 69, dated 26.05.2011 “On issuing authorisations to individuals for the sale of the Collective Investment Undertakings quotas/shares at Public Offer”, amended by Board Decision no.235, dated 26.11.2018;
. Regulation no. 114, dated 11.09.2008 “On the Confidentiality in the Financial Supervisory Authority”, amended by Board Decision no. 47, dated 20.12.2018;
. Regulation no. 58, dated 30.06.2015 “On due diligence and on enhanced due diligence by legal subjects, on prevention of money laundering and terrorism financing”, amended by Board Decision no. 24, dated 26.02.2018, which added Annexes 4 and
FINANCIAL SUPERVISORY AUTHORITY 39 5, the self-assessment forms for the subjects. From the categorization of risk, based on the self-assessment forms deposited at the AFSA for 2017 (off-site), a low level of risk followed; Regulation no. 58 re-amended by the Board’s decision no. 214, dated 31.10.2018, adding Directive “On measuring the risk from Money Laundering and Terrorism Financing’.
The Supervision Manual for AML/CTF has been amended by Board Decision no. 34, dated 27.03.2019, adding the supervision of the investment fund.
An important contribution to the successful drafting of the Manual and Guidelines for a better risk assessment was provided by SECO experts who provided ongoing assistance, particularly in the capital market.
In the framework of addressing the recommendations, the AFSA increased inspections of AML/CTF, in practically all subjects it supervises. The Inspection Plan as well as the Action Plan were filed with GDPML to increase coordination between the two institutions. Only during 2018, have been carried out 13 inspections. The inspections were carried out in cooperation with GDPML and also separately from the AFSA.
The AFSA continued to maintain ongoing correspondence with the GDPML for entities requiring getting licensed from the AFSA. During 2018, 8 letters were filed with GDPML, of which, we received the relevant responses.
We emphasize that, the empowerment and cooperation among the counterpart institutions of the region and beyond have been on the focus of AFSA’s work.
The AFSA has received assistance from the European Union and the Council of Europe in the framework of the project “Horizontal Facility for the Western Balkans and Turkey”.
AFSA is member to the Steering Committee of the project ‘Action against Economic Crime in Albania’. In the framework of this project, AFSA has participated in trainings (conferences, workshops), within the country, on topics such as: “Risk-based supervision, an effective supervision’; “Improvement of the inter-institutional cooperation between supervisory authorities’; “International conference on the transparency of beneficiary owner’, etc.
AFSA representatives have participated to the trainings organised by the Academy of European Law ERA, in Trier, Germany, on the topic “Prevention of money laundering and EU financial services”.
40 ANNUAL REPORT ‘18 INSPECTIONS
During 2018, AFSA, has significantly increased inspections for supervised markets by carrying out 76 inspections in comparison with 22 carried out in 2017. These inspections consist in full inspections, risk-based inspections, thematic inspections, consumer safety inspections, compensation fund inspections. Some of them have been carried out in cooperation with other institutions such as the General Directorate for the Prevention of Money Laundering (GDPML) or the Bank of Albania.
2018 marked the completion of the first complete cycle of inspections according to risk -based methodology across the insurance market regarding the Risk-Based Insurance Supervision Manual of Insurance Companies. In addition, AFSA continued to carry out six thematic inspections in non-life insurance companies, thus increasing the number of such inspections compared to 2017.
Thematic inspections are focused on the verification of the claims handling process, based on the “Practical Manual on claims handling”, drafted with the assistance of the World Bank and approved by the AFSA’s Board in June 2018.
Following the inspections carried out, cases of non-compliance have been identified regarding the determination of workability loss coefficient, provisioning of pending losses, deficiencies of the procedures in the internal regulations of insurance companies on claims handling.
In addition, in the capital and fund market was performed a thematic and a full risk-based inspection in one of depository banks, which is the depository of four investment funds and of one pension fund. This inspection was carried out in cooperation with GDPML.
Findings from the inspections carried out consisted of measures to implement the regulatory requirements, adaptation of IT systems, as well as regarding the penalties imposed to investor/member of fund in compliance with legal requirements.
Have been carried out on-site inspections to three companies in the function of agent on behalf of international brokerage firms, and an on-site inspection at a company (bank) with the main object of the Custodian service activity for Government securities, as well observance of the rules related to the prevention of money laundering and the fight against terrorism.
The agency’s recommendations consisted of applying regulatory requirements, corporate governance issues, reward policies, and etc. Related to custody activity, the recommendations consisted of implementing the rules on the allocation of the assets of the company.
In the framework of monitoring the implementation of the AFSA Board’s decisions, two thematic inspections were carried out in Non-life insurance companies with the object “Verification of the implementation of AFSA’s Board Decision’s requirements”.
FINANCIAL SUPERVISORY AUTHORITY 41 AFSA pursuant to the cooperation agreements with financial institutions within country has carried out seven common inspections during 2018 in comparison with two inspections carried out in 2017.
For the first time, in order to protect consumers’ interests, 12 inspections have been carried out to all brokerage firms and to three broker banks. Inspections focused on two main directions: protection of consumer interests and continuous fulfilment of licensing conditions. From the inspections carried out, the respective recommendations were made based on the conclusions drawn for each company, in order to take immediate measures to improve the situation. AFSA during 2019 has planned to monitor the implementation of the recommendations issued during these inspections.
42 ANNUAL REPORT ‘18 IMPLEMENTATION OF RECOMMENDATIONS FROM OTHER INSTITUTIONS
During 2018, AFSA has received recommendations from the Competition Authority.
Pursuant to Decision No. 561 dated. 15.01.2018 “On some recommendations and closure of the preliminary investigations into the compulsory motor insurance market to the third parties for the domestic TPL insurance product” the Competition Authority, decided:
To recommend to AFSA that within 90 days deadline:
a. To approve the risk premium for each insurance company according to the report prepared by the actuary of the company by not approving and orientating an equal risk premium for the entire MTPL market;
b. To verify whether green card insurance trading in their sales systems is in compliance with the rules of market behaviour approved by the AFSA in order to avoid the undesirable consequences on the market competition;
c. To take measures aiming at banning the trading of compulsory insurance policies in violation of the definitions of Law no. 52/2014 “On the activity of insurance and reinsurance”;
d. Take the necessary measures to allow the emergence in the trading systems used only by the agents of the insurance company on whose account it operates;
e. To prohibit the agents trade on behalf of other insurance companies for which they are not licensed;
f. To avoid interventions in the compulsory insurance policies trading systems that are not in compliance with by-laws and rules established by the AFSA, with the intention of avoiding the potential coordination of behaviour between competing undertakings;
g. To submit to the Competition Authority requesting the initiation of appropriate legal procedures for any case for which it finds out the anti-competitive behaviour by undertakings operating into the compulsory motor insurance market for the responsibility towards third parties.
Pursuant to the Decision of the Competition Authority no. 561, dated 15.10.2018 “On some recommendations and closure of the preliminary investigations into the compulsory motor insurance market for the domestic green card insurance”, the Financial Supervisory Authority established a working group for their follow-up.
It needs to be emphasised that proceeding the commitment to implement the requirements of Assembly Resolution “On Evaluating the Activity of the AFSA for 2017”, AFSA has carried out a series of inspections of themes related to issues that have also been addressed to the decision of the Competition Authority.
FINANCIAL SUPERVISORY AUTHORITY 43 Specifically, during July 2018, AFSA carried out the inspection “On Insurance policies selling system verification in the insurance market”.
As it has been mentioned on the report sent to the Competition Authority by letter 2375/2 dated 31.08.2018 on the findings from the verification carried out on the insurance policies selling system to agents, intermediaries and headquarters of insurance companies, “Electronic system of compulsory insurance contracts” serves as a reporting system of compulsory motor insurance policies rather than a system of their sales.
This system does not trace the path of policies’ sales and cannot administer this process from the moment the policy was issued from the companies’ sales systems until they are reported in the AFSA system.
Therefore, the work plan for the implementation of the recommendations is mainly related to on-site inspection at sales points as well as inspections in sales systems administered by the insurance companies themselves and/or intermediaries, especially brokerage companies.
Recommendations of the Competition Authority and AFSA’s actions for each of them are listed below:
Point “a”: To approve the risk premium for each insurance company according to the report prepared by the actuary of the company by not approving and orientating an equal risk premium for the entire MTPL.
Amendment of Article 10 of Law no. 10076, dated 12.02.2009 “On compulsory insurance in the transport sector”, brought the liberalization of compulsory motor insurance fees.
Based on the Regulation no.110, dated 28.07.2011 “On determining the technical provisions level for compulsory motor insurance in the transport sector” risk premium shall be approved by March 31 of each year. This is the necessary time for the collection of information, the preparation of financial statements up to the approval of risk premiums by the AFSA. In addition, we point out that within this period AFSA shall approve the technical provisions of insurance, which are components included in the risk premium.
AFSA by means of Decision no. 14, dated 15.02.2019 has approved changes to Regulation no. 110, dated 28.07.2011 “On determining the technical provisions level for compulsory motor insurance in the transport sector”, for the implementation of the recommendation on risk premium approval for each insurance company. With Decision no. 62, dated 27.03.2019, the AFSA approved the risk premium tables for the estimation of the level of compulsory third party liability insurance for motor vehicle owners on losses caused from using this vehicle on green cards insurance contract, insurance contract made on the border, and Green Card contract. In addition, risk premium tables were approved for each company in order to estimate the level of compulsory third-party liability insurance for motor vehicle owners on losses caused from using this vehicle on green card insurance contract. Companies are required to publish on the website risk premiums and compulsory insurance premiums
44 ANNUAL REPORT ‘18 in the transport sector and keep them posted on the site throughout the implementation period.
Point “b”, “c”, “e”, “f”: To verify whether TPL trading in their sales systems is in compliance with the rules of market behaviour approved by the AFSA in order to avoid the undesirable consequences on the market competition.
In this regard, AFSA will continue to carry out inspections to the companies in accordance with the rules set forth in Regulation no. 23, dated 26.02.2018 “On the online electronic compulsory motor insurance register of sales”, as amended.
Following the recommendations from the inspection “On Insurance policies selling system verification in the insurance market”, the AFSA proposed the relevant amendments to Regulation no. 23, dated 26.02.2018 “On the online electronic compulsory motor insurance register of sales”, which has been approved by the Board’s decision no. 188, dated 18.09.2018. (http://amf.gov.al/pdf/publikime/ Nr188 datë 18.09.2018.pdf)
Amendments to the regulation relating to the recommendations of decision no. 561 dated 15.10.2018 of the Competition Authority, specifically in point “b”, “c”, “e” and “f”, as mentioned below:
“The insurance company, agents/agents’ companies shall take all necessary measures to adapt the respective information systems of on-line sales policies to operate in accordance with the provisions of this regulation. An authorized user cannot sell the insurance policies from more than one point of sale or location.
The insurance company shall inform the AFSA in advance of its sales system of compulsory motor insurance policies. These systems should at least comply with the following criteria:
. Provision of unlimited access for the sale of policies any time required by the agent;
. Identification of agents uniquely using the code approved by AFSA;
. Any agent who is authorised to selling polices of more than one insurance company should have a copy of the agreement on it premises, which certifies its authorization;
. The system used by the agent responsible for the sale of compulsory policies should be part of the company’s system for which it is licensed, by directly related to it without interference of other unauthorized systems.
The insurance company shall inform the AFSA (IT Directorate) of the network scheme and all systems responsible for selling or reporting policies through an official letter and email ([email protected]). The notification is made before the changes in the network or systems occur, together with the purpose of the change.
FINANCIAL SUPERVISORY AUTHORITY 45 AFSA is entitled to exercise its duty for supervising these systems at any time by considering these criteria, but also others, based on the standards of information and technology systems auditing. “
Point “d”: Take the necessary measures to allow the emergence in the trading systems used only by the agents of the insurance company on whose account it operates;
Related to the point “d” we have to specify that pursuant to Law no.52/2014 “On the insurance and reinsurance activity”, Article 194, the activity of the insurance agent can be exercised for some insurance companies.
1. The insurance agent activity is performed on behalf of and for the account of the insurance company and includes the presentation, proposal and other preparatory activities on the insurance contract as well as its signature by the insured.
2. The insurance agent activity may by also be performed on behalf of some insurance companies, if the insurance companies agreed between them by a written agreement.
This recommendation will be applied during the inspections, where included “c”, “e” and “f”.
Point “g”; To submit to the Competition Authority requesting the initiation of appropriate legal procedures for any case for which it finds out the anti-competitive behaviour by undertakings operating into the compulsory motor insurance market for the responsibility towards third parties.
The AFSA, following the amended regulation, but also in the framework of the recommendations, conducted during the months of December 2018-January 2019 a series of combined inspections at the agents’ points of sale in order to verify; the necessary documentation they use, the information technology systems they use to issue a compulsory motor insurance policy, the thematic inspection of brokerage firms.
Given the public sensitivity and concerns that have emerged from time to time and the findings that have emerged from everyday work, we have sent several letters to the Competition Authority: no. 1416/1 dated 27.04 .2018 “On a complaint filed at AFSA”, no. 1725, dated 14.05.2018 and prot. no. 1725/2, dated 22.05.2018 “On Inspecting Insurance Brokers” at the Hani i Hotit border point, as well as prot. no.1789, dated 18.05.2018 and prot. no. 2143, dated 18.06.2018 “On inspecting insurance intermediaries” Broker Banks, for which we remain awaiting to the investigation outcome.
46 ANNUAL REPORT ‘18 A SUMMARY OF THE PROGRESS OF THE MARKETS UNDER SUPERVISION
The Insurance Market
The insurance market, during 2018, continued its expansion trend, reporting positive data, which indicate its growth, with a more diversified and balanced structure. The gross written premium, amounted to ALL 16.93 billion, or about 5% more compared to 2017. The total of Gross Paid Claims for 2018 amounted to ALL 6,983 million, which is ALL 1,449 million or 26% more than 2017 and 47% more than 2016.
The compulsory motor insurance continued to dominate the insurance market structure. They provide 63.4% of gross premiums written and an increase of 8% compared to the previous year.
The specific weight of the insurance market volume as a percentage of Gross Domestic Product GDP in 2018 results 1.06%, with a slight increase compared to 2017. Despite the market growth in the recent years, this report indicates that the insurance market is still in need of further expansion.
Related to the insurance market, the number of contracts in 2018 continued to increase by 5.9% compared to the previous year and 14% compared to 2016. The number of contracts in compulsory motor insurance, increased by 9.8% compared to 2017 and 14% compared to 2016.
For the first time in 2018, the ratio claim/net premium (for non-life insurance) increased by 5% compared to the previous year, thus amounted over 42%, a level comparable to the countries of the region. A positive impact on this report had the payment of claims, Compensation Fund which amounted to ALL 1 billion or 39% more than 2017, by almost twice those recorded in 2016.
The fire safety and natural hazards by about 42%, followed by car accidents and health insurance by 23% dominated the voluntary non-life insurance.
Life insurance premiums in 2018 had a decrease of about 5% compared to 2017. Life insurance continues to be closely related to the lending level, mainly to individuals. This fact is also supported by the product analysis which had the main impact on the growth of this market. One of the reasons of the decrease comes from the “Debtor’s Life” portfolio, where beneficiaries are the second-level banks, which grant loans to individuals.
The Voluntary Pension Fund Market and Investment Funds
The Voluntary Pension Fund Market, even though modest in its development, has continued to expand this trend in increasing the net value of the assets and the number of members. On 31.12.2018, the total of this market net assets amounted to ALL 2.3 billion with 25.298 members. The net assets of this market on 31 December 2018 have increased by 33%, while the number of members increased by 21% compared to the end of 2017. Compared to the
FINANCIAL SUPERVISORY AUTHORITY 47 last year, that of 2016, turns out that the net assets increased by 74%, while the number of members increased by 46%.
The investment fund market decreased by 6.6% compared to the previous year. However, it marked an increase by 3.8% compared to 2016. The reasons for decreasing are thought to have been a consequence of low returns from investments, especially in foreign currency and as a result of the exchange rate. The total net assets under management of investment funds amounted to ALL 66 billion, constituting about 4% of GDP3
The market weight of the investment funds for 2018 on markets supervised by AFSA, amounted to 67% holding the major share in these markets. Already this market represents an important part of the financial sector in Albania. In order to assess the impact of extraordinary situations and the possibilities for their solution, two simulations have been organised by the AFSA, one of them with the participation of the representatives of the Ministry of Finance, the Bank of Albania and the Deposit Insurance Agency. The World Bank and the IMF participated in these simulations as observers.
Capital Market
The official start of the Albanian Securities Exchange -ALSE activity on February 22, 2018 is the novelty of the capital market for 2018. This Securities Exchange is of private capital and licensed on 03.07.2017. The trading system of the Securities Exchange is observed by AFSA in real time, aimed at protecting the interests of investors and ensuring a fair and transparent market. During the first year of its activity, over the period February-December 2018, the total value of trading (on exchange) in the Albanian Securities Exchange ALSE amounted to ALL 1.4 billion, where treasury bonds transactions dominated among banks on their behalf.
Despite the positive developments, the markets under the supervision of the AFSA need to focus more on increasing consumer confidence and improving the service in its entirety. Therefore, it is necessary drafting a national strategy on financial education of the population, which in this regard requires inter-institutional cooperation.
3 Referring to GDP data according to the Ministry of Finance and Economy
48 ANNUAL REPORT ‘18 Chapter 1 CONSUMER PROTECTION
1.1 Consumer and Investor Protection
The fulfilment of AFSA functions is directed to the main objective of protecting the interests of investors and consumers. Increasing the level of investor and consumer protection plays a key role in the activity of the Authority.
For this purpose, the institution’s commitment during 2018 is focused on:
. Investigating and handling claims of consumers and investors;
. Monitoring the implementation of the applicable legislation and strengthening the preventive actions in the market conduct under supervision and the entities operating in these markets;
. Increasing the level of information available to the public;
. Organizing campaigns to increase public’s financial education; as well as
. Providing consumer/investor assistance by giving information and clarification as required.
Additionally, a lot of work has been done during 2018 to enable the submission through the online system of complaints that consumers may have about the services they receive from entities operating in markets supervised by the AFSA, which was completed and became operational in February 2019.
Investigating and handling consumer and investor claims
The purpose of investigating consumer/investor claims is to resolve the complaints filed in a professional, impartial and rapid manner. In addition, the Authority intends to gather and analyse the information on the quality of the services provided by the entities under supervision for the consumers and investors through the examination of the filed complaints. These data serve the institution to intervene in time so as to improve the policies and processes of supervised entities’ work with regard to prevent unacceptable behaviour towards the consumer/ investor.
During 2018, have been filed 82 complaints related to the claims for compensation arising directly from insurance contracts issued by insurance companies or regarding the complaints to market operators of investment funds and voluntary pensions funds.
Most complaints filed with regard to the type of insurance relate to compulsory insurance in the transport sector, which consists of the principal portfolio of the insurance market. In relation to the causes of the complaint, it has resulted that the main cause is the dissatisfaction of the aggrieved party on the value of the compensation. Based on the verifications carried out, there was no result of cases of assessment act to have been
FINANCIAL SUPERVISORY AUTHORITY 49 completed in violation of legal procedures. However, upon the request of the Authority for a review, the insurance companies have proceeded with a review of the value of the compensation or offered the complainant alternative methods of compensation such as repair of the vehicle in the services which the companies have a cooperation agreement with. In certain cases, when the cause of complaints was related to the terms of handling the requests for compensation, it has resulted that the payment delay from the insurance company has occurred due to failure of filing the necessary documentation for assessment or payment such as: representation document no. bank account no., etc.
In certain cases, the examination of complaints has not continued due to lack of data or because the handling of cases was outside the jurisdiction of the Authority.
Upon the conclusion, about 58% of the consumer complaints have been resolved after the intervention of the Authority.
Cases of complaints regarding to the voluntary pension funds relate to the interpretation and the procedure applicable to cases of being out of funds. Following various discussions with the supervised entities and clarifications provided, the case has been resolved in favour of the party that filed the complaint.
In the complaints related to investment funds have been raised claims regarding the commissions applied by the investment fund depositor (bank). The Authority carried out an inspection and in one case ordered the Depositary not to apply additional commissions and the case was resolved in favour of the complainant. Whereas for the second case related to the same issue, from the verifications carried out resulted that no additional commissions were applied from the investment fund depositor.
In addition to the complaints directly related to the services provided by the insurance companies, during 2018, there have been filed about 80 complaints related to compensation payments subject to the Compensation Fund, which lead to 162, the total number of complaints filed.
During 2018, AFSA administered 20 information requests, which have been managed in time by responding, and providing the necessary clarifications and guidance. The average time for management of information requests varies from 1-2 days.
Monitoring of the implementation of the applicable legislation and strengthening of the preventive actions in market conduct under supervision and the entities operating in these markets
In the function of consumer protection, in order to ensure that promotional activity on supervised entities and products offered on the market contains clear, true and complete data, AFSA has examined and verified the legal compliance of 5 promotional materials and terms of contracts for 4 insurance products.
During 2018, a significant importance was given to providing complete information to
50 ANNUAL REPORT ‘18 consumer. With the aim of verifying consumer behaviour and taking the necessary measures, AFSA has conducted continuous inspections in supervised entities and in cases when it results in failure to provide pre-contractual information it was followed by the relevant supervisory measures.
Increasing the level of information available to the public
Companies active in the insurance market in the Republic of Albania have the obligation to create an official website where they can publish information about the activities of the company and the products it provides. During 2018, AFSA has paid particular attention to monitoring the fulfilment of the obligation to provide information efficiently. During January, July and December 2018, periodic verifications were carried out. After ongoing verifications and communications with insurance companies, the situation of compulsory information to be communicated by the end of the year, appears to be in compliance with legal obligations.
1.2 Financial Education
Financial education of the public is a key factor on the market’s development under the supervision of AFSA. By increasing the public knowledge and awareness of non-bank financial markets and products provided, we might be able to protect consumers as well as increase consumer confidence and financial market development in general.
Taking this into consideration, AFSA has been engaged in concrete actions in order to increase consumer confidence and education on the markets under supervision. AFSA continued to work on the organisation of the activities for the implementation of the Strategy “On increasing consumer/investor confidence to the markets under supervision (October 2017–October 2020)” throughout 2018. Among the most important activities undertaken by AFSA in the framework of this strategy are:
In May 2018, the National Conference was successfully held, having a positive impact with the theme: “Market Development Challenges under the supervision of AFSA and the financial education”. In this conference students and academic staff from public and private Universities in the country participated, who contributed with various works on issues related to markets under the supervision of AFSA.
During 2018, AFSA continued to be present in different universities in the country, presenting the institution, its activity and the markets under supervision, through open lectures and discussions. The AFSA provided internships for certain students to the institution and coordinated the process of granting internships for more than 300 students to the entities under supervision.
As an important part of strategy “On increasing consumer/investor confidence to the markets under supervision”, AFSA has requested the cooperation with the Ministry of Education to enter into negotiation for inclusion of themes of markets under the supervision to the curriculum or specific subjects.
FINANCIAL SUPERVISORY AUTHORITY 51 AFSA continued cooperation and increased the presence of its staff and financial market experts under supervision and in the media.
In order to increase public information, AFSA prepared and published informative materials, which are listed as:
. Informative brochures (Property Insurance, Health Insurance, Insurance Market);
. Informative materials published on the AFSA’s website (Insurance Market “Frequently asked questions”, What should consumers be aware of?).
1.3 Transparency and Public Relations
During 2018, AFSA continued to implement the Strategy “On increasing consumer/investor confidence to the markets under supervision”, by carrying out activities and providing public and media coverage. Its objective has always been to increase the level of information to consumers about the markets under supervision, as well as their awareness of the role that AFSA has in protecting the consumer. Different activities organized by the AFSA consist of conferences, national and regional seminars, as well as media coverage focused on AFSA activities.
During 2018, AFSA entered into an agreement with public and private universities in the country, therefore giving a further dimension to the public communication and information of the most active age, that of the youths in the country. During the meetings with students and lecturers and in the open hours of the lectures, the supervisory and regulatory function to insurance market, voluntary private pensions, investment funds and securities has been indicated. AFSA conducted a survey in order to test the financial knowledge of the markets under supervision with a certain group of students especially from the Faculty of Law and Economics of these Universities. Survey results are published in specialized economic media, such as “Monitor” and “Bankieri” magazines. In addition, a part of them were made public at a joint conference organized by the banks’ association to increase financial inclusion in the country. Referring to the survey, it is noted that the information available to the insurance market is higher than for the securities market, voluntary private pension funds and investment funds. However, even for the insurance market, information is mainly focused on compulsory insurance, especially vehicle insurance. The results of this survey served the AFSA to bring the youth groups and specific non-bank financial markets into the treatment focus.
The first national conference held by AFSA on financial education was widely covered by media. At the conference, were made over 30 presentations by the students of public and private universities who had studied aspects of the performance and challenges on the development of non-bank financial markets. After the conference, AFSA organized a TV program in the “Education Auditor” section on Albanian Radio and Television –
52 ANNUAL REPORT ‘18 RTSH. Students, Lecturers who participated and won prizes at the conference and also representatives of market associations under the supervision of AFSA were included in the television discussion. The TV program served to wide range of information on markets and the opportunities the AFSA provides in the cooperation of Students with AFSA for the implementation of professional practices.
AFSA has maintained open, transparent and direct communication with the media, giving priority to communication on social networks, both on the official Facebook page and on the official website. Effective communication has increased confidence to consumers, who addressed various issues at AFSA, which has examined them within legal deadlines.
During 2018, the Facebook AFSA’s official page has gradually been grown, therefore expanding its audience. For a period of a year was almost doubled the number of likes on the page. During the last year, various posts were posted on Facebook page (short news with pictures, photo albums, graphs with short descriptions, videos, various information, etc.). According to the data there is a doubling of the number of clicks/views and users on the page, compared to the previous year. Regarding the location of the page followers, most of them are from Albania (Tirana) and then Italy, USA, Greece, etc. The majority of the followers are between 25-44 years old.
Graph 1: Data on average attendance of followers on the Facebook page, 2018 (In number)
Engagement 180 160 140 Link clicks 120 Likes 100 80 60 40 20 0
Photo views Shares
Other clicks Comments
The trend towards increasing the number of clicks in the AFSA’s official Facebook page and in the official website also continued to be throughout 2018 parallel with the current media developments in the country where digital communications are gradually replacing traditional media communications, becoming the most important form of communication.
Referring to the information published on the website, the majority of the users search for information on the legal framework, regulations, decisions adopted by the AFSA Board, as
FINANCIAL SUPERVISORY AUTHORITY 53 well as various directives. Over 46% of clicks given on the website have been for reading news and different publications. A significant part of the website users, about 20%, have clicked on the section of the National Centre for the Evidence of Compulsory Motor Insurance to verify the insurance policies.
Graph 2: Structure of clicks on AFSA’s website, 2018 (In %)
4.64
News, Home Page, Posts 19.90
Legislation, Directives, Board Decisions
46.78 Statistical Information
National Insurance Information 17.36 Centre of Motor Vehicle Data Research, Projects, Education
11.32
Website is organized in two languages, both in Albanian and English, and it also serves as a source of information to foreign investors and analysts on the structure and development of financial markets, private voluntary pensions and securities in Albania. Website is also visited by persons abroad, and most of them are from countries like USA, Canada, England, Malta, France, Italy, Russia, etc.
Traditional media coverage of information on AFSA activities and markets under supervision continued also throughout 2018. The most popular topics covered by the media during 2018 relate to the insurance market, in particular motor insurance and the new draft law on insurances. Particular attention has been paid to the Compensation Fund, where the media have reported the increasing tendency of payments, following successive decisions made by the AFSA Board. The media showed an interest to the coverage of the public communications of the Executive Director and the Chairman of the AFSA Board.
Another widely covered issue in the media is related to the new types of investment, online trading platforms and virtual currency investments. Through the creation of a specific section on the website and in the Facebook, AFSA advised investors to pay attention when deciding to invest on the online platforms, on virtual currencies, by recognizing the risks and having the required financial culture in order to make such investment decisions. AFSA continuously publishes warnings from international institutions or partner countries.
54 ANNUAL REPORT ‘18 I. INTEGRATED SUPERVISION OF NON-BANK FINANCIAL MARKETS
Chapter 2 Capital Market Supervision and Investment Funds
2.1 Investment Fund Market
The investment fund industry in Albania commenced its activities in 2012. During these years, this sector has undergone important structural changes, therefore making a positive step towards the development of the capital market in Albania and the support of the financial market in general.
Under these conditions, in the focus of the AFSA work during 2018 has been the further strengthening of the investment funds market by improving the risk management that these funds face and enhancing their transparency.
2.1.1 Market Structure
Five investment funds exercised their activity in the investment fund market throughout 2018, two of which were licensed during 2018. Investment Market Funds are managed by 3 management companies which consist of Raiffeisen Invest sh.a., Credins Invest sh.a. and WVP Fund Management Tirana, licensed in January 2018. Companies Raiffeisen Invest sh.a. and Credins Invest sh.a. carry out the management activity both for investment funds and voluntary pension funds, whereas WVP Fund Management Tirana carries out the management activity only for investment funds.
Graph 3: The share of net assets of each investment fund market 31.12.2018 (In %)
12.85 0.12 2.96
Raiffeisen Prestigj Raiffeisen Invest Euro 15.60 Credins Premium WVP Top Invest Raiffeisen Vizion
72.06
FINANCIAL SUPERVISORY AUTHORITY 55 2.1.2 Financial Position and Market Supervision
From the beginning of the first investment fund activity in 2012, the investment fund market has grown significantly, and this market already represents an important part of the financial sector in Albania.
This market reached a sustainable level in 2018 mainly on the first funds licensed by the AFSA, assets of which have been decreased as a normal part of its activity. That decrease had an impact on market decline of 2018. Therefore in 2018, the net assets of the investment funds market amounted to 66.09 billion ALL. During 2018 the net assets of investment funds marked a decrease up to All 6.6 billion or 9.1% less, compared to 2017. This decrease seems to have occurred as a result of the presence of a low interest rate environment, especially in foreign currencies. Exchange rate had an impact on the asset value decrease of one of the investment funds in Euro, moreover, this impact at market level is 0.84%. The number of members in investment funds is 29,421 of whom 99.96% are individual investors.
Investments of investment funds market consist of Government Securities within and outside the Republic of Albania, Treasury Bonds of the Government of the Republic of Albania, Foreign companies’ bonds, investment fund shares and international company shares. This market is mostly dominated by investments in government securities within and outside the Republic of Albania, which constitute 61.2% of the assets of this market.
The initial value of each investment fund and its value at the end of 2017 and 2018 is reflected in the following table.4
Table 1: The unit value of investment funds shares on 31.12.2018 (In ALL)
Initial net Net asset value Net asset value Description asset value per quote per quote per share 31.12.2017 31.12.2018
Raiffeisen Prestigj 1,000 1,435 1,496
Raiffeisen Invest EURO4 14,000 15,547 14,197
Credins Premium 1,000 1,137 1,219
WVP Top Invest 1,000 - 898
Raiffeisen Vizion 1,000 - 1,018
4 The values of Raiffeisen Invest EURO are converted with the rate of the relevant period.
56 ANNUAL REPORT ‘18 The performance of the investment market fund’s portfolio during the quarters of 2018 is reflected in the following table.
Table 2: Data on investment funds portfolio, according to quarterly periods of 2018
Description Value (in ALL mln.)
Period 31.03.’18 30.06.’18 30.09.’18 31.12.’18 Net assets of funds 68,797 66,461 65,637 66,087 Total Net Assets 69,127 66,635 65,820 68,124 of which: - - - - Government Securities 42,723 42,293 41,560 41,725 Foreign Bonds 3,167 2,671 2,678 2,060 T-Bonds 13,335 11,496 10,288 11,912 Investment on investment fund quotas 3,275 2,884 2,650 2,686 International shares 73 78 86 78 Cash 5,844 6,478 7,742 8,937 Other assets 710 735 816 726 Total Funds Liability 330 174 183 2037
The change of investment market fund’s portfolio of 2018 compared to 2017 as well as the weight of each of the components of portfolio in the total of assets for 2017 and 2018 is reflected in the following table.
Table 3: Change in the portofolio composition of investment funds, 31.12.’16-31.12.’18
Description Value (in ALL mln.) Change (in %) Share to total (in %) 31.12.’16- 31.12.’17- Period 31.12.’16 31.12.’17 31.12.’18 31.12.’16 31.12.’17 31.12.’18 31.12.’17 31.12.’18 Fund’s net assets 65,429 72,717 66,087 11.14 (9.12) Total Net Assets 65,613 72,921 68,124 11.14 (6.58) 100 100 100 of which: ------Government 42,234 44,700 41,725 5.84 (6.66) 64.37 61.30 61.25 Securities Foreign Bonds 2,830 3,854 2,060 36.18 (46.55) 4.32 5.28 3.02 T-Bonds 9,404 12,912 11,912 37.30 (7.74) 14.33 17.71 17.49 Investment on investment fund 2,173 3,618 2,686 66.50 (25.76) 3.31 4.96 3.94 quotas International shares - - 78 - - - 0.00 0.11 Cash 8,295 7,101 8,937 (14.39) 25.86 12.64 9.74 13.12 Debtors 677 736 726 8.71 (1.36) 1.03 1.01 1.07 Total Funds Liability 184 204 2037 10.87 899 0.28 0.28 2.99
FINANCIAL SUPERVISORY AUTHORITY 57 Graph 4: Structure of Investment Fund Assets 31.12.2017 (In %)
1.01 9.74 Government Bonds 0.00 4.96 Corporate Bonds
Treasury Bills
Investment on investment fund quotas 17.71 International company shares
Monetary Instruments
5.28 Other assets 61.30
Graph 5: Structure of Investment Fund Assets 31.12.2018 (In %)
1.07 13.12 Government Bonds
0.11 Corporate Bonds 3.94 Treasury Bills
Investment on investment fund quotas 17.49 International company shares
Monetary Instruments
3.02 61.25 Other assets
For the purpose of being in compliance with the requirements of liquidity regulation, management companies ensure that investment funds they invest in inactive markets maintain liquidity for up to 1 month, at least 10%. As indicated in the graph below, the maturity up to 1 month of investment funds market is 17.95%.
58 ANNUAL REPORT ‘18 Graph 6: The profile of investment funds market 31.12.2018 (In %)
4.27 17.95 9.39 up to 1 month 1 month up to 3 months 5.20 3 months up to 6 months 15.79 6 months up to 1 year
8.00 1 year up to 3 years 3 years up to 5 years 5 years up to 7 years 7 years 12.55 26.85
2.1.3 Inspections
Following the changes made to the Board Decision no. 173, dated 30.11.2017 to Regulation no. 128, dated 06.10.2011, “On the Procedures and Additional Requirements for the Licensing of the Depository of Collective Investment Undertakings”, and by reason of a investor’s complaint, the AFSA carried out an inspection in one of the bank deposit, with the purpose of verifying if the latter is in compliance with the changes of the above-mentioned regulation. Following the inspection, AFSA provided the relevant recommendations and followed the progress of the implementation of these recommendations.
In addition, in October 2018, the AFSA carried out a full inspection at a depository bank, which serves as a Depository of a Pension Fund and of some investment funds including two investment funds licensed during 2018. This inspection was carried out in cooperation with the GDPML on issues related to the prevention of money laundering and financing of terrorism. Findings and recommendations from this inspection have been communicated to the depositary bank in compliance with the procedure. AFSA is following the progress of their implementation according to the terms set out in the inspection report.
FINANCIAL SUPERVISORY AUTHORITY 59 2.2 Capital Market
Albanian Securities Exchange ALSE, licensed from AFSA by Decision no. 88, dated 03.07.2017, become operational on February 22, 2018. In support of the limit condition set forth in the license for the first year of activity, during 2018, the Securities Exchange activity focused on the trading of Government securities of Republic of Albania. Trading sessions on the ALSE Securities Exchange were held twice a week, due to modest trading volumes. Modest trading volumes proceeded with a limited number of members. Albanian Securities Exchange ALSE closed 2018 with four members: Credins Bank, American Investment Bank, Tirana Bank and International Commercial Bank. The short-term objective of the Stock Exchange is to further increase the number of members as a essential and indispensable element for the well-functioning of Securities Exchange and the implementation of the principle of proper execution of consumer orders, or the most realistic reflection of the market price.
AFSA, in the capacity of the trading system supervisor, has followed Stock Exchange transactions in real-time at each trading session.
The Volume of Trading on Securities Exchange
During the first year of its activity, the total value of trading in the Albanian Securities Exchange ALSE amounted to ALL 1.38 billion, performed in 68 transactions over the period February-December 2018.
In an overall analysis of trading development characteristics (on-exchange)5 over the period February-December 2018 have dominated:
. Inter-bank transaction
. Transactions on-Exchange hours;
. T-Bonds transactions;
. Transactions in ALL currency.
T-Bonds traded value is 57.54% compared to 42.46% of government securities.
Considering the maturity of T-Bonds, the most active ones are the 12-month maturity securities, followed by 6-month T-Bonds. While, considering the maturity of T-Bonds, the most active traded ones are the 5 year and 10-year maturity securities, followed by 2-year T-Bonds. Most transactions were executed in ALL currency, compared to very few transactions in securities denominated in EUR.
5 Over the period February - December 2018, the total trading value of the Albanian Securities Exchange ALSE amounted to ALL 2.57 billion. Given that, about ALL 1.4 billion were traded on the Securities Exchange, while the rest of ALL 1,17 billion was traded off-Exchange hours.
60 ANNUAL REPORT ‘18 The table below provides Information on Transactions executed on Securities Exchange among Banks and those carried out on behalf of clients, where it is noted that dominate transactions among banks for the account of its portfolio.
Table 4: Transactions executed on securities exchange among banks and transactions executed on behalf of clients (In %)
February - December 2018 Type of transaction Transaction No. Volume in value of trading Inter-bank 61.76 62.64 For clients 38.24 37.36 Individuals 7.35 1.83 Legal Persons 30.88 35.53
Regulatory framework for Securities Exchange
Drafting of the necessary regulatory framework regarding the operation of the capital market has been on the focus of the governing bodies of the Albanian Securities Exchange and of the AFSA. During 2018, the AFSA approved several acts prepared by Securities Exchange, such as the following:
1. Regulation on Supervision and Monitoring of Albanian Securities Exchange, by Decision no. 165, dated 31.08.2018. The regulation intends to establish rules for the monitoring and supervision in order to prevent, identify, define and take action against illegal trading practices by Members, Member’s Brokers and their clients. Establishing rules for the supervision and monitoring of Securities Exchange Transactions serves the purpose of a fair and efficient market, as well as protect the interests of investors through the prevention of abusive practices. This regulation sets out the main principles of supervision and the determination of supervisory levels (structures).
2. Guideline on the Transaction Trading, Clearing and Settlement at ALSE; as adopted by Decision no. 91, dated 13.06.2018. This instruction provides some technical details regarding the securities trading in the trading system of the Securities Exchange.
3. The amended list of Securities Exchange fees and commissions, as adopted with Decision no. 91, dated 13.06.2018. During the first year of its activity, Securities Exchange decided for its members to be excluded from the obligation to pay fees and commissions.
FINANCIAL SUPERVISORY AUTHORITY 61 Government securities retail market
The most active segment of the securities market remains the Government securities retail market. The retail market consists of the trading of Government securities of Republic of Albania between certified brokerage companies (mainly banks) and investors (individuals or legal entities). Bank acquisition in the primary market of government securities, on behalf and for account of the investor dominates in the retail market. Activity on the secondary market remains low.
Pursuant to Regulation no. 22, dated 26.03.2009 “On the Retail Market of Government Securities of the Republic of Albania” companies licensed to perform transactions in the retail market of government securities have periodically reported throughout 2018 to the Authority and the GSRM platform the transactions performed in this market. This platform continued to perform its functions and meet its role in order to enhance transparency in quotations and provide full information to the public and institutional investors over transactions in the retail market of government securities.
The volume of secondary market of Government securities during 2018 was dominated by transactions in short term instruments (T-Bonds) at 70.6% and the remaining part consisted of long-term instruments (bonds) at 29.4%. In terms of the number of transactions, 87.8% of all transactions in the secondary market of Government securities were in T-Bonds. Statistical data on the Government securities retail market for the year 2018, indicate that the market was dominated by transactions “Purchase in the primary market” and “Payment of nominal value on maturity date” respectively with 48.5% and 34.5% of the total volume.
Transactions of the individual investors dominate at the Government securities secondary market with 98.85% of all transactions in the market. During 2018, the type of transaction “Sales from financial intermediary portfolio” increased by ALL 484 million or 10.32%compared to 2017. Mean the number of transactions also increased by 0.68%.
During 2018, the type of transaction “Purchase prior to maturity” increased by ALL 694 million or 27% and the number of transactions also increased by 0.1% compared to 2017. There is an increase in the absolute total amount of these two transactions, as whole by about ALL 1,177 million compared to 2017.
62 ANNUAL REPORT ‘18 Table 5: Government securities retail market
Nominal value Type of transaction (in ALL. mln) Change (in %) Year 2017 2018 ‘17/‘16 A Purchase in the primary market 48,556.49 25,640.09 (47.20) Individuals 26,119.69 24,833.70 (4.92) Legal persons 22,436.80 806.39 (96.41) B S a l e s f r o m fi n a n c i a l i n t e r m e d i a r y p o r t f o l i o 4,685.59 5,169.33 10.32 Individuals 4,291.69 3,983.53 (7.18) Legal persons 393.90 1,185.80 201.04 C Purchase prior to maturity 2,568.48 3,262.01 27.00 Individuals 2,551.48 2,668.21 4.57 Legal persons 17.00 593.80 3,392.94 D Pledging securities as collateral 773.16 488.56 (36.81) Individuals 506.16 296.56 (41.41) Legal persons 267.00 192.00 (28.09) E Payment of nominal value on maturity date 24,046.12 18,250.39 (24.10) Individuals 22,944.28 17,615.80 (23.22) Legal persons 1,101.84 634.59 (42.41)
Bonds’ Market of Joint Stock Companies (Bonds’ Issued at Private Offer)
Starting from November 2011, the corporate bonds market has been active through private offers. Bonds issued at private offer by joint stock companies are provided to institutional investors, joint stock company shareholders or up to 100 individuals. These bonds are characterized by fixed interest rates, long-term maturities and semi-annual coupons. Some of the issued bonds had the feature of convertibility in ordinary shares. From 2011 to the end of 2018, the total amount of corporate bonds offered to investors has been approximately ALL 11,300 million. The AFSA continued with the approval of prospectuses for issuing bonds submitted by a corporation and by financial institutions (bank and microcredit institution, in total of 4 issues) also throughout 2018. The total value of the approved issues amounted to ALL 1,343 million, while the amount subscribed amounted to ALL 1,236 million. The investor base of corporate bond buyers composed of institutional investors and individuals.
FINANCIAL SUPERVISORY AUTHORITY 63 2.3 Licensing Activity
During 2018, AFSA Board, by Decision no. 14, dated 31.01.2018 licensed the management company of investment funds “WVP Fund Management Tirana” sh.a., in order to manage the assets of Collective Investment Undertakings” as well as the creation of investment fund “WVP Top Invest”, managed by “WVP Fund Management Tirana” sh.a., foreign-owned company.
During 2018, 3 physical brokers were licensed for brokerage firms. There are 17 brokerage firms, 29 individual brokers, 2 investment advisory firms, 3 individual advisers, 3 associated agents, 9 custodians of securities, 1 registrar represented by the Shares Registration Centre in the securities market, by the end of 2018.
Table 6: Entities operating in the securities market 2012-2018 (In number)
Entities 2012 2013 2014 2015 2016 2017 2018
Albanian Securities Exchange 0 0 0 0 0 1 1
Brokerage firms 13 13 13 14 15 17 17
Physical broker in brokerage firm 18 18 18 19 21 26 29 Custodian of Governmental securities of the Republic of Albania 8 8 8 8 8 9 9 Share Registrars 1 1 1 1 1 1 1
Securities investments advisory firms 0 0 1 1 2 2 2
Securities investments advisor 0 0 1 1 3 3 3
Associated agents 1 1 1 2 2 4 3
64 ANNUAL REPORT ‘18 2.4 Governance
According to legal and by-laws requirements, the organizational and the management structure of management companies of collective investment undertakings and voluntary pension funds is shown in the following scheme:
Graph 7: Scheme of the current management structure of companies for the management of pension and investment funds
SHAREHOLDERS ASSEMBL
ADMINISTRATION COUNCIL
ADMINISTRATOR
Supervision and Operational Unit Supporting Unit Screening Unit (Main Office) (Back Office) (Intermediate Office)
Portfolio Management, Finance, Legal, IT, Risk Management Marketing Human Resources
Table 7: Data on the shareholders of management companies of collective investment undertakings and voluntary pension funds.
Subjects Number Management companies 4 Total shareholders 11 Classification of shareholders according to participation shares under 10% 3 over 10% below 33 % 3
over 33% below 50% 1
over 50% 4
FINANCIAL SUPERVISORY AUTHORITY 65 Table 8: Classification of shareholders by country of origin
Subjects Number
Total Number of Shareholders 11 of whom Foreign shareholders 7
Local shareholders 4
Table 9: Classification of shareholders by their status
Subjects Number
Total Number of Shareholders 11 of whom Individual Shareholders 5
Joint-stock company 6
Table 10: Data on adoption of statutory changes (In number)
Reason for Amending the Statute 2013 2014 2015 2016 2017 2018
New statute/other amendments - 1 2 2 - - Capital increase 1 1 - - 1 2 Changes in shareholding structure 1 1 - - 1 -
Companies operating in the securities market are organized pursuant to the law “On Commercial Companies”. Meanwhile, the requirements for the appointment of administrators or members of Supervisory Council/Administration are set out in Law “On Securities” or in the regulatory basis of AFSA.
For a better governance of companies operating in the securities market, special attention was given to fulfilment of the requirements by the persons holding management positions in the company. The interviews conducted with the persons appointed as administrators or members of the Board of Administration/ Supervisor in order to reach a conclusion on their suitability and ability, marked a novelty for 2018.
66 ANNUAL REPORT ‘18 2.5 Inspection of the Companies
During April-May 2018, AFSA carried out an on-site inspection at the three companies, which were adopted by the AFSA to carry out the activity of the agent on behalf of international brokerage firms that manage online trading platforms.
The scope of inspection was the activity of the international broker agent from the time when adopted by the AFSA to end of the first quarter of 2018 and the compliance with the rules related to the prevention of money laundering and the fight against terrorism.
Observance of the rules for the prevention of money laundering and the fight against terrorism was inspected by a specific group, with representatives from the Directorate for the Prevention of Money Laundering and representatives from AFSA.
The inspection was focused on the implementation of internal procedures for communication and consumer recognition; identifying the location of the clients to whom it is communicated, selective verification of recorded calls, the level of commissions received and staff’s salaries, as well as other issues pertaining to the agent’s activity. Following the findings, the inspection team proposed the relevant recommendations.
During October-November 2018, AFSA carried out an on-site inspection at a company (bank) with the main object of the Custodian service activity for government securities for the period of January 2017 to September 2018, as well observing the rules related to the prevention of money laundering and the fight against terrorism. The inspection was focused on: Organizational structure of the custody unit; Procedures /manuals related to securities custody; Risk management procedures on securities custody; consumer recognition and money laundering procedures and the fight against terrorism; System used for securities custody; Fees/commissions of securities custody (transparency with clients, complaints regarding fees/commissions); Audit of custody activities; Disaster Recovery and Business Continuity Plan of custody activities.
Upon the completion of the inspection process, findings and recommendations proposed by the AFSA were reported to the company and their applicability is being followed by the AFSA in accordance with the time limits specified in the inspection report.
2.6 Enforcement and Legal and Regulatory Framework
The Financial Supervisory exercising regulatory and supervisory functions of non-bank financial markets has drafted two draft laws relating to the capital market and investment funds. The draft laws “On Collective Investment Undertakings” and “On the Capital Market” were drafted within the SECO project of the Swiss Government with the scope of strengthening the supervisory capacities of the AFSA, with the focus on the development of capital market. The draft laws have been prepared in consultation with the Ministry of Finance and Economy, Bank of Albania, Banks Association, stakeholders, pension fund
FINANCIAL SUPERVISORY AUTHORITY 67 management companies and investment funds, the securities market stakeholders such as Securities Exchange, brokerage firms, etc.
In terms of the regulatory framework for 2018 new acts were issued and the existing acts were amended as follows:
New regulations
Regulation no. 16, dated 31.01.2018 “On the application form, the content of the documentation for prospectus approval on bond issuance,” which defines the manner of application for the approval of the prospectus for issuing bonds at private and public offers, as well as the relevant documentation.
Regulation no. 21, dated 06.02.2018 “On liquidity management for the investment fund”, which lays down rules for management companies of collective investment undertakings related to the liquidity management of investment funds.
Regulation no. 57, dated 29.03.2018 “On related party transactions and/or on parties belonging to the same Financial Group”, which sets out rules for portfolio transactions of collective investment undertakings carried out with related parties and/ or parties belonging to the same financial group, on behalf or directly related to the entities designated as a related party to the CIU’s administration company, as well as with the Investment Fund Depository or the Collective Investment Undertaking (CIU).
Amendments to the existing acts
With Decision no. 259, dated 28.12.2018, The Board adopted a change to Regulation no. 21, dated 06.02.2018 “On liquidity management for the investment fund”, a change that is related to the reporting deadline to the AFSA of changes to the resistance test model by the SIK management companies.
With Decision no. 235, dated 26.11.2018, the Board, in order to comply with recommendations of the Council of Europe’s MONEYVAL reports, adopted the additions and amendments to Regulation no. 69, dated 26.05.2011 “On issuing authorisations to individuals for the sale of the Collective Investment Undertakings quotas/shares at Public Offer”.
With Decision no. 218, dated 31.10.2018, the Board approved the additions and amendments to the Regulation no. 165, dated 23.12.2008 “On the Licensing of Brokerage/Advisory firms, Broker and Investments Adviser”.
With Decision no. 142, dated 30.07.2018, the Board approved a change to the Regulation no. 89, dated 27.06.2016 “On the criteria and requirements for the approval of the audit firm of management companies of collective investment undertakings and management
68 ANNUAL REPORT ‘18 companies of voluntary pension funds” The changes related to the update of the title of regulation under the law on legal audit. In addition, the changes related to the unification of AFSA regulations for external auditors, in terms of application filing deadlines, documentation submitted to AFSA, AFSA’s approval/rejection, etc. for both the audit of insurance companies and auditing of the management companies of CIU and PF.
With Decision no. 89, dated 13.06.2018, the Board approved a change to Regulation no. 127, dated 06.10.2011 “On Compulsory Content, deadlines and form of reports of collective investment undertakings, management companies and depositors”. Therefore, the deadlines for submitting reports were changed, and a new reporting was made on related party transactions and/or on the parties belonging to the same Financial Group”, as well as deadlines for their submission has been set.
Agreement between AFSA and the Bank of Albania
With Decision no. 189, dated 27.09.2018, the Board approved an agreement between the Bank of Albania and the Financial Supervision Authority “On cooperation for the licensing, regulating and supervising of the securities settlement systems and securities clearing houses” and authorised the General Executive Director for signing this agreement. The agreement sets forth the conditions, procedures, division of tasks and responsibilities during the process of licensing, regulating and supervising the securities settlement systems and securities clearing houses.
2.6.1 Corrective and Administrative Measures
During 2018, no decisions concerning corrective and administrative measures for the capital and investment funds market was adopted, but referring to the inspections made at a depository bank for collective investment undertakings, AFSA ordered the bank to undertake specific measures for the reimbursement of all investment funds’ investors which have settled the securities, in order for the investor to receive, at the end of the reimbursement process, the entire amount of commission paid during the process of settlement. This process has been finalised for the majority of investors, whereas for the remaining it has continued, pursuing the recommendations received from the inspection.
FINANCIAL SUPERVISORY AUTHORITY 69 Chapter 3 INSURANCE MARKET SUPERVISION
3.1 Insurance Market Structure
In 2018 the volume of gross written premium from the insurance companies was ALL 16,930 million, with an increase of ALL 732 million or 4.5% more than the previous year. Within this premiums volume, ALL 15,785 million or 93.2% of the premium total belongs to the Non-life market whereas ALL 1,144 million or 6.7% to the Life market.
The volume of gross written premium from Non-life insurance marked an increase of about 5.3% whereas the volume of gross written premium from Life insurance marked a decrease of about 5% compared to 2017. All in all, the market has maintained the same configuration in years, with Life insurances having a low premium volume in comparison to Non-life insurances.
The number of insurance contracts entered into in 2018, in total for the market, was 1,309,143, with an increase of about 5.9% compared to 2017.
Graph 8: Gross written premium according per Life and Non-life type of insurance for 2018 (In ALL mln.)
18,000
16,000
14,000
12,000
10,000
8,000
6,000
4,000
2 , 0 0 0
- Non-Life Insurance Life Insurance
Compulsory motor insurance occupies 68% of the Non-life insurance market with a premium volume of ALL 10,733 million and an increase of 7.7% compared to the previous year. According to the graph below, the second place in the market share is held by portfolio ‘Fire and land claims’ with a premium volume of ALL 2,096 million or an increase in volume of 9%.
The gross written premium for the accidents and health insurance for 2018 was ALL 1,134 million or 4.7% less than the previous year.
70 ANNUAL REPORT ‘18 Graph 9: Gross written premium share according to Non-life activity, 2018 (In %)
Others Accidents 4 Liability 3 and health 7 Fire and other Casco 5 property insurance 13
Compulsory motor insurance 68
Graph 10: Market share - Non-life insurance for 2018 (In %)
Eurosig Albsig 14 15
Ansig 7
Sigal Uniqa Group Austria Atlantik 26 6
Intersig Vienna Insurance Group 11 Sigma Interalbanian Insig Vienna Insurance Group 7 14
Within the gross written premium volume, the major share is held by Life insurance, with ALL 723 million or 38.6% more than the previous year.
FINANCIAL SUPERVISORY AUTHORITY 71 6
Graph 11: Market share - Life insurance for 2018 (In %)
SiCred Insig 23 18
Sigal Life Group Austria 59
Table 11: Premiums volume in Central and Eastern European countries for 2018
Gross Gross Gross written Life Insurance Central and Eastern European Written Written premium premium ratio to Countries Premium/ Premium / (in mln. Euro) market total (In %) GDP (in %) Person (In Euro) Bulgaria 365 2.16 104 20.10
Estonia 1,292 2.35 184 17.59
Hungary 552 2.15 419 17.30
Kosovo 3,185 2.43 326 46.56 Croatia 94 1.38 52 3.21
Kroaci 1,329 2.59 324 31.80
Latvia 756 2.56 391 19.21
Lithuania 878 1.95 315 28.28
Montenegro 87 1.90 139 17.54
Macedonia 161 1.50 78 16.82
Poland 14,458 2.94 381 34.91
Czech Republic 6,027 2.95 569 36.27
Rumania 2,174 1.07 111 20.70
Serbia 845 1.97 121 23.81
Albania6 133 1.05 46 6.75
Slovakia 2,208 2.45 406 46.53
Slovenia 2,341 5.10 1,132 30.61 Total 36,885 2.15 306 33.56
6 Central and Eastern European Countries’ data are collected from www.xprimm.com. Albania’s data are from AFSA’s statistics.
72 ANNUAL REPORT ‘18 Graph 12: Gross written premium/GDP (Penetration in %) for 2018 (In %)
Slovenia 5.10 Slovakia 2.45 Albania7 1.05 Serbia 1.97 Romania 1.07 Czech Republic 2.95 Poland 2.94 Macedonia 1.50 Montenegro 1.90 Lithuania 1.95 Latvia 2.56 Croatia 2.59 Kosovo 1.38 Hungaria 2.43 Estonia 2.15 Bulgaria 2.35 Bosnia and Herzegovina 2.16
1 2 3 4 5 6
Gross Paid Claims
The total of Gross Paid Claims for 2018 in the insurance market was ALL 6,983 million, which is ALL 1,449 million or 26.2% more than 2017. 7
Graph 13: Total Gross Paid Claims (In ALL mln.)
8,000 30% 6,983 7,000 25% 6,000 5,534 26.18% 4,762 20% 5,000 4,050 4,000 18.00% 16.22% 15% 3,000 10% 2,000 5% 1,000 0.00% - 0.% 2015 2016 2017 2018
Gross Paid Claims (Total) Changes through years
7 Central and Eastern European Countries’ data are collected from www.xprimm.com. Albania’s data are from AFSA’s statistics.
FINANCIAL SUPERVISORY AUTHORITY 73 Graph 14: Share of Gross Paid Claims according to the business line for 2018 (In %)
Life Activity Paid Claims 3 Compensation Fund 15
Non-Life Activity 82
Graph 15: Gross Paid Claims according to the business line in years (In ALL mln.)
8,000
7,000
6,000
5,000
4,000
3,000
2,000
1,000
- 2016 2017 2018 Non-Life Activity Life Activity Paid Claims Compensation Fund
74 ANNUAL REPORT ‘18 3.2 Financial Position
In the framework of existent regulatory frame, AFSA has been supervising and analysing the insurance market, assessing the financial position, the results and technical indicators of the insurance company’s activity during 2018. AFSA has been following on the legal requirements for the Guarantee Fund of the insurance companies and the implementation of rules for its investment.
Guarantee Fund
The Guarantee Fund is an amount in cash (which value is set out in Article 81 of the Law No. 52/2014 ‘On the insurance and reinsurance activity’) deposited from the insurance or reinsurance company in a one-purpose bank account with the same name, in banks within the territory of the Republic of Albania, where the company has its headquarters, to be disposed by the insurer from the moment of starting the activity onward. Insurance companies own the Guarantee Fund invested in ‘one-purpose deposits’ of 1-year maturity at second-level banks and in T-Bonds. The Guarantee Fund at market level for 11 insurance companies and one reinsurance company should be ALL 4,440 million.
On 31.12.2017 the Guarantee Fund of the insurance companies, at the market level, was invested in deposits with no less than 1-year maturity as well as securities. From the examination of the data contained in the financial reports, reflected in the tables.
The total assets on the 31.12.2018 were ALL 31,512 million and compared to 2017, this heading has increased with ALL 933 million or 3.1%. This increase is the sole result of the Non-life insurance sector, which has increased with ALL 989 million or 3.3 %, whereas the Life insurance market has decreased with ALL 56 million or -1.7%.8
Table 12: Financial data on the insurance market, Assets8 (In ALL mln.)
31.12.’14 31.12.’15 31.12.’16 31.12.’17 31.12.’18 Total assets 24,451 27,610 29,688 30,579 31,512 Life 4,009 3,857 3,287 3,382 3,326
Non-life 20,442 23,752 26,401 27,197 28,186
Total investment 15,721 18,996 18,811 19,409 20,655 Life 2,971 2,904 2,743 2,839 2,821 Non-life 12,750 16,092 16,068 16,570 17,834
8 The values for 2014-2017 periods are updated according to those corresponding Supervision Reports’.
FINANCIAL SUPERVISORY AUTHORITY 75 Graph 16: Total assets according to the business line in years (In ALL mln.)
35,000
30,000
25,000
20,000
15,000
10,000
5,000
- 2014 2015 2016 2017 2018
Life Non-Life
Graph 17: Total investment according to the business line in years (In ALL mln.)
25,000
20,000
15,000
10,000
5,000
- 2014 2015 2016 2017 2018
Life Non-Life
76 ANNUAL REPORT ‘18 The investments have dominated the total assets of the insurance companies. These investments in 31.12.2018 were ALL 20,655 million. The increase in investments from the previous year, in absolute terms, was ALL 1,246 million or 6.4%.
The investments are concentrated in term deposits in credit institutions (banks), Albanian government securities, and lands and buildings. Deposits hold the main share with 33.5%, followed by land and building with about 10.6% and Government securities with 8.4%.
Graph 18: Structure of Assets (In %)
25.16 26.16 27.76 25.21 25.81
8.88 7.93 9.32 12.5 12.58 10.85 11.52 9.5 11.72 8.17 10.92 11.18 9.43 17.26 9.15 7.93 7.21 9.88 10.83 6.76
36.26 36 29.39 31.55 33.19
31.12.2014 31.12.2015 31.12.2016 31.12.2017 31.12.2018
Deposits Land and Buildings Shares and participation Treasury Bills and Bonds Debtors Other assets
The major share in the liabilities structure of the insurance companies is held by the technical provisions headings, where the provisions are calculated on the unearned premium for the part concerning the period of risk following the end date of the financial year and the loss provisions, as well as ‘its own equity’ which represent the remaining interest in the assets of the entity after all obligations have been deducted.
FINANCIAL SUPERVISORY AUTHORITY 77 Table 13: Financial data on the insurance market, Liabilities9 (In ALL mln.)
31.12.’14 31.12.’15 31.12.’16 31.12.’17 31.12.’18 Total liabilities 24,451 27,610 29,688 30,579 31,512 Life 4,009 3,857 3,287 3,382 3,326
Non-life 20,442 23,752 26,401 27,197 28,186
Gross technical provisions 11,191 14,014 15,568 15,840 16,390 Life 1,522 1,605 1,690 1,702 1,726
Non-life 9,667 12,409 13,878 14,138 14,664
Total of own equity 9,954 10,120 9,688 9,418 10,657 Life 1,988 1,782 1,503 1,542 1,510
Non-life 7,966 8,338 8,185 7,876 9,148
Total subscribed capital 8,156 8,196 7,721 6,953 7,365 Life 1,359 1,227 1,234 1,221 1,230 Non-life 6,797 6,969 6,487 5,732 6,135
The gross technical provisions have shown a positive increasing trend for the period 2014- 2018. This positive trend has continued for 2018, where the gross technical provisions for the insurance market, compared to 2017, have increased with ALL 550 million or 3.5%. The major increase is noticed in the Non-life insurance market, with ALL 526 million or 3.7%, whereas the Life insurance sector has increased with ALL 24 million or 1.4% of the share held in 2017. The positive increasing trend of the technical provisions, in absolute terms, is also reflected in the specific weight that this heading represents in the total liabilities presented in the graph below. In 2018, the specific weight of the technical provisions in the liabilities’ structure of the insurance market was 52%, with an increase of 0.2% compared to the previous financial period.
Its own equity, resulting from the maintenance of the profit of the period, the increase in the shares revaluation reserve, as well as the increase in the share capital of the insurance companies in 2018, has increased with 13.1% compared to 2017. This increase is reflected in the increase of the specific weight of this heading in the liabilities’ structure of the insurance market, reaching 32.6% from 30.8% in 2017. 9
9 The values for 2014-2017 periods are updated according to those corresponding Supervision Reports’.
78 ANNUAL REPORT ‘18 Graph 19: Structure of Liabilities (In %)
30.86 32.61 41.62 36.96 37.17
17.36 15.37 12.28 14.2 13.32
50.76 51.78 52.01 45.16 48.63
31.12.2014 31.12.2015 31.12.2016 31.12.2017 31.12.2018
Gross Technical Provisions Other Liabilities Own-capitals
According to the Law no. 52/2014 ‘On the insurance and reinsurance activity’ the assets covering the technical provisions are assets of the insurance company which serve for the coverage of future obligations arising from the insurance contract and covering losses resulting from the activity of the insurance company, this latter being obligated to make technical provisions.
The assets covering the technical and mathematical provisions, on the 31.12.2018, for the insurance market, total ALL 16,666 million: ALL 14,776 million for the Non-life insurance market and ALL 1,890 million for the Life insurance market.
FINANCIAL SUPERVISORY AUTHORITY 79 Graph 20: Structure of assets covering technical and mathematical provisions (In %)
3 1 1 1 6 5 Tangible long-term assets other 3 than Land and Buildings
22 Prepayments and income incurred
Commercial accounts receivable 2 50 derived from direct 13 insurance activities Reinsurers
17 Monetary Means and Equivalents of Monetary Means
Land and Buildings
Financial Investments 35 39 Bank deposits
Non-Life Insurance Market Life Insurance Market
The net financial result of the insurance market for 2018 is positive and amounts to ALL 703 million: ALL 542.6 million from the Non-life insurance market and ALL 160.4 million from the Life insurance market.
Graph 21: Financial results for the insurance market according to the business line (In ALL mln.)
800
700
600
500
400
300
200
100
- 12.2017 12.2018
Non-Life Life
80 ANNUAL REPORT ‘18 The claims/premiums ratio for the Non-life insurance market, including the gross payments for the Compensation Fund, is 42.2%, having increased with 4.9% compared to 2017. Whereas the combined ratio for the Non-life insurance market is 97.2% in agreed levels.
Graph 22: The claims/premiums ratio/combined ratio, including payments for the Compensation Fund (In %)
120%
94.8 97.2
80%
60% Claims/premiums ratio 42.17 37.31 Combined ratio 40%
20%
0% 2017 2018
3.1 Inspection of insurance companies
Risk-based inspection
Even in 2018 AFSA continued with full on-site inspections in three Life insurance companies applying the risk-based methodology, based on the Manual for the Supervision of the Insurance Companies. These inspections focused on the structuring of the inspection procedures and the drafting of the interviewing plan with different executive levels of the insurance companies. It also assessed the risks present per business activities in the inspected companies, as well as the administration and mitigation of these risks by company’s senior executives. With the on-site full inspection in life insurance companies, the full range of inspections based on risk-based methodology was completed. In more details, these inspections focused on the:
. Credit risk assessment in relation to the reinsurers, collection of premiums and other related activities;
. Insurance risk assessment, focusing mainly on insurance acceptance and liability risks, as well as other related activities;
. Operational risk assessment, focusing on the provisions, losses estimation, losses
FINANCIAL SUPERVISORY AUTHORITY 81 treatment procedures, information technology systems, operational performance, and other related activities;
. Regulatory and strategic risk assessment in view of Guarantee Fund evaluation;
. Capital strength and profit quality assessment;
. Assessment of the specific elements of the assets of the company’s financial statements;
. Risk management, internal control systems, including the supervision of the activity from the executive levels of the company.
At the conclusion of the inspections, AFSA drafted the risk profile of the inspected companies, which represents its evaluation for each of the company’s risks in the insurance market. Risk-based methodology inspection focuses on the responsibilities of the insurance company supervisory council and senior executives, in view of safeguarding the company’s financial security and stability.
Thematic Inspections
During 2018, 8 thematic inspections were carried out in non-life insurance companies by increasing their number from 3 compared to 2017. The objective of these inspections was to verify the process of handling losses, in 6 inspections, and the implementation of AFSA Board’s decisions recommendations, in 2 inspections. The object of the thematic inspections carried out in non-life insurance companies was the inspection of the process of treating the losses, in accordance with the requirements of the new handbook on losses. More specifically, the verifications made related to the:
. Internal rules, procedures and structure of claims management by the company in compliance with the applicable legal and regulatory framework;
. Procedures for communicating with the claimant requesting compensation, including requests for completing the documentation of claims’ files;
. Information systems for claims management and data accuracy;
. Practices for claims provisioning, outstanding claims, claims payments and costs for handling claims;
. Rejected claims, beneficiary complaints and fraud cases;
. Implementation of Board’s decisions and recommendations issued by AFSA during previous inspections;
82 ANNUAL REPORT ‘18 The main problems found during these inspections are as follows:
. Lack of procedures and internal regulations of the companies on the treatment of claims for voluntary products as well as communication among the departments for the coordination of claims
. Lack of documentation in the claims’ files as per the requests of Regulation No. 53, dated 25.06.2009 (amended).
. Failure to comply with the requirements set forth in Article 11 of the Regulation No. 53, dated 25.06.2009 (amended) concerning performance of assessment of claims only by assessors of claims certified by ASFA.
. Failure to fully and accurately operate the information software for the claims database used for the calculation of the technical provisions.
. Failure to comply with the requirements of Regulation no. 9, dated 25.01.2016 “On the bases and methods of calculation, manners of technical provisions maintenance, and the criteria and procedures for their approval by AFSA” concerning the provisioning of pending claims.
. Failure to comply with the requirements set forth in bullets 3 and 4 of Article 17 of Regulation no. 53 of 25 June 2009 (amended), concerning the determination of the loss of work ability coefficient as an important element in calculating the amount for the health claim.
In the framework of monitoring the implementation of the AFSA Board’s decisions, 2 thematic inspections were carried out in Non-life insurance companies with the object “Verification of the implementation of AFSA’s Board Decision’s requirements”.
Joint inspections
7 joint inspections with other institutions were carried out during 2018, from 2 carried out in 2017.
. ASFA, based on the Manual for the Supervision of Money Laundering Prevention, approved with Board Decision no. 136, dated 29.09.2016, has carried out 3 inspections with the General Directorate for the Prevention of Money Laundering. These inspections were carried out in parallel with risk-based inspections at Life insurance companies, which are subject to the law on money laundering prevention and terrorism financing;
. 2 inspections with the Bank of Albania at 2 commercial banks aiming at the verification of insurance policies benefiting banks, the monetary values of the insurance company and the verification of pending claims practices benefiting Banks;
FINANCIAL SUPERVISORY AUTHORITY 83 . 2 thematic inspections with the General Directorate of Taxation at insurance companies in the framework of the agreement with this institution.
3.2 Technical Provisions
In the framework of the analysis on the insurance companies’ financial health, ASFA assesses whether the technical provisions are adequate and proportionate to the level of risk contracted by the company. The adequacy of the technical provisions is measured against the legal basis in force and the failure to comply with this obligation constitutes a breach of the risk management rules.
The market-level performance of technical provisions in years has shown a growing trend, maintaining the structure of Life and Non-life activity. Therefore, the major weight, from the point of view of the exercised activity, is held by the gross technical provisions of Non-life companies, which is also reflected in the structure of the insurance market in Albania.
From the data at the market level, reflected in the graph below, an increase in the trend of the technical provision of losses and premiums is detected, reflecting the continuous efforts of AFSA in improving this indicator. ASFA has issued recommendations for the progressive improvement of the technical provision on claims from compulsory insurance, in proportion to the growth in insurance market activity. These recommendations are based on the analysis of the data on insurance companies, the findings from on-site inspections, and the information received from third parties (courts, for claims in court proceedings) related to the obligations and risks which societies are exposed to.
Graph 23: Gross technical provisions (In ALL mln.)
18,000 16,000 14,000 12,000 10,000 8,000 6,000 4,000 2,000 - 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018
Non-Life Life
84 ANNUAL REPORT ‘18 Gross technical provisions for compulsory motor insurance (MTPL)
The gross technical provisions for the MTPL product hold the highest specific weight in the total of technical provisions for the Non-life market. In 31.12.2018 this indicator has increased compared to the previous year, totalling 73% compared to 69% of the end of 2017. This was due to an increase in the gross technical provisions for the Non-life market compared to the end of 2017. The structure of technical provisions is also reflected in the Non-life insurance market structure, with a high percentage held by compulsory insurance.
Table 14: The weight and structure of technical provisions for compulsory insurance (In ALL mln.)
The weight of technical provisions for compulsory 2012 2013 2014 2015 2016 2017 2018 insurance Total gross provisions MTPL 4,903 5,876 7,606 8,259 9,757 9,824 10,710
Total Non-life gross provisions 7,375 7,980 9,663 12,410 13,866 14,138 14,707
Specific weight (in %) of compulsory insurance against 66% 74% 79% 67% 70% 69% 73% total of the market
Technical provisions structure 2012 2013 2014 2015 2016 2017 2018 for compulsory insurance Claim technical provisions MTPL 56% 52% 53% 52% 52% 52% 54%
Unearned prime provision MTPL 44% 48% 47% 48% 48% 48% 46% Total gross provisions MTPL 100% 100% 100% 100% 100% 100% 100%
With regard to the technical provisions structure, it has been constantly noted that the highest percentage is held by the technical provisions for the claims compared to unearned premium provisions. Even during 2018 the same sharing structure has been maintained, in line with the progress of the tariffing of the products offered for the compulsory vehicle insurance, an indicator which reflects its consequences on the unearned insurance provision.
Premiums for Compulsory Vehicle Insurance
Risk premium
In the framework of the World Bank First Initiative, concerning the liberalisation of tariffs for the compulsory motor insurance, the insurance companies are familiar with and have agreed on the model of risk premium calculation for the compulsory motor contract TPL, a
FINANCIAL SUPERVISORY AUTHORITY 85 methodology that has been adapted and used also for the evaluation of risk premium for the insurance contract of Green Card Insurance and compulsory travel insurance.
Based on the requirements of this methodology, where the main elements for the determination of the risk premium are the frequency and average cost of the losses, the insurance companies take into account the loss inflation in years and make their projections for the forthcoming financial periods, an important element for the determination of a precise premium value for a future risk.
ASFA, based on data from the insurance companies, calculates the risk premium at the market level for products of compulsory vehicle insurance within 31 march of each forthcoming year. Thereafter, the insurance companies calculate the level of technical provisions for the unearned premium for compulsory vehicle insurance, making sure that:
. Technical provisions are calculated for every insurance policy;
. The value of technical provisions is at least the highest value between the risk premium calculated by the insurance company itself and the risk premium at market level calculated by ASFA.
Average insurance premium
The premium paid by the insured includes the risk premium, the calculated amount for the coverage of costs of the acceptance to insure and administrative costs, including commissions, as well as the amount calculated for the profit of the insurance company.
The average premium paid by the insured for the compulsory motor insurance is reflected in the following table:
Table 15: Average premium for compulsory motor insurance
Type of insurance Average premium (in ALL) Change in % Year 2016 2017 2018 18/`17-1 18/`16-1
Compulsory Insurance 15,841 15,700 15,398 (1.9) (2.9)
Internal TPL 18,209 18,128 18,534 2.2 1.8
Green Card 13,012 13,125 10,512 (19.9) (23.8) Border Insurance 7,875 6,910 6,648 (3.8) (18.5)
In internal TPL insurance, the average premium was approximately ALL 18,534 with an increase of 2.2% compared to 2017.
86 ANNUAL REPORT ‘18 In the case of Green Card insurance, the gross written premium in 2018 increased of 1.65% compared to 2017 and of 5.83% compared to 2016. The number of contracts in 2018 increased of 26.82% compared to the previous year. This increase resulted in an average premium 20% lower than 2017, due to the following factors:
. About 7% of the change in insurance premium results from the exchange rate and;
. About 13%, from the issuance of specific policies for the insured who travel to the Republic of Montenegro, a territory in which the limits of responsibility are lower than in EU countries.
The number of Border Insurance policies has slightly decreased with approximately 3.7% compared to 2017.
Reinsurance
Based on the legal framework and the regulatory acts approved by AFSA, the insurance company is obligated to reinsure, in a reinsurance company, that portion of the insured risk that exceeds the allowed limit of 10% of the capital value.
For the products and special cases of insurance, the insurance companies have transferred the risk, by means of facultative reinsurance contracts, in order to mitigate the financial consequences of the huge and potential losses.
Facultative reinsurance
Facultative reinsurance implies the transfer of a portion of the specific insured risk from the insurance company to the reinsurance company, by means of a specific reinsurance contract.
The strategy followed by the insurance market for the transfer of risk, in general, is implemented through co-insurance (transfer of a portion of the risk of the insurance contract to another insurance company), transfer to reinsurance of the insurance portfolio, and the coverage with facultative reinsurance of the specific contracts.
Based on these regulatory requirements, the insurance companies report to AFSA on the reinsurance programme. Based on its supervisory function, ASFA follows on the progress of this programme implementation and its related specific contracts, aiming at ensuring continuous financial stability of the standards for the retaining of risk by these insurance companies and the criteria related to the reinsurance quality.
The reinsurance agreements in the Non-life insurance portfolio are of a non-proportional form, mainly Excess of Loss type and proportional form, Quota Share Surplus type. In Life
FINANCIAL SUPERVISORY AUTHORITY 87 insurance, the reinsurance coverage is attained by means of reinsurance agreements of a proportional form, Surplus and Quota Share type.
On the 31.12.2018, the reinsurance ceded premiums are:
. For insurance market total, ALL 2.87 billion or 16.99% of the gross premiums written value at the market level;
. For Non-life insurance, ALL 2.83 billion or 17.96% of the gross premiums written value for the Non-life insurance;
. For Life insurance, ALL 41.67 million or 3.64% of the gross premiums written value for the Life insurance.
The value of reinsurance ceded premiums compared to the same period in 2017:
. At the market level, decreased with approximately ALL 206 million or 6.70%;
. For Non-life insurance, decreased with approximately ALL 212 million or 6.98%;
. For Life insurance, increased with approximately ALL 6 million or 16.86%;
Graph 24: Progress of reinsurance ceded premiums for the period 2011 – 2018 (In ALL mln.)
2011 2012 2013 2014 2015 2016 2017 2018
Reinsurance ceded premium: Life Reinsurance ceded premium: Non-Life Reinsurance ceded premium: Total
88 ANNUAL REPORT ‘18 Graph 25: Reinsurance ceded premium/gross written premium, total market (In %)
35%
30%
25%
20%
15%
10%
5%
0% 2011 2012 2013 2014 2015 2016 2017 2018
Graph 26: Reinsurance ceded premium/gross written premium, Non-life (In %)
35%
30%
25%
20%
15%
10%
5%
0% 2011 2012 2013 2014 2015 2016 2017 2018
FINANCIAL SUPERVISORY AUTHORITY 89 Graph 27: Reinsurance ceded premium/gross written premium, Life (In %)
5.0%
4.5%
4.0%
3.5%
3.0%
2.5%
2.0%
1.5%
1.0%
0.5%
0.0% 2011 2012 2013 2014 2015 2016 2017 2018
The main parties to the reinsurance contracts, as in the previous years for the Non-life insurance, were VIG Re, UNIQA Re, Munich Re, Hannover Re, Swiss Re, Partner Re, Scor, Lloyd’s syndicates, etc. Concerning Life insurance, the sole reinsurance company involved in this programme is Score Global Life. More than 90% of insurance companies’ reinsurance partners rank higher than BB grade in Standard & Poor rating scale, with more than 60% having higher grades than A.
Own risk and solvency assessment (ORSA)
Pursuant to the requests and terms set forth in Regulation no. 18, dated 28.04.2015 on “Rules for the organisation of risk administration systems in insurance companies”, insurance companies during 2017 have submitted annual reports on companies’ risk assessment. ASFA has analysed the self-assessment reports of the insurance companies, paying special attention to the:
. Strategies, which establish the approach of the insurance company regarding specific risk areas and legal and regulatory obligations;
. Policies, which set forth the procedures and other requests mandatory for the Administration/Supervisory Council, high executive managers, main officials and insurance companies’ employees.
. Processes, which actualise the strategies and policies of the insurance company;
90 ANNUAL REPORT ‘18 . Controls, which ensure that strategies, policies and processes are in place, supervised and contribute to meeting the objectives.
Pursuant to the self-assessment reports’ analysis, in the framework of supervision and monitoring, ASFA performed a perspective evaluation on the insurance companies’ solvency as well as issued respective recommendations for future improvements in the reports.
On the amendments to the capitalised amount calculation coefficients
In 2018, Board’s Decision no. 72, dated 04.04.2018, has amended Regulation no. 53 “On claims treatment covered by compulsory insurance contract in the transport sector”.
The approved amendments enter into force on the 1st of July 2018 and apply to all cases of health claim calculation (property) that are covered by compulsory insurance contract in the transport sector. These amendments concern the determination of the updated table of the capitalised amount calculation coefficients. The new coefficients are divided per gender and are based on two elements:
. Average life expectancy of the individuals, calculated on the basis of mortality table;
. Interest rates used for the capitalisation.
The higher the average life expectancy of the individuals, the higher the capitalised amount coefficient, whereas the higher the interest rate considered, the lower the capitalised amount coefficient.
The coefficients used until now refer to the coefficients published in the studies on population in 1922 in Italy, obtained from the 1901–1911 Census. Upon update on longevity data by INSTAT, ASFA actuaries have calculated the new coefficients (perpetuity).
The amendment to Regulation no. 53, related to consumer protection, will have an impact on the claim parties’ compensation, given that the value of the health claim is expected to raise considerably.
FINANCIAL SUPERVISORY AUTHORITY 91 3.3 Groups Supervision
Pursuant to Law no. 52/2014 “On the activity of insurance and reinsurance”, section IV, AFSA performs the complementary supervision of insurance companies clustered into insurance groups, as provided by this law. In the Albanian insurance market, there are two insurance companies, undertakings with state capital, members to the same group. There are also four more insurance companies operating, members to the international insurance groups Uniqa Insurance Group (UIG) and Vienna Insurance Group (VIG), Austrian foreign stock companies.
ASFA, in view of an effective supervision of the insurance groups in compliance with basic insurance principles (ICP), pursuant to ICP 23 ‘On groups supervision’ drafted by the International Association of Insurance Supervision (IAIS), has signed a cooperation agreement with the supervisors of the states where the insurance companies with Albanian capital operate and the supervisors of international insurance groups that operate in Albania.
During calendar year 2018, ASFA representatives participated in the annual meetings of the insurance groups UNIQA Insurance Group (UIG) and Vienna Insurance Group (VIG) supervisory colleges, which are organised by the Austrian Financial Supervisory Authority (FMA). The supervisory colleges’ objective is to exchange information concerning insurance groups’ progress in view of a more effective financial supervision. ASFA representatives reported to FMA on the progress of the activities of insurance companies, member to UIG and VIG, that operate in Albania, on the present risks that characterise their operations in the Albanian market, as well as brought to their attention the issues noticed during off-site supervision as well as on-site supervision.
Consequently and to put into effect the 2018 Strategy, ASFA, with Board’s decision no. 250, dated 28.12.2018, approved the Methodological Directive “On insurance groups supervision’. The objective of this methodological directive is the establishment of general rules and a system of cooperation between supervisory institutions, such as Insurance Group Supervisory College, aiming at exchanging information in view of an effective supervision at group level for the local insurance and reinsurance companies, which have invested or have their branches in foreign countries.
The general rules established by this directive set some standards on the methods of reporting, forms of reporting and its time-term. The controlled company within an insurance group reports to AFSA.
3.4 Insurance Companies Governance
The insurance companies that operate in the Albanian market are organised in one- and two-level governance system. In one-level governance companies, the administrative council exercises administrative and supervisory powers, whereas in two-level governance
92 ANNUAL REPORT ‘18 companies, the supervisory council exercises supervisory and administrative powers whereas the Board’ administration powers. During 2018, ASFA has approved amendments to or re-nominations in the constitution of the supervisory councils of four insurance companies and has approved the nominations in their governing bodies.
Table 16: Data on insurance companies’ shareholders
Entities Number % Insurance companies 11
Total shareholders 35 Classification of shareholders according 100 to participation shares under 10% 18 51.43
over 10% below 20% 1 2.86
over 20% below 33 % 1 2.86
over 33% below 50% 3 8.57
over 50% 12 34.29
Classification of shareholders according to country of origin: 100 Foreign shareholders 2 6
Local shareholders 33 94
Classification of shareholders according to status 100
Individual Shareholders 30 85.71
Company Shareholders 5 14.29
Approvals of insurance companies’ statutory amendments
During 2018, ASFA has approved requests from insurance companies concerning statutory amendments, as shown in the table below:
Table 17: Data on the approved statutory amendments (In number)
Reason for Amending the Statute 2013 2014 2015 2016 2017 2018
New statute/other amendments 2 6 4 4 2 3 Capital increase 3 5 2 2 1 3
Changes in shareholding structure 2 3 3 4 1 1
FINANCIAL SUPERVISORY AUTHORITY 93 3.5 Licensing Activity
During 2018, ASFA licensing activity on the insurance market concentrated on licensing the activity of:
. Insurance intermediation (broker/agent);
. Insurance claims adjusters;
. Insurance actuaries.
ASFA makes sure that the requests and procedures applied to the subjects that wish to carry on an activity in the intermediation field during the licensing process are clear, objective and transparent. Regulation no. 79, dated 31.08.2015 “On the approval/licensing of the persons to carry on the insurance agent activity, and the events of refusal of registration and of issuing a license”, amended, and Regulation no. 48, dated 30.06.2015 “On the criteria, procedures and terms of licensing and the events of refusal to issue a licence to carry on the insurance brokerage activity”, amended, emphasise the professional growth and integrity of the persons that will carry on the intermediation of insurance products activity.
Insurance intermediaries
Insurance intermediation is carried on by brokers and brokerage companies, agents, agents’ companies, other subjects, banks and non-bank financial subjects, licensed by AFSA, based on the rules approved per each category. During 2018, as a result of the developments in the insurance market, subjects have continued to have an interest on the licensing in the intermediation market.
Insurance brokerage
There are 15 brokerage companies and 4 banks acting as brokers currently operating in the insurance market. Data on the number of insurance brokers licensed during 2018 are shown in the following table:
Table 18: Data on licensed insurance brokers (In number)
New licenses in Licenses revoked Licensed at the Broker Status Licensed in 2017 2018 during 2018 end of 2018 Brokerage - 16 3 19 companies -from these banks: 3 1 - 4 Natural broker 36 17 1 52
94 ANNUAL REPORT ‘18 Of 15 brokerage companies, 9 of them and one bank, carry on their activity only in the area of Non-life insurance, whereas 4 companies carry on their activity in Non-life and Life insurance and Reinsurance brokerage activity, 3 other companies and 3 banks that carry on their activity in both Life and Non-life insurance areas.
Table 19: Brokerage companies according to the insurance classes (In number)
Year 2013 2014 2015 2016 2017 2018 Non-life brokerage company 5 4 5 6 8 9 Non-life and Life brokerage company 2 2 2 5 5 6 Non-life, Life and Reinsurance brokerage 1 2 2 3 3 4 company Total 8 8 9 14 16 19
Insurance agent activity
During 2018 work has continued for the approval of natural persons to carry on activity as Non-life insurance agents based on requests received from Non-life insurance companies. 274 natural persons (agents) were licensed during 2018, of which 242 for the first time. 16 non-bank financial subjects and other subjects carrying on financial and commercial activity were involved in this process.
Table 20: Data on licensed insurance agents (In number)
License Licensed Licensed at License New Licenses revoking, at the Agent status the end of renewal licenses in expired in termination end of 2017 in 2018 2018 2018 of contract in 2018 2018
Legal persons 14 16 - - - 30 Of this number, in - 3 - - - 3 banks Natural persons 420 242 32 18 39 637
Insurance claims adjusters
ASFA, based on the regulatory framework and the provisions of Law no. 52, dated 22.05.2014 “On the activity of insurance and reinsurance’ licenses insurance claims adjusters. During 2018, ASFA has approved 7 new licenses for claims adjusters and renewed of 1 existing license. Data on the number of insurance claims adjusters, according to the status of the adjuster (employed/independent) are shown in the following table:
FINANCIAL SUPERVISORY AUTHORITY 95 Table 21: Data related to the number of licensed claims adjusters (In number)
Licensed License New Licenses License Licensed at Claim adjusters at the end renewal licenses in expired revoking in the end of of 2017 in 2018 2018 in 2018 2018 2018
According to the person’s status Independent 36 1 3 4 - 36
Employed 36 - 4 2 - 38
Non-active license 5 - - 1 - 4
According to the type of license Material claims 3 - 1 1 - 3
Health claims 16 1 2 2 - 17 Material and health 58 - 4 4 - 58 claims TOTAL 77 1 7 7 - 78
Insurance actuaries
During 2018, ASFA, based on and pursuant to the requirements of article 222 of the Law no. 52, dated 22.05.2014 “On the activity of insurance and reinsurance” as well as Regulation no. 57, dated 28.04.2016 “On the continuous professional training and renewal of authorised actuary”, approved the authorization of 3 persons to carry on the activity of the insurance authorised actuary, for a 3-year period, of which, one for the first time and the other 2 for the renewal of the actuary license.
Professional tests in the field of insurance
According to the regulatory requirements, the licensing of insurance broker or insurance claims adjuster activity is linked with the successful passing of a test on professional knowledge in the respective field. During 2018, ASFA organised 2 tests for the applicants that had applied for the insurance broker license and 2 tests for the claim’s adjusters. The aim of these tests was to certify the professional knowledge related to offering financial services from professionals that are well acquainted with the legislation and the field of activity they will operate in.
96 ANNUAL REPORT ‘18 3.6 Insurance intermediaries
According to the insurance legislation in force, the insurance intermediaries are all natural or legal persons that carry on intermediation activity, which includes the activity of presenting, proposing and carrying out other preparatory actions till the signing of the insurance contract, and providing assistance during the period in which the contract is valid, against payments and commissions determined in the legal provisions.
The insurance intermediation activity, according to the legal framework in force, is carried on by:
. Agents natural persons, agents’ companies, banks, branches of foreign banks or non-bank financial institutions, as well as other subjects, when the sale of insurance products by these subjects falls within or complement their primary commercial activity;
. Brokers natural persons, brokerage companies, banks and/or branches of foreign banks in Albania, non-bank financial institutions.
Agents’ supervision
ASFA, during 2018, based on the Law no. 9572, dated 03.07.2006 “On the Financial Supervisory Authority’, in order to supervise the activity of the agents/employees of the approved companies, has carried out several inspections at the insurance companies’ sales points that carry on the sales of compulsory insurance policies TPL, to verify their implementation during the activity of insurance policies’ sale, the legal acts and by-laws in force, such as Law no. 52/2014 ‘On the activity of insurance and reinsurance’, and Regulation no. 79, dated 31.08.2015 ‘On the approval/licensing of the persons to carry on the insurance agent activity, and the events of refusal of registration and of issuing a license’.
From the verifications on-site, at the sales’ points, concerning the manner of conducting the sale of policies’ activity by the persons who performed them, cases of violations of the legal acts and by-laws in force were also evidenced. For all the violations found, reports for AFSA Board have been prepared, which took disciplinary action by removing the agent’s license in two cases, and by suspending the licenses for a 6-month period in six cases. In addition, some of the violations evidenced have been disclosed to the Competition Authority in writing.
During 2018, in the framework of the cooperation agreement with the State Police, a joint inspection was carried out at the Port of Durrës’ border crossing point, concerning the observance of the legal provisions in force by the foreign plated vehicles that have entered the territory of our country.
This joint inspection found that there were several uninsured vehicles with fake insurance policies and invalid Green Card Insurance This number amounted to approximately 8% of
FINANCIAL SUPERVISORY AUTHORITY 97 the total number of controlled vehicles, which implies a potential risk of increase of the Compensation Fund in cases of claims caused by these vehicles.
With regard to the issues evidenced during this inspection, a letter was sent to the highest officials of the State Police, requesting their intervention in taking the appropriate measures to change the situation, based on the legal obligations set forth in Article 34, of the Law no. 10076, dated 12.02.2009 “On compulsory insurance in the transport sector”, which stipulates that: the monitoring of the fulfilment of the obligation to equip the drivers of motor vehicles with foreign plates, is carried out by persons authorized to control the border of the Republic of Albania.
Supervision of brokerage companies
In 2018, all brokerage companies licensed from the beginning of 2008 were inspected for the first time.
The inspection focused on two main areas:
. Continued fulfilment of licensing requisites;
. Protection of consumers’ interests.
During this year, 3 second-level banks that operate as Life insurance brokers, were also inspected, where issues such as consumer protection, according to the provisions of Chapter IV of Law No. 52/2014, as well as the verification on the observance of internal rules in the conduct of insurance intermediation activity were looked into.
From the inspections carried out in all the brokerage companies and the second level banks, some issued were evidenced, for which the respective recommendations were issued in order to take immediate measures to improve the situation, and a report was prepared for the AFSA Board.
3.7 Albanian Insurance Bureau (AIB)
The Directorate of Enforcement, regarding AIB, has adopted the following decisions:
. Addendum to the Regulation no. 36, dated 21.03.2012 “On the establishment, estimation, financing, and administration of the Compensation Fund and the payment of losses”, amendments that relate to the issues of accumulation by AIB of the Compensation Fund liabilities;
. The Executive Director of AIB has been fined and the renewal of its nomination has been refused.
98 ANNUAL REPORT ‘18 During 2018, the following decisions concerning the Compensation Fund have been adopted:
Claims payment, subject to the Compensation Fund
A special plan for resolving the problems of the Albanian Insurance Bureau and the Compensation Fund was drafted. In May 2018, the draft-law “On Compulsory Insurance in the Transport Sector” was sent to the Ministry of Economy and Finance.
During 2018, the implementation of the Board’s decisions regarding the settlement of the companies’ obligations, the publication of the beneficiaries for the approved outstanding administrative practices, and the control of the payments made following the conclusions of the inspection and the addendum to the Compensation Fund, were monitored. Proposals have been submitted to the Board and measures have been taken against companies in cases where they failed to comply with AFSA decisions;
Pursuant to Regulation no. 2, dated 28.01.2010, amended, on the accurate drafting of the losses reports, subject to the Compensation Fund, in January 2019, the Losses Management Electronic System operates at the AIB, where AFSA is entitled to review the status of any case, in order to protect the interests and rights of consumers.
With regards to the monitoring of completed cases, AFSA, with decision no. 156, dated 30.07.2018, has amended the Regulation no. 36, dated 21.03.2012 “On the Establishment, Calculation, Financing, and Administration of the Compensation Fund and the Compensation of Losses”, wherein Article 6, comma 1.1 determines that, if the Bureau does not distribute to its member insurance companies the losses’ files of the Compensation Fund, in proportion to the respective values of their obligations, the distribution to pay to the insurance companies shall be made by AFSA. The Bureau, within 7 days from the date of the receipt of notice by AFSA of the files distribution, shall proceed with the submission of the authorization and the copy of the file to the insurance company designated by AFSA.
Other measures taken by AFSA are:
. Attending legal proceedings upon notification by the Bureau, participating as a hearing party in order to verify the due attendance of the proceedings;
. Approval of the new AIB director;
. Approval of some regulations by AIB related to the improvement of the procedures for following on the cases, subject to the Compensation Fund.
FINANCIAL SUPERVISORY AUTHORITY 99 3.8 Compensation Fund
During 2018, the following decisions concerning the Compensation Fund have been adopted:
On the approval of contributions for the Compensation Fund
July 2018, the Board has adopted the Decision no. 155, dated 30.07.2018, “On the approval of additional contributions to the Compensation Fund in 2018”, which approved the addendum to the Compensation Fund for 2018, for the payment of losses in events occurred from the 1st of January 2014 onward, in the amount of ALL 182 million approximately. This decision has been adopted based on the findings from the on-site inspections performed during May, 21-30 2018 at the insurance companies, as well as the verifications made, on the 8th of June, at AIB concerning the files returned from the insurance companies.
October 2018, the Board, with the Decision no. 219, dated 31.10.2018, has approved an addendum to the Compensation Fund for 2018, in the amount of ALL 275 million approximately, for events occurred until 31.12.2013, with a view to proceed with the payment for these events.
This decision has adopted by referring to the proposals received from the AIB through a letter with Prot. no. 5997, dated 17.10.2018, whereby the Decision no. 21, dated 11.10.2018, ‘On the approval of the addendum for the Compensation Fund for 2018”, has been deposited. The respective report and proposal were drafted.
December 2018, the Board, with the Decision no. 260, dated 28.12.2018, has approved the Compensation Fund for 2019. This decision was adopted pursuant to Article 45 of Law no. 10076, dated 12.02 2012, whereby ASFA, upon proposal by the Bureau, decides every year on the amount of contributions, according to bullets 2 and 3, comma b, of this article and time-term for the depositing.
The value of the Compensation Fund for 2019, referring to the data presented by AIB in the meeting of 18 December 2018, for events occurred until 31.12.2013 and from the inspection made at the insurance companies, as per the inspection programme 4083, dated 11.12.2018, for events occurred from the 1st of January 2014 onwards.
Compensation Fund and claims payment
3 on-site inspections were carried out in all insurance companies and AIB on Compensation Fund files. The conclusions from the inspections have served to determine the exact amount of Compensation Fund liability and the payment of losses in order to avoid their accumulation.
AFSA structures have monitored the management of Compensation Fund’s completed
100 ANNUAL REPORT ‘18 files, constantly seeking implementation of the relevant regulation. 2-week information packages about the Compensation Fund payments are being prepared for the Economy and Finance Commission starting from September 26. The payments incurred in 2018 amount to ALL 1,009 million, which are verified through bank payment orders during the inspection performed in January 2019.
The agreements concluded by the insurance companies, which amount to ALL 205 million approximately, were also verified during these inspections.
Thematic on-site inspections were carried out in all insurance companies and at AIB, on the files concerning the losses subject to the Compensation Fund, and on the authorizations issued by AIB and the confirmations of payments by the companies for the obligations rising from AFSA Board’ decisions.
In December 2018 AFSA approved the amount of the Compensation Fund for 2019, a decision that has had a positive impact on the Compensation Fund, by solving the issues inherited from 2002.
AFSA is monitoring the management of files that are sent to the Compensation Fund, the final court decisions pursuant to the deadlines set out in the Regulation on the administration of this fund, the payments as per the agreements declared by the companies and the implementation of AFSA’s decisions.
Inspections of the Compensation Fund
36 thematic inspections were carried out in 2018: 4 at the Albanian Insurance Bureau, from 2 carried out in 2017, and 4 inspections in each of the 8 Non-life insurance companies with a focus on the losses subject to the Compensation Fund, from 1 inspection carried out in 2017. These inspections focused on essential issues, such as the control of the losses payments in compliance with the regulatory requisites, the control of physical documentation about losses of a high value at AIB, their compliance with the data reported, evaluation of security and validity of the information programmes used by AIB for data storage and administration, and the implementation of recommendations issued by previous AFSA inspections. AFSA internal audit unit has controlled the procedures followed concerning the payments of the Compensation Fund.
3.9 Enforcement and Legal and Regulatory Framework
New acts
Regulation no. 56, dated 29.03.2018 “On the form and detailed content of information about the insurance companies’ known creditors”, which sets forth the rules on the form and detailed content of information about insurance companies’ known creditors in
FINANCIAL SUPERVISORY AUTHORITY 101 cases of compulsory liquidation. Directive no. 250, dated 28.12.2018, ‘On insurance group supervision’ The objective of this methodological directive is the establishment of general rules and a system of cooperation between supervisory institutions, such as Insurance Group Supervisory College, aiming at exchanging information in view of an effective supervision at group level of the local insurance and reinsurance companies, which have invested or have their branches in foreign countries.
Practical manual on the supervision of reinsurance activity approved with the Board’s decision no. 140, dated 30.07.2018.
Regulation no. 23, dated 26.02.2018, “On the on-line electronic register for the sales of compulsory motor insurance contracts”, which sets forth the procedures for the functioning, identification, and reporting of contracts’ sales data for the compulsory motor insurance in the On-line Electronic Register of sales, installed at ASFA Information Centre.
Decision no. 55, dated 29.03.2018, on the adoption of the risk premium table for the calculation of technical provisions concerning the compulsory insurance of the vehicle owner for the claims caused to third parties by this vehicle.
Practical manual concerning on-site inspections for vehicles’ and property’s claims, due to the need to have clear directives/guidelines concerning on-site thematic inspections of the claims. The manual was drafted with the assistance of World Bank experts during the implementation of FIRST project, who have assisted in the development of a more effective supervision of the insurance market. This manual has been adopted with Board’s decision no. 97, dated 13.06.2018.
Amendments to the existing acts
The amendments to Regulation no. 37, dated 28.05.2015 “On the criteria and requirements for the selection of the firm auditing the insurance companies’, approved with Board’s decision no. 141, dated 30.07.2018 concerned the updating of the denominations by the law on legal auditing as well as the unification of AFSA regulations concerning external auditing, related to the terms for depositing the request, the documentation submitted to AFSA, AFSA approval/refusal, etc., for the auditing of the insurance companies as well as the companies administering SIK and FP.
The adoption of some amendments and the addendum to the Regulation no. 79, dated 31.08.2015 ‘On the approval/licensing of the persons to carry on the insurance agent activity, and the events of refusal of registration and of issuing a license’, with Board’s decision no. 215, dated 31.10.2018, serve to empower the criteria for carrying on the agents activity and their supervision. The amendments were made in view of the recommendations issued by Council of Europe’s MONEYVAL.
The addendum to the Regulation no. 2, dated 25.01.2016 “On the form, terms and content
102 ANNUAL REPORT ‘18 of financial statements, statistical reports and other reporting of insurance and reinsurance intermediaries”, adopted with Decision no. 73, dated 04.04.2018 established the rule for depositing at AFSA the draft annual financial statements for the forthcoming year from the agents and brokerage companies.
Amendments to the Regulation no. 23, dated 26.02.2018 ‘On the on-line electronic register for the sales of compulsory motor insurance contracts’, was adopted with Board’s decision no. 188, dated 18.09.2018.
The amendment to Regulation no. 2, dated 28.01.2010 ‘On the reporting and supervision standards of the Albanian Insurance Bureau’ was adopted with the Board’s Decision no. 168, dated 31.08.2018, consisted in determining the unit responsible for the examination of periodical AIB reports and the follow on the observing AIB reporting terms. Whereas with Board’s Decision 240, dated 12.12.2018, the “Monthly and progressive statistics concerning losses for the Compensation Fund’ was added to this Regulation.
Additions and amendments to Regulation no. 53, dated 25.06.2009 ‘On claims treatment covered by compulsory insurance contract in the transport sector’, were adopted with Board’s Decision no. 72, dated 04.04.2018, and concern the calculation of moral and existential claim and the coefficients for the calculation of the capitalised amount.
The addendum to the Regulation no. 36, dated 21.03.2012 “On the establishment, calculation, financing, and administration of the Compensation Fund and the compensation of losses”, was adopted by Board’s Decision no. 156, dated 30.07.2018. The necessity to intervene in this regulation stemmed from the failure of AIB to comply with the decisions regarding the Compensation Fund.
The cooperation agreement between the Italian Insurance Supervision Institute (IVASS) and AFSA was adopted with Decision no. 1, dated 09.01.2018 authorising the CEO to sign this agreement.
Agreement between AFSA and National Business Centre (NBC)
With Decision no. 187, dated 18.09.2018, the Board approved the agreement AFSA-NBC ‘On cooperation and exchange of information’. The scope of this agreement is to set forth the rules and procedures for exercising the right to access the data accessible in the Trade Register that is maintained and administered by the National Business Centre, in accordance with the legislation in force, in order for AFSA to exercise its legal functions. The scope of cooperation between NBC and AFSA was the exchanging of information on every recording activity in the trade register of the subjects under AFSA jurisdiction, for which the law requires AFSA prior approval/confirmation, in order to carry on the activity, for the security, the guarantee of obtaining information, and the preservation of the integrity of the databases by the parties.
FINANCIAL SUPERVISORY AUTHORITY 103 3.10 Corrective and Administrative Measures
The laws regulating the activity of the financial subjects under AFSA supervision and the law ‘On the Financial Supervisory Authority’ stipulate corrective and administrative measures that aim at preventing, correcting and suspend the circumstances and actions that violate the legal provisions or AFSA acts.
The supervisory and correcting measures and the sanctions by AFSA in an impartial and transparent and observing the principles of efficiency, continuity, and proportionality to the circumstances or the activity that violates and inflicts the interests of the insured.
The measures taken by AFSA were based on the inspection on-site, control of documents and the verification of information.
AFSA Board, during the period January-December 2018, has adopted 34 decisions in total concerning administrative and corrective measures for the supervised subjects. As a result of findings from inadequate financial inspections and performance, legal remedies taken in accordance with the legislation in force are: the addition of funds to meet regulatory requirements for the minimum required capital, the coverage of assets of technical provisions, the use of assets limitation company, license revocation, suspension of activity, monetary fines and other issues. Detailed decisions by type of administrative measures are presented as follows:
Table 22: Legal proceedings attended by ASFA in 2018 (In number)
Monitoring Inspection the failure through Insurance to enforce risk-based AIB/ Insurance Insurance broker/ Description of Financial Reporting board’s supervision Compensation claims agents/ brokerage measure Indicators to AFSA decisions methodology Fund adjusters employees company
Board decisions 3 13 4 3 4 1 2 4
Order for reinstatement 3 4 3 3 Corrective measures 1 Penalties 13 1 3 Refusal to nominate 1 License revocation 1 License suspension 1 1 1
104 ANNUAL REPORT ‘18 During 2018, 9 Board decisions were brought to court, whereas 13 AFSA Board decisions are in the process. AFSA has rigorously attended the complaints and legal defence at all levels of the judicial system. During 2018, AFSA has attended 22 legal proceedings.
Table 23: Legal proceedings attended by ASFA in 2018 (In number)
Total Pending New (during 2018)
22 13 9
During 2018, 9 cases were adjudicated at the Administrative Court of First Instance all of which have been appealed to the Administrative Court of Appeal. Of these 9 cases, 3 were adjudicated in favour of the plaintiffs by the court of the first instance, and 6 cases in favour of AFSA; AFSA has appealed two decisions, whereas one decision could not be appealed because it is excluded from the appeal procedure according to Article 45 of the Law no. 49/2012 “On the organisation and functioning of the administrative court and the adjudication of administrative conflicts”. Of 13 cases pending, six cases are being reviewed at the Administrative Court of Appeal and 7 cases are expected to be adjudicated at the Supreme Court. The total number of cases that are expected to be reviewed at the Administrative Court of Appeal are 12, 6 of which are pending. The total number of cases that are expected to be tried in the Supreme Court are 7.
AFSA did not receive any notification on criminal charges during 2018.
FINANCIAL SUPERVISORY AUTHORITY 105 Chapter 4 SUPERVISION OF THE PRIVATE VOLUNTARY PENSION MARKET
4.1 Market Structure
Scheme for the organization and operation of private voluntary pensions, sanctioned by Law no. 10197 of 10 December 2009 has created the necessary space to stimulate consumers to privately and voluntarily save for an additional pension.
During 2018, voluntary pension funds operated in the private voluntary pension market, administered by three management companies, respectively “Raiffeisen Invest” sh.a., which manages the Voluntary Pension Fund “Raiffeisen”, “Sigal - Life Uniqa Group Austria “, which operates the” Sigal “Voluntary Pension Fund, as well as” Credins Invest “JSC, which administers the” Credins Pension “Voluntary Pension Fund.
The developments in this market since the entry into force of the law have had a positive dynamic. However, the net asset value of this market is negligible compared to the GDP in Albania.
4.2 Financial Position
The voluntary pension fund market since the beginning of its activity has been growing in terms of the assets it manages, as well as the number of contributors. The total net assets of this market as of 31.12.2018 is over ALL 2,289 million with a total of 25,298 members. The net assets of this market on 31 December 2018 have increased by 32.51%, while the number of members increased by 20.77% compared to the end of 2017. Meanwhile, if we compare these two indicators by the end of 2016, net assets increased by 73.58%, while the number of members increased by 46.09%. The net asset value of voluntary pension fund market assets for the last three years is given in the following table:
Table 24: Net Assets of Voluntary Pension Funds
Description Value (in ALL mln) Change (in %) 31.12.’16- 31.12.’17- 31.12’.16- Period 2016 2017 2018 31.12.’17 31.12.’18 31.12’.18 Net assets of PF 1,318.74 1,727.54 2,289.10 31 32.51 73.58
As can be seen from the table above, the growth rate of the market volatility of voluntary retirement funds for the period 31.12.2017-31.12.2018 is higher than for the period 31.12.2016-31.12.2017.
At 31.12.2018, the voluntary pension fund “Sigal” occupies the largest share of this market in terms of the net assets value of 47.43%, while the voluntary pension fund “Raiffeisen” and the Voluntary pension fund “Credins Pension” occupy respectively 27.21% and 25.36% of the market, as seen in the chart below.
106 ANNUAL REPORT ‘18 Graph 28: Market share by net asset value of pension funds on 31.12.2018 (In %)
Credins Pension 25.36
Sigal 47.43
Raiffeisen 27.21
The following chart shows the market share by the net asset value of voluntary pension funds over the last three years.
Graph 29: Market share by net asset value of voluntary pension funds (In %)
17.73 19.99 25.36
31.26 29.35 27.21 Credins Pension
Raiffeisen
Sigal
51.01 50.67 47.43
2016 2017 2018
FINANCIAL SUPERVISORY AUTHORITY 107 The table below indicates the shares of each voluntary pension fund over the last three years.
Table 25: The value of the voluntary pension fund shares (In ALL)
Value of net assets per Value of net assets per Value of net assets per Pension fund share 2016 share 2017 share 2018
Sigal 1,297 1,350 1,394 Raiffeisen 1,544 1,635 1,724 Credins Pension 1,305 1,354 1,406
From the table above it can be seen that the net asset value per share for each of the pension funds has been growing. By the end of 2018, the value of net assets per share of the “Sigal” pension fund increased by 3.26% compared to the end of 2017, while for the “Raiffeisen” and “Credins Pension” voluntary pension fund this indicator was increased respectively by 5.44% and 3.84%. Compared to the end of 2016, this indicator for the above- mentioned pension funds has increased by 7.48% for “Sigal”, 11.66% for “Raiffeisen” and 7.74% for “Credins Pension”.
The assets of this market at 31.12.2018 are in the amount of ALL 2.303.26 million and are invested in bonds of the Albanian Government. These assets increased by 32.91% compared to 31.12.2017, compared to 31.12.2016 they increased by 73.78%.
Investments in bonds of Republic of Albania account for 95.96% of total market assets of pension funds and increased by 34.62% compared to year-end 2017, compared with end- 2016, an increase of 76.07%. The rest of the assets of this market consists of cash and cash equivalents and accounts receivable.
The structure of the assets of this market during the last three years and the change of this structure is given in the tables below.
108 ANNUAL REPORT ‘18 Table 26: The structure of voluntary pension fund market assets over the last three years
Description Value (ALL mln.) Period 31.12.’16 31.12.’17 31.12.’18
Net assets of pension funds 1318.74 1,727.54 2,289.10
Total Net Assets 1325.36 1,732.94 2,303.26
of which: Monetary Means and Equivalents of 46.31 58.44 47.73 Monetary Means Treasury Bonds of Republic of Albania 1,255.29 1,641.76 2,210.16
Bank deposits 0.00 0.00 0.00
Other assets 23.76 32.74 45.37 Total Fund Liabilities 6.62 5.4 14.16
Table 27: Change in the structure of voluntary pension fund market assets as at 31.12.2018 compared to 31.12.2017
Description Value (in ALL mln) Change (In %) Share to total (in %) 31.12.’17- Period 31.12.2017 31.12.2018 31.12.’17 31.12.’18 31.12.’18 Net assets of pension 1,727.54 2,289.10 32.51 funds Total Net Assets 1,732.94 2,303.26 32.91 100 100
of which: Monetary Means and Equivalents of 58.44 47.73 (18.33) 3.37 2.07 Monetary Means Treasury Bonds of 1,641.76 2,210.16 34.62 94.74 95.96 Republic of Albania Bank deposits 0 0 - 0 0
Other assets 32.74 45.37 38.58 1.89 1.97
Total Fund Liabilities 5.4 14.16 162.22 0.31 0.61
During 2018, the total investment of pension funds amounted over ALL 2,210 million and these investments consist of treasury bonds of the Republic of Albania (95.96% of the total assets).
Investments in the pension market have increased by 34.62% compared to 31.12.2017, compared to 31.12.2016 they increased by 76.07%. Investment performance over the last three years is presented in the table below.
FINANCIAL SUPERVISORY AUTHORITY 109 Table 28: Value of voluntary pension fund market investments (In ALL mln.)
Description Value (in ALL mln.) Period 2016 2017 2018 Total PF investments 1,255.29 1,641.76 2,210.16
Since voluntary pension fund liabilities are long-term, as members can retire when they reach retirement age, then the investment policy for the three pension funds operating in the market is long-lasting, thus carrying the risk of the market. Thus, this pension fund investment policy has aimed at maturities of 3, 5, 7 and 10 years as can be seen and, in the chart, below:
Graph 30: Breakdown by market maturity of voluntary pension funds’ investments on 31.12.2018 (In %)
0.19 10.25
3 year maturity bonds
5 year maturity bonds
7 year maturity bonds
56.70 32.86 10 year maturity bonds
The above graph shows that the largest part is invested in 7-year and 10-year maturity bonds respectively in the 32.86% and 56.70% measures. This fact indicates that voluntary pension funds intend to build a portfolio consisting mainly of long-term securities.
110 ANNUAL REPORT ‘18 The number of members who contributed to voluntary pension funds over the last three years and the percentage change for these periods is reflected in the table below.
Table 29: Number of members according to voluntary pension funds
Description Number of PF members Change (in %) 31.12.’16- 31.12.’17- Period 2016 2017 2018 31.12.’17 31.12.’18 Sigal 5,794 6,066 7,067 4.69% 16.50%
Raiffeisen 2,653 2,800 2,911 5.54% 3.96%
Credins Pension 8,870 12,081 15,320 36.20% 26.81%
Total 17,317 20,947 25,298 20.96% 20.77%
As can be seen from the table above, the number of members of the voluntary pension funds has been increasing. The chart below shows the market share by the number of members in voluntary pension funds expressed in percentage for the end of 2018.
Graph 31: Market share by number of members in voluntary pension funds on 31.12.2018 (In %)
Sigal 27.94%
Credins Pension 60.56%
Raiffeisen 11.51%
FINANCIAL SUPERVISORY AUTHORITY 111 The following chart shows the market share by the net asset value of voluntary pension funds over the last three years.
Graph 32: Market share by number of members in voluntary pension funds (In %)
51.22 57.67 60.56
Credins Pension
Raiffeisen 15.32 Sigal 13.37 11.51
33.46 28.96 27.94
2016 2017 2018
By the end of 2018, there were 14,643 members of the voluntary pension fund market that were included in individual voluntary pension plans, while 10,655 members were included in the voluntary pension plans created by employers for their employees.
The graph below shows the breakdown of voluntary pension fund market members according to pension plans for the end of 2018, where 57.88% of the members of this market are part of individual pension plans, while 42.12% of them are part of the professional plans of the pension.
112 ANNUAL REPORT ‘18 Graph 33: The breakdown of voluntary pension fund market members according to the pension plans on 31.12.20188 (In %)
42.12 Members of individual pension plans
Members of the professional pension plans
57.88
Most of the members of the Voluntary Pension Funds “Sigal” and “Raiffeisen” are included in the pension plans respectively 79.55% and 69.53%, while 80.36% of the members of the Voluntary Pension Fund “Credins Pension” are included in individual pension plans.
The table below shows the allocation of members in each of the voluntary pension funds according to individual and professional pension plans for the end of 2018.
Table 30: The breakdown of voluntary pension fund market members according to the pension plans on 31.12.2018
Number of members in Number of members in Pension Fund individual pension plans profesional pension plans
Sigal 1,445 5,622 Raiffeisen 887 2,024 Credins Pension 12,311 3,009 Total 14,643 10,655
Contributions paid to voluntary pension funds on 31.12.2018 have increased by 47.05% compared to the end of 2017, compared to the end of 2016 they increased by 59.41%.
Total withdrawals from pension funds for the period 31.12.2018 were ALL 86,015,992, representing 3.76% of total net market assets. Early withdrawals from pension funds for the period of 31.12.2018 accounted for 65.76% of total withdrawals, while withdrawals from retirement age make up 34.24% of total withdrawals from pension funds. Withdrawals
FINANCIAL SUPERVISORY AUTHORITY 113 from filling the retirement age are mainly immediate withdrawal of 31.53% and monthly withdrawals of 2.71%, as can be seen from the graph below.
Graph 34: Withdrawals from voluntary pension funds on 31.12.2018 (In %)
2.71
65.76 Advance withdrawal 31.53 Monthly pension withdrawal Immediate pension withdrawal
4.3 Supervision and Analysis of Market Risks
In the framework of the risk-based supervisory methodology, 2018 was carried out on- site inspection at a depository unit of pension funds and investment funds. The scope of this inspection was to assess the risk level of the depositor unit, based on the principles upon which its activity should conform. These principles are part of the implementation of the new supervisory methodology for voluntary and risk-based pension funds, which was drafted and approved in 2016. This methodology identifies the greatest risks affecting this market and at the same time the strategies to be followed for mitigating them to an acceptable level.
The approach followed during the inspection at the depositary’s unit was to review the documentation required in advance by the depositary unit, to conduct interviews with employees holding key positions in the depositor unit, as well as site verification or testing on various issues. Upon completion of the inspection, based on the identified findings, the compliance of the depositor unit’s activity with the principles to which its activity and the level of risk of the depositor unit have to comply is assessed. From the findings of this inspection, AFSA has left the relevant recommendations for which the depositary unit has worked to fulfil.
The risk-based methodology, with a view to developing a sound process for judging risk assessment, has also foreseen the establishment of the Risk Committee for Pension Funds, which started its activity in 2016 with the adoption of the new Supervisory Methodology.
During the meetings of the Risk Committee in 2018, the present risk and risk matrix were
114 ANNUAL REPORT ‘18 presented in the system and an assessment of these risks was agreed, identifying the risks that require more rapid intervention in the system. Thus, the increased risk of the participation of contributors in the system was identified as the greatest risk in Albania, which is also related to the increased reliability of the system. The Risk Committee, aiming to alleviate the risks, adopts the oversight plan for the medium-term period for the pension fund market.
4.4 Legal and regulatory framework
For the draft law “On some amendments and addenda to Law no. 10,197, dated 10.12.2009 “On Voluntary Pension Funds”, even during 2018, there were no developments in procedures for its approval.
No new acts, but only an amendment to a regulation, no. 89, dated 27.06.2016 “On the criteria and requirements for the approval of the audit firm of management companies of collective investment undertakings and management companies of voluntary pension funds”. Amendments approved by Decision no. 142, dated 30.07.2018, concerned the updating of the titles of the regulation with the law on legal auditing. In addition, the changes related to the unification of AFSA regulations for external auditors, in terms of application filing deadlines, documentation submitted to AFSA, AFSA’s approval/rejection, etc. for both the audit of insurance companies and auditing of the management companies of SIK.
FINANCIAL SUPERVISORY AUTHORITY 115 Chapter 5 INSTITUTIONAL COOPERATION AND PROJECTS
5.1 National Partnership
The Financial Supervisory Authority has an important role to play in developing and maintaining the country’s sustainable financial stability. Cooperation of various economic and financial regulators has been considered very important for the performance of financial markets. In order to serve this cooperation, the relationship with the most important financial institutions in the country or institutions and other interest groups, whose activity relates directly or indirectly to the supervisory or regulatory activity, has been deepened in 2018.
In order to revitalize and further develop research work at AFSA and in order to gain experience in the research field in May 2018, a meeting was held between AFSA and the BoA. During the meeting, the Bank of Albania shared with AFSA its research experience and where in this meeting it was agreed that the Bank of Albania will enable by making available to the Authority all its literature at the Bank’s Library. This cooperation is in the focus of the Authority and will be deepened and strengthened further in the future.
5.2 Regional and International Cooperation
Partnerships and memberships in international organizations
AFSA is a member of the International Association of Insurance Supervisors, (IAIS), since 2001. Established in 1994, IAIS represents the regulators and supervisors of more than 200 jurisdictions in around 140 countries. Its objectives are the most effective supervision of the insurance industry for the development and preservation of markets as well as the protection of the insured and contributing to global financial stability. This accession has helped to deepen international co-operation between the authorities for supervising the insurance market.
During 2018, AFSA continued to actively participate in IAIS activities. These are some of the IAIS activities, where AFSA has participated as a member of this organization.
At the 25th Annual IAIS Conference, in November 2018, AFSA presented the initiatives undertaken to increase financial education in the country, within the framework approved by the Board of Authority to increase consumer confidence in the markets under supervision. Also, AFSA continued to participate actively in other activities organized by IAIS. Below are some of the main activities of IAIS, where AFSA participated as a member of this organization:
Main activities within the framework of cooperation with IAIS . IAIS Annual Committee Meetings and Conference; . IAIS Committees and Subcommittee Meetings and global security conference; . IAIS Regional Meeting for Central, Eastern and Transcaucasian Europe.
116 ANNUAL REPORT ‘18 AFSA is a member with full rights of the International Securities Commissions Organization (IOSCO) and is also a signatory to the IOSCO’s Multilateral Memorandum since 2009. The International Organization of Securities Commissions is the international body that brings together around 95% of securities regulators worldwide and is known as the global securities compilation toolbox for the securities sector. IOSCO develops, implements and promotes the observance of internationally recognized standards for securities settlement.
AFSA has been committed to meeting all the obligations arising from participation in this organization and continues to complement the regulatory framework in order to align with IOSCO standards and principles. The AMF is also actively participating in the European Committee of IOSCO (European Regional Committee, ERC) and a member of the Growth and Emerging Markets Committee (GEM).
Below is a summary of AFSA’s participation in activities organized by IOSCO during 2018.
Main activities within the framework of cooperation with IOSCO . IOSCO Committee Meetings (GEM); . Workshop “On investor protection through supervising, inspections and examinations”.
AFSA is a member of the International Organization of Pension Supervising, (IOPS), since 2006. IOPS is an independent international organization, which represents those institutions that are involved in supervising private pension agreements. IOPS currently has 87 members and observers representing 76 countries and territories around the world.
Main activities within the framework of cooperation with IOPS . IOPS International Seminar . Joint Working Group Meeting and IOPS/OECD Research Seminar on . Private Pensions; . Global OECD/IOPS Forum “On Care for the future of pensions; . Meeting of Technical and Executive Committees, Annual General Meeting.
AFSA’s participation in these activities consists in engaging in the drafting of political and study documents. During 2018, AFSA continued its contribution as a participant in completing various documents and questionnaires, providing information on the practices currently pursued in markets supervised by AFSA. Membership in these organizations provides support to the Authority in solving problems and issues related to under supervision markets.
FINANCIAL SUPERVISORY AUTHORITY 117 Strategic projects and increased institutional capacities of AFSA were also supported during 2018 through effective cooperation and relationships with international financial institutions and donors. Thus, during 2018, AFSA cooperated with the World Bank, the Swiss Secretariat for Economic Affairs (SECO), the A2II organization, and FSVC.
The World Bank remains an important strategic partner that supports the Authority over the years, in fulfilment of the core mission. Even during 2018, the World Bank continued to support the Authority in implementing the Technical Assistance Project “Strengthening the supervisory capabilities of the Financial Supervisory Authority, focused on the development of the capital market”. Through its expertise and experts, the World Bank has been following the ongoing development of this important project, funded by the Swiss Securities and Exchange Commission (SECO) through the Trust Fund Grant.
Also, in 2018, the World Bank-backed Authority continued to implement the project “Improving the quality of financial reporting”, which aims to support and enhance the capacity and growth of financial regulators (AFSA and BiH) in monitoring and implementation of high quality financial reporting based on the IFRS as well as the preparation of tools, providing guidance and recommendations for quality review and improvement of communication practices with auditors assisting the Authority to evaluate external audit reports companies under supervision.
During the official visits of the World Bank missions in Tirana, World Bank representatives have expressed their considerable appreciation regarding the work done by AFSA in the framework of project implementation. AFSA’s staff in collaboration with project consultants and World Bank support have worked intensively to deliver project products with a high quality and within the deadlines. This successful cooperation is expected to reach the finalization of the project in the first quarter of 2019.
Cooperation with the Financial Services Volunteer Corps (FSVC)
A very important partner for AFSA is the Financial Services Volunteer Corps (FSVC/USAID). Over the years, this organization has assisted AFSA in various projects, strengthening the supervisory and regulatory role as well as developing human resources. Even during 2018, AFSA and FSVC have deepened their cooperation by continuing with projects such as the Early Warning System, the Memorandum of Cooperation between AFSA and FSVC.
118 ANNUAL REPORT ‘18 AMF deepens cooperation with the Financial Services Volunteer Corps
January 2018 - The Executive Director of the Financial Supervisory Authority held a meeting with representatives of the FSVC Financial Services Volunteer Corps. The subject of the meeting was the further deepening of cooperation and the launching of joint projects between the two institutions. Representatives of FSVC expressed their willingness to deepen cooperation with the Authority by increasing the number of joint projects.
June 2018 - a Memorandum of Understanding between AFSA and FSVC was signed after approval by the AFSA Board pursuant to Decision 93, dated 13.06.2018.
Cooperation with counterpart authorities in the EU
During 2018, the Authority has been focusing on the further expansion and strengthening of bilateral and multilateral relations with counterpart authorities, by participating in meetings or activities organized for the recognition and updating of the latest supervisory and regulatory trends as well as exchange of mutual experience.
Financial Market Authority Austria (FMA)
A very important partner of AFSA in the development of financial markets under supervision for years is the Financial Market Authority Austria (FMA). The cooperation with FMA has been consolidated over the years and has been materialized with frequent meetings of senior management of institutions and technical staff. Since 2009, the two institutions have a memorandum of understanding, which was signed after the investments of the Austrian insurance groups in Albania, actualizing with exchange of experience and joint work in the supervision of Austrian groups operating in Albania.
In this context, a senior AFSA delegation made a work visit in December 2018 to Austria at the AFSA offices and held meetings with senior executives of this Authority. During the meetings, important issues of common interest were discussed, as well as the recent developments in the insurance markets of Austria and Albania. Moreover, the meetings focused on the new developments in the insurance market during the implementation of Solvency II in supervised markets.
AFSA is a regular participant of supervisory colleges of “UNIQA Insurance Group” (UIG) and “Vienna Insurance Group” (VIG). Experts of the AFSA Supervision Department in 2018 attended the two-day meetings of the Supervisory Board of the UIG Group and the VIG Group.
On this basis successful relations between the two institutions were built, actualizing with exchange of experience and signing in 2016 of the VIG Supervisory Colleges Coordination
FINANCIAL SUPERVISORY AUTHORITY 119 Agreement, which aims to determine the role and responsibilities of the members of this Group, the exchange of the information and professional experience among them, the most efficient cooperation between the Group members and the parent company, as well as a consultation on the decision-making process among Group members.
IVASS and CONSOB – ITALY
In the framework of the expansion of bilateral relations with counterpart authorities, senior AFSA leaders, in January 2018, high-level working meetings were held with officials of the Italian Insurance Supervision Institute (IVASS), and the Pension Funds Supervisory Commission (COVIP). These meetings focused on strengthening the relationship between the two regulatory authorities through technical assistance and training, and the drafting and signing of the new bilateral mutual understanding agreement between AFSA and IVASS was agreed upon.
During meetings with representatives of The Italian Companies and Exchange Commission (CONSOB), a new agreement was reached between the two authorities based on the legal changes of the supervisory and regulatory framework of these two institutions.
In October at the invitation of IVASS, AFSA delegation attended the third annual conference on the application of Solvency II, a conference organized by IVASS.
Regional Cooperation
Also, in 2018 cooperation with counterpart institutions in the region continued, through joint working meetings, exchange of information and experience in the regulatory and supervisory aspect, with the aim of increasing the effectiveness of supervision of non-bank financial markets.
Croatian Financial Services Supervisory Agency (HANFA)
An important AFSA partner in the development of financial markets under supervision for years is the Croatian Financial Services Supervisory Agency (HANFA) which is a member of the EU and applies Solvency II.
Starting from the leadership role in the region, AFSA executive directors participated in a high-level meeting at HANFA premises in Zagreb with representatives of HANFA in April, which was very positive for the role that AFSA has in the region. In November, HANFA executives conducted a working visit to AFSA premises where the need for a more stable relationship and exchange of experiences between the two institutions was highlighted
120 ANNUAL REPORT ‘18 The Insurance Supervision Agency of the Republic of Northern Macedonia (ISA)
AFSA has closely cooperated with the Insurance Supervision Agency of the Republic of Northern Macedonia (ISA). The Mutual Understanding Agreement between the two institutions, which has been in place since 2010, has a positive impact on the efficiency of supervising and regulating the insurance industry of the two countries, especially in terms of the extent of the activity of Albanian insurance companies in the territory of the Republic of Northern Macedonia.
In February 2018, at the initiative of ISA and XPRIMM Media, AFSA representatives participated in the Regional Conference on Insurance Actuaries which was held in Skopje, and in July, a working meeting of experts of the Directorate of Information Technology of AFSA was held in July with counterpart authorities in Northern Macedonia for exchange of experiences in the field of IT.
In December 2018, the two regulatory authorities, respectively AFSA and ISA, together with the Central Bank of Kosovo (CBK), held a joint working meeting aimed at further strengthening the cooperation during 2019, for an effective and dynamic market surveillance of insurance in the three participating States.
Central Bank of Kosovo (CBK)
AFSA’s cooperation with Central Bank of Kosovo (CBK) continued to strengthen during 2018. In the framework of intensifying cooperation between the two authorities, in July a working meeting was held between AFSA IT specialists and CBK IT specialists in Pristina. Also in December 2018, a work meeting was held at AFSA offices, with the participation of the Insurance Supervisory Agency of the Republic of Northern Macedonia (ISA) on insurance companies, which have extended their activity as in Albania also in Kosovo and Macedonia. The meeting aimed at further strengthening of cooperation, both in terms of exchanging information, technical and professional experiences for effective oversight and discussion of issues related to the supervision and regulation of respective security markets where frequency was set and a working plan for joint meetings throughout 2019.
Regional Initiative for the Supervision of the Insurance Market in Central, Eastern and South-Eastern Europe (CESEE ISI)
Another important meeting in the framework of regional cooperation is the “Regional Initiative for the Supervision of the Insurance Market in Central, Eastern and South-Eastern Europe” (CESEE ISI), which has continued to support the exchange of information and best practices among the employees of regulatory authorities in the insurance market.
FINANCIAL SUPERVISORY AUTHORITY 121 AFSA is an active participant in the regional initiative “Regional Initiative for the Supervision of the Insurance Market in the Central, Eastern and South-Eastern Europe” (CESEE ISI), which is considered successful, driven by the continued interest and active participation of the countries of the region, while maintaining and further promoting the spirit of effective cooperation on common issues and issues encountered in regulating insurance markets in the region. During 2018 two meetings of this initiative were held, one in our country, organised under the auspices of AFSA, while the other in Vienna, Austria. At the fifteenth meeting in Tirana, the issues dealt with were the practical implementation of the new EU Directive, “Distribution in Insurance”, and the problems encountered during its transposition into the national legislation of each country.
At the 16th Vienna Summit, “Risk-Based Supervision”, the challenges of risk-based oversight, the challenges and experience of regulators were addressed in terms of implementing new supervisory regimes, market approaches to new requirements, supervision of insurance groups, and ways of enhancing cooperation among regional regulators. At this meeting, one of the topics was moderated by a AFSA representative.
EIOPA and the World Bank organized in Albania with the support of AFSA an international workshop on “Risk-Based Supervision” for Insurance and Reinsurance.
The European Insurance and Occupational Pensions Authority (EIOPA) in cooperation with the World Bank organized for the first time in Albania an international workshop on “Risk-Based Supervision” organised under the auspices of AFSA in September 2018. Representatives of counterpart regulatory and supervisory authorities, representatives of insurance and reinsurance groups participated in this event, where experiences and views on global risk-based oversight trends were discussed and exchanged, as well as the challenges associated with the implementation of global standards supervision. Authority employees assisted in moderating this two-day meeting and represented the institution with the presentation on “Provisioning elements and appropriate price” theme.
The meeting of the capital market authorities of the six Western Balkan countries (WB6)
In April, AFSA participated in the second meeting of the capital market authorities of the six Western Balkan countries (WB6) “Diversifying financial systems to boost investment”. The meeting explored opportunities for the integration of financial markets in the region and specifically of the capital markets, assessing the need for a regional strategy for the development of capital markets. Albania’s representative made a presentation on the development of capital markets in Albania and the challenges they face.
122 ANNUAL REPORT ‘18 5.3 Integration processes for markets under supervision
Opening Negotiations for Albania
Currently, the European integration process of the Republic of Albania is at a very important moment following the unconditional proposal of the European Commission on May 28th 2019, for the opening of Albania’s EU membership negotiations. Receiving this positive recommendation from the European Commission for Albania is halfway to the dream of initiating membership talks. The final decision is due in october 2019 when the Council of Foreign Ministers of the member states will meet and vote whether to accept the opening of negotiations with Albania. The European Council has given a clear political mandate to the European Commission to continue its special engagement for Albania. This engagement will also include the use of some technical processes that are normally carried out only after the formal opening of membership negotiations. As part of this technical process was agreed with the European Commission initially the development of meetings for the recognition of the European Union legislation (Screening) of the negotiating chapters.
Graph 35: Phases from the opening until the closure of the negotiations
5. Membership Treaty
4. Intergovernmental Conference
3. Negotiating Position
2. Screening Report
1. Screening process: 1.1. Explanatory Screening 1.2. Bilateral Screening
FINANCIAL SUPERVISORY AUTHORITY 123 Specifically, this process includes screening of all legal and sub-legal acts regulating non- bank financial services for the three areas and determining their degree of compliance with the EU acquis (directives, regulations, decisions, directives, European Court Decisions), as well as the relevant articles of the Treaty on the Functioning of the European Union. This process is expected to last from 1 year to 1 year and a half. The screening process consists of Explanatory Screening; Bilateral Screening;
The Analytical Screening phase of legislation begins with the so-called Explanatory Screening during which the EC will submit to the candidate country the acquis divided into negotiating chapters. The explanatory phase lasts for a maximum of 5 days.
Then, through the so-called Bilateral Screening, the assessment of the level of harmonization of the candidate country’s legal system with the EU acquis will be evaluated and what will still be needed to achieve compliance with the EU acquis, in anticipation of full membership.
After the completion of the Bilateral Screening, the EC will submit to the Member States a Screening report containing recommendations for launching negotiations for a particular chapter or, if evaluated by the EC, it will include the Opening Benchmarks of a separate chapter. Opening Benchmarks relate to requests for approval of strategies and action plans, fulfilment of contractual obligations towards the EU, mainly the implementation of the Stabilization and Association Agreement, requests for adoption of laws and sub-laws, etc. The opening of negotiations on chapters that should meet the Opening Standards could only begin after the EU Council decides that the candidate country has met these standards.
AFSA’s role in European Integration
AFSA has made positive efforts to harmonize the internal financial services legislation with the acquis. Albania’s current legislation in the field of financial services provides a strong basis for further and full harmonization with European legislation. In the field of non-bank financial services, work has been done to review the regulatory and supervisory framework aiming at further alignment with the EU acquis and progress has been made in aligning the insurance market, securities and private pension market legislation. AFSA as a contributing institution in this process has worked intensively regarding the approximation of the legal framework, as highlighted in the latest EU Progress Report.
AFSA has also continued to contribute to the fulfilment of the obligations deriving from the Progress Report and the National European Integration Plan. It coordinates and prepares the reports related to Chapter 9 “Financial Services” and is contributing to Economic Criteria chapters and Chapter 17 “Economic and Monetary Policy”.
AFSA has also regularly monitored the implementation of the SAA, as well as the National Plan for European Integration. She has participated in the forthcoming meetings of the respective subcommittees and has conducted successful reports in the framework of European Integration more concretely:
124 ANNUAL REPORT ‘18 . 10th Meeting of the Subcommittee on Economic and Financial Affairs & Statistics - 27 September 2018;
. 10th meeting of the Subcommittee on Internal Market and Competition, including Consumer and Health Protection - 21 February 2019;
The European party’s assessment during these reports was positive for AFSA’s activity and the only recommendation for AFSA in the EC Progress Report for Albania was the adoption of the draft law “On compulsory motor insurance in the transport sector”.
During 2018, AFSA continued cooperation with the Ministry of European and Foreign Affairs as the coordinating institution in the European integration process. AFSA has prepared reports that reflect the progress achieved by contributing to the drafting of documents related to the Stabilization and Association process. The key to Albania’s success in the path of European integration is the rapid implementation of reforms through planned activities, in one of the core documents such as the National European Integration Plan (PKIE) for the period 2018-2020, which serves as a basis for planning of the European integration process of Albania. During 2018, AFSA forwarded to the Ministry of Europe and Foreign Affairs periodic information on monitoring the implementation of PKIE 2018-2020 for the “Financial Services” and “Economic Criteria” chapters, and worked on drafting the plan for the period 2019-2021, as one of the main instruments for planning and monitoring the approximation of Albanian legislation with that of the EU, in the process of European integration of Albania.
Also during 2018, the Authority as the coordinator of Chapter 9 “Financial Services” has held monthly GNPIE meetings for Chapter 9 “Financial Services”, part of which is also the Bank of Albania, according to Prime Minister’s Order no. 500, dated 13.09.2017 “On the establishment, composition and functioning of interinstitutional working groups for European Integration”, as well as participated in the GNPIE monthly meetings of the Chapter “Economic Criteria”.
FINANCIAL SUPERVISORY AUTHORITY 125 The MiFID II Directive (Markets in Financial Instruments Directive)
The MiFID Directive 2014/65/EU of the European Parliament and of the Council, dated15 May 2014 “On the markets for financial instruments and modifies directive 2002/92 / EC and directive 2011/61 / EU” is the basic directive, the most important of regulating EU financial markets, which is defined as the new European perspective for financial instruments. In October 2011, following consultations on the reform of this directive, the European Commission published legislative proposals which took the form of the MiFID II (Market in Financial Instruments Directive) and the new MiFIR (Market in Financial Instruments Regulation) regulation. Both MiFID II and MiFIR entered into force on 2 July 2014, should be transposed by July 2017 into the laws of member states and became applicable as of 3 January 2018. MiFID II will bring significant changes and impact on the financial markets. It will make them more integrated, more efficient, competitive and will improve supervision and transparency and enhance investor and consumer protection. This directive enabled for the first time the competition in securities trading between different investment firms and markets operating in the EU and gave them “a passport” to trade anywhere in the EU based solely on the authorization of their member state. The directive also included various measures for investor protection. MiFID II aims to: . Ensure greater integrity, effective competition of the EU financial market; . Establish a secure, sound financial market, more transparent and accountable; . Ensure that organized trading takes place on regulated platforms; . Ensure increased investor protection and improved conduct of business rules, as well as conditions for competition in the trading of financial instruments; . Improve supervision and implementation.
126 ANNUAL REPORT ‘18 5.4 Projects
The project “Improving the quality of financial reporting” with the component “Improving the capacity of financial regulators”.
In the framework of the national project “Improvement of Financial Reporting Quality (REPARIS), AFSA is the beneficiary of the second component of the project” Improving the capacity of financial regulators in monitoring and controlling better reporting on financial reporting “. This component of the project is funded by the Secretariat of the Swiss State for Economic Affairs (SECO), administered by the World Bank and executed by the Ministry of Finance and Economy. The project started in July 2017.
Following the completion of the first phase of the project, “Training on SNRFs with focus on insurance and funds” in February 2018, where AFSA staff training was conducted for International Financial Reporting Standards (SNRFs), work has been done with the second phase specifically for the preparation of tools for reviewing the quality of the audit and the dissolution of the relevant training, which help the Authority to evaluate the external audit reports of the companies under supervision.
During 2018, in parallel, the third phase of the project was implemented in the framework of the communication of regulators with legal auditors by compiling an evaluation report on the level of cooperation between regulators and auditors, a report that provides recommendations for improvement of communication practices and information exchange with auditors according to the models of other states.
Through this project, the aim was to improve the capacities of the relevant national oversight and financial control institutions at the level of expertise, system and regulatory capacity in terms of adapting and implementing the highest standards of EU legislation and best international practices
The Microinsurance project “Access to Insurance Initiative” (A2ii)
This project is supported and funded by the Access to Insurance Initiative in cooperation with the Global Governance Academy of GIZ (GIZ Global Leadership Academy). The project aims to promote multi-faceted cooperation, learning from international colleagues and developing innovative solutions that will increase the admission of insurances with low- income and small businesses. The project brings together a wide range of comprehensive insurance actors involved in 4 teams of selected countries to provide an innovative solution to increase the degree of involvement of vulnerable groups in voluntary insurance schemes.
One of the main reasons for undertaking this project is the low penetration rate of insurance
FINANCIAL SUPERVISORY AUTHORITY 127 products, mainly to low-income and low-income businesses, in most developing economies, excluding the benefits provided by the sector of insurance to cover unforeseen and financial losses.
The project started concretely in November 2017 and lasted for 12 months, until November 2018.
Albania created a national team with representatives from insurance companies, banks, credit bureaus as well as other organizations active in the financial and business area, which worked to address in a new way the challenges faced by the insurance industry in place regarding microinsurance, as a voluntary comprehensive insurance.
In April 2018, the second national meeting was held in the framework of this project. The participating team worked in several ways in order to build trust, cooperative ties, establish a dialogue on voluntary insurances and find forms, schemes, new products and their application, with the objective of approaching the challenge of increasing the participation of the wider population in voluntary insurance schemes.
This meeting was followed by the international Think Tank Laboratory meeting in June 2018, where the best studies and ideas were developed in the design of products suitable by the internationally selected teams, according to the project’s program.
Later, the AMF held its 3rd National Workshop in September 2018, and the latest subject of assessment, whether these studies imply challenges to their “theory of change” and any correction as well as how these findings these lessons learned can be used to move forward; reviewing and re-calibration of ideas and approaches and planning of further implementation steps as well as anticipating a longer and more comprehensive future for Think Tank Laboratory.
During the workshop, participants were presented the project team’s work to support and develop comprehensive insurance products focused on agriculture.
Also present were lecturers of the Agricultural University of Tirana who, based on a special study and their experience, gave opinions on how further security can be expanded in the agricultural sector. Also, in the context of increased access in finance for the agricultural sector, representatives of microfinance institutions in Albania expressed their positive outlook on the need for new products in the insurance market with the aim of increasing the involvement of individuals and small businesses and medium-sized insurance schemes.
This project was a good experience in discussing and finding solutions to overcoming barriers of cost of products and introducing new products suitable for a wider inclusion of vulnerable layers in insurance products.
128 ANNUAL REPORT ‘18 Project “Strengthening the supervisory capacities of the Financial Supervisory Authority: Focus on capital market development”
Project “Strengthening the supervisory capacities of the Financial Supervisory Authority: Focus on capital market development “aims to support AFSA in strengthening its capacity to supervision the investment fund market and corporate and local government bond markets. This project is supported by the World Bank, which follows its implementation, and the Swiss State Secretariat for Economic Affairs (SECO) is funding this project through the Trust Fund Grant.
The project started in July 2016. It is designed to cover the challenges faced by AFSA and the areas covered by this project are mainly:
. Development of AFSA’s capacity for supervision and regulation of investment funds. This component is intended to carry out diagnostic evaluations, to develop a supervisory package (methodology, manuals and tools), and human resources development;
. Development of AFSA’s capacity to prepare for bond issuance of joint stock companies and local government bonds. In this component is intended to conduct diagnostic assessments as well as the development of human resources in the field of debt instruments and markets.
The project is divided into three phases of implementation:
. First phase: Develop AFSA’s supervisory and regulatory capacities for the investment fund sector / AFSA’s oversight needs regarding the rapid development of the investment fund sector. (This phase was completed in 2017);
. Second phase: Review and development of legislation and supervisory framework for the sector of investment funds and the bond market (Phase completed in March 2019);
. Third phase: AFSA’s capacity development to supervise and regulate the investment fund sector and bond market/capacity building (Phase completed in March 2019).
. During 2018, an intensive work was carried out within the framework of the implementation of Phase II of the project, completing a series of reports, worth mentioning:
. January 2018 - Organization and holding of project consultants meeting with members of the Parliamentary Committee on Economy and Finance and the Legal Affairs Committee, with the aim of raising the awareness of MPs on the necessity to draft and approve two draft laws to respond to developments capital markets;
. Final drafting of the Law on Investment Funds and the Law on Securities, two of the most important project products;
FINANCIAL SUPERVISORY AUTHORITY 129 . January 2018 - approved by the Board, Regulation no. 16 dated 31.01.2018 “On the application form, the content of the prospectus approval documentation”;
. February 2018 - approved by the Board, Regulation no. 21, dated 06.02.2018 “On the liquidity management of FI”;
. March 2018 - approved by the Board, Regulation no. 57, dated 29.03.2018 “On related parties”;
. October 2018 – approved by AFSA the revised crisis management report, with the participation of GKFS.
During 2018, work continued with the implementation of the third phase of the project related to capacity development and staff training. More specifically work has been done and trainings / visits have taken place, as well as workshops within and outside the country.
A series of reports have been drafted and ongoing correspondence was held with all parties, the World Bank, the Ministry of Finance and Economy, and the AFSA departments for the implementation of the project.
Monthly reports, 6-monthly reports, and Project Steering Committee meetings, with representatives from AFSA, World Bank and SECO (twice during 2018) were compiled on project progress monitoring.
Project “Strengthening Supervisory Capabilities of the Financial Supervisory Authority” for the package “Study of the future form of Central Securities Depository in Albania”
The trading of securities other than those of the Government on the Albanian Stock Exchange (ALSE) is closely related to the licensing of the Securities Registry and the Central Securities Depository.
The Central Securities Depository is an important market institution that promotes public interest and serves to protect investors by providing the function of Clearing and Settlement.
The current Securities Clearing System infrastructure only supports Albanian government bonds, which are registered and cleared through AFISaR, operated by the Bank of Albania. In order to support the creation of a Central Securities Depository, the Authority undertook an activity of three months within the framework of the “Strengthening AFSA Supervisory Capacities” project. This activity consisted of “Study of the Future Form of the Central Depository of Securities in Albania”.
The final report on the Central Securities Depository was submitted in August 2018. This report, provided by the contracted consultant of this activity, explains the role of the Depositary, its ownership structure, based on IOSCO‘s requirements. The report contains key findings and recommendations on how it will look like a Central Securities Depository
130 ANNUAL REPORT ‘18 in Albania. The project lasted for a period of twelve weeks ending in August 2018.
Projects with Technical Assistance of the Volunteer Financial Services Corps – (FSVC)
The projects supported by FSVC during 2018 are as follows:
. Early Warning System. During 2018, work has continued for the pursuance of the implementation of the early warning system. After working with a team of AFSA’s staff and FSVC experts on drafting a plan for an insurance supervision platform, which includes early warning criteria, will continue during 2019 with the implementation that will also include automation through a Business Intelligence (BI) package, to be solved and installed by IT staff at AFSA.
. Technical Assistance Project “Online Electronic Compulsory Motor Insurance Register of Sales”. In January 2018, the AFSA visited FSVC experts in the framework of the IT project and reviewing the Regulation “On the online electronic compulsory motor insurance register of sales”. Afterwards the experts prepared the relevant report, based on the meetings and observations they had with AFSA staff during the project week, which contained recommendations on improving the four key aspects related to the register, which was sent to AFSA by the representative of FSVC in April 2018. Project follow-up with FSVC continues from the Authority for inclusion in the online sales register and some other compulsory products.
. In June 2018, a Memorandum of Mutual Understanding between AFSA and FSVC was signed, following the approval by the Board under Decision 93, dated 13.06.2018.
. A weekly meeting took place in October 2018 with FSVC consultants at AFSA premises with representatives of the authority, focusing on consultancy and assistance in regulating oversight of the insurance market, particularly on the financial issues and problems of Eurosig Group companies. FSVC consultants prepared an assessment report, which was further reviewed by the Authority in the framework of the technical assistance project for managing performance scenarios related to the supervision of the insurance market.
. During 2018 communications between the Authority and FSVC continued, providing information on the status of the recommendations given and the expression of interest for other possible projects during 2019, such as the technical assistance project “Information security in the information centre”; other initiatives in the framework of technical assistance projects related to the supervision of the insurance market.
FINANCIAL SUPERVISORY AUTHORITY 131 II. INSTITUTIONAL ORGANIZATION OF AFSA
II.1 AFSA’s legal and regulatory framework
During 2018, in order to improve the internal regulatory framework of the Authority, regulating its organization and functioning, the following new acts were approved as well as amendments to the existing acts as follows:
New acts
Regulation no. 217, dated 31.10.2018 “On the organization of vocational training activities”. This regulation aims at establishing the rules for the organization and development of professional qualification treatments for professions licensed by the Authority.
Regulation no. 216, dated 31.10.2018 “On the recognition of ongoing vocational training credits”. This regulation aims at establishing the criteria and procedure for credit assessment in order to recognize them as valid vocational training loans for professions that are licensed/approved by the Authority.
Guideline no. 20, dated 06.02.2018 “On the principles and general rules of information security”. The purpose of this guideline is to establish general AFSA principles and rules of information security and to define responsibilities for security-related actions in order to maintain the integrity, availability and confidentiality of the Authority’s assets.
Amendments to existing acts
Additions and amendments to Regulation no. 58, dated 30.06.2015 “On due diligence and on enhanced due diligence by legal subjects, on prevention of money laundering and terrorism financing”, were approved by Board Decision no. 24, dated 26.02.2018 and consisted of rules for reporting and deadlines for reporting, while the amendments approved by the decision no. 214, dated 31.10.2018, were in compliance with recommendations given by the Council of Europe’s MONEYVAL Committee.
Some changes to Regulation no. 14, dated 11.09.2008 “On Confidentiality in AFSA”, were approved by Board Decision no. 247, dated 20.12.2018, with a view to clarifying the rules and procedures for dealing with foreign confidential information, in compliance with the recommendations of the Council of Europe’s MONEYVAL reports. Moreover, the deadline for addressing requests for information was changed, and the course of their treatment when there are several requests at the same time.
With Board’s Decision no. 95, dated 13.06.2018, a change was adopted to Regulation no. 75, dated 30.05.2016 “On communication with the media and the public, the publication and functioning of the website”. According to this amendment, the Official Bulletin is prepared within July of each year. The bulletin is published for distribution in printed or electronic format (with CD or USB). While all Board decisions that constitute the Official Bulletin are published on the AFSA’s online website after each Board meeting.
132 ANNUAL REPORT ‘18 By the Board’s decision no. 163, dated 30.07.2018, the Board approved a change to the Regulation no. 155, dated 23.12.2014 “On the determination of the elements of the calculation and the tariff levels charged to the supervised entities, as well as the procedures for their collection and reconciliation”.
By Decision no. 224, dated 26.11.2018, the Board adopted the Guideline “On the performance evaluation of the employees of the Financial Supervisory Authority and amended Regulation no. 129, dated 26.11.2015 “On the Work Relations of Employees in the Financial Supervisory Authority”, in function of the annual work evaluation, performance evaluation and performance of the employees of the Authority.
By the Board’s decision no. 213, dated 31.10.2018, an amendment to the Guideline “On the performance evaluation and performance of employees at the Financial Supervisory Authority”, with respect to the explanatory table of the employees’ performance at the Financial Supervisory Authority, was approved grading scales, level, average score, etc.
By Decision no. 195, dated 27.09.2018, the Board approved an addition to Regulation no. 129, dated 26.11.2015 “On the employment relations of employees in the Financial Supervisory Authority, regarding the criteria and procedure for the position of the chief specialist in the Authority.
With Decision no. 154, dated 30.07.2018, the amendment to the AFSA salary instruction no. 76, dated 28.07.2015 “On the remuneration of non-executive members and the salaries of the Executive Director, Executive Vice President and the employees of the Financial Supervisory Authority”.
Amendment to Regulation no. 102, dated 30.09.2015 “On the Establishment, Investment and Use of the Reserve Fund of the Financial Supervisory Authority”, Board Decision no. 222, dated 26.11.2018, and related to the terminology referring to the year in which the financial statements are approved.
Cooperation agreements and information exchange
With Decision no. 93, dated 13.06.2018, the AFSA-FSVC agreement was approved in order to strengthen the institutional capacities of the AFSA through personal consultations, on- the-job training and workshops.
With Decision no. 43, dated 23.03.2018, was approved an agreement between the National Agency for Information Society and the Financial Supervisory Authority, which aims to provide services in order to increase the effectiveness, duration, limitation of technical risks, thus preserving integrity, confidentiality and continuity of work subject to this agreement.
With Decision no. 19, dated 31.01.2018, the Board approved the signing of the Cooperation Agreement between the Financial Supervisory Authority and the Universities, according to a list of universities and a type agreement.
FINANCIAL SUPERVISORY AUTHORITY 133 II.2 Human Resource Policy
Human resource policies are mainly oriented towards professional growth and staff expertise. These policies are in line with the medium-term strategy objectives of the institution and in accordance with the regulatory framework definition.
Maintaining a motivating working environment, increasing collaboration between departments and staff, and achieving consistency and long-term continuity of administrative capacities has been a priority of policies in the field of human resources. This has been achieved through human resources policies for the promotion of staff targeting the professional race and serves as an instrument for identifying and best possible human resource management. The AFSA for 2018 has adapted the regulatory infrastructure to offer the possibility of promotion to higher positions of more experienced and highly skilled workers. Thus, part of the employment relations regulation as well as a special instruction are the set of rules to be applied in the cases of specialists’ appointments to the senior specialist position. A very important indicator in this regard is the promotion of the AFSA’s internal staff, where it results that 6 employees have been promoted to a degree.
It is worth mentioning the AFSA’s staff turnover indicator - which for 2018 was less than 5% versus the very high levels of previous years, which shows staff continuity policy, mainly technical and qualified staff according to recommendations of the World Bank.
Another important aspect of human resources work is the completion of the AFSA organizational structure and the legal and regulatory framework. Thus, filling vacancies has been part of the objectives for human resource management throughout the year, through an open and transparent competition process. The number of jobs completed during 2018 is 19.
At AFSA, by the end of 2018, the number of employees reached 87 out of 90 planned employees. The employment rate is 96.6%.
Another development in human resource policies for 2018 was the guideline “On employee performance appraisal”, which was adopted in November 2018. The new form of performance appraisal gives more space for a more objective assessment of work and employees in relation to each other. The main purpose of reviewing the form of assessment is to help employees and managers clearly understand the concrete performance of the job with the objective of increasing the quality of work.
Assessing sustainability and continuity as priorities, the human resources policies have significantly influenced the reduction of staff turnover index from 14% in 2017 to 5% in 2018.
134 ANNUAL REPORT ‘18 The data show a medium-age employee standing at 39 years of age. About 72% of the staff are women. In terms of the management data, it turns out that women in managerial positions account for 65%, while men with 35%.
Graph 36: Structure of employees according to key function units of AFSA (In %)
26
Insurance Market Supervision Department 37 Capital and Funds Market Supervision Department
Legal Affairs Department
Strategic Developments and Operations Department 14
23
Graph 37: Structure of employees by profession (In %)
Others Mathematician 8 5
IT speicalists 6
Legal experts 18
Economist 63
Professional qualification
The professional development of staff is made possible through the realization of professional trainings, both inside and outside the country. Participation in these specialized trainings organized by homologous Authorities, international financial institutions besides increasing the professional knowledge, also serves the staff of the Authority for the exchange of professional and managerial experiences.
FINANCIAL SUPERVISORY AUTHORITY 135 Graph 38: Structure of AMF staff by age group (In number)
60
50
40
30
20
10
0 up to 30 years of age 31-50 years of age over 50 years of age
The activities carried out for 2018, within and outside the country, consisted in participation in trainings, seminars, conferences, meetings and visits to the exchange of best professional experiences, based on the assistance of prestigious international institutions in the financial field such as: The World Bank (WB), the Council of Europe, USAID through the Financial Sector Development Program in Albania as well as the International Association of Regulators, the International Association of Insurance Supervisors (IAIS); The International Organization of Securities Supervisors (IOSCO); International Oversight of Pension Organization (IOPS); The National Association of US Insurance Commissioners (NAIC), etc.
The training program continued in line with the objectives of the institution and the individual objectives for the employees. Thus, within the framework of the third phase of the project “Strengthening the supervisory capacities of the Financial Supervisory Authority: Focus on Capital Market Development “(SECO), study tours and exchanges of experience with counterpart authorities (Italy, Estonia, Croatia) have been conducted.
On a continuous basis workshops and trainings focused on the development of AFSA capacities for overseeing and regulating investment funds, training for development and strengthening the role of human resources as well as workshops for management level employees on issues such as leadership, presentation and public impact incurred; training on knowledge management and their development.
136 ANNUAL REPORT ‘18 II.3 Information Technology Systems
During 2018, there have been important developments in the internal IT infrastructure by applying the most modern methods in building information systems. Meetings with homologous have been held in other countries for the purpose of exchanging ideas and experiences with the consequence of improving IT according to best practices. In addition to the functional tasks closely related to the functions of supervision, inspection and regulation, during 2018 successfully completed the projects as follows:
1. Construction of disaster recovery site infrastructure at AKSHI:
. At the beginning of the year, it was possible to install IT infrastructure at AKSHI, which is linked to 2 fibres with the AFSA information centre. This infrastructure enables to keep all information on AFSA systems on a daily, weekly and monthly basis by archiving all information digitally;
. Through this AFSA infrastructure, it is possible to store information outside the server room’s premises in order to store information when the AFSA server rooms may have run out of service due to potential catastrophes. The implementation and establishment of this infrastructure also coincides with international standards or even with different recommendations. This project paved the way for the implementation of another business continuity site project, which is expected to be implemented in the coming year.
2. Analysis of IT systems at AFSA by AKSHI:
. At the request of AFSA, the working group of AKSHI was set up and all IT systems and infrastructures were analysed in order to submit a final report with the findings. Also, at the conclusion of this analysis AKSHI undertook the delivery of specialized products and services by highlighting some of them: Provision of improved Mail Server, Symantec AntiVirus system for all AFSA devices, etc;
. The final report of the working group by AKSHI highlighted the need for further improvement of IT systems that were taken into account immediately, enabling the relevant changes to be made. Through the assistance provided by AKSHI will be made possible a safer and more efficient environment.
3. Improving server room infrastructure at AFSA:
. Based on the recommendations of FSCV, AKSHI, Internal Audit as well as analysis of the AFSA’s IT directorate, it was possible to increase server and storage processing capacity, increase of the first line of network security from cyber-attacks, physical monitoring of the server room;
. These changes have brought increased security, high performance in service delivery, and the opportunity to provide more of the following services.
FINANCIAL SUPERVISORY AUTHORITY 137 4. Electronic compulsory motor insurance register improvements:
. One of the main tasks under the supervision of the insurance market is the maintenance and continuous improvement of the technical infrastructure of the National Compulsory Motor Vehicle Data Protection Center and the maintenance and improvement of the infrastructure of inter institutional services provided by the AFSA as DPSHTRR, DPGJC , NBC, AKSHI and the Ministry of Interior; Some of these changes and maintenance executed during 2018 are: Upgrade of Oracle, version 11G (64 bits), avoiding reporting of Albanian IDs as ‘FOREIGN’, reporting “returned” insurance status in real time, and integration for the first time with the NBC registry;
. These improvements have enabled faster service delivery, automated some of the manually executed processes, and in order to enhance data quality by reducing human error while retaining consumer responsibility.
5. Real-time reporting of miners and passengers’ policies
. Interconnection with the insurance market for real-time reporting of insurance policies for miners and passengers while travelling;
. These changes have resulted in the fulfilment of the recommendations of the Albanian Parliament under the resolution, but also the enhancement of the quality of the insurance market supervision.
6. Improving the claim system and reporting them in real time:
. Improve the claims system with new areas when filing claims files as well as the synchronization between AFSA and the insurance companies’ system of claims;
. Such additional functions provide the necessary information for real-time surveillance as well as provide appropriate consumer protection. Moreover, the quality of data related to claims has increased, which will provide more efficient application of the Bonus-Malus system that is expected to become operational in the current year.
7. Online Reporting on Investment and Pension Market, real-time reporting:
. Establishment of an online platform for direct reporting of financial statements or other periodic market reports of investment and pension funds;
. In this way AFSA completes the digitalization framework and collects all periodic reports of markets under supervision by facilitating the process of periodic reporting, enhancing the quality of processing these reports as well as paving the way for application of the business intelligence system in the coming year.
138 ANNUAL REPORT ‘18 8. The online complaint reporting platform:
. Establishment of a platform where each consumer of each of the AFSA markets can report a complaint in addition to the traditional but now also online through this platform;
. The application of this platform has given rise to transparency and ease to the consumer after offering them not only convenience in reporting the complaint but also the possibility of online pursuance of the status of their complaint until its end.
9. IT involvement in inspections:
. Various thematic inspections, but it is worth mentioning based on the resolution of the Albanian Parliament on the assessment of IT systems that the insurance companies use to report compulsory motor insurance policies.
. It is therefore amended Regulation no. 23, where also the company’s IT meetings were organized in order to recommend for further improvement of their systems in order to provide safe information based on the best international standards.
10. Continuous improvement of IT systems:
. Different visits to the region’s counterparts and beyond, as well as participation in international thematic activities. Some of them are visits to Croatia, Slovenia, Kosovo and Macedonia;
. Part of the work done by the IT Directorate in 2018 has come not only from the above recommendations, but also as a result of the application of best international practices through exchange of experiences with developed countries.
11. Maintenance the current infrastructure:
. Further preparation and configuration of AFSA’s internal infrastructure such as administration of e-mails, computers, servers, electronic documents as well as central telephony; Monitoring and updating of the official AFSA online site; Extending the maintenance of Internet connections and AFSA data exchange in the context of increased use of IT systems; Design and implement security programs, while maintaining the confidentiality, integrity and reliability of AFSA information. Collaboration with national security information institutions such as DSIK, NAECCS and IDP Commissioner;
. Consequently, the current infrastructure has consistently provided services to the internal staff with maximum responsibility and efficiency and is adapted to the following based on the best national and international standards.
FINANCIAL SUPERVISORY AUTHORITY 139 In more detail we would highlight the work performed by categories as follows:
Online Reporting System
. AFSA In-Reg is the reporting system for the insurance market that consists of a set of application components that cooperate to realize the primary activity for which this system is created as a web reporting platform through which insurance companies report to the information requested by the Authority electronically via the Internet. Reporting formats are another component of AFSA’s In-Reg Firms system (the interface that enables AFSA’s under supervision reporting procedure). They are designed, built and implemented in accordance with the Vizor Builder application, which updates according to the growing demands;
. Following the application of the same reporting principle to the operators of other entities supervised by AFSA, the analysis of claims was conducted and the procurement procedure for the capital market and the voluntary pension market was completed. This project paved the way for other systems related to predictive analysis and systems that provide business intelligence reporting. Within 2019, the application of business intelligence will begin, offering a high level of market measurement and even more efficient decision-making.
The Central System in the Server Room
Information Technology (IT) at AFSA has been developed in accordance with the national computerization strategy as an integral part of the institution, having as its object the development, maintenance and upgrading of the IT structure. Even during 2018 considerable progress has been made in this area after numerous analyses and audits have been carried out in order to improve the technology infrastructure, some of which are worth mentioning FSCV, Internal Audit, AKSHI and the IT Directorate itself.
Following these recommendations, the following projects were implemented: During March 2018, a disaster recovery infrastructure was started at AKSHI, which is linked to 2 fibres. In December 2018, improvements were made to the recommendations made regarding IT infrastructure, both server and storage processor capacity, the first line of network security increased by cyber-attacks. Water, humidity, CO, fire, temperature sensors, and access control for physical room server monitoring are installed.
During 2018, the main IT systems in AFSA have been operating consistently with 99% availability of annual time by providing support to the Authority’s functions. IT systems in the Authority have also provided co-ordination of work with the institutions with which the Authority cooperates in the exchange of information, such as DPSHTRR, AKSHI and the Ministry of Interior.
140 ANNUAL REPORT ‘18 Online Electronic Compulsory Motor Insurance Register
Several developments were achieved in the framework of the improvement of the compulsory motor insurance electronic register, some of which are: development and adaptation of a 9-digit serial number reporting policies, developing and adapting reporting on the abolition of reporting of IDs as ‘FOREIGN’ (abusive use also for Albanian consumers) by associating with the design of the procedure for truly foreign persons; Development and adaptation policy reporting to real-time status by developing web services; Development and adaptation of reporting of policyholders by arranging bug, Integration with the NBC and upgrading of the current system by avoiding bugs and adding control conditions for the purpose of publishing Web Services of NBC to increase data accuracy while issuing policies; Upgrade of the Oracle database to the 11G (64 bit) version of the Online Electronic Sales Registry, and many other developments that have come as a result of fruitful collaboration with the insurance association.
For 2018, there are about 300 practices addressed to AFSA from consumers and third parties that are handled by the Authority based on the Online Electronic Compulsory Motor Insurance Register.
Drafting regulations and guidelines
Some inspections have been carried out, but it is worth mentioning the thematic inspection of the IT systems assessment used by insurance companies, brokerage firms and brokers to report compulsory motor insurance policies, extracting findings, analysing observations and finally drafting final report with findings and recommendations regarding IT issues;
It is therefore amended and carried out Regulation no. 23, dated 26.02.2018 “On the online electronic compulsory motor insurance register of sales” and also the Instruction “On the general principles and general rules of information security” associated with the preparation of policies, forms and registers that flow from this guide (mainly the latter has been the internal AFSA’s need for compliance with international standards).
FINANCIAL SUPERVISORY AUTHORITY 141 II.4 Internal Audit
The activity of the Audit Unit during 2018 was based on the fulfilment and realization of the objectives set out in the Annual Plan approved by the Board of Authority for 2018.
The internal audit unit has been fully operational with one Unit Leader, one Auditor of general financial profile, and one Audit Information Technology and Risk Assessor. Audit activity is based on audit procedures, regulated by applicable legal acts and international internal auditing standards. In order to ensure the highest efficiency, attention has been paid to the risk assessment process in accordance with the audit field. From the analysis of the most specific audit indicators it turns out that they have changed over the years, influenced by both the number of audits and the specifics of the objects or areas under audited. The nature of 20 audit findings mainly refers to irregularities in the implementation of procedures, while 53 recommendations aim at improving internal control systems, reducing the risk level in these systems, and providing election advices to prevent cases of violations in the future. Findings and recommendations have been reported to the Executive Director and the Board of the Authority.
In 2018, the AFSA Board approved the “Strategic Plan for the years 2019-2021 and the annual internal audit plan for 2019” in fulfilling its functions and competences on the Internal Control of the Authority.
The Strategic and Annual Internal Audit Plan, as one of the most important activities for the internal control service, has been built to provide AFSA management bodies with all the activities and operations of the Financial Supervisory Authority covered by audit in framework of the functioning of the internal control system.
Graph 39: Structure of the implementation situation of recommendations left by IAU (In %)
2 6
Implemented within the deadline Deadline ongoing 39 53 Implemented after the deadline Not implemented
142 ANNUAL REPORT ‘18 III. STRATEGIES AND OBJECTIVES OF THE AUTHORITY
During 2019, the work of the Authority will also be focused on continuing the implementation of the Strategy “ On growth of consumer/investor confidence in the markets under supervision (October 2017-October 2020)”, following the activities forecast to increase public’s financial education and consumer awareness.
AFSA’s objective to transform the weakest non-bank financial markets in the Western Balkans into the most consolidated markets was reflected in the Strategy “On the Development of AFSA and of the Markets under Its Supervision 2018-2022”, presented in May 2018 as a 5-year-term perspective, also closely linked to the process of integration of the country into the European Union. The 2019 and mid-term objectives are based precisely on this AFSA’s major objective, which are listed below:
i) Supervision and Monitoring, Promotion and Development of Markets
This objective has been addressed in the legal and regulatory framework for the three under supervision markets guaranteeing sustainability in the function of consumer protection. Describing tasks in the function of this objective clearly shows the division of tasks by market and the coordination of work between departments working for the same objective.
For the three markets, their main directions have been defined regarding inspections, off- site Analysis, risk-based analysis and collaborations with other financial institutions within and outside the country. In order to achieve this objective, the amendments to the Law “On compulsory insurance in the transport sector”, Law “On Securities”, Law “On Collective Investment Enterprises”, Law “On Private Pensions” and a series of other amendments or drafting of regulations for monitoring and supervising these markets are provided.
ii) Consumer Protection
To achieve this objective during 2019, we have also supported the three-year strategy “To increase consumer/investor confidence in the markets under supervision 2017-2020” and to the activities plan that accompanies this strategy.
In addition to the work that is expected to be developed to increase the financial education of the population on the financial markets, a set of monitoring procedures for companies operating in the markets under their supervision regarding their behaviour towards the consumer and some activities at different levels education in the country and especially with public and private universities to present and cooperate with them in the framework of enhancing and strengthening the knowledge on AFSA’s markets.
iii) Improvement of the legal and regulatory framework
This objective describes the steps that will be followed by the respective departments of the supervised markets together with the Department of Legal Affairs for drafting and amending legal and regulatory acts as cited above and in Objective 1. Along with the drafting of new laws and changes of existing ones for 2019, work will also be done to comply with EU directives and international standards. This is a process that extends throughout 2019 and beyond.
FINANCIAL SUPERVISORY AUTHORITY 143 iv) Administration of the Compensation Fund
During 2018 on the importance given to it, with the aim of protecting the consumer, an intensive work has been done to close the backlog of the Compensation Fund. The respective departments, in addition to paying the payments that will be performed by the Albanian Insurance Bureau, will monitor and enforce board decisions for this purpose. It is one of the main objectives, and we aim inhibiting the accumulation phenomena of non- payment within the time limits of the incident.
v) Strengthening the administrative capacities of the AFSA
This objective has been in the focus of AFSA’s work during 2018. In order to complete the structure and recruit a highly qualified staff, work will be undertaken to attract and hire experienced specialists in the financial field as well as further capacity building of the existing staff. An annual calendar on the training of AFSA staff within and outside the country will be drafted in accordance with the needs and requirements of the departments. Improve the ability to manage market crises under supervision.
vi) Modernization of ICT infrastructure and Information Center capacities
This objective is related to one of the main areas of AFSA information processing and strengthening the capacity of the IT and Information Center staff, modernizing current platforms and programs towards an integrated and secure intelligence solution, consolidating and maintaining Information Center data, increasing security in information networks and increasing the level of knowledge, skills and capabilities for expertise. Alongside these developments, which are very necessary, special efforts will be made to manage and maintain the online sales registry, electronic claim record and AFSA In-Reg. Establish a new reporting system for the capital and pension market in the context of providing easier integration of companies and intelligent reporting generation for AFSA departments. Establishment of a system for online internal complaints about DTI and their tracking for quality service delivery.
vii) Implementation of technical assistance projects
In this objective are presented the concrete actions that will be undertaken by AFSA to fulfil and realize all projects and technical assistance in order to increase the standards and expertise of AFSA, improve financial reporting in accordance with best international practices and harmonize the legal and institutional framework of the country with EU directives, crisis management, etc.
144 ANNUAL REPORT ‘18 viii) Inter-institutional Cooperation with International Organizations, Counterpart Authorities and Institutions inside and outside the country
This detailed objective with a plan of activities that will be organized during the year aims to strengthen the relations between institutions within and counterpart institutions outside the country. The goal is to realize a bilateral agreement that serves us for the work and the exchange of experiences.
FINANCIAL SUPERVISORY AUTHORITY 145 IV. APPENDICES A
Organizational Structure of AFSA Sector Sector Support Support Services Services, Financial Directory Maintenance Management and Protocol Archive Sector Human Resource Human Resource Procurement and
Sector Sector Center
Platform Information Information Intelligence Directorate Technology Information and Business Management Development
Sector Strategic Strategic Research, Directorate and Projects International Research and Developments Developments Developments Relations Sector STRATEGIC DEVELOPMENTS AND OPERATIONS DEPARTMENT AND
Sector Statistics Statistical Directorate and Reporting Analysis Sector Data Processing Public Public
Media Unit Media Internal Audit Unit Communication and
Office Licensing Executive Director Deputy Funds Sector Sector Investment Supervision Supervision Directorate Supervision Supervision Funds Market Funds Pension Funds DEPARTMENT
Sector Sector Market v CAPITAL MARKET SUPERVISION CAPITAL MARKET SUPERVISION Securities Supervision Supervision Directorate Supervision Supervision
Capital Market Capital Stock Exchange d ut i k oa r z e B E k Office Sector Licensing Supervison Intermediaries Executive General Director
Risk Risk Sector Sector Financial Modelling Directorate Management Management DEPARTMENT
AIB Life Sector Office Sector Groups surance Non-Life Insurance Supervision INSURANCE MARKET SUPERVISION Supervision Supervision Directorate
Supervision Supervision surance and Insurance/Rein - Insurance/Rein - Insurance Market et n i a b C Board Secretary Board Money Sector Sector Insurance, Directorate Enforcment Pensions and Securities and Laundering Issues Money Laundering Investment Funds,
Sector Sector Legal and Integration Directorate Legal Affairs Acts Drafting Standards and integration Sector
LEGAL AFFAIRS DEPARTMENT Sector Investors Financial Consumer Protection Directorate Consumers and Protection, and Education Sector Market Behaviour
146 ANNUAL REPORT ‘18 APPENDICES B
List of Supervised Institutions 4. SIGAL Uniqa Group Austria sh.a. Uniqa Group 4. SIGAL PONARI Avni Non-life insurance, reinsurance Foreign and domestic capital Bl. “Zogu I”, No. 1 , Tirana No. 2387, Postare Kutia +355 42 233 308/ 253 407/408/ +355 42 250 220 www.sigal.com.al [email protected] No. 02, dt. 23.06.1999 and No. 06, dt. 03.02.2006 Unlimited 8. ALBSIG sh.a. Muharrem BARDHOCI Non-life insurance Domestic capital Bush”, No. 10, St. “George W. Tirana +355 42 254 770 +355 42 254 664 www.albsig.com.al [email protected] No. 10 dt. 19.07.2004 Unlimited 3. SIGMA Vienna Insurance Vienna 3. SIGMA Group sh.a. Klaidi ÇITOZI Non-life insurance Foreign and domestic capital e Parisit”, St. “Komuna Tirana No. 1714, Postare Kutia +355 42 258 254 +355 42 258 253 www.sigma-al.com [email protected] No. 01, of 03.02.1999 Unlimited 7. EUROSIG sh.a. Xhevdet KOPANI Non-life insurance Domestic capital II”, Gjon Pali St. “Papa Tirana 5, vila Nr. +355 42 238 899/999, +355 42 223 841 www.eurosig.al [email protected] No. 7 dt. 8.07.2004 Unlimited 2. INSIG JETA sh.a. 2. INSIG JETA Elvana MINO Life insurance Domestic capital Tirana 116, St. “Kavajës”, nr. +355 42 223 838 www.insig.com.al [email protected] 4 dt. 08.06.2000 Nr. Unlimited Insurance 6. INTERSIG Vienna Group sh.a. Gentian SULA Non-life insurance Foreign and domestic capital St. “Ismail Qemali”, Nd. Samos Floor 2, Box Office 8292, Tower, Tirana +355 42 270 576/577 www.intersig.al [email protected] No. 6 dt. 13.09.2001 Unlimited 1. INSIG sh.a. Areta Çuko Non-life insurance Domestic capital Tirana No. 21, St. “Jul Variboba”, +355 42 223 838 www.insig.com.al [email protected] No. 3 dt. 08.06.2000 Unlimited sh.a. 5. ATLANTIK Dritan ÇELAJ Non-life insurance Domestic capital St. “Themistokli Gërmenji”, 3/1, Tirana +355 42 230 506 +355 42 235 088 www.atlantik.com.al [email protected] No 5, of 13.04.2001 Unlimited CEO Scope of Activity of Ownership Type Office address Tel./Fax Website Email Licence number/date License Duration CEO Scope of Activity of Ownership Type Office address Tel./Fax Website Email Licence number/date License Duration INSURANCE MARKET
FINANCIAL SUPERVISORY AUTHORITY 147 12. MAI sh.a. Elnar GASHI Insurance brokers and reinsurance Foreign capital Gener 2 St. “Ismail Qemali”, P. Tirana Floor III/4, Verde), (Valle +355 42 500 514 www.mai-cee.com [email protected] No. 1 of 11.09.2008 Unlimited INSURANCE BROKER A-EJA 16. sh.a. Anila QENDRO Non-Life Insurance Brokerage Domestic capital 20, St. “Pjetër Bogdani”, P. Floor 1, Tirana +355 42 249 952 +355 42 227 307 [email protected] No. 7 of 21.05.2010 Unlimited 11. SIGAL-LIFE Austria sh.a. Uniqa Group Edvin HOXHAJ Life insurance Foreign and domestic capital Tirana Bul. “Zogu I”, Nr 1, +355 42 253 407/ 408 +355 42 233 308 www.sigal.com.al [email protected] No. 11 of 28.07.2004 Unlimited – SIG sh.a. ALL 15. Rezarta ZHUKRI Non-Life Insurance Brokerage Domestic capital St. “Abdyl Frasheri”, Tirana De Rada, P. +355 42 257 903 / 238 018, [email protected] No. 5 of 19.03.2010 Unlimited - 10. SICRED sh.a. Genc KOXHAJ Life insurance Domestic capital Tirana 3/1, St. “Brigada VIII”, Vila +355 42 237 549 +355 42 237 530 www.sicred.com.al [email protected] No. 8 of 26.07.2004 Unlimited 14. DEVON sh.a. ÇARÇANI Valbona Non-Life & Life Insurance Broker age Domestic capital QTZHK, i Kulturës”, “Pallati Scanderbeg Square, Tirana +355 42 379 925, +355 69 20 58424 [email protected] No. 3 dt. 10.12.2009 No. 12 dt. 23.12.2013 Unlimited 8. ANSIG sh.a. Edlir RUKA Non-life insurance Domestic capital 9/1, St. “Donika Kastrioti”, Vila Tirana (St. 4 shkurt) +355 42 263 490/495/486 www.ansig.al No. 12 dt. 22.06.2012 Unlimited 13. 3B BROKER sh.a. Bashkim KRYEZIU Non-Life Insurance Brokerage Domestic capital 7/2, St. “Mustafa Matohiti”, P. Apt. 8, Tirana +355 42 248 768/42 756 [email protected] No. 2 of 26.03.2009 Unlimited CEO Scope of Activity of Ownership Type Office address Tel./Fax Website Email Licence number/date License Duration CEO Scope of Activity of Ownership Type Office address Tel./Fax Website Email Licence number/date License Duration
148 ANNUAL REPORTR ‘18 20. FIDENTIA sh.a. Insurance sh.a. Insurance 20. FIDENTIA BROKER Përparim ISUFI Non-Life Insurance Brokerage Domestic capital St. “Ismail Qemali”, No. 27, Fratari Box P.O. Tirana, Floor 1, Tower, 2408/1 +355 42 269 435 +355 69 20 45 790 www.fidentia.al [email protected] No. 14 dt. 26.11.2015 Unlimited BANK sh.a. ALPHA 24. Georgios PAPANASTASIOU Jerina LLUKMANI Life and Non-Life insurance broker Foreign capital St.. Kavajës, G-KOM Business Tiranë Center, +355 42 233 550 www.alphabank.al [email protected] No. 19 dt. 27.12.2016 Unlimited 19. IFIS BROKER sh.a. MUÇKA Edmira Life and Non-Life Insurance Brokerage, and Reinsurance Domestic capital 2K, Floor 8, St. “Ismail Qemali”, P. Apt. 40, Tirana +355 69 20 87 987 [email protected] No. 13 dt. 23.01.2014 Unlimited sh.a. TREGTARE KOMBËTARE 23. BANKA Seyhan PENCAPLIGIL Klaida ÇEKREZI Life and Non-Life insurance broker Foreign capital Tirana Bul. “Zhan D’ark”, +355 4 250 955 +355 4 250 956 www.bkt.com.al [email protected] No. 18 dt. 27.12.2016 Unlimited 18. STAR BROKER sh.a. 18. STAR Arben SIMAKU Non-Life Insurance Brokerage Domestic capital Building no. 4, Tupe”, St. “Nikolla Floor I, Tirana +355 69 40 37 001 [email protected] No. 11 dt. 23.05.2013 Unlimited 22. RAIFFEISEN BANK sh.a. Christian CANACARIS Gentiana GJINO Life and Non-Life insurance broker Foreign capital Apt.4, shk.1, St. e Kavajës, P.71, Tirana +355 42 226 699 +355 42 275 599 www.raiffeisen.al [email protected] No. 17 dt. 31.10.2016 Unlimitetd 17. WVP INSURANCE BROKER 17. WVP sh.a. Ardian KELMENDI Life & Non-Life Insurance Brokerage Foreign capital 18, H 6, St. “ Barrikadave”, P. Floor 4, Apt,11, Tirana +355 42 224 525 www.wvp.al [email protected] No. 10 dt. 25.04.2012 Unlimited BROKER SIGURIME Sh.a. 21. BEST Olti PECINI Non-Life insurance broker Domestic capital H.13, Çollaku”, P.24, St. “Reshit Apt.5, Tirana, +355 66 20 53 172 www.wvp.al [email protected] No. 16 dt. 30.05.2016 Unlimited CEO Scope of Activity of Ownership Type Office address Tel./Fax Website Email Licence number/date License Duration CEO Përgjegjësi i njësisë së brokerimit Scope of Activity of Ownership Type Office address Tel./Fax Website Email Licence number/date License Duration
FINANCIAL SUPERVISORY AUTHORITY 149 27. ASSIBROKER sh.a. Ejona RRYÇI Non-Life insurance broker Domestic capital Tirana St.. “Brigada VIII”, vila 3/1, floor III, +355 42 2237549 www.assibroker.com.al [email protected] 22 dt. 30.11.2017 Nr. Unlimited 26. EURO BROKER sh.a. Grean SHEHAJ Non-Life insurance broker Domestic capital Tirana St.. “Mustafa Matohiti”, 21 dt 19.06.2017 Nr. Unlimitetd 29. ABI BROKER SIGURIMESH sh.a. 29. Grean SHEHAJ Non-Life insurance broker Domestic capital Tirana “Kavaja” St. Building 27, No. 1, No. 25 dt 20.12.2018 Unlimited 25. SMART INSURANCE BROKER sh.a. 25. SMART Fiorela QOSHJA Non-Life insurance broker Domestic capital no. 5, Tower, St. “Dëshmorët e 4 Shkurtit”, Sky Tirana code 1019, Suite 7/2, Postal +355 696033316 20 dt. 30.03.2017 Nr. Unlimited 28. SUNTRUST BROKER sh.a. 28. SUNTRUST Dhorothea MALE Life and Non-Life Insurance Brokerage, Reinsurance Domestic capital 2th St. “Zef Jubani”, “Olimpia” Shopping Center, Tirana no.3, floor, +355 696036252 www.suntrustbroker.com [email protected] [email protected] No. 24 dt. 31.01.2018 Unlimited CEO Scope of Activity of Ownership Type Office address Tel./Fax Website Email Licence number/date License Duration CEO Scope of Activity of Ownership Type Office address Tel./Fax Website Email Licence number/date License Duration
150 ANNUAL REPORTR ‘18 4. ALPHA BANK sh.a. ALPHA 4. Georgios PAPANASTASIOU Life and Non-Life insurance broker Foreign capital St.. Kavajës, G-KOM Business Tiranë Center, +355 42 233 550 www.alphabank.al [email protected] No. 19 dt. 27.12.2016 Unlimited NDËRKOMBËTARE 8. BANKA sh.a. TREGTARE Den BROEK Gideon Van Albanian Brokerage company for Government securities on the exchange. Foreign capital kati VII , pranë Toptani”, St. “Murat Tirana Gjergji Center, + 355 42 256 254 + 355 42 235 409 www.icbank-albania.com [email protected] No. 11 of 25.06.2009 Unlimited 3. INTESA SAN PAOLO Bank SAN PAOLO 3. INTESA Albania sh.a. Silvio PEDRAZZI Albania of Broker of Republic Government securities on the Exchange and on the retail market, Albania of and custodian of Republic Government securities Foreign capital Tirana St. “Ismail Qemali”, No. 27, +355 42 276 000/42 248 762 www.intesasanpaolobank.al [email protected] No. 6 dt. 25.06.2009 No. 2 dt. 21.05.2010 Unlimited ALBANIA 7. SOCIETE GENERALE sh.a.* Frederic BLANC Albania of Broker of Republic Government securities on the Exchange and on the retail market, Albania of and custodian of Republic Government securities Foreign and domestic capital Kulla Bul. “Dëshmorët e Kombit”, Binjake I, Tirana +355 42 280 442/3 +355 42 280 441 www.societegenerale.al [email protected] No. 5 of 25.06.2009 No. 8 of 13.12.2011 No. 5/1 of 21.03.2012 Unlimited 2. BANKA KOMBËTARE KOMBËTARE 2. BANKA sh.a. TREGTARE Seyhan PENCAPLIGIL Albania of Broker of Republic Government securities on the Exchange and on the retail market, and custodian of Republic Albania Government securities of Foreign capital Tirana Bul. “Zhan D’ark”, +355 4 250 955, 956 www.bkt.com.al [email protected] No. 4 dt. 25.06.2009 No. 7 dt. 18.11.2010 Unlimited BANK sh.a. TIRANA 6. Dritan MUSTAFA Albania of Broker of Republic Government securities on the Exchange and on the retail market, and custodian of Republic Albania Government securities. of Foreign capital Tirana St. “Ibrahim Rugova”, +355 42 277 700 +355 42 263 022 www.tiranabank.al [email protected] No. 1 of 21.05.2010 No. 1 of 21.05.2010 Unlimited 1. RAIFFEISEN BANK sh.a. Christian CANACARIS Albania of Broker of Republic Government securities on the Exchange and on the retail market, and custodian of Republic Albania Government securities of Foreign capital Bul. Center, Trade European “Bajram Curri”, Tirana +355 42 381 / 275 599 www.raiffeisen.al [email protected] No. 3 dt. 25.06.2009 No. 6 dt. 29.09.2010 Unlimited CREDINS sh.a. 5. BANKA Maltin KORKUTI Albania of Broker of Republic Government securities on the Exchange and on the retail market, and custodian of Albania Government of Republic securities and corporate local government bonds Domestic capital St. “Ismail Qemali”, No. 21, Tirana +355 42 234 096, 222 916 www.bankacredins.com [email protected] No. 8 of 25.06.2009 No. 4 of 30.08.2010 No. 1 of 13.12.2011 Unlimited SECURITIES MARKET CEO Scope of Activity of Ownership Type Office address Tel./Fax Website Email Licence number/date License Duration CEO Scope of Activity of Ownership Type Office address Tel./Fax Website Email Licence number/date License Duration ______Albania Bank on 12.04.2019 Albania Bank has changed its name to OTP * 7. Societe Generale
FINANCIAL SUPERVISORY AUTHORITY 151 12. TRIUMF GROUP sh.a. TRIUMF GROUP 12. Mirela ANGJELI Albanian Brokerage company for Government securities on the exchange. Domestic capital Apt. 2, Tower St. “M. Gjollesha”, 13, Tirana +355 68 20 58 275 +355 42 256 081 No. 2 of 25.06.2009 Unlimited SECURITIES sh.a. 16. PRODATA Gertin QINAMI Securities brokerage company for buying and selling of securities upon clients order on the licensed market in the territory of Republic Albania. of Domestic capital 0/1, A e Diellit”, “Kodra Rezidenc Tirana Farkë e Madhe, Selitë, +355696084033 www.prodata.al [email protected] No. 17 of 03.07.2017 Unlimited 11. KAPITAL INVEST sh.a. INVEST 11. KAPITAL Lirim MUHARREMI Albanian Brokerage company for Government securities on the exchange and on the retail market Foreign and domestic capital “Ajet Metaj”, Njësia Bashkiake Vila Autotraktoreve, No.1, ish Uzina e Tirana +355 42 280 202 No. 9 of 25.06.2009 Unlimited 15. EUROTRADE SECURITIES sh.a. Florin DEDA Securities brokerage company for buying and selling of securities upon clients order on the licensed market of in the territory of Republic Albania. Company with foreign capital St. e Kavajës, Compelx Parc Construction, G.D, Foor 2, Njësia Tirana Bashkiake Nr.7, +355694056681 www.eurotradesecurities.com [email protected] No. 16 of 30.03.2017 Unlimited 10. POSTA SHQIPTARE sh.a. SHQIPTARE 10. POSTA Laert Duraj Albanian Brokerage company for on Government securities (T-bills) the retail market Government-owned Tirana Collaku”, No. 4, St. “Reshit +355 42 222 315 +355 42 266 559 www.postashqiptare.al [email protected] No. 10 dt. 25.06.2009 Unlimited AMERIKANE E 14. BANKA INVESTIMEVE sh.a. Andi BALLTA Securities Brokerage Company on Stock of Government R.A Exchange and in the Retail Market. Company with foreign capital St. e Kavajes, Building 27, Kati 1001,Tirana Postar VIII, Kodi +355 44537253 +355 4225875 www.abi.al [email protected] No. 15 of 31.10.2016 No. 9 of 31.10.2016 Unlimited 9. FIRST INVESTMENT BANK sh.a. INVESTMENT 9. FIRST Bozhidar TODOROV Albania of Broker of Republic Government securities on the Exchange and on the retail market, and custodian of Republic Albania Government securities of Foreign capital Twin Bul. “Dëshmorët e Kombit”, Tirana 2 Kati i 14 & 15, Nr. Towers +355 42 276 702/3 +355 42 280 210 www.fibank.com No. 12 of 29.09.2010 No. 5 of 29.09.2010 No. 2 dt. 23.12.2014 Unlimited 13. AKSIONER INTERNATIONAL SECURITIES BROKERAGE sh.a. Alma HASANAJ Securities brokerage company in trading securities on orders on the customers’ licensed market in the Republic Albania, and stock broker on of behalf of “Saxo Bank” Foreign capital St. “Donika Kastrioti”, Building Tirana 14, 12-13th floor, +355 44 400 600 www.aksioner.com [email protected] No. 13 dt. 28.04.2011 No. 64 dt. 28.04.2011 Unlimited CEO Scope of Activity of Ownership Type Office address Tel./Fax Website Email Licence number/date License Duration CEO Scope of Activity of Ownership Type Office address Tel./Fax Website Email Licence number/date License Duration
152 ANNUAL REPORTR ‘18 20. BURSA E TIRANES sh.a. E 20. BURSA activity suspension in Temporary conformmity with the decision of the shareholders no. 16 date 07.04.2015 19. BURSA SHQIPTARE TITUJVE SHQIPTARE 19. BURSA ALSE sh.a. Artan GJERGJI Operating as a Securities Exchange Foreign and domestic capital no.1, Floor 3, Tupe”, St. “Nikolla Apt.3, Tirana +35542243808 [email protected] No. 2 of 03.07.2017 Unlimited FUND INVESTMENT “CREDINS PREMIUM” Under the management of “Credins Innvest - management company of voluntary pension funds and collective investment undertakings” sh.a. 18. QENDRA E REGJISTRIMIT TË E REGJISTRIMIT 18. QENDRA AKSIONEVE sh.a. Ardian MYSLIMAJ Corporate share registry Government-owned 13, Kutia Bush”, Nr. St. “George W. 7424, Tirana Postare +355 42 233 442, 425 www.qra.al [email protected] dt. 05.11.2002 Unlimited FUND INVESTMENT EURO” “RAIFFEISEN INVEST (Ref. FI-B2) Under the management of “Raiffeisen Invest-Management Pension Company of Voluntary Funds and Collective Investment Undertakings” sh.a. Investment Raiffeisen Vizion (Ref. FI-B4) Fund Under the management of “Raiffeisen Invest-Management Pension Company of Voluntary Funds and Collective Investment Undertakings” sh.a. 17. SMARTCOM sh.a. 17. SMARTCOM Alessandro UNGARO Securities brokerage company for buying and selling of securities upon clientson the order licensed market in the territory of Republic Albania. of Company with foreign capital. Kompleksi St. “Panorama”, Tirana “Erion”, Floor 1, +355 694811119 [email protected] No.18 of 27.07.2017 Unlimited FUND INVESTMENT RAIFFEISEN PRESTIGJ (Ref. FI-B1) Under the management of “Raiffeisen Invest-Management Pension Company of Voluntary Funds and Collective Investment Undertakings” sh.a. Invest Top WVP Investment Fund (Ref. FI-A1) Under the management of “WVP - Tirana Fund Management Company of Collective Investment Undertakings” sh.a. Type of Ownership Type Office address Tel./Fax Website Email Licence number/date License Duration CEO Scope of Activity
FINANCIAL SUPERVISORY AUTHORITY 153 iCRED Pension Funds Management Funds iCRED Pension S 6. SOCIETE GENERALE sh.a. ALBANIA Frederic BLANC pension fund asset depositary Voluntary foreign and domestic capital Private I, Tower Twin Bul. “Dëshmorët e Kombit”, Tirana +355 42 280 442/3 +355 42 280 441 www.societegenerale.al [email protected] No. 3 of 13.12.2011 Unlimited 3. Company sh.a Estela KOCI pension fund management company Voluntary Domestic capital Tirana no.1 , floor 3, Tupe, St. Nikolla +355 42 237 549/ 496/ 44 538 674 www.sicred-pensions.com.al [email protected] No. 3 of 23.11.2011 Unlimited Group Austria Pension Austria Pension Group UNIQA -Life SIGAL 5. BANKA E TIRANËS sh.a. E 5. BANKA Dritan MUSTAFA pension fund asset depositary Voluntary Foreign capital Tirana St. “Ibrahim Rugova”, +355 42 269 616/617/429 +355 42 269 707 www.tiranabank.al [email protected] No. 2 of 18.11.2010 Unlimited 2. Management Company sh.a Funds Naim HASA pension fund management company Voluntary Foreign and domestic capital Tirana Bul. “Zogu I”, +355 42 233 308 +355 42 250 220 www.fppsigal.com.al [email protected] No. 2 of 30.03.2011 Unlimited 4. FIRST INVESTMENT Bank sh.a. INVESTMENT 4. FIRST Bozhidar TODOROV Depositary of voluntary pension fund and collective investment undertaking assets Foreign capital 2 Nr. Towers Twin Bul. “Dëshmorët e Kombit”, Tirana Kati i 14 & 15, +355 42 276 702/3 +355 42 280 210 www.fibank.com No. 1 of 13.12.2011 Unlimited 1. Raiffeisen Invest - Management Company and Collective Funds Pension of Voluntary Investment Undertakings KONINI Edlira pension fund and collective Voluntary investment undertaking management company Foreign capital Tirana. St. “Bajram Currri”, ETC Kati 10, + 355 42 277 901 +355 42 277 905 www.raiffeisen-invest.al [email protected] No. 1 dt. 18.10.2010 No. 1 dt. 13.12.2011 Unlimited PRIVATE VOLUNTARY PENSION MARKET VOLUNTARY PRIVATE General Managing Director Scope of Activity of Ownership Type Office address Tel./Fax Website Email Licence number/date License Duration Executive Director Scope of Activity of Ownership Type Office address Tel./Fax Website Email Licence number/date License Duration
154 ANNUAL REPORTR ‘18 VOLUNTARY PENSION FUND VOLUNTARY SICRED PENSIONS 3) (Ref. FP Under the management of “Management Funds SiCRED” Pension Company of Voluntary sh.a 9. WVP fund management tirana sh.a Company fund management tirana 9. WVP of Collective Investment Undertakings” sh.a. Arton LENA Collective investment undertaking management company Company with foreign capital ap. 1, St. “Barrikadave”, no. 118, 4th floor, Tirana +355 4 22 24 525 www.wvpfunds.al [email protected] No. 4, dt. 31.01.2018 Unlimited Andi BALLTA Depository for assets of voluntary pension funds and collective investment undertakings Company with foreign capital St. e Kavajes, Building 27, Floor VIII, Postal Code 1001,Tirana +355 44537253 +355 4225875 www.abi.al [email protected] No. 5 of 03.07.2017 Unlimited PENSION FUND SIGAL VOLUNTARY 2) (Ref. FP 8. BANKA AMERIKANE E INVESTIMEVE sh.a. 8. BANKA Under the management of “Sigal-life UNIQA Austria” sh.a. pension funds management Group company sh.a. Seyhan PENCAPLIGIL pension fund asset depositary Voluntary Foreign capital Tirana Bul. “Zhan D’ark”, +355 4 250 955, 956 www.bkt.al [email protected] No. 4 dt. 21.12.2015 Unlimited PENSION VOLUNTARY FUND RAIFFEISEN 1) (Ref. FP 7. BANKA KOMBËTARE KOMBËTARE 7. BANKA sh.a. TREGTARE Under the management of “Raiffeisen Invest- Pension Management Company of Voluntary Funds and Collective Investment Undertakings” sh.a. Executive Director Scope of Activity of Ownership Type Office address Tel./Fax Website Email Licence number/date License Duration
FINANCIAL SUPERVISORY AUTHORITY 155 APPENDICES C Memberships And Signed Cooperation Agreements nsurance Supervision Authority, nsurance Supervision Authority, Institution AFSA) Securities Commission (now I Securities Commission (now AFSA) AFSA AFSA) Securities Commission (now AFSA) Securities Commission (now AFSA) Securities Commission (now AFSA) Securities Commission (now AFSA) Securities Commission (now AFSA) Securities Commission (now Insurance Supervision Authority, Securities Commission (now AFSA) AFSA) Securities Commission (now AFSA) Securities Commission (now AFSA) Securities Commission (now AFSA) Securities Commission (now AFSA) Securities Commission (now AFSA AFSA AFSA AFSA AFSA AFSA AFSA AFSA AFSA Year 1998 2001 2006 1999 2000 2002 2003 2003 2003 2004 2005 2005 2005 2005 2005 2008 2009 2009 2010 2012 2013 2015 2016 2016 Membership in International Organizations of Regulators International Organization of Securities Commissions (IOSCO) Association of Insurance Supervisors (IAIS) International Supervisors (IOPS) International Organization of Pension Agreements signed with foreign counterpart institutions Capital Market Commission of Greece Authority) Quebec Securities Commission (Quebec Financial Market Securities and Exchange Commission of Italy Agency of Slovenia Securities Market Authority of Poland) (now Financial Supervisory Securities and Exchange Commission of Poland Turkey Capital Market Board of of Kosovo) Authority (now the Central Bank of Republic Banking and Payment Kosovo Financial Supervision Commission of Bulgaria National Securities Commission of Romania Securities and Exchange Commission of Macedonia Securities and Exchange Commission of Montenegro Agency of Croatia) Securities Commission of Croatia (now the Financial Services Supervisory of Kosovo Central Bank of the Republic Authority Austrian Financial Market Austrian Ministry of Finance & IOSCO Multilateral Memorandum of Understanding Agency (ISA) Macedonian Insurance Supervision Insurance of Macedonia (MAPAS) Agency for Supervision of Fully Funded Pension Authority (ESMA) Authorities, member of European Securities and Markets EU Competent Actuaries of London Agreement with Coordination Agency (Slovenia) Insurance Supervision Authority FINMA Swiss Financial Market Supervisory A. B.
156 ANNUAL REPORTR ‘18 nsurance Supervision Authority, nsurance Supervision Authority, AFSA AFSA AFSA) Securities Commission (now AFSA) Securities Commission (now I AFSA) Securities Commission (now AFSA AFSA AFSA AFSA AFSA AFSA AFSA AFSA AFSA AFSA AFSA AFSA AFSA AFSA AFSA AFSA AFSA AFSA AFSA AFSA AFSA AFSA AFSA AFSA AFSA AFSA AFSA 2018 2018 2002 2003 2005 2006 2009 2010 2011 2011 2012 2012 2014 2015 2016 2017 2017 2017 2017 2017 2017 2018 2018 2018 2018 2018 2018 2018 2018 2018 2018 2018 Italian Institute for the Supervision of Insurance (IVASS) Corps (FSVC) Financial Services Volunteer Agreements Signed with Organizations in the Country Tirana Faculty of Economics, University Auditors (IEKA) Institute of Statutory Bank Albania of Competition Authority Directorate General of Customs Public Supervisory Board Ministry of Interior Transport and Ministry for Public Works Advisory Group (FSAG) Agreement in the framework of Financial Stability Transport Directorate General of Road Agency Albania and the Deposit Insurance Ministry of Finance, Bank General Directorate of Money Laundering Prevention Tirana Faculty of Economics’, University Albania Ministry of Finance, Bank “Aleksander Moisiu” University Business Faculty, General directorate of taxation College University “Luarasi” The Mediterranean University Institute of Statistics. INSTAT Albanian University Elbasan "Aleksandër Xhuvani" University, Korça "Fan S. Noli" University, Agency of Information Society National Tirana European University of Technology Canadian Institute of Tirana University of Polytechnic Business University" "Tirana Bank Albania of National Business Center Swisscontact C.
FINANCIAL SUPERVISORY AUTHORITY 157 APPENDICES D
Independent Accounting Auditor’s Report And Financial Statements
INDEPENDENT AUDITORS’ REPORT
To: Management and Directors of the Financial Supervisory Authority
Opinion
We have audited the financial statements of the Financial Supervisory Authority (the Institution) which include the statement of financial position as of December 31, 2018, the statement of comprehensive income or loss, the statement of changes in own funds and the statement of cash flows for the year ended on this date, as well as notes to the financial statements, including a summary of the most relevant accounting policies.
In our opinion, the attached financial statements fairly represent, in all material respects, the financial position of the Institution as at December 31, 2018, and its financial performance and its cash flows for the year then ended, in accordance with International Financial Reporting Standards.
Basis for the opinion
We conducted our audit in accordance with International Standards on Auditing (ISAs). Our responsibilities under these standards are described in details in the Report section, whereby the Auditor’s Responsibilities for the Financial Statements are provided. We act independently of the Institution, in accordance with ethical requirements applicable to the audit of financial statements in Albania and we have acted in compliance with other ethical responsibilities pursuant to such requirements. We believe that the audit evidence we have provided is sufficient and appropriate to provide a basis for our opinion.
158 ANNUAL REPORT ‘18 APPENDICES D
Independent Accounting Auditor’s Report And Financial Statements
Responsibilities of the Management and persons in charge of the Governance related to the Financial Statements
The Management is responsible for the preparation and fair presentation of financial statements in accordance with IFRSs and for the internal audit that the Management deems necessary to enable the preparation of financial statements that do not contain material anomalies, whether due to fraud or error.
In preparing the financial statements, the Management is responsible for assessing the institution’s going concern, explanatory notes, as well as issues related to the institution’s going concern, using the basic principles of going concern, unless the management intends to liquidate the activity or terminate the operational activity, or there is no other realistic alternative to the above.
The Parties in charge for the governance are responsible for the supervision of the Institution’s financial reporting process.
Auditor’s Responsibilities for the Audit of Financial Statements
Our objective is to provide reasonable ground for assuring whether the entire financial statements are free of material anomalies due to fraud or error, and to issue an audit report whereby our opinion is included. Reasonable assurance shall mean a high level of assurance, but it does represent any guarantee that an audit carried out according to ISAs will always identify a material anomaly in case it exists. Anomalies may arise as a result of error or fraud and are considered as material if, individually or collectively, it is expected to reasonably affect the economic decisions of users taken based on these financial statements.
As part of the audit in accordance with ISAs, we exercise professional considerations and maintain professional scepticism throughout the audit. Moreover:
. We identify and assess the risk of material anomalies in the financial statements as a result of fraud or error, we schedule and implement appropriate procedures for mitigating such risks, and we also obtain sufficient and appropriate evidence to create a basis for our opinion. The risk of non-disclosure of an anomaly due to fraud is higher than the risk of non-disclosure due to error, since fraud may include concealment of information, forgery of information, intentional embezzlement, misinterpretation or violation of internal control.
. We understand that these internal audits are relevant to the audit process to draft audit procedures accordingly, however not to express an opinion on the effectiveness of internal audit.
. We evaluate the appropriateness of accounting policies used and the reasonableness
FINANCIAL SUPERVISORY AUTHORITY 159 of accounting estimates and related disclosures made by the Management.
. We express ourself on the appropriateness of the going concern, based on the evidence obtained during the audit, on the existence of material uncertainty about the Institution’s ability to continue its activity. If a material uncertainty exists, we should draw attention to the relevant explanatory note, through our audit report, or if the explanatory notes are not appropriate we shoild modify our opinion. Our conclusions are based on the audit evidence obtained up to the date of our auditor’s report. However, subsequent events or conditions may cause interruption of the Institution’s ability to follow up.
. We assess the presentation, structure and content of the financial statements and explanatory notes and in case they fairly represent transactions and events.
We communicate to the persons in charge of the governance of the Institution, among others, the scheduled audit object and timing, the main audit findings, including any relevant deficiencies in internal audit, as identified during our audit.
April 05, 2019
160 ANNUAL REPORT ‘18 Statement of the Financial Position On 31 December 2018 (Values are in ALL)
31 December 2018 31 December 2017 ASSETS Long-term Assets Tangible Fixed Assets 81,896,107 67,262,883 Intangible Fixed Assets 212,534 283,379 Total Long-Term Assets 82,108,641 67,546,262
Short-Term Assets Accounts receivable 42,212,834 29,380,734 Advances and accrued income 3,365,815 588,364 Warranties 20,000 20,000 Investment in Deposits and Treasury Bills 38,190,314 76,000,000 Monetary assets 159,202,901 132,575,257 Total Short-Term Assets 242,991,864 238,564,355 Total assets 325,100,505 306,110,617
CAPITAL Basic Fund 119,287,505 119,287,505 Reserve Fund 149,641,000 97,138,000 Total Capital 268,928,505 216,425,505
LIABILITIES Long-Term Liabilities - - Total Long-Term Liabilities - -
Short-Term Liabilities Accounts payable 1,832,118 1,707,595 Liabilities for taxes 6,175,976 5,352,535 Liabilities to insurance companies 23,224,738 59,360,346 Other payable 145,797 107,465 Provision Fund 24,793,371 23,157,171 Total Short-Term Liabilities 56,172,000 89,685,112 Total Liabilities 56,172,000 89,685,112 Total Capital and Liabilities 325,100,505 306,110,617
FINANCIAL SUPERVISORY AUTHORITY 161 Statement of Profit and Loss and All-Inclusive Revenues For the year ended on 31 December 2018 (Values are in ALL)
For the year ended For the year ended on 31 december 2018 on 31 december 2017
From public and private financial entitites 279,943,201 233,422,012 Fines and late payment interests, seizures and claims 14,920,000 150,000 Total non-monetary revenues 294,863,201 233,572,012
Current Expenses (173,961,730) (156,147,542) Goods and other services (51,111,416) (67,299,917) Depreciation units and anticipated amounts (13,223,959) (7,071,829) Disposals - - Total current expenses (238,297,105) (230,519,288)
Revenues from deposit interests 270,401 346,038 Expenses for exchange rate (4,333,497) (3,398,762)
Profit / Loss of the Year 52,503,000 -
Outcome of the year 52,503,000 -
162 ANNUAL REPORT ‘18 FINANCIAL SUPERVISORY AUTHORITY
FINANCIAL SUPERVISORY AUTHORITY 163