2012 Annual2012annual2011 Reportreport © 2013 Albanian Financial Supervisory Authority

Any use of data included in this publication should be subject of the reference to AFSA.

Please contact us for any further information. 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 Contents

Chairperson’s Statement 6

PART I AFSA PRESENTATION AND ACTIVITY 7

Chapter 1 AFSA Organization 7 1.1 Mission, Objectives & Fundamental Functions 7 1.2 Management & Organization 8 1.3 Budget 16 1.4 Changes to AFSA Regulatory Framework 17

Chapter 2 AFSA Activity 19 2.1 Regulatory Activity 19 2.2 Licensing Activity 21 2.3 Supervisory Activity 30 2.4 Information Technology 45 2.5 Institutional Cooperation 48 2.6 European Integration 56 2.7 Public Relations and Transparency 61

Chapter 3 Consumer Protection 64

PART II SUPERVISED MARKETS 67 II. 1 Insurance Market 67 II. 2 Securities Market 78 II. 3 Voluntary Private Pension Market 82

AFSA Challenges and Priorities 84

APPENDICES 88 A: AFSA organizational chart B: Supervised Financial Sector Legal/Regulatory Framework C: List of Supervised Institutions D: Membership and signed Cooperation Agreements E: Macroeconomic Indicators

AL BANIAN FINANC IAL SU PERVISORY AUTHOR ITY 5 Chairperson’s Statement

Dear Reader of 2012 Annual Report,

For several years the international community has made efforts for overcoming the crisis and establishing an ambitious regulatory and supervisory framework that is a real challenge for financial regulators, including the Albanian Financial Supervisory Authority (AFSA). This ever-changing international framework is also reflected in AFSA activity, despite the relatively low integration of the Albanian financial market into the global one and the rather marginal impact of the global financial crisis on the financial markets in Albania.

First and foremost, AFSA consolidated its belief that strengthening the independence of the regulator was a significant factor in coping with the challenge of developing the supervision framework. On 31 October 2012 Enkeleda Shehi, Chairperson Financial Supervisory Authority AFSA organized its first international conference, which focused on the independence of financial regulators from the perspective of EU integration, and the lessons learnt from the latest global financial crisis. The event was transformed into a forum of discussing views by experts and chairpersons from regulators that represented markets from USA to Europe. The messages conveyed and conclusions drawn at the conference helped AFSA reformulate the Law on AFSA in a more complete and clearer way. The amendments, which were resubmitted to the Government, contribute to restoring independence to the Authority and setting up independence safeguards.

Second, the extension of supervised ﬁnancial markets and their increased complexity generates constant challenges for AFSA. Therefore, a considerable part of AFSA human and ﬁnancial resources are committed to strategies and projects that are related to enhancing the quality and effectiveness of the supervisory and regulatory processes.

Third, the management of the compulsory insurance tariff liberalization process received signiﬁcant attention in 2012. That process required AFSA response in the form of developing and adopting the necessary regulatory framework, and supervisory vigilance in order to assess risk premiums as realistically as possible. AFSA intends to protect consumers by encouraging what we call “healthy competition”, working along two lines of action: consumers will be provided with competitively priced products, and insurance companies will have adequate levels of provisions and guarantees that they will be able to settle their obligations deriving from damages suffered by consumers.

Fourth, I would like to note the increased number of licensees in the supervised ﬁnancial markets, which shows investors’ increased attention to the Albanian ﬁnancial markets.

The most important challenge for AFSA is the need to extend its risk-based supervision methodology to the securities market and the private voluntary pension fund market. The strategy that AFSA has designed is of a complex nature. I am proud of the serious and insistent AFSA staff’s efforts for implementing it, and of the support that international institutions and the Board have given for the process.

I hope that readers will ﬁnd this Report a useful source of information and education.

Sincerely,

Enkeleda Shehi PART I AFSA PRESENTATION AND ACTIVITY

Chapter 1 • Protecting the consumers AFSA Organization • Promoting the markets • Enforcing the law 1.1 Mission, Objectives & Fundamental Functions

The Financial Supervisory Authority (AFSA) was established pursuant to Law No. 9572 of 3 July 2006 “On the Financial Supervisory Authority”, as an independent public legal institution reporting to the Parliament of Albania.

The Financial Supervisory Authority is a consolidated regulatory body that supervises the ﬁnancial markets of insurance, securities and private voluntary pensions in Albania, which are hereinafter referred to as the “supervised ﬁnancial markets”.

Our Mission AFSA mission is to contribute to promoting stability and secure development in the supervised ﬁnancial markets.

Objectives In the context of performing its legally sanctioned functions and responsibilities, AFSA is guided by the following objectives:

• Protect consumers’ interests; • Promote supervised financial market transparency and reliability; • Ensure legal compliance.

AFSA Main Functions AFSA main functions are the regulation and supervision of:

• insurance market and its activity, including all insurance, reinsurance and brokerage activities and related operations; • securities market and its activities, including the securities-investment-related activities of persons operating in this market; • voluntary pension market and its activities, including all voluntary pension insurance activities provided by entities that have been licensed to operate in this market; • other non-banking financial activities in accordance with the provisions of the relevant special laws.

AL BANIAN FINANC IAL SU PERVISORY AUTHOR ITY 7 1.2 Management & Organization

AFSA Board

AFSA Board is its governing and decision-making body. All Board members are appointed by the Parliament of Albania for a ﬁve-year term. AFSA Board underwent a few changes in 2012. The current AFSA Board composition1 is shown below:

• Enkeleda SHEHI Chairperson * • Riçard MARKU Member

• Mati PEPA Deputy Chairperson ** • Kestrin KATRO Member

• Enkela IDRIZI Deputy Chairperson • Astrit HADO Member

• Miranda RAMAJ Member

In the context of performing its functions, AFSA Board conducted 12 meetings and took 172 decisions in 2012. The following table shows the number of AFSA Board decisions grouped by type of decision.

The Board decisions aimed at more effective supervision of the insurance, securities Albanian Financial Supervisory Authority Board and private voluntary pension markets. The most signiﬁcant decisions included ones that were related to the invigoration of the market through licencing of entities. In this context AFSA licensed a new Non-Life insurance company, in addition to insurance professionals, investment funds and securities brokers.

Note 1 * Decision no. 10/2012 of 16 February 2012 of the Parliament of the Republic of Albania discharged from her duties the Deputy Chairperson of the Board, Mrs. Enkeleda Shehi, and appointed her as the Chairperson of the Authority Board. ** Decision no. 11/2012 of 16 February 2012 of the Parliament of the Republic of Albania appointed Mr. Mati Pepa as a Member and Deputy Chairperson of the Board, holding the position of the Head of the Supervision and Disciplinary Department.

8 ANNUA L REPORT ‘12 Table 1: Classiﬁcation of AFSA Board decisions, by type of decision Type of decision Number

Decisions on companies operating in supervised markets2 137

Decisions adopting and amending implementation legislation 18

Decisions imposing administrative measures on supervised entities 8

Decisions on AFSA regulatory framework 9

Total number of decisions 172

In addition AFSA Board approved statutory amendments of insurance companies and pension fund management companies, amendments to prospectuses, amendments to template contracts of private voluntary pension funds and insurance contracts, private offering of bonds on the securities market, etc.

Other important decisions were related to the supervisory functions, including remedying measures and sanctions, the aim of which was to prevent any Enkeleda Shehi Chairperson adverse situations, and eliminate violations.

AFSA Board key powers

1. Develop the rules on job descriptions and goals for each department and unit;

2. Draft and approve basic principles of the Institution’s activity;

Mati Pepa 3. Draft and approve rules and instructions provided for in the Law; Deputy Chairperson

4. Disseminate written guidelines on the interpretation and implementation of laws and regulations;

5. Issue, reject, suspend or revoke licences to operate in the non-banking financial market;

6. Restrict or prohibit insurance and reinsurance company investments if they do not comply with regulatory ratios or endanger the company financial position;

Enkela Idrizi Deputy Chairperson

Shënim 2 Key decisions in this group pertain to amendments to articles of association of companies, licencing, changes to insurance contracts and private voluntary pension funds, changes to prospectuses, decisions on the activity of the Albanian Insurance Bureau, etc.

AL BANIAN FINANC IAL SU PERVISORY AUTHOR ITY 9 7. Review insurance contract terms and conditions before such contracts are introduced by operators;

8. Approve financial statements of insurance and reinsurance companies;

9. Approve and disseminate accounting standards and financial reporting Miranda Ramaj formats that are mandatory to be applied by licensees; Member

10. Set the policies for supervision, inspection of supervised subjects and development of the non-banking financial market;

11. Approve the list of auditors for companies operating in the non-banking financial markets;

12. Approve annual industry reports on the situation and prospects of the Riçard Marku non-banking financial market; Member

13. Approve inspection manuals;

14. Decide to initiate bankruptcy proceedings for supervised entities and appoint liquidators;

15. Approve AFSA Draft-Budget and Annual Report;

Kestrin Katro 16. Take decisions on MoUs and information exchange with authorities in the Member country and abroad;

17. Decide to purchase advisory services from relevant experts;

18. Approve AFSA salary and bonus policy;

19. Adopt the rules on staff recruitment and dismissal.

Astrit Hado Member

AFSA Organizational Structure

AFSA operates under the staffing structure adopted by the Albanian Parliament Decision No. 98 of 30 April 2007 “On the Approval of the Structure and Staffing of the Financial Supervisory Authority”, following an Authority Board proposal. It has 58 employees. At the end of 2012, the occupancy rate of the AFSA approved staffing structure was 84%. The increased number of staff has contributed to a higher quality

10 ANNUA L REPORT ‘12 of efforts for coping with the increasingly higher volume of AFSA activity in the context of meeting its objectives.

78% of AFSA staff are appointed to units performing core functions, which are related to the Authority basic tasks, such as licensing, regulating, and supervising. It also includes senior management staff. The remaining 22% of the staff is engaged in support functions that facilitate the day-to-day functioning of the Institution.

Management Staff of Albanian Financial Supervisory Authority

Graph 1: AFSA core function staff structure, by unit (%)

Legal Affairs Department, 20%

Supervision and Enforcement Department, 34%

Licensing and Monitoring Department, 23%

Research, IT and Statistics Department, 23%

AL BANIAN FINANC IAL SU PERVISORY AUTHOR ITY 11 Graph 2: AFSA staff structure, by profession (in %)

IT Experts, 7% Mathematicians, 5% Other, 7%

Lawyers, 19%

Economists, 62%

The average age of AFSA staff is 39. It has been around this number for several years. The age range of AFSA staff ensures the best combination of dynamism coming from the younger staff with professional knowledge and life skills owned by the more senior staff. The combination of those two aspects increases work effectiveness and enables successful coping with complex tasks. AFSA has maintained optimum ratios in its staffing structure in terms of their education, too. Special attention was paid to employing young graduates with high educational attainment level both in the Albania and abroad.

Graph 3: AFSA staff structure, by age-group (number)

over 50 7

31 - 50 years old 27

under 30 15

0510 15 20 25 30

Number of employees

12 ANNUA L REPORT ‘12 Graph 4: Technical staff structure, by degree (in %)

Graduated Abroad, 13%

Graduated in Albania, 87%

Current developments in the markets AFSA supervises demand a more ﬂexible organizational structure, which would help cover supervisory and regulatory functions better and extend those functions to other aspects. Such a structure will anticipate market developments and the capacities AFSA needs to have in place under the crisis management action plan. This has also been underlined in recommendations issued by such international organizations as the World Bank (WB) and the European Commission (EC).

Human Resources Policies

Human resource development is considered as an important function by AFSA, because it contributes to increased efﬁciency and work quality and ensures optimum relations between employer and employees. In the short run, the HR Unit focused on:

• Encouraging and motivating employees; • Training staff constantly; • Employing increasingly high-quality human resources.

The number of AFSA employees increased by two in 2012. They were recruited under recruitment procedures that allow a satisfactory selection of candidates having very good professional knowledge and skills and sound ethics and integrity at work. Last year AFSA also adopted the Instruction on appraising the progress and performance of the Financial Supervisory Authority employees, which is intended to increase individual responsibility in the performance of their tasks and achievement of the institutional objectives, as well as increase the objectivity of employee performance appraisal. In addition, job description were rewritten in 2012 in order to adapt them

AL BANIAN FINANC IAL SU PERVISORY AUTHOR ITY 13 to the increasing tasks and responsibilities in the fulfilment of AFSA supervisory and regulatory functions.

Vocational Training

In the context of implementing the administrative capacity building recommendation, in 2012 AFSA focused on the development of staff training programs organized into two tiers:

• Basic training of newly employed staff; • Vocational training for the rest of staff.

The training program was developed in line with the institutional objectives as well as individual staff objectives. In 2012 activities included participation in training events, workshops, conferences, meetings and study tours in the country and abroad in the context of sharing best practices, with the assistance of international ﬁnancial institutions, such as World Bank (WB), European Commission (EC), USAID Programme for Financial Sector Development in Albania, Malta International Training Centre (MITC), as well as international associations of regulators, including the International Association of Insurance Supervisors (IAIS), the International Organization of Securities Commissions (IOSCO), the International Organisation of Pension Supervisors (IOPS), the US National Association of Insurance Commissioners (NAIC), etc. About 72 percent of AFSA staff in main functions participated in those events in 2012.

In cooperation with MITC, AFSA organized trainings in specific topics related to Life insurance products and relevant contracts, legal infrastructure and consumer protection, for the Supervision and Disciplinary Department and Legal Affairs Department staff. The training in best practices and international standards on consumer protection was organized for the first time with the participation of a large number of AFSA employees. It introduced the participants to further information on both the theoretical level and comparable specific practices relevant to the markets under AFSA supervision.

In 2012 the Authority continued to provide its staff with the online FSI Connect training. It was the second year that AFSA used this new training alternative, which is also used by quite a large number of employees of supervisors around the world. AFSA has taken out subscriptions for ﬁve online user proﬁles. The intention is to provide new knowledge and in-depth understanding for employees across levels of AFSA staff in relation to Training session on the Life insurance organized in cooperation with MITC insurance supervision.

14 ANNUA L REPORT ‘12 In continuation of its policy for staff vocational training, AFSA provided funding for the training of its Finance Ofﬁce staff in using the Financa 05 software in late 2012.

In addition, in 2012 AFSA continued to encourage staff training by fully or partly covering the cost of specialized training, especially in those areas that contribute to the successful achievement of the institutional tasks and objectives.

Main training topics in 2012

• Consumer protection in the insurance market; • Group supervision in the area of insurance; • Main principles of insurance supervision; • Risk-based supervision; • Advanced Life insurance focusing on Life contract accounting aspects; • Supervision of the private pension market; • Supervision and audit in the securities market; • EU legislation in the area of ﬁnancial services; • Legal practice and infrastructure in the context of insurance supervision.

Internal Audit

The Internal Audit Unit was involved in the auditing of seven units in 2012, meeting its target completely. The internal audit function was still carried out by an auditing expert, who has a six-year experience in AFSA and holds a certiﬁcate as a Public Sector Internal Auditor. Based on the audit ﬁndings in 2012, 32 recommendations were given to the audited units and submitted to AFSA Board.

Archive-Protocol Ofﬁce

The AFSA ofﬁcial correspondence, which is handled by the Archive-Protocol Ofﬁce, consisted of 3,469 cases in 2012. The Authority received 2,305 replies from various public and private institutions and from stakeholders. The correspondence from AFSA to third parties—most of the cases, with over 63%—comprised initial documentation that AFSA issued to various stakeholders, with the rest being replied information to other institutions. The internal correspondence within AFSA contained 681 memos and letters.

AL BANIAN FINANC IAL SU PERVISORY AUTHOR ITY 15 1.3 Budget

AFSA budget is determined on the basis of the legal provisions in power, more speciﬁcally on Law No. 9572 of 3 July 2006 “On the Financial Supervisory Authority”. AFSA funded its 2012 budget with its own resources, as an independent institution.

In 2012 AFSA total revenues were ALL 142.93 million or 12.99% more than revenues in 2011. Nearly all revenues came from the current year operations (contributions), at the amount of ALL 142.46 million. A very small portion came from voluntary pension fund management companies and from other revenues (ﬁnes and bank interest).

The main contribution to the operational revenues came from revenues from insurance operators’ fees (95% of total revenues). Revenues from insurance operators’ fees were about 10% more than in 2011.

Table 2: Revenues Item Amount ALL

1. Operating Revenues:

1.1 Revenues from insurance market 135,235,828

1.1.1 Revenues from insurance company contributions 133,585,828

1.1.2 Revenues from licensing in the insurance market 1,650,000

1.2 Revenues from securities market and investments funds 7,230,218

1.3 Revenues from private voluntary pension fund management companies 240,076

2. Revenues from fines and bank interests 227,498

Total 142,933,620

Table 3: Expenses Item Amount ALL

1. Operating expenses: 113,166,023

1.1 Salaries, bonuses, social insurance 65,066,787

1.2 Operating expenses 48,099,236

2. Financial expenses (foreign currency revaluation at 31.12.2012 exchange rate) 430,639

3. Funds carried forward to future periods 29,336,958

Total 142,933,620

16 ANNUA L REPORT ‘12 AFSA funds had two main uses:

• Financing operational expenses; • Financing investments.

AFSA invested in purchasing assets and economic inventory at ALL 2.94 million in 2012. Investment expenses aimed at improving the technology infrastructure and maintenance with a view of increasing AFSA supervision quality in the supervised ﬁnancial markets and improving the working conditions for AFSA staff.

Total used revenues in 2012 were ALL 116.54 million (14.40% more than in 2011).

Operating expenses were the main use of revenues in AFSA, with 97.10% of total expenses. In 2012 they were executed at the amount of ALL 113.16 million, or 13.50% more than in 2011. The investment expenses in 2012 were executed at the amount of ALL 2.94 million, or 34% less than in 2011.

Under its investment plan AFSA also developed and implemented the 2012 procurement plan which contained three procurement cases, of which two cases were executed, with the rest of the needs being covered by small-value procurement.

AFSA annual ﬁnancial statements have been audited by statutory auditors since 2007, although the Law does not require such an audit. In general, the auditor’s reports state that “The ﬁnancial statements give a fair presentation, in all material aspects, AFSA

ﬁnancial position and ﬁnancial performance.” Internal Service Directorate

1.4 Changes to AFSA Regulatory Framework

In 2012 AFSA worked on amending Law No. 9572 of 3 July 2006 “On the Financial Supervisory Authority”. The amendments aim at strengthening AFSA’s supervisory and regulatory roles in the context of achieving its goals. This can be achieved by strengthening de jure independence, better combination with accountability, and adoption of legal provisions establishing mechanisms protecting the independence of the Authority in the future. The draft amendments were developed in cooperation with the group of experts from USA, France and Poland under the Financial Services Voluntary Corps (FSVC). They have also taken into consideration the comments that the World Bank had stated in its

AL BANIAN FINANC IAL SU PERVISORY AUTHOR ITY 17 Aides Memoire3 over time, the European Commission comments stated in its Progress Reports on Albania4, and the IMF comments5.

In 2012 AFSA Board adopted a series of new regulations and amendments to existing ones, in relation to institutional operation of AFSA. The most signiﬁcant ones included:

Regulation No. 90 of 18 July 2012 “Rules on the inventorying, evaluation and decommissioning of assets owned by the Financial Supervisory Authority”. The purpose of the Regulation is to strengthen the controls for the identiﬁcation, maintenance and proper management of AFSA assets.

Guideline No. 117 of 29 August 2012 “On appraising the progress and performance of the Financial Supervisory Authority employees”, which lays down the procedures and rules on appraising the progress and performance of AFSA staff.

Amendments were also made to existing Regulation No. 177 of 13 December 2011 “On the organization of research activities in the Financial Supervisory Authority”, adopted by Board Decision No. 98 of 18 July 2012. The amendments specify the method for convening the Research Board, the rules of procedure for the Research Board meetings and how its decisions are taken.

Shënim 3 WB (10 January 2007), “Albania Post FSAP NBFI Integration and Insurance Sector Supervision Technical Assistance Mission for FSA 3-15 December 2006 - Aide-Mémoire”; (10 May 2007), “Albania FSAP NBFI Integration and Insurance Sector Supervision Technical Assistance Aide-Mémoire of FSA 16-21 April, 2007 Mission”; (8 March 2011), “Aide-Mémoire of Insurance Technical Mission, November 22-26, 2010”. 4 EC, “Albania Progress Report” 2010, 2011, 2012, Chapter 9: Financial Services, Brussels. 5 IMF (2010), “Detailed assessment report on anti-money laundering and combating the ﬁnancing of terrorism”.

18 ANNUA L REPORT ‘12 Chapter 2 AFSA Activity

2.1 Regulatory Activity

In the context of improving the existing laws and approximating them with EU Directives, AFSA developed six new regulations and amended several other regulations on the supervised markets in 2012. They are also aimed at supporting AFSA objective to move to risk-based supervision. Also, efforts were made for reflecting the recommendations from other institutions and stakeholders in the Draft Law on Insurance and Reinsurance Activity. The first draft of the bill was completed in December 2011. In the first half of 2012 the bill was revised again in order to further enhance it.

Regulations in the area of insurance

The new regulations in the area of insurance were:

Regulation No. 36 of 21 March 2012 “On establishing, calculating, funding and managing the Compensation Fund, and paying claims”, which sets the rules on the establishment, calculation, ﬁnancing and management of the Compensation Fund.

Regulation No. 126 of 5 September 2012 “On the procedures for prohibiting the free use of insurance company assets”, which lays down the procedures for prohibiting the free use of insurance company assets, in order to protect insured persons, policy-holders or beneﬁciaries of insurance policies.

Guideline No. 140 of 26 September 2012 “On the list of annual and periodic statutory reporting documents for insurance and reinsurance companies”, which is applied together with the requirements of the Regulation “On the operation of the AMF In-Reg reporting system”, adopted by Board Decision No. 26 of 23 February 2011, the purpose of which is to specify the list of documents comprising the insurance company annual and periodic compulsory reporting to AFSA on its In-Reg system.

The following existing regulations were also amended:

Regulation No. 26 of 23 February 2011 “On the operation of the AMF In-Reg reporting system”, amended by Board Decision No. 141 of 26 September 2012. The amendment is related to the governing of AMF In-Reg working procedures, adding the electronic signature to them. Legal Department

AL BANIAN FINANC IAL SU PERVISORY AUTHOR ITY 19 Regulation No. 9 of 8 February 2007 “On the basis, accounting methods and ways of keeping Non-Life insurance technical provisions”, amended by Board Decision No. 61 of 25 April 2012. The amendment consisted of specifying the method to be used by company actuaries in calculating technical provisions for claims in legal proceedings.

Regulation No. 110 of 28 July 2011 “On setting the level of technical provisions for compulsory motor insurance”, amended by Board Decision No. 142 of 29 October 2012. The amendments revised the minimum time-limit applied to changing insurance premiums from six months to three months. The time-limit was revised in order to bring it in line with the legal provisions on the time-limits applied to the calculation of technical provisions.

Amendments to Guideline No. 2 of 21 November 2007 “On the procedures for inspections at ﬁnancial entities under supervision”, adopted by Board Decision No. 161 of 21 December 2012. The amendments consisted of further governing the procedure and time-limits applied to the veriﬁcation of the information received during inspections in order to reach the fairest conclusions possible. The Guideline also applies to the rest of markets under AFSA supervision.

Regulations in the area of securities

The new regulations in the area of securities were:

Regulation No. 160 of 21 November 2012 “On the conditions for the organization and operation of the multilateral trading facility”, the purpose of which is to lay down the conditions for the organization and operation of the multilateral trading facility (MTF), and the requirements to be met by its operators.

Regulation No. 50 of 21 March 2012 “On the special circumstances for the payment in securities of investment fund units”, the purpose of which is to specify the special circumstances under which investment fund units may be paid out in securities, and lay down the procedure for getting approval by the Financial Supervisory Authority.

Amendments were also made to existing Regulation No. 120 of 2 October 2008 “On licensing and supervising the Securities Exchange”, adopted by Board Decision No. 153 of 21 November 2012. The amendments consist of increasing the functions of a company operating a stock exchange granting it the additional right to operating a multilateral trading facility, and including additional entities with ownership rights in a securities exchange.

Regulations in the area of private voluntary pensions

The new regulations and the amendments to existing ones on the private voluntary pension market included:

20 ANNUA L REPORT ‘12 Regulation No. 139 of 26 September 2012 “On the calculation of the net asset value of voluntary pension funds, and information publication time-limits”, the purpose of which is to lay down the method of pension fund asset and liability valuation, pension fund net asset value calculation, and pension fund unit value calculation, and the requirements on the frequency of the calculation of pension fund net asset value.

Amendments to Regulation No. 1 of 28 January 2010 “On allowed assets, restrictions and maximum limits of pension fund investments”. The amendments were adopted by Board Decision No. 32 of 21 March 2012, and they consist of removing the time restriction in terms of deposit maturity in order to approximate our legislation with the best practice of Organisation for Economic Cooperation and Development (OECD) countries.

2.2 Licensing Activity

In exercising its licensing powers, AFSA has ensured that licensing requirements and procedures applicable to entities operating in the supervised ﬁnancial market are clear, objective and transparent, placing an emphasis on:

• Applicant’s sound financial position; • Applicant’s managerial and decision-making staff professional skills and reliability; • Applicant’s suitable governance structure design; • Submission of clear and justified financial and business plans.

Insurance Licensing Activity

The novelty in the area of licencing in 2012 was the approval of the licence for ANSIG sh.a. on 22 June 2012. The company was licenced to operate in the Non-Life insurance market.

ANSIG sh.a. was licenced after a careful review of its documentation and the follow-up steps taken by the company in line with the requirements of the provisions in power. The licencing process was in two stages.

In November 2011 AFSA Board approved the provisional licencing of the company, which was related to the compliance with the conditions required for building a business in the insurance Licensing and Monitoring Department market.

AL BANIAN FINANC IAL SU PERVISORY AUTHOR ITY 21 In the second stage, which was LICENCES ISSUED BY THE AUTHORITY completed with the granting of the • Licence to operate as an insurance company; licence in June 2012, the company • Licence to operate as an reinsurance company; complied with the obligations related • Licence to operate as a foreign insurance company branch; to the company incorporation, • Licence to operate as an insurance agent; selection of the management team, payment of the initial capital and the • Licence to operate as an insurance agency; establishment of the infrastructure • Licence to operate as an insurance broker; necessary for starting the business. • Licence to operate as an insurance brokerage company; AFSA appraised all those elements • Licence to operate as an insurance claim adjustor; carefully, paying special attention to • Authorization to operate as a Certified Actuary; the professionalism of the management • Licence to operate as an insurance adviser; team, too. The entry of a new operator • Licence to operate as a management company; in the insurance market sends a very • Licence to operate as a depositary; positive signal. This signal should be • Licence to operate as a pension fund agent; interpreted in several respects. • Licence to operate as a pension fund agency; First, it reaffirms the constant market • Licence to operate as a management company branch; development and the fact that the • Licence to operate as a collective investment undertaking with insurance market is attractive to new public offering; investors. A capital of ALL 370 million • Licence to operate as a securities brokerage company; is injected into the insurance market • Licence to operate as a stockbroker; immediately, which means additional • Licence to operate as an investment adviser; capacity for underwriting risks in the • Authorization to operate as a Certified Custodian; domestic market. • Licence to operate as a stock exchange; Second, the introduction of a new • Licence to operate as a registrar. operator will further increase the pressure on the market in terms of increasing consumer service quality. Qualitative competition always benefits consumers; however, it goes beyond this: to AFSA an increased number of market operators means more room and flexibility in employing supervision mechanisms, which directly affects consumer protection positively. The dynamics of the insurance market—as a segment of the financial market—have put this market in the constant focus of strategic investors.

Outsourcing some functions of insurance companies

For the ﬁrst time in 2012 AFSA approved the application of insurance companies “Sigma Vienna Insurance Group” sh.a., “Interalbanian Vienna Insurance Group” sh.a. and “Intersig Vienna Insurance Group” sh.a.—all subsidiaries of Vienna Insurance Group—for outsourcing several functions to a company called “VIG Services Shqipëri” sh.p.k. In February the outsourcing of the accounting and digitalization was approved, and the outsourcing of the claim handling function was approved in May.

22 ANNUA L REPORT ‘12 The outsourcing of those functions does not affect the liability of each of those companies in relation to the outsourced functions; nor does it affect their reporting obligations.

Licensing insurance practitioners

AFSA licensing activity in 2012 also continued along the lines of:

• Licensing insurance intermediaries: brokers and agents; • Licensing claim adjustors; • Authorizing insurance actuaries.

Insurance brokers

The number of insurance brokerage companies changed in 2012. Thus, two new brokerage companies were licenced last year: “Smart Brokers” sh.a. and “WVP Ndërmjetësim në sigurime” sh.a.; while the licence of “Bindi Insurance Broker” sh.a. was revoked upon its request. Meanwhile, the brokerage company “P&C Albania” sh.a. changed its name into “3BBroker” sh.a. As a result, at the end of 2012 the insurance market included seven brokerage companies, of which ﬁve operated in the Non-Life classes and two in the Life and Non-Life classes.

At the end of 2012 the number of individual brokers licenced by AFSA was 10. The following table presents detailed data on the licencing of brokers, by their status.

Table 4: Data on licenced insurance brokers (number) Brokers Total Expiry of Revocation Broker’s licensed/ Total licensees licensees at license period of licence in Status relicensed at end of 2012 end of 2011 in 2012 2012 in 2012

Legal entities 6 2 - 1 7

Natural persons 9 5 2 2 10

The business of brokerage companies consists of intermediation of such insurance products as Travel Health Insurance, Offer and Contract Security, CASCO Insurance, TPL, Green Card, Border Insurance, Fuel Insurance, Insurance against Fire, CAR Insurance and Life Insurance “Today for Future”.

Insurance agents

Insurance companies sell their insurance policies through salespersons or licensed agents. AFSA received complete information on all sales staff, and requested compliance with the criteria by any entity applying for a license as sales agent on behalf and for an insurance company.

AL BANIAN FINANC IAL SU PERVISORY AUTHOR ITY 23 At the end of 2012, the companies licenced to operate as insurance agents were: UDSA sh.p.k., “Posta shqiptare” sh.a. and NOA sh.a., while the total number of individual licenced agents was 279.

Most of the licensed or relicensed individual agents in 2012 pertained to “Sigal Uniqa Group Austria” sh.a. and Insig sh.a. UDSA sh.p.k. and its individual agents operate as intermediaries on behalf of six insurance companies: Insig sh.a., “Interalbanian Vienna Insurance Group” sh.a., Atlantik sh.a., “Sigma Vienna Insurance Group” sh.a., “Intersig Vienna Insurance Group” sh.a. and Eurosig sh.a. “Posta shqiptare” sh.p.k. and its individual agents operate as intermediaries on behalf of Insig sh.a. NOA sh.p.k. and its individual agents operate as intermediaries on behalf of “Sigal-Life Uniqa Group Austria” sh.a.

Table 5: Data on licensed agents (number)

Agents Agents newly Expiry of Total Agents Total licensees Agent’s Status relicensed in licensed in license period licensed at end at end of 2011 2012 2012 in 2012 of 2012

Legal entities 4 1 1 3 3

Natural persons 237 23 85 66 279

Claim Adjusters

In the context of contributing to the insurance claims adjustment by licenced claim adjusters, AFSA licenced ten additional claim adjusters in 2012, with the total number of licenced claim adjustors reaching 65. The following table provides data on licensed claim adjustors by type of licence and status.

Table 6: Data on licensed agents (number)

Revocation Total End of year New licenses Claim adjustors of licence licensees at 2011 2012 2012 end of 2012

1. By claim Independent 17 4 - 21 adjustor’s status Employed 38 6 - 44

Material claims 5 - - 5 2. By type Health claims 4 1 - 5 of licence Material and 46 9 - 55 health claims

Total licensed claim adjustors 55 10 65

24 ANNUA L REPORT ‘12 In 2012 the supervision focused on the activity of independent claim adjustors. To that end, the Board took a decision in March 2012 whereby it approved the reporting forms to be used by insurance claim adjustors, through which AFSA would be informed about the activity of independent claim adjustors in their capacity of representing harmed parties in court proceedings.

Insurance Actuaries

Actuaries’ role in insurance companies is essential to preparing actuarial reports, calculating insurance provisions and calculating solvency margins for insurance companies. AFSA licenced two additional insurance actuaries in 2012, with the total number of actuaries reaching 15.

Professional examinations for insurance-related professions

Regulations on the licensing criteria for the professions in the area of insurance such as insurance brokers, claim adjustors or actuaries provide that one of the licensing requirements is the successful passing of tests in the relevant areas.

In 2012 FSA organized regular tests based on various licence applications. Three examinations with applicants for insurance claim adjusting licences and three examinations with applicants for insurance broker licence were organized. The purpose of the examinations was to put an emphasis on the applicants’ professionalism so that ﬁnancial services are provided by professionals with adequate knowledge of the legislation and area of activity they operate in. Efforts were made for including reputable and experienced representatives from the academia and the market in the examination commissions.

Foreign capital in insurance companies

There were no changes in terms of the number of foreign shareholders owning shares in Albanian insurance companies in 2012. The following operate in the Albanian insurance market:

• “Vienna Insurance Group AG Wiener Versicherung Gruppe”, with its head ofﬁce in Vienna, Austria; • “Uniqa International Beteiligungs –Verwaltungs GmbH”, with its head ofﬁce in Vienna, Austria; • Albanian-American Enterprise Fund.

AL BANIAN FINANC IAL SU PERVISORY AUTHOR ITY 25 Graph 5: Capital structure, by country of origin, 2012

Albanian-American Enterprise Fund 4,20%

Albania 59,90%

Austria 35,90%

Insurance company governance

In the context of good governance of insurance companies, AFSA has aimed at achieving increased integrity, professionalism, experience and qualiﬁcations of the persons that are elected to supervision boards, management positions and internal audit committees of those companies. In 2012, the Authority approved changes or reappointments in the composition of the Supervisory Boards of three insurance companies, and approved appointments to governing bodies of four insurance companies. AFSA also approved the head of the Albanian Insurance Bureau.

Graph 6: The current governing structure of insurance companies

SHAREHOLDERS' GENERAL MEETING

SUPERVISORY BOARD

MANAGEMENT INTERNAL AUDIT

Finance Department, Actuarial Department, Underwriting Department, Claims Department ect.

26 ANNUA L REPORT ‘12 Table 7: Insurance company governance statistics 2007 2008 2009 2010 2011 2012

Average number of shareholders 6.0 4.5 4.2 4.4 4.2 3.7

Average number of supervisory board members 5.0 3.6 3.4 3.6 4.0 4.2

Average number of supervisory board members 2.0 2.8 2.7 3.1 3.5 3.7 who are not shareholders

Number of executive directors with qualified 3.0 3.0 2.0 2.0 3.0 3.0 holding over 10%

Table 8: Data in insurance company shareholders Description Number

Insurance companies 11

Total shareholders 41

Classification of shareholders by capital ownership:

under 10% 21

from 10% to 20% 6

from 20% to 33% 1

from 33% to 50% 3

over 50% 10

Classification of shareholders by country of origin:

Foreign shareholders 3

Domestic shareholders 38

Classification of shareholders by status:

Individual shareholders 32

Corporate shareholders 8

Government shareholder 1

Graph 7: Shareholder data, by qualifying holding (%)

24.39% 51.22%

under 10%

from 10% to 20%

from 20% to 33 % 7.32% from 33% to 50%

2.44% over 50%

14.63%

AL BANIAN FINANC IAL SU PERVISORY AUTHOR ITY 27 Graph 8: Shareholder data, by country of origin and status (%)

Government Foreign shareholders shareholders 7.32% 2.44% Corporate shareholders 19.51%

Individual shareholders 78.05%

Domestic shareholders 92.68%

Approval of statutory changes to insurance companies

AFSA approved a number of applications for statutory changes in 2012. They consisted of:

• New statutes, adaptation to legal amendments, or amendments to statutory articles for six insurance companies; • Statute amendments resulting from increased share capital for four insurance companies; • Statute amendments resulting from changes to the shareholder structure for two insurance companies.

Table 9: Data on statutory changes (number of companies) Reason for Statute Amendment 2008 2009 2010 2011 2012

New statute and other changes 2 2 2 6 6

Capital increase 9 4 2 4 4

Changes in the shareholder structure 2 2 5 3 2

Licensing activity in the securities market

In its meeting of 26 September 2012, AFSA Board approved the licencing of “Raiffeisen Invest Euro” under the management of “Raiffeisen INVEST Pension Fund Management Company”. The licencing of “Raiffeisen Invest Euro” means the approval of the fundamental documents of the fund, such as its prospectus and rules. Despite its similarity to “Raiffeisen Prestigj Fund” in terms of the investment objective and the instruments in which the

28 ANNUA L REPORT ‘12 monetary assets are invested, the new investment fund represents a new investment alternative in foreign currency. Albanian investors will have the option of investing their savings in ﬁnancial assets, too, mainly in Euro.

In 2012 a new operator was added to the retail securities market: “Banka Societe Generale Albania” sh.a., which was licenced to operate as a brokerage company in the market.

In June 2012 “EASY Trade Consulting” sh.p.k. was authorized to operate as an agent of a licenced securities brokerage company “Forex Capital Market LTD”, in addition to the brokerage company “AKSIONER International Securities Brokerage” sh.a., which operates as an agent of “SAXO Bank” as of January 2012. In order to monitor the operation of those companies, in November the Authority approved the licenced securities broker agent business reporting form.

The licencing activity in 2012 also including the licencing of an individual securities broker, the approval of brokerage company or fund management company managing directors, and the approval of amendments to the prospectus of “Raiffeisen Prestigj Investment Fund”.

The most active part of the securities market is the Albanian Government securities retail market. Operators in this market mainly include entities that have been licensed by AFSA. The licensed banks are: “Raiffeisen Bank” sh.a., “Intesa SanPaolo Bank” sh.a., “Banka Kom- bëtare Tregtare” sh.a., “Alfa Bank Albania” sh.a., “Banka Credins” sh.a., “Tirana Bank” sh.a., “First Investment Bank” sh.a. and “Banka Societe Generale Albania” sh.a.

Table 10: Entities licensed to operate in the securities market (number)

Supervised Entities 2010 2011 2012

Securities brokerage companies 12 13 13

Individual brokers in brokerage companies 16 17 18

Custodians of Republic of Albania Government securities 7 8 8

Securities registrars 1 1 1

Organized securities markets 1 1 1

Approval of the private offer of bonds

In February, September and December 2012 AFSA approved the respective prospectuses submitted by “Banka Credins” sh.a. as an issuer of bonds in a private offer.

AL BANIAN FINANC IAL SU PERVISORY AUTHOR ITY 29 Private Offering of Bonds

Private offering of bonds means the issuance of bonds and the invitation to subscribe to them, only addressed to institutional investors, shareholders or employees of a company but no more than 100 external investors which have been addressed directly by the issuer.

In the case of a private offering of bonds, the issuer communicates with potential investors by sending his offer (prospectus) to the investors’ addresses. Prior to being sent to any potential investors, prospectuses are submitted to AFSA for its approval.

Licensing activity in the private voluntary pension market

The number of private voluntary pension market operators did not change in 2012. Three pension fund management companies and three managed funds operate in this market.

In the private voluntary pension market AFSA licencing focus was on the approval of prospectus amendments, template contract amendments or other amendments, which are listed below:

• Prospectus amendments in the case of “Raiffeisen Voluntary Pension Fund”, “Sigal Voluntary Pension Fund” and “SiCRED Pensions Voluntary Pension Fund”; • Template contract amendments; • Changes in the shareholding structure and capital increase of Sigal-Life sh.a., a pension fund management company; • Change of the depositary of SiCRED sh.a., a pension fund management company.

2.3 Supervisory activity

The supervision process can be deemed as a cycle which begins with the monitoring and analysis of ﬁnancial information and other data that are submitted to AFSA by supervised entities. Such data include independent auditor’s reports and authorized actuary’s reports, and other third party information. The collected information is analysed and the results of that analysis are used to plan on-site inspections and make interventions where necessary through measures provided for by the respective laws. The supervision cycle takes place in line with the legal framework in power and AFSA Strategy and procedures.

30 ANNUA L REPORT ‘12 Based on the legislation in power in 2012 AFSA carried out the supervision and analysis of the respective markets. Regarding the insurance industry, the ﬁnancial position, results and technical indicators of the insurance market, in general, and insurance companies, in particular, were examined. In the course of exercising the supervision function, priority was given to the enhancement of the process of supervising the market and the safeguarding of Supervision and Correction Department policy-holders’ interests.

For more effective supervision

At the end of the “Towards More Effective Supervision” Project, which was funded by the First Initiative and assisted by the World Bank and the goal of which was to strengthen the insurance market supervision methodology, the Authority presented the Risk-Based Supervision Manual.

In a risk-based supervision system the idea is to design a risk profile, which represents the assessment that the Supervisory Authority makes of the company in relation to its specific risks within the insurance industry context. In addition to being a system that identifies and measures risks, it also includes the stages of intervention by the Supervisory Authority at various risk levels, which are intensified and strengthened as an insurance company risk level rises.

The two main pillars of the new risk-based supervision methodology are the Draft Law on Insurance and Reinsurance and AMF In-Reg Reporting System. The Draft Insurance Law aims at establishing the required legal provisions for the implementation of the new methodology. AMF In-Reg Reporting System is a reporting platform and the main channel that supervised entities use to report to the Authority. In the long run, the System will be the main platform supporting risk-based supervision.

In the context of gradually implementing the new supervision methodology, AFSA Board adopted Decision No. 140 of 26 September 2012, laying down the guidelines on mandatory periodic insurance company reporting on AMF In-Reg System.

In addition, with the FSVC Project technical assistance AFSA is working to establish the architecture of an early warning system, which will make it easier to prioritise and manage regulatory resources towards those insurers and activities requiring greater regulatory attention.

Off-Site Financial Analysis of the Insurance Market

The in-depth analysis was carried out through an assessment of insurance company financial position and technical and financial results based on the periodic reporting data that those companies submit to AFSA, additional information submitted by those companies or other institutions, and the findings from on-site inspections.

AL BANIAN FINANC IAL SU PERVISORY AUTHOR ITY 31 During the in-depth financial analysis special attention is paid to the supervision of a few technical and financial indicators of insurance companies. AFSA assesses whether technical provisions representing liabilities to insured persons are adequate and are covered at no less than their gross value with adequate assets at any point in time. In addition, AFSA assesses capital adequacy and assets covering technical provisions, indicators which have to be in compliance with the legal basis in power. Failure to comply with the legal requirements on those indicators is a violation of risk management rules.

AFSA constantly monitored the compliance with the statutory guarantee fund requirements and investment requirements. Currently, insurance companies own a guarantee fund invested in “earmarked deposits” that are one-year deposits with commercial banks and Treasury Bills in accordance with the law. The total market Guarantee Fund is ALL 4.69 billion. The insurance market was well-capitalized as of 30 September 2012, which is demonstrated by a capital adequacy indicator of 128.39%.

Table 11: Structure and dynamics of assets and liabilities on the insurance market6

Item 31.12.2010 31.12.2011 31.12.2012

structure (in %)

Deposits 50.84 45.90 41.38

Land and buildings 10.23 9.32 9.56

Shares and participation 9.31 13.65 12.90

Treasury Bills 4.91 4.89 6.44

Receivables 8.45 8.66 10.02

Other assets 16.27 17.58 19.70

Total Assets 100.00 100.00 100.00

Gross technical provisions 34.21 39.44 40.14

Other liabilities 8.06 7.79 9.72

Equity 57.73 52.77 50.14

Total Liabilities and Equity 100.00 100.00 100.00

Note: 6 The balance sheet information in the Table covers both Non-Life and Life insurance companies. Insurance companies prepare their ﬁnancial statements in accordance with the International Financial Reporting Standards (IFRSs) and the AFSA regulatory framework.

32 ANNUA L REPORT ‘12 Item 31.12.2010 31.12.2011 31.12.2012

dynamics (in %) previous year = 100

Deposits 113.35 96.94 96.43

Land and buildings 116.45 97.82 109.80

Shares and participation 125.36 157.41 101.10

Treasury Bills 181.14 107.04 140.90

Receivables 111.61 110.03 123.82

Other assets 87.38 116.07 119.86

Total Assets 111.16 107.37 106.98

Gross technical provisions 99.07 123.76 108.89

Other liabilities 100.15 103.76 133.42

Equity 121.85 98.16 101.65

Total Liabilities and Equity 111.16 107.37 106.98

The analysis of the ﬁnancial position of insurance companies as of 31.12.2012 showed the following:

Compared with 2011, insurance market assets increased by ALL 1.35 billion (6.98%). Investment in bank deposits was 41.38% of total assets, followed by property investment at 9.56% of total assets. Increased market assets are reﬂected in increased investment in Treasury Bills, land and buildings, other assets, as well as receivables. In the liabilities column for the period ending at 31.12.2012, the Gross Technical Provisions increased by 8.89% (ALL 679.3 million) compared with 31.12.2011.

Table 12: Insurance market data (in million ALL)

Period 2008 2009 2010 2011 2012

Total assets 15,525 16,227 18,039 19,368 20,720

Life 1,841 2,919 2,473 2,884 3,207

Non-Life 13,684 13,308 15,556 16,484 17,513

Total Investment 11,182 10,830 11,855 12,839 14,209

Life 1,389 2,101 1,832 1,992 1,996

Non-Life 9,793 8,729 10,023 10,847 12,213

Gross technical provisions 5,138 6,229 6,171 7,638 8,317

Life 233 361 644 853 942

Non-Life 4,905 5,868 5,527 6,785 7,375

AL BANIAN FINANC IAL SU PERVISORY AUTHOR ITY 33 Total Equinty 8,832 8,546 10,413 10,221 10,389 Life 1,541 1,754 1,764 1,791 1,899 Non-Life 7,291 6,792 8,649 8,430 8,490 Total Subscribed Capital 6,031 5,787 6,684 7.607 8,617 Life 1,248 1,097 1,278 1,283 1,284 Non-Life 4,783 4,690 5,406 6,324 7,333 Total Foreign Investment 2,924 1,985 3,587 3,472 3,597 Life 460 355 347 380 398 Non-Life 2,463 1,630 3,240 3,092 3,199 Net Earned Premiums 5,543 6,092 6,680 6,792 6,736 Life 459 496 636 819 823 Non-Life 5,084 5,596 6,044 5,973 5,913

Financial Indicators (IRIS)

In line with the aim of AFSA efforts for establishing a stable ﬁnancial market and with the goal to move towards risk-based supervision, the early warning system continued to be implemented in 2012.

So, the analysis of the ﬁnancial position of the insurance industry and Non-Life Insurance companies also uses World-Bank-recommended early warning indicators, which have been adapted to Non-Life Insurance in Albania.

IRIS ﬁnancial indicators contribute to the timely identiﬁcation of issues that may lead to the deterioration of one or several parameters of market operators.

Table 13: IRIS Financial Indicator Value Ranges (in %) Limit Ratio 31.12.2010 31.12.2011 31.12.2012 MIN MAX

Premium growth rate 2.73 - 1.06 10.94 -40 40

Net retention ratio 84.37 81.61 76.89 40 80 Net claims ratio 32.86 42.97 34.27 50 80 Expense ratio 62.28 73.98 62.78 25 50 Combined ratio 95.14 116.96 97.05 85 105 Investment income ratio 8.04 7.67 6.37 4 8 Capital ratio 69.83 57.00 55.30 20 50 Technical provisions ratio 96.51 66.78 73.43 10 30 Solvency ratio 439.5 333.30 346.00 150 300

34 ANNUA L REPORT ‘12 Premium growth rate in the insurance market is within the speciﬁed limits. This rate was 8.95% at 31.12.2012 vis-à-vis the previous year.

Net retention ratio in the Albanian Non-Life Insurance market was 76.89%, while internationally recommended ratios vary from 40% to 80%.

The net claims ratio in the Albanian Non-Life Insurance market was 34.27%. This ratio was lower if compared with the same period in the previous year.

The expense ratio fell to 62.78% in 2012. The biggest share of expenses was taken by operating expenses of the Non-Life segment 65.78%.

The ﬁnancial ratios that are described above are illustrated in the following graphs in relation to Non-Life Insurance companies for the period ending at 31.12.2012.

Graph 9: IRIS Indicators 2012

Premium Growth Rate Net Retention Ratio

100.00% 90.00% 50.00% 80.00% 70.00% 40.00% 60.00% 30.00% 50.00% 40.00% 20.00% 30.00% 20.00% 10.00% 10.00% 0.00% 0.00%

-10.00% INSIG SIGMA SIGAL ANSIG ALBSIG INSIG SIGAL ANSIG -20.00% SIGMA INTERSIG EUROSIG ALBSIG ATLANTIK EUROSIG ATLANTIK INTERSIG -30.00% INTERALBANIAN -40.00% INTERALBANIAN

-50.00%

Net Claims Ratio Expense Ratio

90.00% 80.00% 90.00% 80.00% 70.00% 70.00% 60.00% 60.00% 50.00% 50.00% 40.00% 40.00% 30.00% 30.00% 20.00% 20.00% 10.00% 10.00% 0.00% 0.00%

INSIG INSIG SIGMA SIGAL ANSIG SIGMA SIGAL ANSIG ALBSIG ALBSIG INTERSIG EUROSIG INTERSIG EUROSIG ATLANTIK ATLANTIK

INTERALBANIAN INTERALBANIAN

Combined Ratio Operating Ratio 120.00%

100.00%

80.00%

120.00% 60.00% 100.00% 80.00% 40.00% 60.00% 40.00% 20.00% 20.00%

0.00% 0.00%

INSIG INSIG SIGMA SIGAL ANSIG SIGMA SIGAL ANSIG ALBSIG ALBSIG INTERSIG EUROSIG EUROSIG ATLANTIK ATLANTIK INTERSIG

INTERALBANIAN INTERALBANIAN

AL BANIAN FINANC IAL SU PERVISORY AUTHOR ITY 35 On-site inspections on supervised entities

Onsite inspections help gather detailed information which is used to assess the current and expected ﬁnancial activity of the supervised entity.

More speciﬁcally, the objective of onsite inspections is to assess the current and expected solvency of a company comparing it with its risk proﬁle and risk-bearing capacity and identify any problems that might affect a company’s ability to settle long-term obligations to consumers.

In the context of achieving inspection objectives, the inspection staff may interview managers and responsible persons in relation to the following issues:

• Current business; • Business strategy; • Any new developments since last inspection; • Remedies of shortcomings, problems or violations that previous inspections have found, and their implementation; • Efﬁciency of the internal control system; • Services, products, business extension, new investments; • New computer systems intended to comply with the regulatory requirements in power.

Unplanned on-site inspections are carried out if AFSA has indications of ﬁnancial problems in the supervised entities, signiﬁcant changes in the management of an entity, changes in the structure of an entity (merger, etc.), portfolio transfer, complaints from policy-holders, etc. The following table shows inspections carried out in supervised entities.

Table 14: Inspections carried out, by year (number)

Description 2011 2012

Planned full inspections 10 16

Planned topical inspections 8 9

Unplanned topical inspections 1 3

Joint inspections 3 3

Total inspections 22 31

36 ANNUA L REPORT ‘12 Inspections at supervised entities

Inspections in insurance companies

Inspections in insurance companies focused on the verification of the financial statement elements on the basis of issues identified through supervision analysis and reports and other intelligence that need further and immediate verification.

AFSA conducted full and planned onsite inspections in all insurance companies (Life and Non-Life) in 2012. Even last year the inspection scope focused not only on the inspection of the documentation in companies but also on the review of topics related to the supervision shift to risk-based supervision. The inspections aimed at:

• Verifying the insurance company ﬁnancial statement elements for 2011 and the ﬁrst quarter of 2012;

• Verifying the consistency of insurance company internal policies and procedures against the ﬁeld practice in relation to insurance underwriting, and risk bearing limits, speciﬁed by type of insured product;

• Verifying claims in court proceedings, focusing mainly on health claims, and insurance company policies for handling them;

• Verifying the implementation of legal requirements in relation to claims adjustment and management, provisioning policies and other reinsurance-related aspects;

• Analysing liabilities that insurance companies underwrote in 2011 in order to identify risk management in terms of underwritten risks, reinsurers’ payments and their inclusion in the calculation of reinsurers’ reserves;

• Verifying the implementation of AFSA inspection report recommendations in relation to the Internal Audit Committee role in evaluating an insurance company’s compliance with the legislation in power and a company’s internal policies and procedures;

• Verifying the effectiveness of information systems of insurance companies in relation to the employees involved in the information system management of insurance companies and the investment plans of those companies in relation to information technology;

• Verifying the implementation of Board decisions and laws and regulations in power.

The ﬁndings established by the inspections were communicated to insurance companies. On their basis AFSA gave recommendations in relation to:

AL BANIAN FINANC IAL SU PERVISORY AUTHOR ITY 37 • Risk management by insurance companies;

• Adjustment and handling of claims in judicial review;

• Reporting to the Authority the information required by the legal requirements in power;

• Assessment of Internal Audit Committee responsibilities in relation to the effectiveness of internal controls, internal audit functioning and exercise and the quality of internal audit;

• Enhancement of technological policies, procedures and standards related to the security of information systems.

Inspections in private voluntary pension funds and collective investment undertakings

In the context of effective management of voluntary pension funds and collective investment undertakings’ assets, AFSA conducted full onsite inspections in voluntary pension fund management companies and their depositaries. The inspections covered the period from initial licencing of those companies till the last ﬁnancial period on which those companies had reported to the Authority. In compliance with the requirements of Law No. 10197 of 10 December 2009 “On Voluntary Pension Funds” and Law No. 10198 of 10 December 2009 “On Collective Investment Undertakings” the inspections focused on the following:

• Veriﬁcation of contracts and prospectuses of pension funds and collective investment undertakings;

• Veriﬁcation of current contracts between depositaries and management companies;

• Information on investment policies, types of investment of pension funds and collective investment undertakings;

• Information on internal rules of operation of management companies;

• Veriﬁcation of procedures for the calculation of voluntary pension fund net asset value and unit price;

• Veriﬁcation of procedures for the calculation of net asset value per unit or share of collective investment undertakings and the frequency of the determination of that value;

• Information systems that are used by management companies and depositaries to calculate the voluntary pension fund net asset value and unit price, and net asset value per unit or share of collective investment undertakings;

• Implementation of the procedures for a fund member’s asset transfer from one pension fund to another;

38 ANNUA L REPORT ‘12 • Veriﬁcation of early withdrawal contracts;

• Organization of the internal audit and risk management function;

• Veriﬁcation of transactions with related parties.

The ﬁndings established by the inspections were communicated to private voluntary pension fund management companies. On their basis AFSA gave recommendations in relation to:

• The functioning of information systems that enable the accurate calculation of voluntary pension fund net asset value and unit price;

• Daily reconciliation of voluntary pension fund net asset value and unit price between depositaries and pension fund management companies;

• Monthly communication of pension account balance and unit prices to pension fund members.

The conclusions and recommendations drawn by the inspections were helpful in the analysis of the ﬁnancial position of voluntary pension fund management companies and the collective investment undertaking assets in the respective periods.

Joint inspections

In the framework of its cooperation with the Bank of Albania, AFSA conducted a joint thematic inspection of the banking system in 2012, to verify:

• Guarantee and credit contracts issued by insurance companies, in order to verify the aggregate exposure of insurance companies in relation to those products;

• All insurance company earmarked monetary assets deposited in banks for safekeeping during the year;

• Bank transaction data on sold compulsory motor insurance policies reported to AFSA under the implementation of the project on the integration of registration of policies sold through the banking system.

A joint inspection with Traffic Police forces of Durrës, Elbasan and Tirana was carried in 2012. The inspection followed the action plan of 29 September 2011 under the Joint Order issued by the Directorate General of State Police and the Financial Supervisory Authority. The inspection scope was compliance with the provisions of Law No. 10076 of 12 February 2009 “On Compulsory Insurance in the Transport Sector”, and identification and verification of motor vehicles:

AL BANIAN FINANC IAL SU PERVISORY AUTHOR ITY 39 • Without compulsory motor insurance policies;

• With irregular compulsory motor insurance policies that had not been reported to AFSA online electronic register of compulsory motor insurance sales in real time.

The inspection found several irregularities in terms of compulsory data reporting to AFSA Online Electronic Register of Compulsory Motor Vehicle Insurance. In addition, 0.65% of inspected vehicles were found without compulsory MTPL insurance.

AFSA will continue its cooperation with the Trafﬁc Police Department with a view to protecting consumers and contributing to increased national road safety.

Other on-site inspections

AFSA inspected the Albanian Insurance Bureau (AIB) in relation to its activity in 2009-2011 in 2012.

The inspection focused on:

• Supervising AIB activity in the context of complying with the legal provisions related to the handling of claims under the Compensation Fund, and the subrogation claim ﬁling and collection procedures;

• Compliance with the legal requirements related to the management of the Green Card Guarantee Fund and its use in the case of failure to fulﬁl AIB (insurance company) member obligations;

• Cases of failure to fulﬁl the ﬁnancial obligations that those members have towards AIB or foreign companies, as reported by the Council of Bureaux;

• Handling of claims where the offenders are foreign-licence-plate vehicles, and compliance with the Internal Regulation of the Council of Bureaux on the treatment of those cases.

The inspection found the following issues:

• Delays in excess of legal time-limits in the payment of claims pertaining to the Compensation Fund by insurance companies;

• Delays in, and in some cases failure to ﬁle, subrogation claims against parties causing accidents who were not insured on the day of the accident;

• Accentuated shortcomings in the monitoring of subrogation collection from won court cases.

40 ANNUA L REPORT ‘12 The Albanian Insurance Bureau paid ALL 878,647,198 for 1,625 claim cases on behalf of the Compensation Fund from 2001 till 2012. In the same period the Bureau ﬁled only 841 subrogations for ALL 411,881,833, with only 197 cases being collected for ALL 27,378,352, which is about 3% of paid-outs.

Based on the inspection ﬁndings, in the context of improving the situations, AFSA also proposed administrative measures against AIB and insurance companies so that they better and duly fulﬁl all AIB functions.

Corrective and administrative measures

The purpose and goal of the Authority is to protect consumers, strengthen their conﬁdence in AFSA role, and ensure, through preventive and corrective administrative measures, the prevention of any negative phenomena occurring in the activities of supervised entities.

Through the preventive and corrective measures against supervised entities. AFSA has aimed at anticipating and preventing problems in the supervised markets. This has led to improvements in the markets. The measures were taken based on onsite inspections, desk reviews, information inquiries or filed complaints. The Authority has always shown impartiality and transparency in the taking of those measures, which always reflect the findings from the supervision.

The Authority has made careful efforts for identifying the risks by taking the relevant measures, with a view to implement them in the day-to-day practice. The ﬁndings included violations of legal provisions regarding ﬁnancial stability, risk management rules, accurate and timely reporting, organization of internal controls, handling of claims, etc.

AFSA also monitored the activity of claims adjustors in 2012, analysing issues related to the exercise of this activity in practice. In order to further regulate this activity, AFSA organized training events for independent claim adjustors, and adopted decisions standardizing the method of reporting and unifying the practices of claim adjustment acts.

Subject to the identiﬁed issues, AFSA made constant efforts for sensitizing the judicial system of the regulatory framework, implementation legislation and instructions it had adopted.

The measures taken against the supervised entities had an impact on the improvement of the ﬁnancial position of some of the entities, and on risk reduction. In those cases where

AL BANIAN FINANC IAL SU PERVISORY AUTHOR ITY 41 the situation worsened or where its recommendations were neglected, AFSA escalated its preventive and corrective measures.

At the end of the supervision process, AFSA took eight decisions on administrative measures, followed up by monitoring of their implementation. One of the measures was appealed against in court.

AFSA was a litigation party in 17 court cases in 2012. Ten court cases were appealed in 2007-2011 and were still pending, and seven other court cases are appeals ﬁled in 2012. The cases appealed in 2012 were related to six decisions that AFSA took in December 2011 for revoking claim adjustor licences. Only one AFSA decision on imposing a ﬁne in 2012 was appealed.

Legal provisions on administrative measures

Law No. 9267 of 29 July 2004 “On the Activity of Insurance, Reinsurance and Intermediation in Insurance and Reinsurance,” lays down the following administrative measures:

• Order to eliminate noncompliance; • Corrective measures; • Financial plan; • Fine on the entity; • Fine on the responsible staff; • Revocation of licence; • Temporary receivership; • Liquidation.

Law No. 10076 of 12 February 2009 “On Compulsory Insurance in the Transport Sector” lays down a series of administrative measures in relation to compulsory insurance business of insurance companies. The administrative measures include sanctions against insurance companies, insurance company responsible persons, the Executive Director of the Albanian Insurance Bureau (AIB), and AIB responsible persons.

In addition, Law No. 10076 of 12 February 2009 lays down clear administrative measures with regard to claim procedures and time-limits (Article 12). In case of infringement of this Article, the Law provides the following for insurance companies:

• Disclosure by the company (at its own expense) of information on wrong cases; • Withdrawal of approval for members of governing bodies; • Provisional or permanent withdrawal of the relevant licence.

Law No. 9572 of 3 July 2006 “On the Financial Supervisory Authority” provides for administrative sanctions against any persons, members or shareholders of a legal entity preventing the Authority or its structures or employees from exercising the powers laid down in the legislation in power.

42 ANNUA L REPORT ‘12 Table 15: Administrative measures imposed by AFSA, 2012 (number)

Analysis of financial Inspection at Inspection at Albanian Description of measure condition insurance company Insurance Bureau

Board Decisions 3 4 1

Orders to eliminate 3 noncompliance

Corrective measures 1 4 1

Fine 1

Warning 1

Pursuant to the insurance law, AFSA made interventions by taking administrative measures which aimed at preventing and disrupting legal violations and their consequences and correcting them.

Table 16: Court cases related to AFSA administrative measures, 2012 (number)

Concluded Supreme Court Court of Appeal District Court

3 6 6 2

Albanian Insurance Bureau (AIB)

AIB is a not-for-proﬁt legal entity composed of all insurers that have been licenced to provide compulsory motor insurance. It is the national representative on the Council of Bureaux (International Association of National Motor Insurers' Bureaux) and is responsible for all obligations deriving from membership in the Green Card system.

AIB role consists of the following: • It represents its members in its relations with international organizations in the area of compulsory motor insurance; • It ratifies agreements with other counterpart Bureaux; • It carries out the functions of a processing, paying and servicing bureau, in accordance with the provisions laid down in the Internal Regulation of the Council of Bureaux; • It managed the Compensation Fund and the Green Card Guarantee Fund; • It collects and processes statistical data on compulsory motor insurance; • It supplies its Members with the International Insurance Certificate (Green Card), as per the format specified by the Council of Bureaux; • It cooperates with other government structures on issues related to compulsory insurance in the transport sector.

AL BANIAN FINANC IAL SU PERVISORY AUTHOR ITY 43 In 2012, the Authority gave priority to monitoring the obligations of insurance companies toward the Bureau in terms of financing the AIB Compensation Fund, AIB budget, and the payment of any claims under the Compensation Fund, and the fulfilment of financial obligations under the membership in the Green Card system.

Compensation Fund The purpose of the Compensation Fund is to pay out economic and non-economic claims related to damages that have been caused in the territory of the Republic of Albania in the course of using an uninsured or unidentiﬁed vehicle and in those cases where an insurance company has gone bankrupt or has been wound-up. It is established by:

• Annual contributions from insurance companies operating in the market of compulsory motor insurance; • Collections in the form of reimbursement of damages to the Bureau from liable persons; • Fines imposed on vehicle owners who have not bought out compulsory insurance policies; • Other sources that are not prohibited by law.

Since delays in terms of fulfilment of those obligations and payments by the companies were identified in 2012, and based on the fact that the Fund had constantly increased, the Authority took several decisions on the amount of Compensation Fund contribution in 2012, in relation to additions to the Fund and the method of its financing by the insurance companies.

Pursuant to Article 45 of Law No. 10076 of 12 February 2009 “On Compulsory Insurance in the Transport Sector”, AFSA approved the amount of the Compensation Fund at ALL 150,000,000 in 2012. In the same year, after determining that the amount of the Compensation Fund for 2012 was not sufﬁcient, in fulﬁlment of its legal obligations AFSA approved a supplement of ALL 100,000,000 to the Fund.

Insurance companies have fulﬁlled their funding obligations under the Compensation Fund as approved by AFSA. While the total obligation of ALL 250 million was entirely settled by the companies in 2012, the situation of unpaid claims pertaining to the Compensation Fund is still not good. The amount of approved and unpaid claims under the Fund at 31.12.2012 was ALL 459,794,942.

Following such a situation in the Bureau, AFSA took a number of steps toward improving the situation in relation to the Compensation Fund. The Authority asked insurance companies to submit their proposals for the Compensation Fund in 2013, and maintain a Compensation Fund reserve up to the total amount of unpaid approved claims carried forward from previous years.

44 ANNUA L REPORT ‘12 Pursuant to Article 42 of Law no. 10076 of 12 February 2009 “On Compulsory Insurance in the Transport Sector” AFSA supervises the Albanian Insurance Bureau

Scope of Supervision: • Guarantee ﬁnancial liabilities under membership in the Green Card system; • Implement legal obligations related to claims under the Compensation Fund; • Implement other legal obligations related to AIB activity.

Supervision is carried out through: • AIB periodic reporting on: - financing, investing and managing the Compensation Fund; - financing, investing and managing the Green Card Guarantee Fund; - financing, investing and managing the AIB Budget; • Thematic inspections.

2.4 Information Technology

AFSA IT-related activities in 2012 focused on the development of service infrastructure integrated with the IT systems, especially in the context of inter-institutional cooperation and projects with international partners.

AFSA developed systems to meet market supervision needs, respond to the needs of market operators, and protect consumers, and activities for the designing, maintaining and improving of the AFSA internal IT structure. On the basis of that goal, constant management of IT infrastructure, equipment, applications, database, and IT security and constant IT help for AFSA staff were ensured.

In 2012 a system was designed and built to combine the existing infrastructure with the verification in real time of compulsory motor insurance by the Directorate General of State Police finalized with the use of that data on the E-Gjoba (electronic system of fines) in real time. The system was implemented under one of the most important topics of the Memorandum of Understanding on Information Exchange related to Compulsory Motor Insurance, which was concluded between AFSA, the Ministry of Interior and the Ministry of

Public Works and Transport. Research, IT and Statistics Department

AL BANIAN FINANC IAL SU PERVISORY AUTHOR ITY 45 In the context of the inter-institutional cooperation with the Directorate General of Road Transport Services, there is a connection in real time with the national motor vehicle register. The services mentioned above are the outcome of the constant cooperation with the National Agency for Information Society (AKSHI).

National Compulsory Motor Insurance Database Centre

In addition to ensuring the sustainability of electronic registers, structural changes were made in 2012 in order to optimize the component applications and increase service sustainability.

In cooperation with the World Bank in the framework of the Road Ahead for Albanian Motor TPL Market Project, the IT base was implemented in 2012 which will enable the correcting of compulsory motor insurance policy data in order to adopt risk-based evaluation and supervision and enable the Bonus-Malus system.

Company insurance data are expected to be displayed in the ﬁrst months of 2013, on the basis of which insurance companies can calculate their tariffs relying on more complete information on vehicles, owners and Bonus-Malus certiﬁcates for each driver. Under this component AFSA will cooperate with the market for the implementation of the Bonus- Malus system.

The National Compulsory Motor Insurance Database Centre was built by AFSA through its IT Department in cooperation with insurance companies. It consists of:

• The Online Electronic Register of Compulsory Motor Insurance, which is a reporting platform that is used to identify TPL, Green Card and Border Insurance policies in real time. The Electronic Register has been used and maintained by AFSA since December 2007;

• The Compulsory Motor Insurance Claim Register, which is a reporting platform for claims covered by compulsory motor insurance. In order to enable the third stage of the Project—establishment of the Bonus-Malus system—the Claim Register was completed with claim historical data as of 1 January 2006. The Claim Register has been used and maintained by AFSA since August 2009.

46 ANNUA L REPORT ‘12 Information Management System

In the context of moving toward e-reporting by supervised entities, AFSA has already started operating the AMF In-Reg system. The system was developed with ﬁnancial support from the European Bank of Reconstruction and Development (EBRD).

The AMF In-Reg system consists of a web-based reporting platform, through which operators from supervised entities report the required data to the Authority electronically online.

The IT Department, which is part of the working group managing the system, took an active part in the process of implementing and enhancing the functions of the system and designing the new parts of the system. The latter are related to both the reporting forms that are ﬁlled in by supervised entities and the analytical reports that are based on the data collected 2011 through the reporting forms. annual report

The information management system is used and maintained by AFSA. The system is also used by the reporting companies.

Consumer Helpline

The Consumer Helpline System automatically processes phone calls to the consumer helpline toll-free number 0800 6969 and the phone number +355 4 2269329 that is published on AFSA website.

The System gives voice automated information and enables interaction with the relevant structures in AFSA (by voice, email or ofﬁcial website), in addition to monitoring by Consumer Care managers in general and in speciﬁc cases. There were over 400 incoming phone calls in the system in 2012.

Consumer SMS Support System

The Consumer Assistance through SMS Service was implemented and operated in 2012. The system, which was designed in the previous year and was put into operation in 2012, will help consumers with faster service provision.

AL BANIAN FINANC IAL SU PERVISORY AUTHOR ITY 47 2.5 Institutional Cooperation

Cooperation with domestic institutions

In line with the mission of the Financial Stability Advisory Group (FSAG), the Authority, as a member of that body, cooperated with the Bank of Albania, the Ministry of Finance and the Deposit Insurance Agency for further formalizing cooperation with them and assessing the supervised financial markets. In January 2012 a memorandum of understanding among those financial institutions was signed with WB support. The Memorandum identifies a number of specific objectives and enables better alignment of the work of authorities in exercising their role for maintaining financial system stability. The cooperation will also be based on the principles of balanced and proper financial system development, prevention of systemic risks, proper identification of responsibilities, regular exchange of information and joint cooperation for sustainable solutions to situations. FSAG agenda for 2012 focused, inter alia, on the revision and improvement of the legal framework in order to develop financial markets and institutions, develop special action plans, assess systemic risks, maintain and improve human, technical and financial capacities in each institution.

AFSA also had close cooperation with the Ministry of Interior and the Ministry of Public Works and Transport. In the framework of cooperation and the agreement concluded earlier on compulsory motor insurance, AFSA signed a cooperation agreement with the Directorate General of Road Transport Service in June 2012. The agreement will enable mandatory insurance law enforcement, accurate identification of vehicles circulating in the Republic of Albania and provision of those vehicles with the required legal documentation, reduced number of uninsured vehicles, joint inspections and constant supervision of the circulation of motor vehicles.

The cooperation with the Bank of Albania was constant and very fruitful in the context of achieving common ﬁnancial regulatory and supervisory goals. AFSA had a constant exchange of information with the Bank of Albania in 2012 for supervisory and statistical purposes, and joint inspections and expert meetings were conducted with successful results in fulﬁlment of regulatory functions of both institutions.

The cooperation with the Competition Authority was even more necessary in 2012 in the context of the liberalization of the compulsory motor insurance market. In the meetings and constant communications at both management and expert level, both institutions discussed the coordination of joint efforts so that consumers benefit from a financially sound market functioning in line with free competition rules.

48 ANNUA L REPORT ‘12 The regular reports and contacts between AFSA and the Ministry of European Integration continued in 2012. In its reports AFSA described the progress made in the area of legislative and implementation activities within the timeframes laid down in the National SAA Implementation Plan, and the concordance with the Acquis of the legal acts adopted in the area of non-banking financial market. More specifically:

• Reporting to the European Community—through the Ministry of Integration—with regard to legislative developments, measures, projects and institutional capacities;

• Reporting on legislative developments, measures, projects and institutional capacities in the framework of the preparation of Republic of Albania Progress Report under the Questionnaire chapters to which AFSA contributed, and constant reporting in relation to the implementation of the EC Progress Report recommendations;

• Annual reporting on the developments in the insurance, securities or private voluntary pension markets, which are supervised by AFSA;

• Reporting in the framework of the preparation of the Stabilization and Association Committee report and the EU-Albania Subcommittee on the Internal Market and Competition meeting;

• Updated periodic reporting on the latest developments in the supervised financial markets in the context of the Action Plan on Addressing the Recommendations of the EU-Albania Subcommittee on the Internal Market and Competition;

• Reporting in relation to the updating of AFSA action plan under the recommendations in EC 2010 Analytical Report and 2011 Progress Report.

• Periodic reporting on the implementation of the measures laid down in the National SAA Implementation Plan 2012-2015, in relation to Chapter 9 and the Economic Criteria.

In 2012 AFSA applied for receiving technical assistance from European Union programmes under the TAIEX instrument (Technical Assistance and Information Exchange). The applications were successful, and AFSA is going to receive technical assistance through ﬁve expertise missions in 2013. The main areas of assistance that AFSA will receive are related to legislation approximation with European directives on compulsory motor insurance, further raising of public awareness of private voluntary pension system, the establishment of e central securities depositary, insurance group supervision and risk-based supervision of private voluntary pension funds.

AL BANIAN FINANC IAL SU PERVISORY AUTHOR ITY 49 Cooperation with international institutions

The alignment of the supervised financial market regulatory legislation with European Union directives and the latest international trends has been one of the most important goals in AFSA activity. The achievement of those goals has also benefited from the constant communication with homologue institutions. The active participation in events organized by international bodies and in the various regional initiatives has contributed to the reflection of best practices in the regulatory initiatives that AFSA has taken.

Membership in International Organizations

International Association of Insurance Supervisors (IAIS)

AFSA has been a member of the International Association of Insurance Supervisors (IAIS) since 2001, and follows the process started by IAIS on the signing of the Multilateral Memorandum of Understanding (MMoU) with great interest. This is an agreement on cooperation and information exchange among IAIS Members, in order to set the minimum standards for strengthening cross-border supervision of insurance companies. Participation in this multilateral agreement is an important regulatory tool ensuring sound supervision of the insurance market, and AFSA considers the signing of the Memorandum with IAIS to be an important strategic step in its agenda. AFSA has utmost commitment to make the necessary changes in its regulatory framework in order to meet the standards deriving from MMoU.

The 2012 IAIS Annual Conference, with the theme “Insurance Supervision Foundations for Global Financial Strength,” discussed the new market challenges and development alternatives in relation to broad-based supervision and industry issues, insurance standards, risk management, consumer protection, etc. AFSA has always taken active part in these conferences.

AFSA was an active participant in IAIS in 2012. The Chairwoman of AFSA is a member of the Financial Inclusion Subcommittee, which especially promotes developing markets and economies in relation to the implementation of the Insurance Fundamental Principles in support of the regulation and supervision of insurance markets and other special forms of insurance.

International Organization of Securities Commissions (IOSCO)

AFSA is a full member of the International Organization of Securities Commissions (IOSCO), and signed IOSCO’s Multilateral Memorandum in 2009. The Memorandum has helped AFSA exchange useful information with other regulators in the area of securities, and is a useful tool for supervising the market.

50 ANNUA L REPORT ‘12 AFSA is constantly in touch with IOSCO, mainly by actively participating in the annual meetings, which serve as fora for sharing information on the various views in relation to maintaining and improving the international regulatory framework on securities markets. AFSA is also involved in the Committee and other special IOSCO structures in the region and beyond, such as the European Regional Committee and the Emerging Market Committee.

International Organization of Pension Supervisors (IOPS)

AFSA has been a member of the International Organization of Pension Supervisors (IOPS) since 2006. The membership has helped the institution establish signiﬁcant cooperation relationships with other counterparts at global level, which are involved in the supervision and regulation of the private voluntary pension market. By actively cooperating and participating in the annual meetings and various regional events, AFSA is constantly informed on the best practices in the area of private pension funds. The cooperation has had a positive impact on the promotion of new approaches to the supervision of the pension system and completion of the regulatory framework by reﬂecting best practices.

Cooperation with counterparts

The cooperation with the Central Bank of the Republic of Kosovo (CBRK) has already entered the consolidation stage, especially in the supervision of the insurance markets in both countries, given the significant share that Albanian insurance companies have in the Kosovar market. The Memorandum of Understanding between AFSA and CBRK has had a positive impact on the cooperation, expertise and experience sharing between both institutions. High-level cooperation contacts with CBRK were fruitful in 2012. CBRK Governor was one of the speakers in the panel on best international practices of regulators’ independence in the International Conference “Independence of the Financial Sector Regulators: Reemphasized”, which was organized by AFSA on 31 October 2012. In addition, AFSA held a meeting with the Republic of Kosovo Government delegation, which was chaired by the Deputy Prime Minister and also included high-level officials from the Bank of Kosovo. The discussions focused on the possibilities for Kosovar insurers to sell the Green Card issued by the Albanian Insurance Bureau, which would make it easy and beneficial for Kosovar citizens who wish to travel abroad.

AL BANIAN FINANC IAL SU PERVISORY AUTHOR ITY 51 AFSA signed a Memorandum of Understanding with the Macedonian Insurance Supervision Agency (ISA). In the current context of Albanian insurance companies operating in the territory of Macedonia the MoU had a positive impact on the integrity, stability and efﬁciency of the insurance industry in both countries by extending cooperation to all channels of communication, increased mutual understanding and exchange of information and experience.

In the context of increasing its cooperation with other pension supervisors, AFSA signed a Memorandum of Understanding on Technical Cooperation in the area of pensions with the Agency for Supervision of Fully Funded Pension Insurance in Macedonia (MAPAS) in 2012. The agreement provides for exchange of experience of both institutions in the area of private voluntary pension market supervision and regulation and the legal framework governing it. The cooperation will also extend to the technical aspect as mutual exchange of information, documentation and organization of joint trainings. The cooperation was preceded by a regional meeting on pension supervision in the countries of Central and Eastern Europe, Central Asia and Caucasus, which was organized under the cooperation of several organizations such as IOPS, IAIS and with support from MAPAS from Macedonia. The participants in the event discussed important topics on private voluntary pension system supervision on areas of supervision priority for AFSA.

AFSA extended its cooperation to other homologue authorities in Europe. The cooperation with the Austrian Financial Market Authority (FMA) was consolidated in 2012. One reason for this was the increased Austrian participation in the Albanian insurance market. Since the signing of the Memorandum of Understanding between AFSA and FMA in 2009, both authorities have been engaged in increasing their cooperation and further sharing their experience. Thus, upon FMA initiative, the supervision of Austrian groups operating in the Albanian market is in progress.

In cooperation with the Hungarian Financial Supervisory Authority (HFSA), the Austrian FMA took a regional initiative for the supervision of the insurance market in Central, Eastern and Southeast Europe. AFSA took active part in the initiative. The initiative arose with the aim to strengthen regional cooperation and build a discussion forum focusing on the current issues in the countries in the region. The third and fourth meetings under the initiative took place in 2012. AFSA participation in those meetings was of the highest level. The third meeting took place in Ljubljana, Slovenia, in the Slovenian Insurance Supervisory Authority in May 2012. The main topics of the workshop were related to the challenges of natural disaster insurance, the impact of systemic risks on the insurance business, branch supervision, and group supervision challenges.

The fourth meeting was organized by FMA in Vienna in December 2012. The main topics of discussion focused on the strengthening of supervision structures, exchange

52 ANNUA L REPORT ‘12 of experience in relation to alternative insurance dispute resolution mechanisms, Life insurance products from the perspective of current economic conditions, and the role of banks as insurance intermediaries. One session of the meeting—Effective Supervision Structures—was chaired by AFSA representative. The session focused on the revision of regulatory supervisory structures in the context of promoting the ﬁnancial stability, transition to risk-based supervision, adaptation of those structures to the basic principles of insurance, etc.

This initiative may now be considered as a successful one, based on the ongoing interest and active participation from the countries in the region by investing and encouraging the spirit of effective cooperation on shared issues encountered in the regulation of insurance markets in the region. AFSA will continue to take active part in the initiative in the future.

In 2012 AFSA also continued its cooperation with other organizations operating in the area of the insurance market in Austria such as the Austrian Insurance Association (VVO). The high-level meetings between both institutions aim at the strengthening of cooperation and joint coordination of the efforts for creating new development opportunities for the Albanian insurance market and enabling the absorption of consolidated practices that a developed market like Austria provides. Thus, upon FMA initiative, two MoUs on the supervision of Austrian groups operating in the Albanian market were signed.

Cooperation with International Financial Institutions and Donors

Effective cooperation and relations with international financial institutions and donors continued to help implement strategic projects and AFSA institutional capacity building.

The Financial Services Voluntary Corps (FSVC) continues to be one of the main partners for AFSA in terms of the technical assistance it has provided our institution in the past few years.

One of the most important events in 2012 was the international conference “Independence of the Financial Sector Regulators:Reemphasized”, from the perspective of European Union integration and the lessons learned from the recent global ﬁnancial crisis. That very important event was organized with USAID support under the Programme for Financial Sector Development in Albania, which is implemented by FSVC. The conference was International Conference: “Independence of Financial Sector attended by high-level participants from regulatory Regulators: Reemphasized”

AL BANIAN FINANC IAL SU PERVISORY AUTHOR ITY 53 authorities from Europe, and experts from other ﬁnancial markets. The greeting remarks were held by the Albanian Prime Minister Prof. Dr. Sali Berisha, the European Union Delegation Ambassador, Mr. Ettore Sequi, USAID Mission Director in Albania, Mr. Jim Harnhart, and a number of other personalities from Albania.

Main institutional cooperation activities

AFSA cooperated with international organizations on regional and global initiatives in 2012.

IAIS • IAIS Working Subcommittee meeting, February; • Regional meeting “Macroprudential Group Supervision”, May; • Third Meeting of the Regional Central, Eastern and Southeast European Initiative on Insurance Market Supervision, May; • Annual Conference “Insurance Supervision: Fundamental to Global Financial Strengthening”, October; • Working meetings with representatives from the Italian National Association of Insurance Companies (ANIA) and the Institute for Supervision of Private Insurance and Collective Interests (ISVAP), November; • Fourth Meeting of the Regional Central, Eastern and Southeast European Initiative on Insurance Market Supervision, December.

IOSCO • Meeting of the European Regional Committee, September; • Annual Conference, October; • Working committee meetings, October; • Conference of the Southeast European Region on Capital Markets, November.

IOPS • Regional meeting on pension supervision in the countries of Central and Eastern Europe, Central Asia and Caucasus, May; • Executive and technical committee meetings, June.

USAID/FSVC • Comments on the Draft Law on Insurance and Reinsurance; • Consultations on actuarial analysis of insurance companies, March; • Regional Workshop “Consumer Protection in Insurance: Best Practices and International Standards,” June; • Consultations on effective supervision of insurance markets and consumer protection, June; • Consultations on the legal framework, changes and completions in the AFSA Law, June-August; • Workshop “Risk-based Supervision”, September; • International Conference “Independence of the Financial Sector Regulators Reemphasized”, October; • Training of trainers program for actuaries, September; • Consultations on the Early Warning System (EWS), October-November; • Consultations on public relations and conference organization, October-November.

54 ANNUA L REPORT ‘12 The Conference highlighted, inter alia, that the independence of regulators is a must for the achievement and consolidation of development. A more transparent and stable environment promotes consumers’ trust and at the same time encourages fair competition among all market participants.

By emphasizing their practices up to date, the heads of a number of regulatory authorities from the region participating in the Conference shared their ideas and best practices in terms of strengthening the role of regulatory authorities in financial markets. The participants represented the regulatory authorities of Estonia, Netherlands, Hungary, Kosovo, Macedonia, Moldova, Poland, Serbia, Slovenia, USA and Turkey. Presentations on specific supervision issues of supervision and regulators’ role in financial markets were made by experts from the Central European Bank, Washington State Office of Insurance Commissioner, USA, and the former Commissioner of New Jersey Bank and Insurance Department, USA.

In the context of its cooperation with FSVC, support was given in the preparation of the technical staff training in 2012 in relation to topics of special interest regarding risk-based supervision, public relations consultations, assistance in the revision of the legal framework on insurance and AFSA, and consultations for actuary analysis of the insurance market. FSVC was one of the major supporting organizations in the past. Since AFSA establishment, the FSVC experts’ contribution in monetary terms has been about USD two million, which is also due to the serious efforts of the Authority for the development Participants of the regional workshop on and implementation of assistance projects. “Consumer Protection in Insurance”

Another signiﬁcant regional event was the Regional Workshop “Consumer Protection in Insurance: Best Practices and International Standards,” which was organized with USAID support. The workshop agenda focused on addressing the basic principles developed by the International Association of Insurance Supervisors and presenting best practices from other countries in the Region and Europe. The topic of consumer protection in insurance was also in the focus of meetings and discussions with AFSA experts and managers.

In the framework of the long-term strategy for insurance market supervision in line with the risk-based supervision methodology, AFSA, with FSVC support, is developing a risk- based early warning system. The efforts for conceiving the system began in 2011 and the system architecture was designed in 2012. This project is going to continue in the following years, and its main goal is to prioritize insurers by risk and inﬂuence the degree of AFSA intervention in certain insurers on the basis of their risk levels.

AL BANIAN FINANC IAL SU PERVISORY AUTHOR ITY 55 An important strategic partner for the fulﬁlment of AFSA’s fundamental mission was the World Bank, which has constantly assisted AFSA towards materializing a series of important strategic initiatives. One of the signiﬁcant projects in the past years was the “For more effective supervision” Project, which had two important outputs: the Risk-Based Supervision Methodology and the Draft Law “On the Activity of Insurance, Reinsurance and Intermediation in Insurance and Reinsurance,” which aims at supporting the new insurance market supervision methodology.

The World Bank is currently assisting AFSA in their project on the liberalization of the compulsory motor insurance, the Strategy for Compulsory Motor Insurance Market, which is funded by the First Initiative. The Project started in September 2011. The reports determining the supervision strategy and compulsory insurance pricing in Albania were completed in 2012. At the same time AFSA worked to design all IT developments, which comprise the support infrastructure for the implementation of the Strategy in the following years. Other important elements of the project include: development of a strategy for the management of the number of uninsured persons and the establishment of database against insurance fraud in the future.

Through World Bank support the Project enabled the establishment of contacts at technical level with the Istituto per la Vigilanza sulle Assicurazioni Private e di interesse Collettivo (ISVAP) and the Associazione Nazionale fra le Imprese Assicuratrici (ANIA) of Italy. The appraisal of the Italian experience is very important, since it is the last Western European country to have gone through the liberalization of the compulsory motor insurance.

In 2012 AFSA continued its cooperation with the Partners for Financial Stability (PFS) program in the framework of the project for the establishment of securities trading mechanisms at regional level. The Project includes eight stock exchanges from the region, including Tirana Stock Exchange. The Project also included the sharing of experiences and similar models from the EU Member States.

2.6 European Integration

The constant development and elaboration of the relevant legal and regulatory framework has been one of the main pillars on which AFSA institutional development has relied constantly. This completed legal framework aims at the approximation with the international standards and EU directives in the context of meeting the commitments of the institution and the country for the implementation of the Stabilization and Association Agreement with EU, reﬂection of changes in the supervised ﬁnancial markets in Albania, and strengthening of consumer protection mechanisms.

56 ANNUA L REPORT ‘12 AFSA Commitments under Strategic Documents

Stabilisation and Association Agreement, SAA

AFSA obligations deriving from SAA are related to the fulﬁlment of the Copenhagen economic criteria for EU membership, ensuring the right to establishment and freedom to provide non-bank ﬁnancial services, and the approximation of the Albanian legislation with the Acquis Communautaire in the relevant areas.

Article 70 of SAA provides for the obligation to harmonize the Albanian legislation in this area with the Acquis during the first transitional phase. Article 50 of SAA provides for the obligation for Albania to offer Community companies and their branches and subsidiaries a treatment that is no less favourable than the treatment of Albanian companies, branches or subsidiaries. In addition, Article 57 of SAA provides for the obligation for Albania to gradually allow the provision of services by Community companies without the need to be established. Article 89 of SAA provides for priority cooperation between Albania and the European Union in the area of banking, insurance and financial services. Both parties need to cooperate in order to establish and develop a suitable framework to encourage banking and non-banking financial sector.

European Partnership 2007

Under the 2007 European Partnership document, there is a commitment to strengthen the regulatory framework of banking and non-banking ﬁnancial supervision and build Authority capacities.

Recommendations from 2010 Analytical Report, 2011 Progress Report and 2012 Progress Report

AFSA has undertaken to further align the supervised financial sector legislation with European Directives, and build its institutional capacities in order to achieve the most efficient regulation and supervision of supervised financial sector that is possible.

One of the main goals for the Authority since its establishment has been the development and adoption of regulatory and supervisory legislation in the area of the supervised ﬁnancial services that would enable further development of the market and consumer protection.

On 10 October 2012 the European Commission issued its Progress Report on Albania, which described the achievements Albania has made in October 2011-September 2012. This was the second Progress Report on Albania after the publication of the EC Opinion on Albania’s application for EU membership in November 2010. The Progress Report presented Albania’s progress that was measured on the basis of decisions taken, legislation adopted and measures executed. The Report also gives a summary of EC evaluation of the priorities and issues under the 33 Acquis chapters.

AL BANIAN FINANC IAL SU PERVISORY AUTHOR ITY 57 European Commission 2012 Progress Report on Albania (Chapter 9- Financial Services)

The AFSA lacks adequate administrative and supervision capacity and its staff remained unchanged.

Conclusion There has been some progress in the area of financial services. The legislation was aligned with the acquis in the banking area and the investment market was further developed. Additional efforts are needed in the areas of insurance and occupational pensions, financial market infrastructure and the securities market and investment services. Administrative capacity in the banking and non-banking sectors remains insufficient. Overall, preparations are moderately advanced.

In 2012 AFSA gave its contribution to the revision of NP-SAAI 2012-2015, which lays down short-term and long-term actions intended to fulﬁl the obligations deriving from SAA and approximate with EU legislation in general and its implementation in the supervised ﬁnancial industry. In addition, under NP-SAAI 2012-2015, AFSA completed the process of Acquis allocation and assignment of institutional responsibilities for approximating the Albanian legislation with EU directives.

National SAA Implementation Plan

Each candidate country aspiring to EU membership has to prepare a national plan for the adoption of Acquis Communautaire

The National SAA Implementation Plan is a consolidated document that includes short-term, medium-term and long-term priorities and measures to be taken by Albania under SAA in its European integration process, particularly focusing on:

• 2007 European Partnership for Albania priorities; • Recommendations of EC annual progress reports; • Fulfilment of commitments under the National SAA Implementation Plan; • Setting priorities for the approximation of the Albanian legislation with the acquis communautaire; • Specifying and detailing the administrative capacities required for the implementation of SAA commitments in each area; • Determining the financial costs of the implementation of SAA commitments under the Medium-Term Budget Programme and the rest of financial costs under sector strategies.

In 2012 AFSA prepared and presented the required data in the periodic meetings between Albania EU. All the legislative and institutional achievements toward SAA implementation were dealt with in the Stability and Association Committee meeting of March 2012.

58 ANNUA L REPORT ‘12 Acquis communautaire

Acquis communautaire is the body of common rights and obligations shared by all European Union Member States. Acquis communautaire is amended continuously.

Acquis communautaire includes: • The content, principles and political goals of the Treaties; • The legislation adopted pursuant to the Treaties and the case-law of the European Court of Justice; • Declarations and resolution adopted by the EU; • Any actions concerning the common foreign and security policy; • Any actions concerning justice and home affairs; • International agreements concluded by the Community and agreements concluded between Member States in the areas of EU activity.

AFSA participated in the third meeting of EU-Albania Subcommittee on the “Internal Market and Competition”, which took place in Tirana on 24 April 2012. The purpose of the meeting was to review legislative and institutional developments in Albania in the areas of internal market and competition, and for the EU to evaluate Albania’s progress in meeting its commitments deriving from such strategic documents as the SAA, the European Partnership, the EC Analytical Report and Progress Report. In the meeting the Authority presented a report on the supervised markets, focusing on the legislative developments and institutional capacity building and strengthening. The EC Delegation hailed the developments in the legal and regulatory framework and noted the necessity to further strengthen institutional capacities and AFSA independence.

Excerpt from the remarks by Mr Ettore Sequi, Ambassador, European Union Delegation to Tirana, at the Conference “Independence of the Financial Sector Regulators Reemphasized,” on 31 October 2012

The economic and financial crisis has turned financial supervision and fiscal consolidation into an imperative for all EU Member States and across the world. EU overall priorities for the financial reform remain clear: • develop a more effective responsive framework for supervision; • strengthen the means for ensuring financial stability; • Improve EU economy regulatory capability through better functioning of the markets.

2012 Progress Report for Albania notes that the Albanian legislation in the area of ﬁnancial services is partly in line with EU standards. More efforts need to be made for: • strengthening the independence of ﬁnancial regulators, • further approximating legislation with EU Acquis, and • increasing administrative capacities.

Additional efforts are also needed in the areas of ﬁnancial market infrastructure and the securities market and investment services.

AL BANIAN FINANC IAL SU PERVISORY AUTHOR ITY 59 Other commitments

• The Authority is a member of the inter-institutional group for the preparation and organization of events under the Central European Free Trade Agreement (CEFTA). Albania held CEFTA presidency in 2012. The Authority gave its contribution to the completion of the draft schedule on trade of services under CEFTA, for the part pertaining to the supervised ﬁnancial services, and took part in the CEFTA Week that was held in Tirana on 7-8 November 2012 and focused on the liberalization of trade in goods and services, elimination of trade barriers among the state parties to the Agreement and promotion of investment.

• As a member of the technical working group for the implementation of the National Strategy Paper on Financial Crime Investigation, AFSA increased the inter-institutional cooperation with Directorate General for Prevention of Money Laundering (DPPPP). In that respect, willingness was stated in terms of conducting joint inspections of AFSA-supervised markets, with AFSA inspectors being trained by DPPPP. AFSA is going to share information with other domestic and foreign authorities, which it has also included in the Draft Law amending Law No. 9572 of 3 July 2006 “On the Financial Supervisory Authority.” AFSA also reports periodically to DPPPP on the achievement of its tasks.

Central European Free Trade Agreement, CEFTA

On December 19, 2006, Albania, Bosnia and Herzegovina, Croatia, Macedonia, Montenegro, Moldova, Serbia and the United Nations Interim Administration Mission in Kosovo (UNMIK) on behalf of Kosovo in accordance with United Nations Security Council Resolution 1244 signed an Agreement to amend and enlarge the Central European Free Trade – CEFTA 2006.

Following the necessary ratification processes, CEFTA 2006 entered into force on 26 July 2007 for five signatories (Albania, Macedonia, Montenegro, Moldova UNMIK/Kosovo), for Croatia on 22 August 2007, Serbia on 24 October 2007 and for Bosnia and Herzegovina on 22 November 2007. The speed with which the Parties ratified this ambitious agreement indicates the importance of this Agreement to economic development in the region.

This comprehensive Agreement’s main objectives are, inter alia, to expand trade in goods and services and foster investment by means of fair, stable and predictable rules, eliminate barriers to trade between the Parties, provide appropriate protection of intellectual property rights in accordance with international standards and harmonize provisions on modern trade policy issues such as competition rules and state aid. It also includes clear and effective procedures for dispute settlement and facilitates the gradual establishment of the EU- Western Balkan countries zone.

60 ANNUA L REPORT ‘12 2.7 Public Relations and Transparency

AFSA drafted its Strategy for Communicating with the Media 2012-2015 in February 2012. One of the main goals of the Strategy is to increase the degree of public information on the markets that AFSA supervises. Another goal is to conduct constant public ﬁnancial education, which is made all the more necessary by the recent global economic developments.

The Strategy envisages the media as one of the main means of public education and information on the ﬁnancial markets; it does not ignore, however, the rest of communication channels. The initiatives or activity sets that are laid down in the Strategy are speciﬁcally aimed at special target groups.

The public was provided with extensive information on the supervised financial markets in 2012 under the Strategy and based on the experience that AFSA had gained over time. The printed media, mainly those with large circulation, regularly covered AFSA activity. The most reported topics included public sensitivity to compulsory motor insurance prices and the overall development of the insurance market; information on private voluntary pensions; and the performance of the securities market. This was covered in over 160 presentations on daily newspapers and over 50 appearances on national and regional television networks. The media also covered other AFSA information, such as legislative developments regarding AFSA activity, the independence of the financial sector regulator, the Memorandum of Understanding between AFSA and the Directorate General of Police on the inspection of compulsory insurance policies.

In addition to media communication, AFSA also uses a variety of forms and methods to achieve the most effective communication possible with the public. It includes communication through the ofﬁcial website, monthly informational newsletters for the three supervised markets, annual publications, brochures, etc.

Its informational and educational materials aim to familiarize consumers with the supervised financial markets and its manner of operation. Publications in 2012 included the Annual Report, the Supervision Report, the Insurance Geography, the Official Bulletin, and brochures with information on the supervised financial markets.

In October 2012 AFSA organized the conference “Independence of the Financial Sector Regulators: Reemphasized”. The national media gave extensive coverage to the conference, including live broadcasting on television. It was also covered in an extensive article on the website www.xprimm.com. This is a Romania-located media agency which is specialized in insurance and private pension markets, focusing on

AL BANIAN FINANC IAL SU PERVISORY AUTHOR ITY 61 their developments across Central AFSA Publications and Eastern Europe. The Conference was also reported on the websites • Annual Report • Supervision Report of the United States Agency for • Insurance Geography International Development (USAID, • Ofﬁcial Bulletin http://albania.usaid.gov) and the • Brochures on supervised markets Partners for Financial Stability (PSF) program (www.pfsprogram.org). AFSA Electronic Publications Special attention was paid to AFSA • AFSA Newsletter • Insurance Market Statistical Bulletin website (www.amf.gov.al) in 2012, • Securities Market Statistical Bulletin enriching it with useful up-to-date • Private Supplementary Pension Market Statistical Bulletin information on the latest market developments. Such information New AFSA Publication is of great use to both insurance

• Discussion Paper “Independence reserved for AFSA” companies and the users of their services. The website is in two languages, Albanian and English, thus also benefiting foreign investors or researchers as a source of information on the structure and development of the financial markets of insurance, pensions and securities in Albania. AFSA official website also publishes information on all AFSA Board decisions.

It has a special section on consumer education. It gives consumers the option of contacting AFSA on any issues or concerns arising from the markets that AFSA regulates and supervises.

The publication of draft legislation on AFSA website prior to its adoption has been an efficient and transparent method of collecting various comments from all stakeholders. After the publication of the Draft Law on Insurance and Reinsurance Activity on AFSA website in 2012 the Authority received comments on it from various stakeholders. AFSA reviewed the Albanian Insurers’ Association comments on the Draft Law carefully, and many of them were reflected in various articles in the Draft Law.

AFSA continued to inform the public through its monthly e-newsletter, which contains a wealth of information on developments in the supervised financial markets in Albania and recent global AFSA Chairperson Ms. Enkeleda Shehi in a news conference after developments and trends in the regulation of the international conference “Independence of the Financial Sector Regulator: Reemphasized” the supervised financial markets. The Consumer

62 ANNUA L REPORT ‘12 Education feature mainly includes research and studies on financial services and products that fall in AFSA scope. Another special section discusses data and best practices from various markets in the region and beyond.

Periodic monthly, quarterly, semestral and annual statistical and financial reports provide a clear picture of the development of the supervised financial markets and meet the information needs of a great number of users.

AL BANIAN FINANC IAL SU PERVISORY AUTHOR ITY 63 Chapter 3 Consumer Protection

Through constant consumer communication and information, AFSA achieves one of its key goals: protect consumers and their interests. In the context of achieving that goal, AFSA has constantly improved its procedures and practice of complaint handling, ensuring compliance with legal provisions and increasing conﬁdence in its role.

In addition, AFSA assists consumers by asking the supervised financial entities to correct any errors or by explaining legal recourses in an easy to understand way. The legislation in power requires financial entities to provide consumers with up-to-date information on their products, their terms and conditions of contracts, complete or partial selection of contracts, benefits under contracts, etc.

Transparent consumer information aims at establishing and increasing conﬁdence in AFSA role and mission at consumers’ service. Such information is delivered on the visual and printed media. AFSA ofﬁcial website provides insurance policy-holders with the possibility to verify through the National Centre the details and validity of their compulsory MTPL policies. It also includes the GSRM System (the Government Securities Retail Market) which has opened a window for the public to be directly informed on the latest developments on the securities market.

Another efﬁcient tool for protecting consumers’ interests is the continued functioning of the Consumer Protection Unit at AFSA. The Unit deals with complaints on delays in the processing of claims and complaints on refusal to pay claims or underpaying claims, thus helping consumers resolve situations as effectively as possible. AFSA procedures start with information on the claim ﬁle, continuing with suggestions given to the insurance company with regard to the treatment of the claim in compliance with the legislation in power, continuous contacts with the insurance company for an optimum institutional solution of the appealed case, etc.

In 2012 the Unit dealt with 51 complaints on the functioning of the claim handling system under insurance policies; of them, 46 were solved, while four were rejected because the complaints did not contain any legal grounds, and one complaint was returned to be completed with further documentation.

64 ANNUA L REPORT ‘12 Graph 10: Complaints and resolution, 2007-2012 (number)

2012 46 51

2011 50 59

2010 42 62 Complaints received and solved, 2007-2011 (number) 2009 45 75

2008 20 68 2007 12 22 01020304050607080 Resolved complaints Reviewed complaints 5HVROYHGFRPSODLQWV5HYLHZHGFRPSODLQWV

The Consumer Protection Unit covers the insurance market, the securities market and the The Consumer Protection Unit covers the insurance market, the securities market and the private voluntary pension market. private voluntary pension market.

GraphThe following 11: Authority are the tools tools for that consumer the Authority protection uses to protect consumers:

Public Transparency

Consumer Communication Constant Information

Consumer AFSA Website: Supervision of Protection Unit Malpractices • Veriﬁcation of • Clariﬁcations Compulsory Motor • Complaints Insurance Policy • Contact: Telephone Switchboard [email protected] • Tel 35542257557 • GSRM • Toll-Free Number: 08006969

Consumer Service

The telephone switchboard available for consumer protection includes a landline number and toll-free number, which allow consumers to access services free of charge.

In 2011 there was a signiﬁcant increase in the number of phone calls on the green number. Through thisAL serviceBANIAN consumers FINAN askedC IAL questions SU PERV mainlyISORY related AUTHOR to the ITproductsY 65 offered by insurance companies or submitted complaints regarding the provision of those products.

The Consumer Protection Unit seriously reviewed any voicemail messages, and referred them to the relevant units.

62 ANNUAL REPORT ‘11 Consumer service

The telephone switchboard available for consumer protection includes a landline number and toll-free number, which allow consumers to access services free of charge.

In 2012 there was a signiﬁcant increase in the number of phone calls on the toll-free number. Through this service consumers asked questions mainly related to the products offered by insurance companies or submitted complaints regarding the provision of those products.

66 ANNUA L REPORT ‘12 PART II SUPERVISED MARKETS

II.1 Insurance Market

Overview

In 2012 the Albanian insurance industry continued to grow steadily compared with the previous year. The number of insurance companies operating in Albania increased following the licencing of an additional Non-Life insurance company. Therefore, at the end of 2012, eleven insurance companies were operating, of which seven were Non-Life insurance companies, two Life insurance companies, one combined Life and Non-Life insurance company, and one Non-Life insurance and reinsurance company.

Graph 12: Premium and claims performance (million ALL)

2012 2011 2010 2009 2008 2007 2006 2005 2004 2003

-1.000 2.000 3.000 4.000 5.000 6.000 7.000 8.000 9.000

2003 2004 2005 2006200720082009201020112012 Gross Paid Claims 1,319 1,038 1,227 1,287 1,294 1,571 1,733 2,299 2,228 2,808 Gross Written Premiums 3,755 4,151 4,011 4,542 5,948 7,076 7,877 8,200 8,215 8,950

Gross written premiums increased by nearly 8.94%7 in the insurance market in 2012 compared with one year before. Gross written premiums in 2012 were about ALL 8.95 billion. The insurance market growth in 2012 was mainly due to the increased dynamics in the voluntary insurance market, especially in the Non-Life segment, which accounts for 89.85% of total gross written premiums in the insurance market.

Note: 7 The comparative ﬁgures are from the 2011 audited reports.

AL BANIAN FINANC IAL SU PERVISORY AUTHOR ITY 67 Table 17: Gross written premiums, and change, 2010-2012

Gross Written Premiums Gross Written Premiums Change (in %) Business

(million ALL) (thousand EUR)8 (ALL)

2010 2011 2012 2010 2011 2012 2011/2010 2012/2011

Life 848 941 880 6,157 6,707 6,329 10.92 -6.48

Non-Life 7,297 7,256 8,042 52,954 51,717 57,837 0.56 10.83

Reinsurance 55 18 28 401 131 202 -66.66 52.91

Total 8,200 8,215 8,950 59,511 58,555 64,369 0.18 8.94

Graph 13: Insurance Market Structure, 2012

0.31% 0.31% 9.83% 9.83%

48.85% 48.85% 51.15% 51.15%

89.85% 89.85%

Life Insurance Compulsory Insurance Life Non-LifeInsurance Insurance Compulsory Insurance Voluntary Insurance Non-LifeReinsurance Insurance Voluntary Insurance Reinsurance

Insurance Penetration9

The average premium per capita was ALL 3,200 (EUR 23.02) in 2012. This consisted of ALL 316 on Life insurance and ALL 2,885 on Non-Life insurance.

Premiums of Non-Life insurance

In 2012 the Non-Life insurance market marked a rise of 10.83% in gross written premiums compared with 2011, with an increase of about ALL 8.04 billion.

Shënim: 8 Average annual Euro exchange rate is based on Bank of Albania website, www.bankofalbania.org: (2010, 1 EUR = 137.80; 2011, 1 EUR = 140.30; 2012, 1 EUR = 139.04 ALL). 9 Population as of 01.01.2013, ofﬁcial data at the INSTAT, www.instat.gov.al.

68 ANNUA L REPORT ‘12 Graph 14: Gross written premiums, Non-Life, 2003-2012 (million ALL)

9.000 8,042 8.000 7,297 7,084 7,256 7.000 6,530 6.000 5,517 5.000 4,037 4,201 4.000 3,669 3,772 3.000 2.000 1.000 0 20032004 2005 2006 2007 2008 2009 2010 2011 2012

Graph 15: Non-Life Market Structure, 2012

Fire and other property insurance Maritime, 21.22% air & freight 0.92% Accident and health insurance Loan security insurance 7.72% 2.26%

Other 7.38%

General liability insurance 4.20% Motor insurance 63.67%

More than 63.67% of total Non-Life revenues came from motor insurance, with the largest market share. This has led to strong competition in this segment. In 2012, gross written premiums reached the amount of ALL 5.12 billion, compared with ALL 4.35 billion in 2011. The rise by 17.60% in motor insurance premiums mainly came from the domestic MTPL product.

AL BANIAN FINANC IAL SU PERVISORY AUTHOR ITY 69 Graph 16: Gross written premiums, motor insurance, 2003-2012 (million ALL)

6.000 5,120 5.000 4,771 4,840 4,493 4,240 4,354 4.000 3,237 2,998 3,144 3.000 2,827

2.000

1.000

- 20032004 2005 2006 2007 2008 2009 2010 2011 2012

Compulsory insurance

In 2012, the compulsory motor vehicle insurance (TPL) dominated the market structure, bringing in about 51.13% of revenues from gross written premiums.

Gross written domestic MTPL insurance premiums were ALL 3.37 billion in 2012, about 52.81% more than in 2011.

Gross written Green Card insurance premiums were about ALL 0.69 billion in 2012, about 37.56% less than in 2011.

Gross written border insurance premiums were about ALL 0.52 billion in 2012, about 23.85% more than in 2011.

Voluntary Insurance10

Revenues from voluntary insurance amounted to approximately ALL 4.37 billion in 2012, about 2.58% less than the year before.

In the voluntary Non-Life insurance, with revenues of about ALL 3.46 billion, the portfolios with the largest speciﬁc weight were insurance against ﬁre and property damage (about 49.27%), followed by accident and health insurance (about 17.93%) and CASCO insurance (15.66%).

Note: 10 Voluntary insurance revenues also include reinsurance.

70 ANNUA L REPORT ‘12 In the ﬁre and property insurance portfolio there was a rise of 49.87% in the volume of gross written premiums11 in 2012 compared with 2011.

Revenues from gross written premiums in accident and health insurance were about ALL 0.62 billion in 2012—falling by 28.95% compared with 2011. The biggest share (62.30%) of this insurance class was taken by accident insurance.

Graph 17: Development of compulsory and voluntary insurance market, 2003-2012 (million ALL)

2012

2011

2010

2009

2008

2007

2006

2005

2004

2003

0 500 1,000 1,500 2,000 2,500 3,000 3,500 4,000 4,500

2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 Voluntary Insurance 890 1,183 1,435 1,569 2,080 3,082 3,686 3,958 4,488 4,372 Compulsory Insurance 2,865 2,968 2,576 2,973 3,868 3,995 4,191 4,242 3,727 4,578

Shënim: 11 Based on the Guideline No. 140 of 26.09.2012 “On the list of the documents for the compulsory annual and periodic reporting of the insurance and reinsurance companies” at the “Fire and Other Damage Property” portfolio it is reported the “Construction All Risk, CAR” as well as “Erection All Risk, EAR”. In the previous years, those two insurances have been reported under the portfolio of “General Liabilities”.

AL BANIAN FINANC IAL SU PERVISORY AUTHOR ITY 71 Graph 18: Gross written premiums, Non-Life, 2008-2012 (million ALL)

5,000

4,578 4,500 4,191 4,243 3,995 4,000 3,727 2008

2009 3,500 2010

2011 3,000 2012

2,500

2,000 1,707

1,500 1,139 1,070 874 1,000 786 776 597 658 626 457 621 580 668 542 497 498 475 500 375 267 313 267 338 219 227 195 106 74 174 166 182 - Accident, Casco MPTL Maritime, Property Damage Liability Guarantee Health Aviation, and Fire Freight

Premiums of Life insurance

Gross written premiums in Life insurance fell by 6.43% in 2012, at ALL 0.88 billion. The factor with the largest impact on the fall in Life insurance was the fall in gross written premiums under the Debtor Life insurance and Group Life insurance. Gross written premiums under the Debtor Life insurance were 8.67% less than in 2011.

Graph 19: Gross written premiums, Life, 2003-2012 (million ALL)

1.000 941 880 900 849 800 721 700 600 515 500 410 400 302 300 239 200 86 114 100 0 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012

72 ANNUA L REPORT ‘12 Insurance Geographic Distribution Distribution of the insurance A look at geographic distribution of gross written premiums by per prefecture premiums shows that the insurance market is concentrated in the bigger prefectures.

An important indicator of this market is the premium per capita, which in 2012 was about ALL 3,200.41 per capita, ALL 263.23 more than in the previous year. 4.12% 0.70%

Regarding the premium per capita by prefecture, Tirana 2.08% Prefecture is ranked ﬁrst with ALL 7,388.64 per capita, 1.16% followed by Gjirokastra with ALL 3,648.67 per capita, then Durres Prefecture with ALL 2,622.72 and Vlora Prefecture with ALL 1,927.90 per capita. 7.84%

63.42%

3.35%

5.20% 1.77% 3.82%

3.74%

2.80%

Graph 20: Paid claims by prefecture

6.56% 4.32% 4.14% 2.52% 3.98%

Fier 3.53%

3.28% 0.72% 3.22%

Others 6.67% 0.49%

2.94%

64.30%

AL BANIAN FINANC IAL SU PERVISORY AUTHOR ITY 73 Claims

In 2012 insurance companies paid out ALL 2.81 billion in claims12—about 26.00% more than in 2011. Most of gross claims paid were related to compulsory motor insurance with ALL 2.12 billion (75.43% of total claims).

Graph 21: Structure of paid claims, 2012

5.66%

33.52% Compulsory Insurance 60.82% Voluntary Non-Life Insurance Life Insurance

Graph 22: Claims paid by insurance companies over the years (million ALL)

2012

2011

2010

2009

2008

2007

2006

2005

2004

2003

0 500 1,0001,500 2,000 2,5003,000

2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 Compulsory Insurance 1,108 857 863 991 874 933 1,058 1,447 1,259 1,707 Voluntary Insurance 211 181 364 296 419 638 676 852 969 1,100

Note: 12 Gross paid claims.

74 ANNUA L REPORT ‘12 Market Shares of Insurance Companies

In 2012 the Albanian Non-Life insurance market was shared by the following insurance companies: “Sigal Uniqa Group Austria”, “Sigma Vienna Insurance Group”, “Interalbanian Vienna Insurance Group”, “Eurosig”, “Intersig Vienna Insurance Group”, “Albsig”, “Atlantik”, “Insig” and “Ansig”. “Sigal Uniqa Group Austria” was the leading company in the market, with 30.34% of gross written premiums.

Graph 23: Non-Life insurance market shares, 2012

Ansig Eurosig 2.23% 10.07% Sigal Unica Albsig Group Austria 8.61% 30.34%

Intersig Vienna Insurance Group 9.19%

Atlantik Sigma Vienna 8.29% Insurance Group Interalbanian 11.87% Insig Vienna Insurance 7.54% Group 11.86%

Graph 24: Life insurance market shares, 2012

Sigal-Life Unica Insig Group Austria 25.27% 51.18%

Sicred 23.55%

AL BANIAN FINANC IAL SU PERVISORY AUTHOR ITY 75 In 2012 the Life insurance market was shared by “Sigal Life Uniqa Group Austria”, “Insig” and “SiCRED”. “Sigal Life Uniqa Group Austria” was the leading company in the market, with about 51.19% of gross written premiums.

Reinsurance

In 2012 insurance companies underwrote risks pertaining to voluntary insurance, compulsory motor insurance for vehicles both in the territory of the Republic of Albania and in other member countries of the Green Card system, as well as liabilities of the dealers of petroleum, gas and their by-products.

AFSA carried out constant supervision in order to identify and assess risks by business activity, and constantly monitored how insurance companies managed and transferred risks through onsite and offsite inspections. Insurance companies have adequate capital and transfer their special portfolio risks in order to mitigate any ﬁnancial implications of large claims. This transfer is made through coinsurance, ceding whole insurance portfolio to reinsurers, and choosing optional reinsurance under individual contract.

Reinsurance agreements on Non-Life insurance portfolios were both of Excess-of-Loss type and of Quota-Share and Surplus type.

Reinsurance of Life insurance portfolios was done through proportional reinsurance agreements of the Surplus type and Quota Share type.

AFSA has monitored reinsurance agreements and optional reinsurance agreements in line with legal requirements of maximum retention and the criteria on reinsurance quality.

Ceded premiums as of 31.12.2012 were:

• For over ALL 1,865.13 million (23.19% of gross written premiums) for Non-Life insurance; • For over ALL 38.35 million (4.36% of gross written premiums) for Life insurance; • For over ALL 1,903.48 million (21.33% of gross written premiums) in total for the insurance market.

More than 90% of reinsurance partners of insurance companies had a Standard & Poor’s rating of above BBB-, with 50% of them with a rating of above A. Major participants in the reinsurance programmes included Munich Re, Hannover Re, Swiss Re, Scor, Lloyd’s Syndicates, VIG Re, etc.

76 ANNUA L REPORT ‘12 Establishment and Maintenance of Adequate Technical and Mathematical Provisions

A very important issue in supervising the ﬁnancial performance of insurance companies is the periodic analyses of their technical and mathematical provision adequacy. In this respect, AFSA did a careful monitoring of the calculation of technical and mathematical provisions quarterly, in compliance with the Insurance Law and relevant regulations.

Technical Provisions for Compulsory Motor Insurance

Following the liberalization of compulsory motor insurance prices in August 2011, there were price ﬂuctuations, especially downwards, in the Albanian insurance market in 2012. The experience of the Albanian insurance market has shown that reduced proposed tariffs give a signal of reduced liquidity of insurance companies and of a risk of noncompliance with risk management requirements laid down in Law No. 9267 of 29 July 2004 “On the Activity of Insurance, Reinsurance and Intermediation in Insurance and Reinsurance.” AFSA constantly monitored the situation in the compulsory motor insurance market on a daily basis.

Regardless the liberalized tariffs for compulsory insurance policies, insurance companies have to establish technical reserves and provisions no lower than the level of technical reserves and provisions required by AFSA regulations. Under Regulation No. 110 of 28 July 2011 On setting the level of technical provisions for compulsory motor insurance, the Authority sets the risk premium for compulsory motor insurance products at least once a year, which is used as a basis for the calculation of the technical provision for unearned premium, and communicates it to insurance companies by 31 March of the following year.

The technical provisions for claims and premiums are calculated in accordance with the requirements of Regulation No. 9 of 8 February 2007 On the basis, accounting methods and ways of keeping Non-Life insurance technical provisions, as amended. In the case of Life insurance contracts, calculations are based on Regulation No. 8 of 8 February 2007 On the basis, accounting methods and ways of keeping mathematical provisions.

Following the amendment to Regulation No. 9 of 8 February 2007 On the basis, accounting methods and ways of keeping Non-Life insurance technical provisions, when calculating technical provisions for litigated claims for which there are court judgments, regardless the instance of the court proceedings, insurance company actuaries have to take into consideration the amount of damages ordered by the court.

Under Regulation No. 110 of 28 July 2011, as amended, insurance companies set the premiums for their own compulsory motor insurance products. The insurance premium consists of the elements speciﬁed in Article 99 of Law No. 9267 of 29 July 2004, and insurance companies may change it not more frequently than once every three months.

Insurance companies inform AFSA ten days before the new compulsory motor insurance tariffs take effect, and attach to their letter of information the technical basis of calculation, including the calculation methodology and other support documentation.

AL BANIAN FINANC IAL SU PERVISORY AUTHOR ITY 77 Insurance companies have to publish their compulsory motor insurance premiums on their websites throughout the period those premiums are effective.

Under Regulation No. 110 of 28 July 2011, as amended, On setting the level of technical provisions for compulsory motor insurance, the role of the Actuaries Committee is now played by the Association of Actuaries. Upon a request by AFSA, the Association of Actuaries may calculate the risk premium for compulsory insurance products and cooperate with the Authority. The Association also has an advisory role.

Employees in the insurance market

In 2012, the number of the full time staff in the insurance industry was 1,320 on average with a rising trend by 18 % compared to 2011.

Graph 25: Number of employees in the insurance industry, 2009 - 2012

1,320 1400 1,115 1200 1,071 1,011 1000

800

600

400

200

0 2009 2010 2011 2012

II.2 Securities Market

Year 2012 saw positive developments in the securities market, mainly on the investment fund market. The licencing of the ﬁrst management company in the market was followed by a rapid dynamic growth of that securities market segment, which, combined with the retail Government securities (T-Bills and bonds) market, makes the more active segment in the securities market in Albania, while the stock market remains undeveloped. The performance of the Government securities retail market can be followed daily on the GSRM section of AFSA website.

Investment Funds

Investment funds operate under Law No. 10198 of 10 December 2009 “On Collective Investment Undertakings”. Pursuant to the Law AFSA licenced Raiffeisen Invest as Pension Fund and Collective Investment Undertaking Management Company on 13 December 2012.

78 ANNUA L REPORT ‘12 The investment funds that AFSA has licenced so far provide an investment return by maintaining the required level of capital and liquidity. The investment is made by carefully managing the portfolio.

The investment fund “Raiffeisen PRESTIGJ”, which is managed by “Raiffeisen Invest - Shoqëri Administruese e Fondeve të Pensionit dhe Sipërmarrjeve të Investimeve Kolektive” sh.a. started operating on 1 February 2012. A dynamic of rapid development of the investment fund business was noticed in 2012.

“Raiffeisen Invest” sh.a. currently manages two investment funds: “Raiffeisen Prestigj Investment Fund”, which was licenced on 13 December 2011, and “Raiffeisen Invest Euro Fund”, which was licenced on 26 September.

Net assets of investment funds as of 31.12.2012 were ALL 16.01 billion, and were mainly dominated by investment in Government bonds, comprising 71.61% of the fund assets.

Table 18: Number of investment funds and unit-holders 31.12.2012

Description No. amount (thousand ALL) In %

Number of investment fund management companies 1

Number of investment funds 2 Number of fund members 10,962 16,007,895.27 100.00

Individuals 10,960 15,991,483.66 99.90

Legal entities 2 16,411.61 0.10

Table 19: Investment fund unit indicators

Initial value Net value of Annual return Description of net assets assets per unit rate (%) per unit 31.12.2012 Raiffeisen Prestigj 1,000 ALL 13 1,061.72 ALL 7.39

Raiffeisen Invest EURO214 14,000315 14,069.20 7.19

13 Note: Initial value as of 31.03.2012. 14 Raiffeisen Invest EURO were translated with the exchange rate of ALL 140 to the Euro. 15 Initial value as of 22.11.2012.

AL BANIAN FINANC IAL SU PERVISORY AUTHOR ITY 79 Table 20: Detailed indicators of investment fund assets

31.03.2012 31.12.2012 Change Share of the total Description thousand ALL thousand ALL in % in %

31.03.2012 31.12.2012 Fund net assets 1,408,154.99 16,007,895.49 1,036.80 Total fund assets 1,416,546.71 16,061,312.30 1,033.84 100.00 100.00 of which Government bonds 537,854.35 11,502,271.63 2,038.55 37.97 71.61 Treasury Bills 669,330.78 2,074,594.04 209.95 47.25 12.92 Cash 205,961.22 2,138,096.01 938.11 14.54 13.31 Other assets 3,400.36 346,350.63 10,085.72 0.24 2.16 Total fund liabilities 8,391.71 53,416.81 536.54 0.59 0.33

Government Securities Retail Market

The retail market of Government securities in 2012 was dominated by transactions in short-term instruments (T-Bills) at 77.95% and long-term instruments (bonds) at 22.05%. With regard to the number of transactions, 97.05% of all transactions in the retail market of Government securities were in T-Bills. Transactions under “Purchases on the primary market” and “Payment of nominal value at maturity” dominated the Government securities retail market in 2012. Their respective shares of the total volume were 44.04% and 27.71%.

Individual investors dominated over institutional investors, performing 72.44% of all transactions in the Government securities retail market.

Table 21: Government Securities Retail Market

Type of Transaction Nominal value (million ALL) Change (in %)

2011 2012 `12/`11-1

A Purchases in the primary market 8,850 19,991 125.89 Individuals 7,260 10,896 50.09 Legal entities 1,590 9,095 472.00 B Sales from financial intermediary portfolio 6,935 7,066 1.90 Individuals 5,781 5,873 1.59 Legal entities 1,153 1,193 3.46 C Purchases from individuals prior to maturity 3,108 5,663 82.23 Individuals 1,687 5,021 197.67 Legal entities 1,421 642 (54.81) D Pledging Government securities as collateral 53 97 85.10 Individuals 36 54 51.81 Legal entities 17 43 155.35 E Payment of nominal value at maturity 13,473 12,578 (6.64) Individuals 11,449 11,041 (3.56) Legal entities 2,024 1,537 (24.05)

80 ANNUA L REPORT ‘12 Government Securities Retail Market (GSRM) Platform

2012 was the sixth year in which AFSA managed the GSRM Platform successfully. The Platform was extended with one new operator in 2012—Societe Generale Albania— bringing the number of licensed operators in the market to ten.

The Platform continued to operate, with the goal to provide increased transparency on quotes and transactions on the Government securities retail market and better protect investors’ interests. GSRM Platform provides complete up-to-date information to the public and institutional investors on the daily demand and supply in the Government debt securities retail market.

In 2012 GSRM Platform was clicked 19,990 times, accounting for 15.08% of all visits to AFSA ofﬁcial website. Last year visitors showed greater interest, compared with 2011, with an increase by 190.47%, which shows increasingly more interest in the platform among the public.

The Platform also includes an historical database which assists all the persons who need such data for personal, statistical or academic reasons.

The ongoing improvement of this Section with new elements will continue to be in the focus of AFSA work in order to respond to market and public demands for complete and up-to-date information in a timely and qualitative fashion.

Capital Market

As the regulator and supervisor of the capital market, AFSA has constantly advocated for this market and its role in the development of the economy.

The Authority and Tirana Stock Exchange took part in the USAID Partners for Financial Stability program in 2012. The PFS role is to support the ﬁnancial sector, with the capital market representing one of the areas in focus. PFS supports the cooperation among regulators and stock exchanges in the region in relation to the development of capital markets. Under the program, Tirana Stock Exchange joined the “Platform for Joint Action” by the Stock Exchanges of Southeast Europe. The establishment of a joint trade platform will enable investors to trade in the securities listed on the stock exchanges of the countries in the region.

In the meantime, Tirana Stock Exchange continued its efforts for making the local businesses more aware of the beneﬁts of the capital markets as a competitive alternative for raising ﬁnance, and for educating investors in relation to the investment options that participation in the capital market provides.

AL BANIAN FINANC IAL SU PERVISORY AUTHOR ITY 81 Registration of Shares

The registration of shares that are sold outside the organized market are registered with the Share Registration Centre (SRC), which is a company licenced by AFSA to keep the share register. At the end of 2012, SRC had 100 registered joint-stock companies.

Table 22: Statistics on Transactions Registered with the Share Register Centre, 2012

Indicators Statistics

1. Total number of joint-stock companies registered with SRC 100

2. Total number of corporate shares registered with SRC 471,825,721

3. Total number of companies the shares of which were traded 34

4. Total number of transactions executed in 2012 179

5. Total number of shares traded in 2012 195,200

6. The percentage of trading transactions in 2012 0.04%

Source: Share Registration Centre

In 2012, SRC recorded 179 transactions in its joint-stock company share registers, compared with 263 transactions in 2011. The number of shares that were traded in OTC market in 2012 was about 0.04% of all shares of the companies registered with SRC, which indicated a low volume of transactions.

II.3 Voluntary Private Pension Market

Three pension funds carried on business in the private voluntary pension market in 2012. An assessment of private voluntary pension market shows that at the end of 2012 the amount of total managed assets was ALL 283.01 million, with an increase of about ALL 128.27 million (82.89%). In terms of Euros, total managed assets were EUR 2.03 million.16 The number of pension fund members was 7,281 at the end of 2012, marking a rise of 15.66% compared with the end of 2011.

Table 23: Pension Fund Indicators (31.12.2012)

Description Amount (million ALL) Change (%)

Year 2011 2012

PF net assets 154.74 283.01 82.89

Note: 16 Bank of Albania ofﬁcial exchange rate (“ﬁxed”) at 31.12.2012, 1 EUR = 139.5 ALL.

82 ANNUA L REPORT ‘12 Table 24: Net assets and number of members, by pension fund (31.12.2012)

Pension Fund Number of PF members Net Assets (million ALL)

SIGAL 3,045 134.23

RAIFFEISEN 2,513 113.91

SiCRED PENSION 1,723 34.87

TOTAL 7,281 283.01

Graph 26: Market shares in terms of number of pension fund members, 31.12.2012

SiCRED Pensions 23.66%

Raiffeisen 34.51%

Sigal 41.82%

Graph 27: Market shares in terms of pension fund net asset value, 31.12.2012

SiCRED Pensions 12.32%

Sigal 47.43%

Raiﬀeisen 40.25%

AL BANIAN FINANC IAL SU PERVISORY AUTHOR ITY 83 AFSA Challenges and Priorities

AFSA objectives are in the medium-term timeframe, and are implemented through yearly projects. The results achieved in 2012 were a good basis for further continuing with the achievement of the following objectives:

• Improve and complete the legal and regulatory framework; • Increase the quality and capacities of the supervisory process; • Promote and maintain the stability of ﬁnancial markets; • Effectively regulate the compulsory motor insurance market; • Ensure technological development in support of the supervisory activity.

Improvement and completion of the legal and regulatory framework is a long-term goal for AFSA, stemming out of:

• the approximation of the legal and regulatory framework with EU Directives in the context of Albania’s integration into the EU; • the approximation with international standards and best practices in the area of financial market supervision and regulation; • the internal needs and specific conditions of financial markets.

In 2013 AFSA efforts will focus on the necessary improvements in the compulsory insurance law; the required follow-up in relation to the Draft Law on Insurance and Reinsurance Activity and the Draft Amendments to AFSA Law until they are adopted; and the complete approximation of the Voluntary Pension Fund Law with EU Directives, with World Bank assistance. The adoption of the legal framework will be supported with signiﬁcant work on the drafting of the relevant regulations and with an assessment of their compatibility with EU Directives.

In the framework of the commitments AFSA has taken from the World Bank mission in relation to the ﬁnancial stability and debt management project, AFSA is going to work on the drafting of the regulation on the functioning of the over-the-counter (OTC) markets and the code of conduct for OTC dealers in 2013.

Increasing the quality and capacities of the supervision process is a fundamental goal for AFSA. AFSA will continue to pursue the identiﬁed strategic directions in 2013, aiming at modernizing supervision and reaching approximation with European practices. Priorities in 2013 speciﬁcally include:

• Further development and extension of the Management Information System to the rest of ﬁnancial market segments. The Management Information System has been one of the most important medium-term

84 ANNUA L REPORT ‘12 initiatives and goals recently. It was completely achieved in 2012 with the development of the insurance market reporting manual. AFSA now has a modern financial reporting platform that is completely functional for the insurance market, thanks to its five-year efforts. Regardless the achievement of this medium-term goal, AFSA plans to extend this modern reporting platform to the rest of financial market segments that it supervises. Objectives for 2013 specifically include:

• Introduce electronic signature in the reporting platform in order to gradually abandon paper reporting; • Monitor the Strategic Plan for the implementation of the insurance market risk-based methodology, constantly developing dedicated supervision reports; • Start building forms for the Government securities retail market, and test them;

• Insurance market effective risk-based supervision. This medium-term objective was formalized with the Strategic Plan for the implementation of the insurance market risk-based methodology, which was adopted by AFSA Board in October 2011. Main objectives for 2013 will be to:

• Include several risk-based supervision elements in the supervision and onsite inspection of insurance companies in order to build a database that would enable the gradual implementation of the new methodology. The adoption of the Insurance Law in 2013 is very important for the achievement of this objective; • Constantly increase staff knowledge and capacity in relation to risk-based supervision through dedicated training.

• Increased supervision capacities in the securities and private voluntary pension markets. The high development dynamics in other ﬁnancial market segments under AFSA supervision, especially in the investment fund market, has led to AFSA paying great attention to constant capacity building and optimisation of internal resources. In 2013 the focus will be on dedicated projects related to the speciﬁc features of supervision of this market, and the consolidation of institutional interactions with developed market regulators in order to review and implement best practices.

Promotion and maintaining of stability of ﬁnancial markets is another strategic goal that will be a priority for AFSA in the future. Main activities in 2013 contributing to the achievement of this objective include:

• Preparation of the Securities Market Development Strategy; Financial market promotion is a strategic goal for AFSA, in addition to consumer protection and ﬁnancial market supervision. With FSVC support, AFSA is going to build a development strategy for securities market in Albania in 2013, focusing on:

AL BANIAN FINANC IAL SU PERVISORY AUTHOR ITY 85 • assessing the current legal and regulatory framework; • determining the current level of development, and the major factors impacting it; • identifying potential barriers and opportunities of further developing this market.

• Increasing public awareness of private voluntary pensions; Through technical assistance instruments AFSA receives from international bodies, special attention was paid to private voluntary pensions in 2013, mainly towards increasing public awareness of the beneﬁts of this scheme. Together with other market players, AFSA is going to work under the guidance of the European Community experts to identify the main lines of actions, and under the coordination of joint efforts for promoting the market, which is still in its early development stages.

• Designing a special emergency action plan. This is in the context of the commitments AFSA has undertaken for 2013 in the framework of the Financial Stability Advisory Group. This strategic plan will be part of a national plan coordinating institutional actions taken by the Ministry of Finance, the Bank of Albania, AFSA and Albanian Deposit Insurance Agency in potential crises that might affect the ﬁnancial markets.

Effective regulation of the compulsory motor insurance market is one of the major challenges for AFSA in the conditions of the legal removal of ﬁxed compulsory motor insurance tariffs. A World-Bank-assisted and First-Initiative-funded Project was ofﬁcially launched in September 2011, which would assist AFSA with appropriate guidance of the liberalization process. The reports determining the supervision strategy and compulsory insurance pricing in Albania were completed in 2012. At the same time AFSA worked to design all IT developments, which comprise the support infrastructure for the implementation of the Strategy in the following years.

In 2013 efforts will be made for implementing the Project recommendations, especially in the following lines of action: • Develop processes towards risk-based pricing of compulsory motor insurance products; • Approximate the current legal framework on the compulsory motor insurance with EU Directives; • Increase actuarial capacities in the context of prudential provisioning and risk-based tarifﬁng; • Develop the IT systems to support the risk-based tarifﬁng and prudential provisioning process.

Technological development in support of the supervisory activity implies a number of ambitious tasks, given the limited available resources.

86 ANNUA L REPORT ‘12 In the framework of implementing the Bonus-Malus system in line with the compulsory motor insurance market liberalization strategy, in 2013 efforts will focus on:

• Changes to the Online Electronic Register of Compulsory Motor Vehicle Insurance Sales. Provision of automatic access to main vehicle details, vehicle owner details and risk categorization information for sales agents is going to be enabled in 2013. This will be possible thanks to the inter-institutional cooperation with the Ministry of Transport by enabling a connection in real time with the Directorate General of Road Transport Services. In the ﬁrst half of 2013 the necessary changes will be made in order to enable real-time access to any insurance policy, vehicle data, owner data and basic elements of the Bonus-Malus certiﬁcate for every driver; • Design of the user’s interface for the Albanian Insurance Bureau (AIB) in the context of policy management and accuracy. The last project study stage is completed, but its implementation is scheduled for the future.

• The data on the Online Electronic Register of Compulsory Motor Insurance Sales now enable verification in real time by such partner institutions as the Directorate General of State Police, thanks to the integration of verification of policy validity on the online verification system in the “eGjoba” operations centres. The system has already been implemented and has been in operation since November 2012. The goal in 2013 is to enable preview of the results on the Insurance Company Service Portal.

• In 2012 several improvements were made in the register to help insurance companies and the Authority, and to improve its maintenance. In 2013 the Portal will also provide the service of displaying the basic elements of the Bonus-Malus Certiﬁcate. The certiﬁcate will enable the categorization of risk on the basis of insurance policy and claims history.

• The Consumer Assistance through SMS Service will be extended further in 2013. The system is currently voluntary, and enables the verification of policies and reminder at the end of the policy period. In the context of the cooperation with the Directorate General of Road Transport Services access to tax payment data was enabled in 2012. The Authority will further cooperate with the Directorate General in 2013 in order to ensure automated notification several days before the expiry of the annual technical inspection and road tax deadline. In cooperation with the State Police when verifying the insurance policy and road tax verification a SMS will also provide information on any pending fines.

AL BANIAN FINANC IAL SU PERVISORY AUTHOR ITY 87 APPENDIX A AFSA Organization Chart

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88 ANNUA L REPORT ‘12 APPENDIX B Supervised ﬁnancial sector legal and regulatory framework Description The purpose of the Law is to establish the Financial Supervisory Authority as the only institution the The purpose of Law is to establish the Financial Supervisory voluntary private and securities insurance, financial the in entities licensing for responsible is that pensions area and supervising the activity in that market. The purpose of the The purpose of Law on Corporate Bonds and Local Government Bonds is to improve the legal issued by bonds Law applies to The protect investors. the capital market and develop framework, The governments. Albania; and (b) local of (a) joint-stock companies domiciled in the Republic Albaniaby the or Bank of Law does not apply to bonds issued by the Government the of Republic of Albania. AFSA, is the general rules governing the research in organization of the The scope of Regulation in general involved functional all those persons tasksand individual tasksand responsibilities for research. an ethical internal promote culture to in the performance of is the Regulation of The purpose auditing. lays down the responsibilities mission, purpose, goals for international audit The Regulation specified in the definition, international standards and code of conduct Authority, function in the guiding the professional practice of internal auditing. to lay down the is rules governing the setting methodand amount the The purpose of Regulation staff. AFSA of remuneration and expenses is to lay down the rules on the operation, management, safety, the The scope of Regulation working premises and equipment. AFSA security and maintenance of staff in their AFSA Code of Conduct is to serve as a guide for all AFSA The purpose of day-to-day actions or decision-making in line with the mission, guiding principles and The Code of Conduct serves as a link between personal and professional personnel values. Authority integrity in the staff daily actions and states the staff commitment to the Mission. is lay down the rules on the conditions, procedures, rights and the The purpose of Regulation staff. AFSA obligations in the processes of hiring and firing is to ensure impartial decision-making that is transparent and in the The purpose of Regulation by setting officers, rules on the typesinterests of AFSA the best possible interestthe of public by that might cause a conflict of interest. Title “On the Financial Supervisory Authority” Government Bonds” “On the organization of research activities in the Financial Supervisory Authority” Code of Conduct” Auditor’s “Internal Audit” “Charter of Internal “On employee financial relations with the Financial Supervisory Authority” Authority of the Financial Supervisory premises” Code of Conduct” “AFSA staff employment” AFSA “On “On the prevention of conflict interest in the exercise of public functions in the Financial Supervisory Authority” Reference Law No. 9572 of 3 July 2006 Law No. 10158 of 15 October 2009 “On Corporate Bonds and Local Regulation No. 177 of Regulation 13 December 2011. No. 119 of Regulation 19 September 2011 No. 118 of Regulation 19 September 2011 No. 83 of 29 June 2011. Regulation No. 56 of 30 March 2011Regulation “On the operation and management No. 37/2 of Regulation 23 February 2011 No. 37/1 of Regulation 23 February 2011 No. 14 of 25 February 2009 Regulation General

AL BANIAN FINANC IAL SU PERVISORY AUTHOR ITY 89 Description The scope of the Regulation information by AFSA. is the classification, handling and management of non-public the handling the conditions and rules for of to specify overall is this Regulation The purpose of complaints. policy-holders’ aims at laying down the general rules governing the organization and operation The Regulation of AFSA administration, general and specific functional tasks of each department, section, unit and employee. The Regulation specifies how registers are kept and maintained by AFSA and the public is given access to them. Board members and AFSA is to govern the relationships among The scope of the Regulation Authority staff. between them and the this The purpose of Guideline is to lay down the procedures and rules on appraising the progress staff. AFSA and performance of The purpose of this Law is to improve the legal framework on compulsory insurance. This legal this The purpose of Law is to improve the insurance. legal framework on compulsory the insurance in market requiring legal progress rapid time of development place at a took changes in response to such development protect in order consumers and approximate the legal framework with the international standards. to with regard the implementationgeneral principles and rules is this law of of scope The intermediation insurance and reinsurance the in reinsurance activity, the insurance and supervision by the state of entities performing activities provided for in this Law. increasing the August 2008 for provide Decree 3 No. 96 of The amendments Ministers’ to Council of ceiling allowed technical of and mathematical investment provision in land and property to 30%, Albania. given the limited investment opportunities in the licence characteristics, addition to include which, in the general provisions CMD provides The Under these adjustors. other secondary activities claims restrictions on that by may be performed rules, such secondary activities may only include complying with this profession. “On the Activity of Insurance, “On the and Intermediation in Reinsurance Insurance and Reinsurance” “Amendments to Council of August Decree No. 96 of 3 Ministers’ 2008 “On assets covering technical and mathematical provisions, their investment by insurance companies””. “On the criteria and procedures for licensing claims adjusters” Transport Sector” Transport Title “On the confidentiality in Financial Supervisory Authority” holders’ complaints” holders’ Supervisory Authority” registers of licensed, authorized and approved entities by the Financial Supervisory Authority” Authority of the Financial Supervisory Board meetings” performance of the Financial Supervisory Authority employees” Law No. 9267 of 29 July 2004 Decree No. 5 of Council of Ministers’ 7 January 2009, proposed by Board Decision No. 166 of 23 December 2008 Decree No. 164 Council of Ministers’ of 28 January 2008, proposed by Board August 2007 Decision No. 3 of 30 Regulation No. 114 of Regulation 11 September 2008 Reference Law No. 10076 of 12 February 2009 “On Compulsory Insurance in the Regulation No. 61 of 22 May 2008Regulation August 2007 No. 7 of 30 Regulation “On the procedure of handling policy- “On internal rules of the Financial No. 17 of 21 March 2007Regulation “On keeping and maintaining the No. 3 of 2 November 2006Regulation “On rules of procedure and operation August 2012 Guideline No. 117 of 29 “On appraising the progress and In the area of insurance

90 ANNUA L REPORT ‘12 This CMD lays down the rules on technical and mathematical coverage as the provision most an insurance company liabilities insurance important part of that directly related to policies. are The Decree lays down the calculation capital methodology of required solvency and its components for life and nonlife insurance companies. lays down the prohibiting procedures for the free use insurance of company assets, The Regulation in order to protect insured persons, policy-holders or beneficia ries of insurance policies. lays down the rules related to management of Compensation Fund. This Regulation specifies the levelThe ofRegulation technical provisions, the content of the technical database, and the methods for calculating technical provisions related to compulsory motor insurance. the is organization, operation and determination procedures of of the The scope of Regulation the AMF-InReg. lays down the rules related to management of Compensation Fund. This Regulation This CMD lays down the criteria and licensing procedures for and supervising insurance brokers, and the criteria for licensing insurance agents. “On approving the methodology “On approving the methodology of calculation the required solvency capital and its components for life and non-life insurance companies” “On the procedures for prohibiting the free use of insurance company assets” financing and management of the compensation fund, and paying claims” provisions for compulsory motor insurance” reporting system” financing and management of the compensation fund, and paying claims” “On assets covering technical “On assets covering technical and mathematical provisions, their investment by insurance companies” “On setting the criteria and “On setting the criteria and procedures for licensing insurance intermediaries, and the rules on supervising their and their licence activity, revocation” Council of Ministers’ Decree No. 191 of Council of Ministers’ 25 March 2005 No. 126 of 9 May 2012 Regulation No. 36 of 21 March 2012Regulation “On the establishment, calculation, No. 110 of 28 July 2011Regulation “On setting the level of technical No. 26 of 23 February 2011Regulation AMF IN-REG “On the operation of No. 22 of 19 March 2010Regulation “On the establishment, calculation, Council of Ministers’ Decree No. 96 of Council of Ministers’ 3 February 2008, proposed by Board Decision No. 3 of 13 June 2007 Council of Ministers’ Decree No. 79 of Council of Ministers’ 28 January 2008, proposed by Board August 2007 Decision No. 4 of 30

AL BANIAN FINANC IAL SU PERVISORY AUTHOR ITY 91 The purpose of this Regulation is to specify the amount of annual contributions payable to AFSA by AFSA is to specify the amount annual of contributions payable to this Regulation The purpose of insurance companies or foreign company branches operating as insurers. Albanian Insurance Bureau, supervising the and standards for the rules down lays Regulation This Authority. and the content time-limits for its reporting to This Regulation specifies the level of premiumscalculating related to technical premiums and database, the methods for provisions and and technical provisions, the AFSA content which under timeframes and procedures the specifies of the also It insurance. transport mandatory approves mandatory transport insurance premium schedules. the issuance actuary the and withdrawal lays down conditionsand criteria for of Regulation This duties. authorizations, and sets actuaries’ lays down the rules and procedures on handling of claims under public This Regulation transport passenger insurance, vehicle owner or user third party liability aircraft owner or user third party liability insurance, and water vessel insurance. lays down the method insurance and reporting compulsory claims procedures for This Regulation through an electronic register installed the Insurance on the of Compulsory Information servers Centre. is to specify the overall conditions and the rules for handling of this The purpose of Regulation complaints. policy-holders’ to specify the identifying is method and and procedures for thisRegulation The purpose of reporting sales of compulsory motor insurance policies on an electronic register which is installed servers. on AFSA insurance concluding reinsurance agreements companies the criteria on for sets Regulation This Albania. of operating in the Republic is to set the requirements on the professionalism and reputation this The purpose of Regulation insurance the may manage, and control companies, the restrictions on who govern persons of hiring and firing of such persons. to set the granting is timeframes licences and procedures for this Regulation The purpose of insurance company branches, reinsuranceforeign companies and insurance or operate as to the procedures for opening foreign insurance company extend granting licences to reinsurance company insurance for Albania, and the procedures representative of offices in the Republic activities. This Regulation sets the rules on the management of the Green Card Guarantee Fund sets the rules on management of Green Card Guarantee Fund This Regulation aiming at guaranteeing financial liabilities stemming from membership in the Green Card system, and the basic requirements on providing members with International Insurance Certificate. reporting and supervision standards” insurance in the transport sector” “On licensing statutory actuaries of insurance companies” by compulsory motor insurance policies” compulsory motor insurance claims register” “On the procedure of handling complaints” policy-holders’ compulsory motor insurance policy sales” “On reinsurance criteria” elected or appointed to management bodies of insurance or reinsurance companies” reviewing licence applications for insurance or reinsurance operations Albania” of in the Republic insurance companies” and the rules of Green Card claims handling” Regulation No. 2 of 28 January 2010Regulation August 2009 No. 75 of 28 Regulation Albanian Insurance Bureau “On “On premiums of compulsory No. 67 of 27 July 2009 Regulation No. 57 of 25 June 2009Regulation “On the handling of claims covered April 2009 No. 36 of 30 Regulation “On the electronic register of No. 61 of 22 May 2008 Regulation No. 10 of 3 October 2007Regulation “On the online electronic register of No. 2 of 18 June 2007 Regulation No. 14 of 8 February 2007Regulation “On the criteria to be met by persons No. 13 of 8 February 2007Regulation “On procedures of admitting and Regulation No. 20 of 19 March 2010Regulation “On the annual contributions of Regulation No. 21 of 19 March 2010Regulation “On managing the guarantee fund,

92 ANNUA L REPORT ‘12 The scope of this Regulation is the method calculation of mathematical of by insurance provisions this The scope of Regulation companies. The purpose of this Regulation is to set the criteria and procedures for statutory audit firms to approval, and the content insurance of company AFSA be appointed by insurance companies upon audit reports issued by statutory audit firms. The changes consist ofconsecutive years an auditing firm may be appointed for. extending the number of rules on company insurance reporting. AFSA The scope of this regulation includes the sets the basic rules on the preparation annual of reinsurance needs programme This Regulation of insurance companies. to strike a balance is on the investment activity related to insurance this Regulation The purpose of company capital and some mandatory supervisory ratios. This Guideline lays down the principles of the protection of policyholders, beneficiaries or third competition a key element among insurance the same time, also of providers At this is parties. and of enhanced public image the industry. audit report insurance company Guideline includes the elements that an this of scope The prepared by statutory audit firms must have. Guideline This regulates the reinsurance insurance activity companies thatmay reinsure of liabilities of owed to policy-holders, domestic reinsurance portions companies, branches of foreign reinsurance or Authority, reinsurance companies licensed by the Financial Supervisory companies complying with the requirements laid down in this Guideline. . This Guideline lays down the rules on the disclosure of data to inform the public on the financial an insurance settle the capacity company to insurance assess of companies and to of position consumers information to disclosing on sets the rules obligations. It also claims and meet other prior to concluding insurance agreements or during the term of agreements. The Guideline definesAFSA. which are submitted to accountability, the list of documents consisting of insurance company statutory The scope of this Regulation the calculation non-life insurance is method of technical provisions this Regulation of The scope by insurance companies. companies” conditions for company insurance reporting to AFSA” programme of insurance companies, and time-limits for submitting it to AFSA” company capital” “On good management of insurance claims” “On the contents of insurance company audit reports issued by statutory audit firms” “On the criteria of reinsurance companies that may be contracted by insurance companies operating in Albania” of the Republic “On the rules of data disclosure by insurance companies and brokerage companies in the context of public transparency and consumer protection” statutory reporting documents for insurance and reinsurance companies” and ways of keeping mathematical provisions” and ways of keeping non-life insurance technical provisions” Regulation No. 7 of 8 February 2007Regulation “On statutory auditors of insurance No. 6 of 8 February 2007Regulation “On the rules, methods and No. 5 of 8 February 2007Regulation “On the content of reinsurance No. 4 of 8 February 2007Regulation “On limits of investment insurance Guideline proposed by Board Decision August 2008 No. 6 of 30 Guideline No. 15 of 22 February 2008, proposed by Board Decision No. 15 of 22 February 2008 Board AFSA Guideline adopted by Decision No. 12 of 8 February 2007 Board AFSA Guideline adopted by Decision No. 11 of 8 February 2007 Guideline No. 10 of 8 February 2007 “On the list of annual and periodic Regulation No. 8 of February 2007Regulation “On the basis, accounting methods Regulation No. 9 of 8 February 2007Regulation “On the basis, accounting methods

AL BANIAN FINANC IAL SU PERVISORY AUTHOR ITY 93 Description The purpose of this Law is to regulate the conditions and criteria for the establishment, The purpose of this Law is to regulate the conditions and criteria for establishment, constitution and operation of collective investment undertakings management companies; the structures open-participation and closed-participation funds; issue sale of units and shares; the redemption units; promotion collective investment undertakings; etc. the improve legal framework, develop the to capital thisLaw is market The purpose of and (a) joint-stock companies domiciled in the issued by bonds The Law applies to protect investors. issued by the not apply to bonds The Law does Albania; governments. and (b) local of Republic Albania. Albania or by the Bank of of Government of the Republic This Law specifies the types of securities and regulates manner conditions for issuance, trading and registration, identification performance of transactions in securities and persons individuals authorized to perform transactions with securities, the conditions for organization of public trading securities, protection investors and the securities-right holders, conditions for dematerialized securities, the organization and functioning of securities registries, exchanging regulation securities market. the multilateral the organization and operation of the conditions for down lays Regulation The trading facility (MTF), and the requirements to be met by its operators. The Regulation specifies the specialbe paid out in securities,getting by the and lays down the approval Financial procedure for circumstances under which investment fundSupervisory Authority. units may the The purpose of Code is to regulate the behaviour and activity requirementscollective for investment undertaking management companies, in order to ensure a more efficient activity and reduce the business risk. collective details in the register of and content of the form on the rules down lays Regulation The investment undertaking investors, which is created and kept by the depositary. lays down the procedure, cost and time-limits for closing an investment fund. The Regulation This Law lays down the rules related to the conditions and taking procedures for companies over The Law applies to publicly announced bids to acquire shares issued by public by public offer. securitiesthe organized market Albania and listed on of of companies domiciledin the Republic abroad Albania or of the Republic in companies domiciled foreign Albania and by of the Republic Albanian securities exchange. and listed on the Government Bonds” organization and operation of the multilateral trading facility” for the payment in securities of investment fund units” collective investment undertaking management companies" investment undertaking investors" limits for closing investment funds" Undertakings” by Public Offer” Title Law No. 10158 of 15 October 2009 “On Corporate Bonds and Local Law No. 9879 of 21 February 2008 “On Securities” No. 160 of 21 November 2012Regulation “On the conditions for No. 50 of 21 March 2012Regulation “On the special circumstances No. 131 of 6 October 2011Regulation "On the Code of Conduct for No. 130 of 6 October 2011Regulation "On the register of collective No. 129 of 6 October 2011Regulation "On the procedures, costs and time- Law No. 10198 of 10 December 2009 “On Collective Investment Reference Law No. 10236 of 18 February 2010 of Companies Takeover “On In the area of securities

94 ANNUA L REPORT ‘12 AUTOR ITETI I M BIKËQ YRJES F INANC IARE 94 The Regulation lays down the minimum content, time-limits and form of mandatory reporting to mandatory reporting the minimum content, of down time-limits lays and form Regulation The AFSA. lays down the rules on the contents registers collective of investment The Regulation keeps. AFSA undertakings that The Regulation specifies the mandatory basis for determining the value of collective investment transactions undertaking assets, including securities, cash and its equivalents, currency, foreign company assets(in the case of and other derivatives, immovable property, options in futures, investment companies) or other transferable assets. lays down the authorizing units/shares conditionsand methods of the in sale of The Regulation public collective investment undertakings by agents employed by managementcompanies and individual agents who act on behalf of management companies under special agreements. lays down the requirements on the additional documentation licensing for a public The Regulation and business, collective investment undertaking established by a foreign management company, public offer and reporting requirements. This specifies:Regulation a) the time-limits, conditions and procedures for authorizing corporate custodians, be given by banksoperating as government bond b) the information to and local bond custodians and acting their as brokers for clients with regard to those bonds and any future default on Authority in the event of transactions, additional be taken the and c) measures to by the obligations required by Law. and statements financial companies’ brokerage securities of contents the specifies Regulation This financial the on information have users external and Authority the that ensures It reports. business position, business activities and changes. financial of publication and preparation the to related requirements the down lays Regulation This analysis in the area of securities, and the circumstances or relationships that lead to conflict of interest. lays down the disclosure method and content requirements related to the This Regulation The information that must be given to the public on material circumstances decisions. or also defines material facts. Regulation The purpose of the Regulation is to lay down the to additional is procedures and requirements on the of Regulation The purpose licensing collective investment undertaking depositary. Investment Undertaking Register" collective investment undertaking assets and the calculation of net value of assets per unit or share" “On authorizing individuals to sell units or shares in collective investment undertakings with public offer” “On licensing, business, public offer and reporting requirements for collective investment undertakings with public offer established by foreign management companies” procedures for authorizing banks as bond custodians” financial brokerage companies’ statements and business reports” “On the preparation and publication of financial analyses in the area securities” “On the obligation of issuers to disclose material facts to the public” limits and form of reporting for collective investment undertakings, management companies and depositaries" requirements on licensing collective investment undertaking depositary" Regulation No. 78 of 29 June 2011Regulation No. 77 of 29 June 2011Regulation "On the contents of Collective "On determining the value of No. 69 of 26 May 2011 Regulation No. 68 of 26 May 2011 Regulation No. 124 of 7 December 2010Regulation “On the deadlines, conditions and August 2009 No. 74 of 28 Regulation “On the contents of securities No. 68 of 27 July 2009 Regulation No. 42 of 28 May 2009 Regulation Regulation No. 127 of 6 October 2011Regulation "On the mandatory contents, time- Regulation No. 128 of 6 October 2011Regulation "On the additional procedures and

AL BANIAN FINANC IAL SU PERVISORY AUTHOR ITY 95 Description The purpose of the Regulation is to govern the content, frequency, timeframes the and of form is to govern the content, frequency, the The purpose of Regulation financial statements that pension fund management companiesAuthority. are required to submit to the The Regulation lays down the pension fund asset and liability method valuation, of pension fund The Regulation net asset value calculation,unit and pension fund the requirements on frequency the of calculation pension fund net well as the of asset value, as methodand timeframe for publishing that information. The purpose of this Law is to set the required standards for: (a) more effective management of voluntary pension funds through the voluntary pension funds with contributions pensionfunds; (b) supervision of business to diversification of investments, with defined the contributions, aimin order to increase to ensure securitypension and governance of fund assets; good (d) licensing and supervision protectionstability, of of pension fund members; (c) promotion pensionfund and occupational of pension fund management companies, pension fund asset depositaries and all related issues. This Regulation lays down the rules on the operation and the supervision of retail market of This Regulation Government securities, including treasury bills and bonds. lays down transaction conditions related Government to securities custody and the Regulation This method of authorizing banks to perform such operations. and the criteria specifies theThis documentationRegulation to be attached to an application for, the content and of, getting a licence to trade in securities and to be an investment adviser, for, a licence application, the approving procedure for articles association of procedure to review, a company established to operate trading securities, for in and advising on amendments to those bylaws, and the documentation required to approve the appointment the of members of an investment brokerage and adviser and the chief executive of Directorsdirector of the Board company. is to provide the conditions, requirements and procedures this The purpose of Regulation licensing the for company that will operate as a securities exchange, and theconditions requirements on regulating and supervising the company operating as a securities exchange. brokerage by kept be to books order keeping of method and contents the specifies Regulation This 9879 Law No. of Articles 42 (1), (2) and (3) of in securities to companies with regard to referred 21 February 2008 "On Securities". This Regulation specifies the method of balancing brokerage company liquid assets withAuthority. term liabilities, and the procedures for reporting to short- Government securities custodians” intermediary companies, brokers and investment advisers” Securities Exchange” “On the contents and keeping of order books and transaction books” “On the retail market of the Republic “On the retail market of Republic Albania Government securities” of “On minimum liquidity requirements for securities brokerage companies” Title company reporting to AFSA” company reporting to “On the calculation of net asset value of voluntary pension funds, and information publication time-limits” Regulation No. 25 of 23 February 2011Regulation “On pension fund management Regulation No. 139 of 26 September Regulation 2012 Regulation No. 21 of 26 March 2009Regulation No. 165 of 23 December 2008Regulation “On the conditions for authorizing “On the licensing of brokerage/ No. 120 of 2 October 2008Regulation “On licensing and supervising the No. 115 of Regulation 11 September 2008 Regulation No. 22 of 26 March 2009 Regulation Regulation No. 41 of 28 May 2009 Regulation Reference Law No. 10197 of 10 December 2009 Funds” Pension ”On Voluntary In the area of voluntary private pension funds:

96 ANNUA L REPORT ‘12 AUTOR ITETI I M BIKËQ YRJES F INANC IARE 96 The purpose of this The purpose of Instruction is to set the criteria and inspecting procedures for supervised financial institutions. The purpose of this Regulation is to specify allowed assets in which pension funds may be invested, specify to is this Regulation of The purpose the restrictions and maximum allowed investment limits. This Regulation lays down the elements and amounts of fees related to the licensing, approval, related to fees amounts of the elements and down lays Regulation This voluntary managementauthorization of and operation of companies, depositaries brokers pension funds, and the penalties imposed in event of delayed payment. The purpose of this Regulation is to set the procedures for the organization of examinations is to set the procedures for organization of examinations The purpose of this Regulation for pension fund management company managers, the establishment of examination panels, and the delegation of examination organization to specialized centres or universities/ colleges. The purpose of this Regulation is to set the limit and method of application of penalties application in the of set the limit and method of to is this Regulation of purpose The his individual premature account withdrawal assets from with a voluntary of event a member’s of pension fund. This Regulation lays down the methods, conditions and procedures for the paymentpension the methods, conditions and procedures for of down lays Regulation This benefits in voluntary pension fund members’withdrawing and using them in accordance with legal provisions. accounts after they have acquired the right to The purpose of the Regulation is to specify the types functions, of rules and the procedures for the The purpose of Regulation delegation of management company functions to third parties. The Regulation lays down detailed rules on the content voluntary pension fund contracts of and The Regulation prospectuses. The Regulation sets the criteria and standards for separating the activity of pension fund separating the activity of the criteria and standards for sets Regulation The management the collective investment undertakings, from of a single licensed if management company is involved in both types of activities. “On the procedures for inspecting non-banking financial institutions” maximum limits of pension fund investments” “On licensing and operation fees for “On licensing and operation fees for voluntary pension fund management companies, depositaries and brokers” “On the examination of pension fund management company managers” premature withdrawal from pension funds” procedures of pension pay-out” pension fund management companies” contract and prospectus” voluntary pension fund management companies” Guideline adopted by AFSA Board AFSA Guideline adopted by Decision No. 2 of 21 November 2007 Regulation No. 1 of 28 January 2010Regulation “On allowed assets, limitations and Regulation No. 18/1 of 25 February Regulation 2010 Regulation No. 113 of 18 November Regulation 2010 Regulation No. 125 of 7 December 2010Regulation “On the penalties related to Regulation No. 126 of 7 December 2010Regulation “On the methods, conditions and Regulation No. 1 of 13 January 2011Regulation “On the delegation of functions Regulation No. 2 of 13 January 2011Regulation “On the contents of pension fund Regulation No. 24 of 23 February 2011Regulation “On the separation of business

AL BANIAN FINANC IAL SU PERVISORY AUTHOR ITY 97 APPENDIC C List of supervised institutions Domestic capital 10, Bush”, Nr. “George W. Rr. Tiranë +355 42 254 770 +355 42 254 664 www.albsig.com.al [email protected] No. 10 of 19.07.2004 Unlimited 4. ATLANTIK sh.a. 4. ATLANTIK Dritan ÇELAJ Domestic capital “Themistokli Gërmenji”, 3/1, Rr. Tiranë +355 42 230 506 +355 42 235 088 www.atlantik.com.al [email protected] No 5, of 13.04.2001 Unlimited 8. ALBSIG sh.a. Natasha DHOQINA Non-life insurance Rr. “Sulejman Delvina”, Zayed Rr. Postare Kutia Business Center, 277/1, Tiranë Nr. +355 42 229 578 +355 42 229 511, www.interalbanian.com [email protected] No. 9 of 19.07.2004 Unlimited Foreign and domestic capital 3. SIGAL Uniqa Group Austria sh.a. Uniqa Group 3. SIGAL Avni PONARI Non-life insurance, reinsurance Non-life insurance 1 , Bul. “Zogu I”, Nr. Tiranë 2387, Nr. 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 Bardhyl MINXHOZI Non-life insurance 7. INTERALBANIAN Vienna 7. INTERALBANIAN Vienna Group sh.a. Insurance Rr “Papa Gjon Pali II”, Gjon Pali Rr “Papa Tiranë 5, vila Nr. +355 42 238 899/999, +355 42 223 841 www.eurosig.al [email protected] No. 7 of 8.07.2004 Unlimited 2. SIGMA Vienna Insurance Insurance Vienna 2. SIGMA Group sh.a. Qemal DISHA Non-life insurance Foreign and domestic capital e Parisit”, Rr “Komuna Tiranë 1714, Nr. Postare Kutia Foreign and domestic capital +355 42 258 254/ 253 www.sigma-al.com [email protected] No. 01, of 03.02.1999 Unlimited Muharrem BARDHOCI Non-life insurance 6. EUROSIG sh.a. Rr. “Ismail Qemali”, Ndërtesa Rr. kati 2, Kutia Tower, Samos 8292, Tiranë Postare +355 42 270 576/577 www.intersig.al [email protected] No. 6 of 13.09.2001 Unlimited 1. INSIG sh.a. KALAJA Tomor Life & non-life insurance Government-owned Gjon Rruga “Papa Center, ABA II”, kati i gjashtë, zyra nr. Pali 600, Tiranë +355 42 223 838 www.insig.com.al [email protected] No. 03 and 04, of 08.06.2000 Unlimited Gentian SULA Non-life insurance Foreign and domestic capital Domestic capital 5. INTERSIG Vienna Insurance Insurance 5. INTERSIG Vienna Group sh.a. 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 CEO Scope of Activity of Ownership Type INSURANCE MARKET

98 ANNUA L REPORT ‘12 AUTOR ITETI I M BIKËQ YRJES F INANC IARE 98 APPENDIC C List of supervised institutions 12. MAI sh.a. Elnar GASHI Insurance brokers and reinsurance Foreign capital “Ismail Qemali”, pallati Rr. Kati III, Verde), Gener 2 (Valle zyra 4, Tiranë +355 42 500 514 www.mai-cee.com [email protected] No. 1 of 11.09.2008 Unlimited INSURANCE BROKER sh.a. A-EJA 16. Anila QENDRO Non-Life Insurance Brokerage Domestic capital 20, “Pjetër Bogdani”, Pall Rr. kat 1, Tiranë +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 Tiranë 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 Rezarta ZHUKRI Domestic capital “Abdyl Frasheri”, Rr. Tiranë pallati De Rada, +355 42 257 903 / 238 018, +355 42 249 952 No. 5 of 19.03.2010 Unlimited 15. ALL – SIG sh.a. ALL 15. 10. SICRED sh.a. Genc KOXHAJ Life insurance Domestic capital përballë “Jul Varibova”, Rr. Tiranë Top-Channel, +355 42 237 549 +355 42 237 530 www.sicred.com.al [email protected] No. 8 of 26.07.2004 Unlimited CARCANI Valbona Domestic capital “Asdreni”, Bul. “Bajram Curri”, Rr. Tiranë pallati 4, shk. 1, ap1, +355 69 20 58424 [email protected] 3 of 10.12.2009 Nr. [email protected] Unlimited 14. DEVON sh.a. 9. ANSIG sh.a. Edlir RUKA Non-life insurance Domestic capital 9/1 “Donika Kastrioti”, Vila Rr. Tiranë 4 Shkurti), (Rr. +355 42 263 490/445/486 www.ansig.al No. 12 of 22.06.2012 Unlimited Bashkim KRYEZIU Non-Life Insurance BrokerageDomestic capital Non-Life Insurance Brokerage “Mustafa Matohiti”, pallati 7, Rr. Tiranë shk. 2, ap.8, Non-Life Insurance Brokerage +355 42 248 768/42 756 +355 42 379 925, [email protected] No. 2 of 26.03.2009 Unlimited 13. 3B BROKER sh.a. 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

AL BANIAN FINANC IAL SU PERVISORY AUTHOR ITY 99 Unlimited No. 6 of 25.06.2009 No. 2 of 21.05.2010 [email protected] www.intesasanpaolobank.al www.intesasanpaolobank.al +355 42 276 000/42 248 762 Rr. “Ismail Qemali”, Nr. 27, Tiranë 27, “Ismail Qemali”, Nr. Rr. Foreign capital Broker of Republic of Albania Government of Broker of Republic securities on the Exchange and retail Albania of market, and custodian of Republic Government securities Alexander RESCH Unlimited No. 4 of 25.06.2009 No. 7 of 18.11.2010 [email protected] www.bkt.com.al www.bkt.com.al +355 4 250 955, 956 Bul. “Zhan D’ark”, Tiranë Bul. “Zhan D’ark”, Foreign capital Broker of Republic of Albania Government of Broker of Republic securities on the Exchange and retail market, and custodian of Republic Albania Government securities of Seyhan PENCAPLIGIL 2. BANKA KOMBËTARE TREGTARE sh.a.TREGTARE KOMBËTARE 2. BANKA Albania sh.a. Bank SAN PAOLO 3. INTESA 18. WVP Ndërmjetës në sigurime sh.a. Ndërmjetës 18. WVP Ardian KELMENDI Life and Non-Life Insurance Brokerage Foreign capital Vortek “Sami Frashëri“, Pallati Rr. Tiranë Ap.5, 2, shkalla +355 42 224 525 www.wvp.al [email protected] No. 10 of 25.04.2012 Unlimited Unlimited No. 3 of 25.06.2009 No. 6 of 29.09.2010 [email protected] www.raiffeisen.al www.raiffeisen.al +355 42 381 / 275 599 European Trade Center, Bul. “Bajram Curri”, Center, Trade European Tiranë Foreign capital Broker of Republic of Albania Government of Broker of Republic securities on the Exchange and retail Albania of market, and custodian of Republic Government securities Christian CANACARIS 1. RAIFFEISEN BANK sh.a. 17. SMART Brokers sh.a. 17. SMART Përparim ISUFI Life and Non-Life Insurance Brokerage Foreign capital Bul. “Dëshmorët e Kombit“, Tiranë Binjake, kati 2, Kullat +355 42 269 435 [email protected] No. 9 of 18.01.2012 Unlimited License Duration Licence number/date Email Website Tel./Fax Office address Type of Ownership Type Scope of Activity CEO CEO Scope of Activity of Ownership Type Office address Tel./Fax Website Email Licence number/date License Duration SECURITIES MARKET

100 ANNUA L REPORT ‘12 AUTOR ITETI I M BIKËQ YRJES F INANC IARE 100 Unlimited No. 12 of 29.09.2010 No. 5 of 29.09.2010 www.fibank.com +355 42 276 702/3 +355 42 280 210 Bul. “Dëshmorët e Kombit”, Twin Towers Nr. 2 Kati Nr. Towers Twin Bul. “Dëshmorët e Kombit”, Tiranë i 14 & 15, Foreign capital Broker of Republic of Albania Government of Broker of Republic securities on the Exchange and retail Albania of market, and custodian of Republic Government securities Bozhidar TODOROV Unlimited BANK sh.a. INVESTMENT 9. FIRST No. 1 of 21.05.2010 No. 1 of 21.05.2010 [email protected] www.tiranabank.al +355 42 269 616/617/429, 707 Rr. “Ibrahim Rugova”, Tiranë “Ibrahim Rugova”, Rr. Foreign capital Broker of Republic of Albania Government of Broker of Republic securities on the Exchange and retail Albania of market, and custodian of Republic Government securities. 6. BANKA E TIRANËS sh.a. E 6. BANKA Unlimited No. 11 of 25.06.2009 [email protected] www.icbank-albania.com + 355 42 256 254 + 355 42 235 409 Rr. “Murat Toptani”, kati VII , pranë Toptani”, “Murat Rr. Tiranë Gjergji Center, Foreign capital Brokerage company for Albanian Brokerage company for Government securities on the exchange. Gideon Van Den BROEK Gideon Van Unlimited sh.a. TREGTARE NDËRKOMBËTARE 8. BANKA No. 8 of 25.06.2009 No. 4 of 30.08.2010 No. 1 of 13.12.2011 [email protected] www.bankacredins.com www.bankacredins.com +355 42 234 096, 222 916 Rr.”Ismail Qemali”, Nr. 21, Tiranë 21, Qemali”, Nr. Rr.”Ismail Foreign capital Broker of Republic of Albania Government of Broker of Republic securities on the Exchange and retail market, and custodian of Republic Albania Government securities and of corporate and local government bonds Artan SANTO 5. BANKA CREDINS sh.a. 5. BANKA Unlimited No. 5 of 25.06.2009 No. 8 of 13.12.2011 No. 5/1 of 21.03.2012 [email protected] www.societegenerale.al www.societegenerale.al +355 42 280 442/3 +355 42 280 441 Bul. “Dëshmorët e Kombit”, Kulla Binjake Kulla Bul. “Dëshmorët e Kombit”, I, Tiranë Foreign and domestic capital Broker of Republic of Albania Government of Broker of Republic securities on the Exchange and retail Albania of market, and custodian of Republic Government securities Hubert DE SAINT JEAN Unlimited sh.a. ALBANIA SOCIETE GENERALE 7. BANKA No. 7 of 25.06.2009 No. 3 of 28.06.2010 [email protected] www.alphabank.al +355 42 233 550 “Rruga e Kavajës”, G-KOM Business Center, “Rruga e Kavajës”, G-KOM Business Center, Tiranë Foreign capital Broker of Republic of Albania Government of Broker of Republic securities on the Exchange and retail Albania of market, and custodian of Republic Government securities Periklis DROUGKAS 4. ALPHA BANK –Tirana sh.a. BANK –Tirana ALPHA 4. License Duration Licence number/date Email Website Tel./Fax Office address Type of Ownership Type Scope of Activity CEO License Duration Licence number/date Email Website Tel./Fax Office address Type of Ownership Type Scope of Activity CEO

AL BANIAN FINANC IAL SU PERVISORY AUTHOR ITY 101 Unlimited of 05.11.2002 [email protected] www.qra.al +355 42 233 442, 425 Rr. “George W. Bush”, Nr. 13, Kutia Postare 7424, Postare 13, Kutia Bush”, Nr. “George W. Rr. Tiranë Government-owned Corporate share registry Genard KASTRATI Unlimited AKSIONEVE sh.a. TË E REGJISTRIMIT 15. QENDRA No. 2 of 25.06.2009 +355 68 20 58 275 +355 42 256 081 Rr. “M. Gjollesha”, Kulla 2, ap. 13, Tiranë 2, ap. 13, “M. Gjollesha”, Kulla Rr. Domestic capital Brokerage company for Albanian Government Brokerage company for securities on the exchange. Mirela ANGJE LI 12. TRIUMF GROUP sh.a. TRIUMF GROUP 12. Unlimited of 13.07.2007 tseinfo@abcom-al.com www.tse.com.al www.tse.com.al +355 42 265 058 Rr. “Dora D’Istria”, Nr. 2, Kutia Postare Postare 2, Kutia “Dora D’Istria”, Nr. Rr. 274/1, Tiranë Government-owned Organized securities market Anila FURERAJ Unlimited TIRANËS sh.a. E 14. BURSA No. 9 of 25.06.2009 +355 42 280 202 Bul. “Dëshmorët e Kombit”, Twin Towers Towers Twin Bul. “Dëshmorët e Kombit”, Tiranë 2 Kati i 11, Nr. Foreign and domestic capital Brokerage company for Albanian Brokerage company for Government securities on the exchange and on the retail market Lirim MUHARREMI 11. KAPITAL INVEST sh.a. INVEST 11. KAPITAL Unlimited No. 13 of 28.04.2011 BD. No. 64 of 28.04.2011 [email protected] www.aksioner.com +355 44 400 600 Rr. “Qemal Stafa”, pall. 31, njësia tregtare2, “Qemal Stafa”, pall. Rr. 20, Tiranë nr. Foreign capital Securities brokerage company in trading orders on the in securities on customers’ Albania, of licensed market in the Republic and stock broker on behalf of Saxo Bank Alma HASANAJ Unlimited SECURITIES AKSIONER INTERNATIONAL 13. BROKERAGE sh.a. www.postashqiptare.al [email protected] No. 10 of 25.06.2009 + 355 42 222 315 + 355 42 266 559 Rr. “Reshit Collaku”, nr. 4, Tiranë 4, Collaku”, nr. “Reshit Rr. Government-owned Brokerage company for Albanian Government Brokerage company for on the retail market securities (T-bills) Arqile GOREA 10. POSTA SHQIPTARE sh.a. SHQIPTARE 10. POSTA License Duration Licence number/date Email Website Tel./Fax Office address Type of Ownership Type Scope of Activity CEO License Duration Website Email Licence number/date Tel./Fax Office address Type of Ownership Type Scope of Activity CEO

102 ANNUA L REPORT ‘12 AUTOR ITETI I M BIKËQ YRJES F INANC IARE 102 Rr. “Mustafa Matohiti”, Nr. 4, Tiranë 4, “Mustafa Matohiti”, Nr. Rr. +355 42 237 549/ 496/ 44 538 674 www.sicred-pensions.com.al [email protected] No. 3 of 23.11.2011 3. Shoqëri administruese e fondeve të pensionit SiCRED sh.a. Estela KOCI pension fund management company Voluntary Domestic capital Unlimited +355 42 233 308 +355 42 250 220 www.fppsigal.com.al [email protected] No. 2 of 30.03.2011 2. Shoqëri administruese e fondeve të pensionit SIGAL–LIFE Austria sh.a. Uniqa Group Naim HASA pension fund Voluntary management company Foreign and domestic capital Unlimited FONDI I INVESTIMIT EURO” “RAIFFEISEN INVEST (Ref. FI-B2) Under the management of “Raiffeisen Invest-shoqëri administruese e fondeve të pensionit dhe sipërmarrjeve investimeve kolektive” sh.a. + 355 42 277 901 +355 42 277 905 www.raiffeisen-invest.al [email protected] No. 1 of 13.12.2011 Resmi HIBRAJ pension fund and collective Voluntary investment undertaking management company 1.Raiffeisen Invest 1.Raiffeisen - Shoqëri administruese e fondeve të pensionit dhe sipërmarrjeve të investimeve kolektive sh.a. Foreign capital Tiranë. “Bajram Currri”, ETC Kati 10, Rr. Tiranë Bul. “Zogu I”, Unlimited Under the management of “Raiffeisen Under the management of “Raiffeisen Invest-shoqëri administruese e fondeve të pensionit dhe sipërmarrjeve të investimeve kolektive” sh.a. 16. EASY TRADE CONSULTING sh.p.k. TRADE CONSULTING 16. EASY NICULAE Vezure Stock broker on behalf Forex Capital Market LTD Foreign and domestic capital Tiranë Ap. 19”, 14, “Donika Kastrioti”, Pall. Rr. +355 42 228 864/ 68 90 34 004 www.etc.com.al [email protected] BD No. 82 of 22.06.2012 Unlimited FONDI I INVESTIMIT RAIFFEISEN PRESTIGJ (Ref. FI-B1) Director Scope of Activity of Ownership Type Office address Tel./Fax Website Email Licence number/date License Duration PENSION MARKET VOLUNTARY PRIVATE of Ownership Type Office address License Duration Tel./Fax Website Email Licence number/date General Managing Director Scope of Activity

AL BANIAN FINANC IAL SU PERVISORY AUTHOR ITY 103 6. SOCIETE GENERALE ALBANIA sh.a. ALBANIA 6. SOCIETE GENERALE Hubert de Saint Jean foreign and domestic capital Private Tiranë Binjake I, Kulla Bul. “Dëshmorët e Kombit”, +355 42 280 442/3 +355 42 280 441 www.societegenerale.al [email protected] No. 3 of 13.12.2011 Unlimited PENSION FUND VOLUNTARY SICRED PENSIONS 3) (Ref. FP Under the management of “Shoqëria administruese e fondeve të pensionit SiCRED” sh.a. 5. BANKA E TIRANËS sh.a. E 5. BANKA Georgios CHARALAMPAKIS pension fund asset depositaryVoluntary pension fund asset depositary Voluntary Foreign capital Tiranë “Ibrahim Rugova”, Rr. +355 42 269 616/617/429 +355 42 269 707 www.tiranabank.al No. 2 of 18.11.2010 Unlimited PENSION FUND SIGAL VOLUNTARY 2) (Ref. FP Under the management of “Shoqëria administruese e fondeve të SIGAL–Life Austria” sh.a. Uniqa Group [email protected] 4. FIRST INVESTMENT Bank sh.a. INVESTMENT 4. FIRST Foreign capital Bozhidar TODOROV Depositary of voluntary pension fund and collective investment undertaking assets Towers Twin Bul. “Dëshmorët e Kombit”, Tiranë 2 Kati i 14 & 15, Nr. +355 42 276 702/3 +355 42 280 210 www.fibank.com No. 1 of 13.12.2011 Unlimited PENSION VOLUNTARY FUND RAIFFEISEN 1) (Ref. FP Under the management of “Raiffeisen Invest-shoqëri administruese e fondeve të pensionit dhe sipërmarrjeve investimeve kolektive” sh.a. Type of Ownership Type Executive Director Scope of Activity Office address Tel./Fax Website Email Licence number/date License Duration

104 ANNUA L REPORT ‘12 AUTOR ITETI I M BIKËQ YRJES F INANC IARE 104 APPENDIX D Membership and signed cooperation agreements Institution AFSA) Securities Commission (now Insurance Supervision Authority (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 (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 Securities Commission (now AFSA) Securities Commission (now Securities Commission & Insurance Supervision Authority (now AFSA) AFSA AFSA AFSA AFSA AFSA AFSA AFSA 1998 2001 2006 1999 2000 2002 2003 2003 2003 2004 2005 2005 2005 2005 2005 2008 2009 2009 2010 2012 Year 2002 2003 2005 2006 2009 2010 2011 2011 2012 2012 Membership in International Organizations of Regulators Agreements signed with foreign counterpart institutions Agreements Signed with Domestic Organizations Agency for Pension Insurance Capital Funding Supervision (MAPAS) Agency for Pension Bank of Albania Competition Authority International Organization of Securities Commissions (IOSCO) Association of Insurance Supervisors (IAIS) International B. Supervisors (IOPS) International Organization of Pension 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 Market Supervisory 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 C. A. University Business School Tirana Auditors (IEKA) Institute of Statutory Directorate General of Customs Public Oversight 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

AL BANIAN FINANC IAL SU PERVISORY AUTHOR ITY 105 APPENDIX E Tables of statistics

1,222,462 1,297,710 1,346,169

1,148,082

Ministry of Finance, “Dept Indicators – 12/M 2012”. “Dept Ministry Finance, of Indicators – 12/M

5.8 5.7 5.7 5.4 5.9 7.5 3.3 3.9 3.0 1.6 2.4 2.9 2.4 2.4 2.9 3.4 2.3 3.6 3.5 2.0 3.3 2.2 2.0 2.5 3.1 2.2 3.7 3.4 1.7 2.4 926 931 932 935 939 974 899 917 928 923 163 157 153 150 143 141 142 143 142 142 223 240 259 280 306 342 360 383 458 483 2 / 15.0 14.4 14.1 13.8 13.2 12.5 13.6 13.5 13.3 13.3 5,696 7,307 8,159 8,993 10,701 12,984 12,088 11,762 12,862 12,443 3,103 3,120 3,135 3,149 3,153 3,170 3,194 3.195 2,832 2,788 5,048 5,882 6,561 7,168 7,827 8,870 8,694 8,872 9,248 9,682 1,831 2,336 2,597 2,854 3,385 4,081 3,794 3,734 4,542 4,464 1,622 1,881 2,088 2,275 2,476 2,788 2,728 2,777 3,266 3,473 694,098 751,022 814,797 882,209 967,670 1,089,293

% % % % USD Euro 0,000 0,000 0,000 mlln All mln USD mln Euro thousand ALL Measuring Unit 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012

1 1

2 Main maroeconomic indicators 2003 - 2012 Aggregate Indicators Indicators

Population Population Reg. unemployed persons Reg. unemployed Unemployment rate Unemployment rate

Total employed persons persons employed Total Real GDP growth Real GDP Gross Domestic Product (GDP) GDP per capita GDP

Inflation Average Inflation Average End of period

106 ANNUA L REPORT ‘12 8.2 10.2 10.7 12.4 9.6 15.8 2.8 8.4 (8.9) 11.7 4.5 10.6 4.5 11.4 10.4 23.0 8.1 (4.5) (7.9) 12.7 4.5 5.1 4.7 5.8 5.9 8.6 8.4 5.5 4.5 4.6 24.1 24.5 25.1 26.0 26.0 26.7 26.1 26.6 22.8 24.5 12.7 14.2 10.7 11.8 11.0 15.9 2.4 6.5 (5.6) 12.2 20.9 22.1 22.6 23.3 23.6 24.3 23.6 23.6 21.0 22.7 29.0 29.6 28.5 29.3 29.5 32.3 33.1 29.7 25.7 27.9 40.5 39.3 40.2 39.6 38.2 36.8 36.1 33.3 33.8 34.9 18.4 17.1 17.3 16.5 15.2 17.9 23.3 25.2 25.7 26.6 (4.9) (5.1) (3.5) (3.3) (3.5) (5.5) (7.0) (3.1) (2.9) (3.4) 167,224 184,356 204,163 229,444 251,555 291,238 299,502 324,721 295,677 330,384 280,767 295 327,353 348,935 369,536 400,456 415,028 407,372 438,582 470,358 127,533 128,762 140,697 145,802 147,495 195,427 267,518 307,999 333,782 357,629 (33,928) (38,083) (28,176) (29,372) (34,119) (60,254) (80,361) (38,031) (38,274) (45,857) 201.152,3 222,439 232,339 258,816 285,674 351,492 379,863 362,752 333,951 376,241 31.472,0 38,266 38,375 51,108 57,040 93,783 95,881 67,492 58,916 61,655 145.388,1 165,975 183,816 205,523 228,164 264,421 270,830 288,564 272,394 305,508 % GDP % GDP % GDP % GDP % GDP % GDP % GDP % GDP % GDP % GDP % GDP % GDP mlln ALL mlln ALL mlln ALL mlln ALL mlln ALL mlln ALL mlln ALL mlln ALL growth (%) growth (%) growth (%) Measuring Unit 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012* Public Finance Indicators Indicators Finance Public Indicators Total Revenues Total

Tax Revenues Tax

Total Expenditure Total

Public Investment

Overall Deficit Overall

Domestic Debt

Foreing Debt Foreing

AL BANIAN FINANC IAL SU PERVISORY AUTHOR ITY 107

7.9 8.2 8.0 8.8 10.1 10.4 8.7 13.2 15.2 15.7 3.1 4.4 3.2 3.5 6.0 6.7 7.9 8.9 7.8 7.5 447 601 656 793 1,079 1,356 1,049 1,548 1,954 1,960 178 324 258 315 639 874 952 1.,043 997 937 870 1,037 1,107 1,272 1,432 1,379 1,308 1,223 1,252 1,121 (7.0) (5.9) (8.9) (6.6) (10.7) (15.5) (15.3) (11.5) (12.8) (10.6) (400) (428) (726) (591) (1,141) (2,018) (1,851) (1,353) (1,650) (1,314) 1,031 1,379 1,430 1,800 2,145 2,359 2,370 2,542 2,471 2,601 121.9 102.8 99.9 98.1 90.4 83.9 95.0 103.9 100.9 108.2 137.5 127.7 124.2 123.1 123.6 122.8 132.1 137.8 140.3 139.0 (31.3) (29.9) (30.4) (32.1) (37.2) (37.8) (35.3) (36.6) (39.5) (36.4) mln USD (1,783) (2,184) (2,477) (2,882) (3,978) (4,907) (4,267) (4,305) (5,076) (4,527) % of PBB ALL/USD % of GDP % of GDP (23.5) (21.7) (22.3) (23.2) (27.1) (27.4) (26.6) (23.4) (24.3) (20.6) % of GDP % of GDP % of GDP % of GDP % of GDP % of GDP mlln USD (1,336) (1,583) (1,821) (2,089) (2,900) (3,551) (3,219) (2,757) (3,121) (2,567) mlln USD mlln USD mlln USD mlln USD mlln USD ALL/Euro Measuring Unit 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 Foreing Trade Indicators Trade Foreing Indicators Albania Source: Bank of Trade Balance Trade

Export

Import

Current Account Balance

Foreing Direct Investments Foreing

Transfers Reserves Exchange Rate

108 ANNUA L REPORT ‘12 AUTOR ITETI I M BIKËQ YRJES F INANC IARE 108

9.2 12.0 8.4 12.0 6.0 9.7 4.2 4.6 7.0 3.5 8.7 13.5 13.9 16.3 13.7 7.7 6.8 12.5 9.2 5.0 -2.7 19.8 31.5 8.4 0.1 16.6 0.6 -3.2 0.5 1.6 141,987 170,075 223,657 242,391 242,675 282,862 284,506 275,427 276,898 281,247 351,291 393,258 426,432 477,373 506,137 555,005 578,181 604,517 647,003 669,577 443,527 503,232 572,983 666,467 757,610 815,705 871,469 980,284 1,070.150 1,123.408 in % in % in % mlln ALL mlln ALL mlln ALL Measuring Unit 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 Monetary Indicators Albania Source: Bank of Aggregate M1 Aggregate M2

Aggregate M3

AL BANIAN FINANC IAL SU PERVISORY AUTHOR ITY 109 Gross Domestic Product (billion ALL) Gross Domestic Product (billion Euro) Real Growth (in %) Real Growth (in %)

billion ALL in % billion Euro in % 1,600.00 8.00 12.00 8.00 1,400.00 7.00 7.00 10.00 1,200.00 6.00 6.00 8,00 1,000.00 5.00 5.00 800.00 4.00 6.00 4.00 600.00 3.00 3.00 4.00 400.00 2.00 2.00 2.00 200.00 1.00 1.00 0.00 0.00 0.00 0.00

GDP Real GDP Growth (in %) GDP Real GDP Growth (in %)

Inﬂation (in %) Investments (in %)

in % in % billion All in % 4.00 4.00 120.00 10.00 3.50 3.50 9.00 100.00 8.00 3.00 3.00 7.00 80.00 2.50 2.50 6.00 2.00 2.00 60.00 5.00 1.50 1.50 4.00 40.00 3.00 1.00 1.00 2.00 20.00 0.50 0.50 1.00 0.00 0.00 0.00 -

Average inﬂaon (in %) End of period (in %) Public Investment Public % of GDP

Public Debt (in %)

in % 45.00 40.45 39.31 40.18 39.55 38.19 40.00 36.76 36.15 34.94 33.32 33.80 35.00

30.00 26.57 25.19 25.72 23.30 25.00 18.37 17.94 20.00 17.14 17.27 16.53 15.24 15.00

10.00

5.00

Foreign Debt in % Domesc Debt in %

110 ANNUA L REPORT ‘12 6.00

5.00

Deposit interest rate, Yield of T-Bills 4.006.00and inﬂation rate*

3.005.00 3 - month 2012 (in%) Deposit TB Inflation 4.00 Month Interest Yield Rate 2.00 Year 2012 6.00 1.003.00 January** 4.16 _ 3.31 5.00 February 3.98 5.08 2.99 0.002.00 March 3.84 5.29 2.71 4.00 1.00 May June July April** 3.90 - 2.50 March April January August 3.00 February October May 3.85 5.30 2.31 0.00 September NovemberDecember June 3.79 5.26 2.17 2.00 Deposit Interest TB Yield Inflaon Rate May June July July** 3.82 _ 2.09 March April January August 1.00 February October August 3.66 5.15 2.07 September NovemberDecember September 3.79 5.08 2.08 0.00 Deposit Interest TB Yield Inflaon Rate October** 3.74 _ 2.01 May April June July November 3.54 5.03 1.98 March January August February October December 3.78 5.03 2.04 September NovemberDecember * There were no 3-Month Auction in January, April, July and October. Deposit Interest TB Yield Inflaon Rate 7.00 6 - month 2012 (in%) 6.00 Month Deposit TB Inflation Interest Yield Rate 5.00 7.00 Year 2012 4.00 January 4.76 6.23 3.31 6.00 3.00 February 4.61 6.10 2.99 5.00 March 4.59 6.20 2.71 7.002.00 4.00 April 4.54 6.20 2.50 6.001.00 3.00 May 4.63 6.20 2.31 5.000.00 June 4.38 6.25 2.17 2.00 4.00 July 4.34 6.24 2.09 May June July 1.00 March April 3.00 January August August 4.40 6.23 2.07 February October 0.00 September NovemberDecember September 4.40 6.17 2.08 2.00 Deposit Interest TB Yield Inflaon Rate

October 4.47 6.13 2.01 May June July 1.00 March April January August November 4.39 6.06 1.98 February October 0.00 September NovemberDecember December 4.30 5.65 2.04 Deposit Interest TB Yield Inflaon Rate May June July March April January August February October 12 - month 2012 (in%) September NovemberDecember Deposit Interest TB Yield Inflaon Rate Deposit TB Inflation Month Interest Yield Rate Year 2012 8.00 January 5.90 7.07 3.31 7.00 February 5.62 7.11 2.99 6.00 8.00 March 5.68 7.33 2.71 5.00 7.00 April** 5.57 7.35 2.50 4.00 May 5.70 7.36 2.31 8.006.00 3.00 June 5.50 7.37 2.17 7.005.00 2.00 July 5.33 7.34 2.09 6.004.00 August 5.06 7.19 2.07 1.00 5.003.00 0.00 September 5.19 6.93 2.08 4.00 2.00 October 5.24 6.78 2.01 3.00 May June July March April November 5.25 6.46 1.98 1.00 January August February October 2.00 NovemberDecember December 5.17 6.37 2.04 0.00 September 1.00 Deposit Interest TB Yield Inflaon Rate May June July 0.00 March April * Source: www.bankofalbania.org Bank of Albania January August February October Represents the weighted average rates for the period NovemberDecember May June July September March April January Deposit Interest TB Yield August Inflaon Rate February October September NovemberDecember AL BANIAN FINANC IAL SUDepositPE InterestRVISO RYTB AUTHORYield InflaonIT YRate 111