Ukraine has approved a new Strategy for the Development of the Financial Sector. What changes apply to insurance?
The National Bank of Ukraine, the National Securities and Markets Commission, the Deposit Guarantee Fund for Individuals, the Ministry of Finance of Ukraine, and the Ministry of Economy, Environment and Agriculture of Ukraine have approved an updated Strategy for the Development of the Financial Sector of Ukraine.
The preservation of a high level of uncertainty as a result of a prolonged full-scale war requires updating common strategic priorities to effectively respond to new challenges and possible scenarios.
The implementation of the updated Strategy will contribute to increasing the efficiency and coordination of actions of financial market regulators aimed at strengthening macroeconomic and financial stability, attracting investments, and further integration of Ukraine into the European Union.
The update of the Strategy is also provided for in the Memorandum on Economic and Financial Policy between Ukraine and the International Monetary Fund.
Updating the Strategy will allow us not only to adapt to current challenges, but also to build a foundation for sustainable economic growth, attracting private investment and European integration. The integration of the Ukrainian financial sector into the EU legal and institutional space will open up new opportunities for the effective development of capital markets, strengthening investor confidence and raising regulatory standards.
“Currently, the equivalence of banking sector regulation in Ukraine with EU norms reaches 77%, and by 2027 the National Bank intends to achieve 100% equivalence,” said Andriy Pyshny, Governor of the National Bank of Ukraine.
The main changes in the updated Strategy concern
expanding measures for macroeconomic and financial stability: new initiatives have been added regarding the legislative regulation of the Entrepreneurship Development Fund, the development of a Strategy for the Development of Mortgage Lending, the reform of the mandatory state social insurance system, as well as increasing the resilience of critical infrastructure and digital operational resilience of the financial sector and the Deposit Guarantee Fund for Individuals. These steps are aimed at ensuring the reliability and efficiency of the financial system;
modernization of capital markets: measures for the development of the capital markets infrastructure have been updated. This includes agreeing on a target model for the operation of capital markets with stakeholders, consolidating the accounting infrastructure, and actively involving foreign investors. The purpose of these changes is to reform the market in order to maximize opportunities for attracting private investment;
Deepening European integration: Objective III “The financial system works to restore the country and integrates into the EU” has been expanded and a new initiative “European integration of the financial sector” has been added. It is envisaged to deepen cooperation with EU institutions, implement program documents, actively participate in the negotiation process and implement EU law, taking into account the recommendations of the European Commission based on the screening results. These updates reflect the strategic course for the comprehensive development and integration of the Ukrainian financial sector into the European space.
Changes in the Strategy relating to insurance companies and the insurance market of Ukraine are aimed at increasing transparency, sustainability and compliance with international standards.
According to the Strategy, supervision of insurers has been strengthened, including monitoring the ownership structure, quality of corporate governance and compliance with prudential requirements to ensure their financial stability and capital adequacy.
According to the NBU, the regulatory environment is approaching EU standards – the principles of licensing, supervision, insolvency resolution and impact measures are being implemented in accordance with European standards.
Separately, the development of the non-banking financial market is envisaged through the implementation of international standards IAIS, IOPS, IOSCO and the requirements of EU legal acts, including Solvency II, IDD and Motor Insurance Directive, which should improve the sector and contribute to its competitiveness.
The Strategy also provides for legislative changes to create a modern insurance system, including insurance of military-political risks, and the integration of the Ukrainian insurance market into the European financial space.
Military-political risk insurance has been introduced in Ukraine and an updated Strategy for the Restoration of Lending is being implemented, the NBU noted.
The implementation of the measures of the Strategic Plan for the Development of the ECA for 2025–2029, in particular, amendments to the regulatory legal acts of the Cabinet of Ministers and the National Bank of Ukraine regarding state guarantees under insurance contracts, currency control over insured export contracts, revision of requirements for the ratio of liabilities to capital, as well as a possible increase and optimization of the capital structure, should lead to a large-scale strengthening of support for exporters.
The ECA will constantly monitor the situation and, if necessary, update its strategic plan, coordinating it with key state program documents.
Mechanisms for financing the defense-industrial complex are being developed su. The legislation on credit history bureaus has been updated, which will allow for better protection of borrowers’ rights, wider use of BKI data in lending to small and medium-sized businesses, and maintaining the relevance of credit information even after the assignment of obligations.
According to the NBU, the market has maintained citizens’ trust in the financial sector and increased the level of financial literacy, thanks to which the population actively and consciously uses modern financial instruments to improve their own well-being.
To effectively respond to current challenges, the updated Strategy also contains a short list of key indicators that are important in the short term.
Also, during the update of the Strategy, five indicators were clarified and four new ones were added, relating to expanding access to remote financial and state (public) services through the NBU BankID System, legislative regulation of the activities of investment funds, improving the system of voluntary accumulative pension provision, expanding the link with a foreign depository to reconstruction and recovery instruments.
Additionally, the new Strategy updates the description of the current state of the financial sector of Ukraine and the characteristics of its future.