Bonus-malus system and other changes in Slovak insurance

On 3 February 2015, the Slovak National Council passed a new insurance act.

On 3 February 2015, the Slovak National Council passed a new insurance act which introduces several changes for both insurers and insured.

In line with current European legislation the act introduces new economic rules for insurance companies and reinsurers in order to enhance protection of policy holders and beneficiaries, to achieve deeper integration of the European insurance market and to improve division of capital resources. This is to be achieved by using a system of three pillars:

• Pillar 1 deals with o the solvency capital requirement, i.e. the capital required to ensure that the insurance company will be able to meet its obligations, and o the minimum capital requirement, which represents the threshold below which the national supervisor would intervene.

• Pillar 2 sets out requirements for the governance and risk management of insurers.

• Pillar 3 focuses on disclosure and transparency requirements.

The act also amends the Civil Code by requiring insurers to provide clients with pre-contractual information such as insurance proceeds and benefits, the period of insurance, how to terminate an insurance contract, payment and duration of insurance premiums, and the like.

The insurance act also amends the act on automobile third party liability insurance. Insurers must apply a bonus-malus system, i.e. consider the total claims history of a policy holder in order to calculate insurance premiums. Policy holders whose history is claim-free are rewarded with a no-claims discount while at-fault accidents are penalized by premium surcharges.

The insurance act will come into force on 1 April 2015, with the exception of the provisions amending the Civil Code, which will come into force on 1 January 2016.

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