FIRST Initiative Project on Restructuring MTPL Insurance market in Albania AFSA

FIRST   Initiative Project on Restructuring MTPL Insurance market in Albania AFSA

Tirana, April 19, 2013

Albanian Financial supervisory Authority (AFSA) and a World Bank team of insurance experts organized today a workshop with market participants and other stakeholders to present the achievements and recommendations of a technical assistance project on “Restructuring Motor Third Party Liability (MTPL) Insurance market in Albania. The project has been financed under the World Bank – First initiative.

The objective of the project has been to assist the AFSA in the development of policies and processes to enable the move away from centrally-managed tariff-based pricing toward fully liberalized risk-based pricing of the products on the MTPL insurance market.

The purpose of this change is to enable more homogeneous risk underwriting practices, enhance administrative and regulatory efficiency and increase consumer responsibility through the introduction of a dynamic link between costs of MTPL premium and road behavior.

The project has also aimed to assist the AFSA align the relevant domestic insurance market legal framework with the European Union directives, consistent with Albania’s commitments under the Stabilization and Association Agreement with the European Union.

The project has addressed shortcomings in three main aspects:

On the regulatory aspect, the project helped produce the Road Map paper laying out the principles and recommendations for the liberalization of the MTPL market;

On the IT aspect, the project helped design a set of policy and claim handling process, common data base, and a comprehensive fraud database structure. In addition, the project provided an IT governance procedure guideline;

On the actuarial aspect, the project provided methodology for benchmarking coefficients for an initial risk-based-pricing of the MTPL policies; actuarial report for the assessment of the ultimate claims reserves for the whole Albanian market which highlights quality data, methodology applied, recommendations for the future, particularly, in the area of best practice for an effective data collection;

The sustainable MTPL insurance system cannot emerge instantly and without any development pain. Insurers need to build a solid database hence a critical requirement for both the regulator and the insurers is the improvement of the IT system, as well as upgrading and retaining professional capacity of their staff. Albanian insurers can gradually move towards a balanced system where the pricing is stable and built in such a way that safe driving is strongly encouraged. /ibna/