The preliminary results of the Ukrainian insurance market in 2016 show that 55% of assets of insurance companies worth over UAH 30 billion are low liquid or hard to sell and generate low income, a member of the national commission for financial service markets regulation Oleksandr Zaletov has told Interfax-Ukraine.

He said that the 2016 figures also display some positive trends in the improvement of the quality of assets of insurance companies.

He said that thanks to the implementation of the first phase of reformation of assets of the insurance market under the resolution on obligatory criteria and requirements for asset adequacy, diversification and quality took effect in May 2016 the reallocation of the assets of market players was seen from 'unreliable' (corporate securities, financial investment when it is impossible to determine the fair cost) to 'low risk' assets (deposits at banks with the investment credit rating and higher, government securities).

The analysis of the year results showed that insurers more often provided financial assistance to each other as of reporting date, and a large part of assets is presented by doubtful assets, such as bills of exchanges and corporate rights to blank check companies.

"This leads to the non-observation of the insurance agreement conditions by insurers both for payments in claims and the term of payment," Zaletov said.

He said that during the second phase of reformation of assets the commission proposes to remove the following assets from the acceptable assets of insurers: assets burdened with liabilities taken into account on off-balance sheet accounts (collateral, guarantees, liabilities); assets of registered and/or located on the temporarily occupied territory of Ukraine or on the territories where Ukrainian authorities cannot fulfill their duties and located on the contact line.

It is also proposed to remove claims to individuals and companies on which the National Security and Defense Council (NSDC) of Ukraine applied sanctions and banned from using or selling assets of these persons or their property, apart from cases when the restriction is imposed aiming at making insurers to observe their liabilities.

The commission proposes to expand the list of low risk assets thanks to the inclusion of claims to nonresident reinsurers under the reinsurance agreements signed with nuclear unit operators for damage caused due to nuclear incident, obligatory civil aviation insurance and under Green Card agreements if the reinsurers are not residents of the aggressor state.

In addition, the commission proposes to expand the acceptable assets thanks to the inclusion of undue bills receivable under the insurance and/or reinsurance agreements, bills receivable on accrued bank deposit interests and contributions of insurers which are members of financial groups to charter capitals of other insurers – members of the groups in the amount set in Ukrainian law if the financial group observes the requirements to regulatory capital.