The examinations for the right to exercise activity as a broker of financial instruments and as an investment adviser were held on 25 and 26 September 2021.

On September 25, 2021, 17 people took the examination for acquiring the right to exercise activity as a broker of financial instruments, with 21 candidates admitted.

On September 26, 2021, 25 people took the examination for acquiring the right to exercise activity as an investment adviser, with 29 candidates admitted.

The examination papers of the candidates who took the exams will be graded by the examination commission by 8 October 2021. The results of the examinations will be published on the website of the Financial Supervision Commission in compliance with the rules of personal data protection and the names of the successful candidates will be published.

The persons are obliged to stop offering investment services within 3 days from the publication of the list.

With its decision of 28.09..2021, the Financial Supervision Commission published websites through which investment services are provided by persons who do not have the right to do so in the territory of the Republic of Bulgaria. The decision is based on Art. 281, para. 1 and 2 of the Markets in Financial Instruments Act. Decision No. 716-ИП of 28.09.2021 published a list of websites through which investment services should not be provided.

The publication of the decision is considered a notification regarding the obligation of the persons to stop offering investment services through the published websites within 3 days from the date of publication of the decision with the list.

Bulgarian regulators in the field of insurance services, prominent insurers, as well as representatives of the technology sector met at the business breakfast “The Next Frontier for Insurance”, organized by Software Group – a global technology partner of financial institutions in the field of digitalization and supported by Microsoft and PwC.

Kalin Radev, Executive Director of Software Group, welcomed the guests with the words: “This event aims to connect insurance leaders from Bulgaria and the region, to be a platform for discussing challenges and successes in the field of digitalization, as well as to encourage the initiation of regulatory changes supporting innovation and cross-border cooperation.”

In his address, Vladimir Savov, Deputy Chairperson of the Financial Supervision Commission (FSC), Head of the Insurance Supervision Department, pointed out several key points for the FSC in its role as a regulator, namely:

balance between protection of service consumers and financial stability of the sector;

a balance between premiums optimally reflecting the risks they cover while keeping products accessible;

balance between financial innovation, business continuity and consumer protection.

The subsequent discussion on “Maintaining the balance of regulations and digitalization”, moderated by Kalin Radev, together with Vladimir Savov was attended by Maksim Kolev, Chairperson of the Board and Executive Director of the Guarantee Fund, and Konstantin Velev, Chairperson of the Association of Bulgarian Insurers (ABI).

Changes in the regulatory landscape of insurance in Bulgaria

“In the last 18 months, we have witnessed the efforts of the insurance sector to intensify digitalization and provide remote services in the direction of increasing online sales, claim settlement and new products. Thanks to this, the sector managed to get through the crisis. As a regulator, we monitor the protection of consumers of non-banking financial services and the financial stability of insurers, on the other hand we want to promote business and technology development, remain receptive and open to dialogue with business and technology suppliers.” – commented Mr. Savov.

Some of the forthcoming regulatory changes include the already adopted Ordinance No. 71 on the governance systems of insurers, further development of the Solvency II regime, introduction in 2023 of IFRS 17 for insurance contracts. The FSC is also working on an ordinance and methodology for determining the amount of compensation for non-pecuniary damage in connection with the compulsory motor third party liability insurance, which is extremely important. The ordinance on the bonus-malus system, which will be related to additional IT solutions, is also expected to be finalized.

Change in the needs and expectations of insurers regarding regulations

Konstantin Velev, ABI, commented that in the current situation finding this balance is not easy for insurers, as customer expectations and attitudes have changed, accelerated by the pandemic, and the market is looking for digital solutions for automation and optimization.

With regard to digitalization, regulation can be divided into two levels: on the first level are the basic rules according to which the business is done – the contract with the client and servicing the contract, on the second level are the requirements for information systems, cloud services, etc.

“The first regulation is the one where it is difficult to find the balance, because our legislation has chosen a conservative solution – the written form of insurance contract, which begins with pre-contractual communication, conclusion of the contract, payment, termination of policy, claim registration, written correspondence with the client, etc .. The regulatory framework is narrower in the new pandemic environment.” – shared Mr. Velev – “The other type of regulation is subsequent and accordingly we follow the European framework.”

Observed trends and the role of the Guarantee Fund

The Guarantee Fund always accompanies the business and the guidelines of the regulator and all the upcoming changes are with the active participation of the fund, said Maksim Kolev. European trends show that in the portfolios of Western insurance companies online sales are no more than 5%. Digitalization is also happening in other directions – robotization of the policy issuance process, automation of payment, accounting services and more.

“We need to think about digitalization beyond online sales along with optimizing processes and relationships between institutions. Then we would achieve better synergy.” – shared Mr. Kolev.

Digital identity and electronic signature – expectations and forecasts

The working options are a physical signature or a qualified electronic signature, but very few people have one. There is already case law where hybrid contracts are not considered invalid. The FSC is considering adopting changes to the regulations so that they have a legal basis.

Cloud certificates are one of the approaches, as the range of products is extremely wide, as well as the risks that are covered. There may be a differentiated approach when concluding contracts and in the processing procedures. Where the written form is excessive, its mandatory nature should be removed.

Regarding the green cards, the Guarantee Fund is a participant in the transition from green to black and white certificate, which already exists in the 27 EU countries. In non-EU countries, where digitalisation is slower, a paper certificate is valid, which is probably a compromise. The paper certificate will be valid until these countries are digitalized.

What lies ahead for insurers in digital and technological terms?

According to the insurers present, there is room for improvement in the speed of processes and data exchange, it is important to introduce electronic application and identification.

The insurance sector can learn from the banking sector, as banks were the first to go through the process of digital transformation and skilfully integrated the changing needs of consumers.

Insurance companies also report that they do not have sufficient resources for innovation, as the industry is heavily regulated and regulatory software budgets are severe.

The changes related to IFRS 17 will also require changes in the accounting systems of insurers – a serious process comparable to the introduction of the Solvency II Directive.

The digital transformation in Southeast Europe

Representatives of Microsoft and PwC discussed technological innovations in the region in the light of changes in actuarial work, the introduction of machine learning in various areas of non-life insurance, as well as the focus on the digital customer experience.

Microsoft is emphasizing the fact that more and more sensors are entering the world of insurance, and data management is becoming a challenge that world leaders like Microsoft are trying to solve.

Regarding the transformation of the existing “core” systems of insurers, PwC commented that the new technologies create a competitive advantage as they connect existing backend systems with a modern frontend and allow for optimization of existing systems of insurers.

In conclusion, insurers are convinced that regardless of the level and pace of digitalization, the human factor remains key and the future is phigital – a mix of physical and digital space that provides the perfect customer experience.

Updated individual data from the reports of insurance brokers operating during the reporting period and registered in the Republic of Bulgaria as of 30.06.2021 are summarized and published on the FSC website in the section “Insurance Activity”, “Statistics”, “Insurance Brokers”.

The Financial Supervision Commission shall notify the candidates admitted to the examination of the following:

The examination for acquiring the right to exercise activity as a broker of financial instruments will be held on 25 September 2021 (Saturday) at 9:00 h at the Globus Congress Centre, Europe Hall, address: Sofia, 1 Macedonia Sq., the building of CITUB.

The examination for acquiring the right to exercise activity as an investment adviser will be held on 26 September 2021 (Sunday) at 9:00 h at the Globus Congress Centre, Europe Hall, address: Sofia, 1 Macedonia Sq., the building of CITUB.

The examinations will be held in strict compliance with the temporary anti-epidemic measures introduced by Order No. РД-01-748 of 02.09.2021 of the Minister of Health on the territory of the Republic of Bulgaria – use of not more than 30% of the capacity of the room in which the examinations are held and no more than 30 participants, observance of a physical distance of at least 1.5 m and wearing protective face masks by all participants.

The registration of the candidates will start at 8:00. Candidates not registered until 8:50 am will not be admitted to the exam.

When taking the exam, candidates must bring:

 document for paid fee (original or bank certified copy). The name of the candidate who will take the exam should be explicitly stated in the document for paid fee;

 ID;

 HB or 2B pencils;

 pencil eraser;

 protective face mask.

The examinations will be held in one session on the day announced for the exam, as follows:

 the examination for brokers of financial instruments lasts 4 hours and

 the examinations for an investment adviser lasts 5 hours.

The following calculators can be used for exams:

 Texas Instruments BA II Plus;

 BA II Plus Professional;

 HP 12C;

 HP 12C Platinum;

 HP 12C 25th anniversary edition, as well as

 HP 12C 30th anniversary edition.

It is not allowed to use a calculator with programming functions, as well as the use of ordinary calculators or other electronic computing devices.

For additional questions, you can contact the FSC Information Centre at the toll-free line 0800 40 444 (Monday to Friday from 9:00 to 17:30)

For the period from 01.08.2021 to 31.08.2021 the FSC received notifications from the competent authorities of Member States regarding the intention of 90 (ninety) insurers and insurance intermediaries based in other EU Member States to operate (entry or termination of the notification) on the territory of the Republic of Bulgaria under the terms of the freedom to provide services.

The FSC received 5 (five) notifications regarding the intention of insurance companies based in Member States of the EU to operate in the territory of the Republic of Bulgaria under the terms of freedom to provide services (registering insurance companies in the FSC list of notifications), as well as 24 (twenty-four) notifications regarding the withdrawal of intention of insurance companies established in EU Member States, to operate on the territory of the Republic of Bulgaria under the terms of freedom to provide services.

As of the end of August 2021, the number of insurance companies based in other EU and EEA Member States which intend to operate in Bulgaria under the principle of freedom to provide services, increased to 411 (six hundred and eleven).

For the period, the FSC received 12 (twelve) notifications regarding the intention of insurance intermediaries based in EU Member States to carry out insurance mediation activities in Bulgaria under the terms of freedom to provide services, as well as 41 (forty-one) notifications for termination of such activity in the country. As of 31.08.2021, there are 2,265 (two thousand two hundred and sixty-five) insurance intermediaries based in EU Member States that have stated their intention to carry out cross-border insurance intermediation activities in Bulgaria

In August 2021, the FSC sent a notification to the national competent authority of Ireland regarding the withdrawal of the intention of Euroins AD to carry out cross-border activities on its territory.

For the period 01.08.2021 – 31.08.2021 the FSC has not sent notifications regarding the intention or withdrawal of the intention of insurance intermediaries based in the Republic of Bulgaria to carry out insurance intermediation activities under the terms of freedom to provide services or the right of establishment on the territory of EU Member States.

As of the end of August 2021, the total number of local insurance companies that have stated their intention to carry out insurance activities in the territory of other EU and EEA Member States under the terms of freedom to provide services remains 17 (seventeen), and the total number of insurance intermediaries based in the Republic of Bulgaria, which have stated their intention to carry out insurance intermediation activities on the territory of EU Member States under the terms of freedom to provide services or the right of establishment, remains 52 (fifty-two).

The updated lists of notifications are available on the FSC website in the section “Supervised entities” – “Notifications”.

Mr. Vladimir Savov, Deputy Chairperson of the Financial Supervision Commission, Head of the Insurance Supervision Department, participated in an international conference on “Risk-based insurance supervision – the way forward in the post-pandemic world”, organized by the Croatian Financial Services Supervisory Agency (HANFA). The event brought together representatives of regulatory authorities from Central and Eastern Europe, who discussed insurance risks and prospects in the post-pandemic environment.

In his presentation, Mr. Savov drew attention to the major challenges in supervising the market behaviour of insurers and insurance intermediaries, the growing digitalization of the insurance sector following the Covid-19 pandemic, and shared the experience in supervising the insurance sector by the Financial Supervision Commission in Bulgaria.

He told the conference that “Despite the unprecedented global situation caused by Covid-19, the insurance market must find a balance between protecting consumer interests on the one hand and maintaining financial stability on the other.” Mr. Vladimir Savov also pointed out the advantage of digitalization in the insurance sector, noting that insurers have responded adequately to the pandemic and have imposed various workable solutions to facilitate insurance service users. He concluded that regulators must also adapt to the constraints and risks posed by the Covid-19 pandemic, adapt their supervisory practices to dynamically changing conditions, identify the effects on supervised entities ahead of time, and use technological solutions and develop their capacity to be able to make timely and effective decisions.

The Social Insurance Supervision Department of the Financial Supervision Commission announced the results of the change of participation and transfer of funds of insured persons from one to another respective pension fund for the second quarter and first half of 2021. The data were obtained on the basis of reports submitted by pension insurance companies to the Financial Supervision Commission.

In the second quarter of 2021, a total of 84,816 applications for change of participation and transfer of funds from one pension fund to another were submitted to the pension insurance companies.

A total of 72,876 insured persons from the applications submitted in the second quarter of 2021 have changed their participation in the supplementary pension insurance funds. The total amount of the funds transferred to another pension fund of the respective type is BGN 298,998,865.

The insured persons who exercised their right to change their participation and transfer funds from the individual accounts in the first half 2021 are a total of 147,347. The total amount of transferred funds since the beginning of the year is BGN 579,876,453.

Results of the change in the participation and transfer of funds from one to another respective pension fund for the second quarter and first half of 2021 are available in section: Social Insurance Activity / Statistics / Statistics and analysis / 2021.

Ordinance No. 71 on the requirements for the governance system of insurers and reinsurers, adopted by the FSC on 22.07.2021, was promulgated in SG 64 / 2021 and is effective. In accordance with the delegations provided for in it for issuing guidelines on its implementation, at its meeting on 09.09.2021 the FSC adopted the following instructions:

 Instructions regarding the application of Art. 75, para. 1 of Ordinance No. 71 in connection with the observance of the Guidelines for Outsourcing to Cloud Service Providers issued by the European Insurance and Occupational Pensions Authority (EIOPA-BoS-20-002);

 Instructions regarding the application of Art. 102, para. 1 of Ordinance No. 71 in connection with the observance of the Guidelines on Information and Communication Technology Security and Governance issued by the European Insurance and Occupational Pensions Authority (EIOPA-BoS-20/600).

 These guidelines were adopted by the FSC in response to the intensifying process of digitalization in insurance. Through them, the FSC aims to facilitate the application of the specific requirements for the award of activities to could service providers (services provided through data processing in the so-called. “Cloud space”), which are a source of new risks for insurers and reinsurers and require a higher standard of information security in their activities. With these guidelines the FSC aims to establish additional guarantees to ensure compliance with the confidentiality, integrity and availability of information and information systems, with a view to limit the operational risk to which insurers and reinsurers are additionally exposed as a result of the use of high technologies for storage, processing and access to data.

 The adoption of these guidelines completes the national legal framework for the governance system of insurers and reinsurers in accordance with the Insurance Code and the guidelines of the European Insurance and Occupational Pensions Authority. In this manner conditions are created for better management of the new risks faced by insurers and reinsurers, and the guarantees for protection of the interests of the users of insurance services in the environment of a digitized insurance market in the Republic of Bulgaria are strengthened.