INSTRUCTION OF CENTRAL BANK OF THE RUSSIAN FEDERATION

of January 18, 2016 No. 3935-U

About procedure Bank of Russia of monitoring of activities of insurers

List of amending documents

This Instruction based on Item 5.1 of article 30 of the Law of the Russian Federation of November 27, 1992 No. 4015-1 "About the organization of insurance case in the Russian Federation" (Sheets of the Congress of People's Deputies of the Russian Federation and the Supreme Council of the Russian Federation, 1993, No. 2, Art. 56; Russian Federation Code, 1998, No. 1, Art. 4; 1999, No. 47, Art. 5622; 2002, No. 12, Art. 1093; No. 18, Art. 1721; 2003, No. 50, Art. 4855, Art. 4858; 2004, No. 30, Art. 3085; 2005, No. 10, Art. 760; No. 30, Art. 3101, Art. 3115; 2007, No. 22, Art. 2563; No. 46, Art. 5552; No. 49, Art. 6048; 2009, No. 44, Art. 5172; 2010, No. 17, Art. 1988; No. 31, Art. 4195; No. 49, Art. 6409; 2011, No. 30, Art. 4584; No. 49, Art. 7040; 2012, No. 53, Art. 7592; 2013, No. 26, Art. 3207; No. 30, Art. 4067; No. 52, Art. 6975; 2014, No. 23, Art. 2934; No. 30, Art. 4224; No. 45, Art. 6154; 2015, No. 10, Art. 1409; No. 27, Art. 3946, Art. 4001; No. 29, Art. 4385; No. 48, the Art. 6715) (further - the Law of the Russian Federation "About the organization of insurance case in the Russian Federation") and the Federal Law of July 10, 2002 No. 86-FZ "About the Central bank the Russian Federation (Bank of Russia)" (The Russian Federation Code, 2002, No. 28, Art. 2790; 2003, No. 2, Art. 157, No. 52, Art. 5032; 2004, No. 27, Art. 2711; No. 31, Art. 3233; 2005, No. 25, Art. 2426; No. 30, Art. 3101; 2006, No. 19, Art. 2061; No. 25, Art. 2648; 2007, No. 1, Art. 9, Art. 10; No. 10, Art. 1151; No. 18, Art. 2117; 2008, No. 42, Art. 4696, Art. 4699; No. 44, Art. 4982; No. 52, Art. 6229, Art. 6231; 2009, No. 1, Art. 25; No. 29, Art. 3629; No. 48, Art. 5731; 2010, No. 45, Art. 5756; 2011, No. 7, Art. 907; No. 27, Art. 3873; No. 43, Art. 5973; No. 48, Art. 6728; 2012, No. 50, Art. 6954; No. 53, Art. 7591, Art. 7607; 2013, No. 11, Art. 1076; No. 14, Art. 1649; No. 19, Art. 2329; No. 27, Art. 3438, Art. 3476, Art. 3477; No. 30, Art. 4084; No. 49, Art. 6336; No. 51, Art. 6695, Art. 6699; No. 52, Art. 6975; 2014, No. 19, Art. 2311, Art. 2317; No. 27, Art. 3634; No. 30, Art. 4219; No. 40, Art. 5318; No. 45, Art. 6154; No. 52, Art. 7543; 2015, No. 1, Art. 4, Art. 37; No. 27, Art. 3958, Art. 4001; No. 29, Art. 4348; No. 41, Art. 5639; No. 48, Art. 6699; "The official Internet portal of legal information" (http://www.pravo.gov.ru/), on December 29, 2015, on December 30, 2015) establishes procedure the Bank of Russia of monitoring of activities of insurers using financial performance (coefficients) characterizing financial position of insurers and their resistance to internal and external factors of risk (further - financial performance (coefficients).

Chapter 1. General provisions

1.1. Monitoring of activities of insurers is performed on the basis of the accounting (financial) records represented to the Bank of Russia and the reporting according to the procedure of supervision of insurers, and also other information, available the Bank of Russia.

Monitoring of activities of newly created insurers (except for reorganized) is performed from the date of submission to the Bank of Russia of the first annual accounting (financial) accounts and the reporting according to the procedure of supervision of insurers.

1.2. Monitoring of activities of insurers is performed by assessment:

own means (capital) and borrowed funds (except for societies of mutual insurance);

profitability;

qualities and liquidities of assets;

qualities of underwriting;

reinsurance transactions;

loudspeakers of the main financial performance of the insurer;

ratios of own means (capital) and undertaken obligations (except for societies of mutual insurance).

1.3. Calculation of financial performance (coefficients) is perfromed by the Bank of Russia according to this Instruction at least once a quarter.

1.4. Data of monitoring of activities of insurers can be used by the curator of insurance company in case of execution of the obligations according to the Provision of the Bank of Russia of December 22, 2014 No. 447-P "About curators of insurance companies", the registered Ministry of Justice of the Russian Federation on May 12, 2015 No. 37236 ("the Bulletin of the Bank of Russia" of May 20, 2015 No. 44).

1.5. Data on values of financial performance (coefficients) of the insurer are data of limited access and are not subject to disclosure to the third parties.

1.6. Action of this Instruction does not extend to medical insurance companies regarding transactions on compulsory medical insurance.

Chapter 2. Calculation of financial performance (coefficients)

2.1. Assessment of own means (capital) and borrowed funds is performed by results of calculation of the following financial performance (coefficients) (further - group of indicators of assessment of own means (capital) and borrowed funds):

earned premium to own means (capital);

relative capitalization of insurance company;

sufficiency of own means (capital);

ratios of not insurance bonds and own means (capital) of insurance company;

accounts payable shares.

2.1.1. Indicator of earned premium to own means (capital) (the PK1) is determined as percentage of the earned insurance premiums - net - reinsurance to own means (capital) (except for the insurers performing life insurance) on formula:

 

where:

Zspnetto-perestrakh - the earned insurance premiums - net - reinsurance for the last twelve months, preceding reporting date;

To - own funds (capital) for reporting date.

2.1.2. Indicator of relative capitalization of insurance company (the PK2) is determined as percentage of own means (capital) to the total amount of liabilities by formula:

 

where:

To - own funds (capital) for reporting date;

П - total amount of liabilities on reporting date.

2.1.3. Indicator of sufficiency of own means (capital) (the PK3) is determined as percentage of own means (capital) to the size of reserves of losses less share of overcautious persons in reserves of losses by formula:

 

where:

To - own funds (capital) for reporting date;

SUM RU - the amount of reserve of payments for the declared, but not settled insured events, and reserve of payments for the occurred, but not declared insured events, less share of overcautious persons, on life insurance, calculated according to the order of the Ministry of Finance of the Russian Federation of April 9, 2009 No. 32n "About approval of the Procedure for forming of insurance reserves on life insurance", the registered Ministry of Justice of the Russian Federation on July 16, 2009 No. 14361 (The Russian newspaper of August 7, 2009), or the amount of reserve of the declared, but not settled losses and the reserve which occurred, but unclaimed losses less share of overcautious persons, on insurance to other, than life insurance, calculated according to the order of the Ministry of Finance of the Russian Federation of June 11, 2002 No. 51n "About approval of Rules of forming of insurance reserves on insurance to other, than life insurance", the registered Ministry of Justice of the Russian Federation on July 16, 2002 No. 3584, on July 11, 2003 No. 4896, on February 7, 2005 No. 6297, on October 16, 2008 No. 12461, on November 24, 2008 No. 12718, on November 6, 2009 No. 15190, on August 31, 2010 No. 18328, on March 21, 2011 No. 20195, on December 21, 2011 No. 22710, on March 27, 2012 No. 23611 (The bulletin of regulations of federal executive bodies of August 19, 2002 No. 33, of December 1, 2003 No. 48, of February 14, 2005 No. 7, of October 27, 2008 No. 43, of December 1, 2008 No. 48, of November 23, 2009 No. 47, of September 20, 2010 No. 38, the Russian newspaper of March 30, 2011, of January 27, 2012, of April 11, 2012) (further - Rules of forming of insurance reserves on insurance to other, than life insurance), on reporting date.

2.1.4. Indicator of ratio of not insurance bonds and own means (capital) of insurance company (the PK4) is determined as percentage of the amount of not insurance bonds to own means (capital) by formula:

 

where:

It - not insurance bonds: borrowed funds, accounts payable and other obligations on reporting date;

To - own funds (capital) for reporting date.

2.1.5. Accounts payable share indicator (the PK5) is determined as accounts payable percentage to the total amount of liabilities by formula:

 

where:

KZ - accounts payable on reporting date;

П - total amount of liabilities on reporting date.

2.2. Assessment of profitability is performed by results of calculation of the following financial performance (coefficients) (further - group of indicators of assessment of profitability):

the combined unprofitability indicator - net - reinsurance;

profitability of own means (capital);

investment profitability;

profitability of the insurer.

2.2.1. The combined unprofitability indicator - net - reinsurance (PR1) represents the amount of coefficients of unprofitability - net - reinsurance and expenses - net - reinsurance (except for the insurers performing life insurance) on formula:

                                                                                              PR1 = Kub-netto-perestrakh + Kraskh-netto-perestrakh,

where:

the unprofitability coefficient - net - reinsurance is determined as percentage of the taken place losses - net - reinsurance to the earned insurance premiums - net - reinsurance by formula:

 

where:

Sunetto-perestrakh - the taken place losses - net - reinsurance for the last twelve months, preceding reporting date;

Zspnetto-perestrakh - the earned insurance premiums - net - reinsurance for the last twelve months, preceding reporting date;

the expense ratio - net - reinsurance is determined as expense amount percentage by insurance transactions and the expenses which are not connected with insurance transactions to the earned insurance premiums - net - reinsurance on formula:

 

where:

Rstrakh - expenses on insurance transactions: assignments from insurance premiums, expenses on conducting insurance transactions - net - reinsurance, balance between other expenses and the income on insurance to other, than life insurance, for the last twelve months, preceding reporting date;

Rnestrakh - management expenses and balance between the other expenses and the income which is not connected with insurance transactions less the income and expenses on investments for the last twelve months preceding reporting date;

Zspnetto-perestrakh - the earned insurance premiums - net - reinsurance for the last twelve months, preceding reporting date.

2.2.2. Indicator of profitability of own means (capital) (PR2) is determined as profit percentage to the taxation to arithmetic-mean value of own means (capital) by formula:

 

where:

Пр - profit (loss) to the taxation for the last twelve months, preceding reporting date;

K0 - own funds (capital) for reporting date;

K1 - own funds (capital) for similar date of last year.

2.2.3. Investment profitability indicator (PR3) is determined as percentage of result of investment (placement) of means to the arithmetic-mean amount of cost of the invested assets by formula:

 

where:

Id-r - result of investment (placement) of the means for the last twelve months preceding reporting date;

Ai0 - investment assets (the financial investments (except for cash equivalents), money and cash equivalents) on reporting date;

Ai1 - investment assets (the financial investments (except for cash equivalents), money and cash equivalents) for similar date of last year.

2.2.4. Indicator of profitability of the insurer (PR4) is determined as percentage of net profit to the earned insurance premiums - net - reinsurance (except for the insurers performing life insurance) on formula:

 

where:

Пр / h - net profit for the last twelve months, preceding reporting date;

Zspnetto-perestrakh - the earned insurance premiums - net - reinsurance for the last twelve months, preceding reporting date.

2.3. The quality evaluation and liquidities of assets is performed by results of calculation of the following financial performance (coefficients) (further - group of indicators of quality evaluation and liquidity of assets):

current liquidity of assets;

level of illiquid assets;

security of claimed losses - net - reinsurance by highly liquid assets;

receivables shares on transactions of insurance, joint insurance and reinsurance in assets.

2.3.1. Indicator of current liquidity of assets (PL1) is determined as percentage of cost of quick assets to the amount of the current obligations by formula:

 

where:

Ali - quick assets: money and cash equivalents, bank deposits (deposits), state and municipal securities, shares, bonds, investment shares of mutual investment funds, housing certificates, except for investments in the affiliated, dependent societies and other faces which are the related parties on reporting date;

From - the current obligations: insurance reserves less share of overcautious persons in them, accounts payable on transactions of insurance, joint insurance, accounts payable on reinsurance transactions, debt to insurers on direct indemnification and other accounts payable on reporting date;

Riski - the risk coefficient determined proceeding from the level of credit rating of the assets of the insurer connected with banks, overcautious persons, issuers or issue of securities. Levels of credit ratings and coefficients of risk corresponding to them are established by the Board of directors of the Bank of Russia.

2.3.2. Indicator of level of illiquid assets (PL2) is determined as percentage of cost of debt securities of affiliated and dependent societies and the loans granted them and debt securities of other organizations (except for the organizations having rating is not lower than the lower bound of the level established by the Board of directors of the Bank of Russia on classification of the rating agencies included in the list of rating agencies established by the Board of directors of the Bank of Russia) and the loans granted them to the amount of the invested assets, on formula:

 

where:

DTsB - debt securities of affiliated and dependent societies and loans granted them: bills of exchange, bonds, the granted loans, deposits to the authorized capital and investments in the affiliated, dependent societies and other faces which are the related parties, except for the organizations having rating are not lower than the lower bound of the level established by the Board of directors of the Bank of Russia on classification of the rating agencies included in the list of rating agencies established by the Board of directors of the Bank of Russia on reporting date;

Ainvest - investment assets: the financial investments (except for cash equivalents), money and cash equivalents on reporting date.

2.3.3. Indicator of security of claimed losses - net - reinsurance by highly liquid assets (PL3) is determined as percentage of cost of highly liquid assets to the size of reserve of the declared, but not settled losses less share of overcautious persons in reserve of the declared, but not settled losses (except for the insurers performing life insurance), on formula:

 

where:

Çó/l - highly liquid assets: money and cash equivalents and bank deposits (deposits) on reporting date;

Rzunetto-perestrakh - reserve of the declared, but not settled losses, less share of overcautious persons in reserve declared, but not settled losses, on reporting date.

2.3.4. Receivables share indicator on transactions of insurance, joint insurance and reinsurance in assets (PL4) is determined as receivables amount percentage by transactions of insurance, joint insurance and reinsurance to the total amount of assets on formula:

 

where:

SUM DZ - receivables on transactions of insurance, joint insurance and reinsurance reduced by the amount of overdue receivables on transactions of insurance, joint insurance and reinsurance on reporting date;

And - the total amount of assets on reporting date.

2.4. The quality evaluation of underwriting is performed by results of calculation of financial indicator (coefficient) of diversification of insurance portfolio (further - indicator of quality of underwriting) the insurer.

Indicator of diversification of insurance portfolio (PA1) is determined as percentage of the amount of squares of insurance premium by types of insurance to total square of insurance premium (except for the insurers performing life insurance) on formula:

 

where:

Spbrutto 1, 2,..., i insurance premiums according to insurance contracts, joint insurances and under the agreements accepted in reinsurance, on types of insurance for the last twelve months, preceding reporting date;

Spbrutto - insurance premiums according to insurance contracts, joint insurances and under the agreements accepted in reinsurance for the last twelve months, preceding reporting date.

2.5. Assessment of transactions of reinsurance is performed by results of calculation of the following financial performance (coefficient) (further - reinsurance indicators):

reliability of asset "share of overcautious persons in insurance reserves";

shares of overcautious persons in insurance reserves.

2.5.1. Indicator of reliability of asset "share of overcautious persons in insurance reserves" (PP1) is determined as percentage of the amount of shares of overcautious persons in insurance reserves taking into account risk degree to total cost of share of overcautious persons in insurance reserves by formula:

 

where:

DPI - share of overcautious persons in insurance reserves on each overcautious person on reporting date;

DP - share of overcautious persons in insurance reserves on reporting date;

Riski - the risk coefficient determined proceeding from the level of credit rating of the assets of the insurer connected with banks, overcautious persons, issuers or issue of securities. Levels of credit ratings and coefficients of risk corresponding to them are established by the Board of directors of the Bank of Russia.

2.5.2. Indicator of share of overcautious persons in insurance reserves (PP2) is determined as percentage of the amount of share of overcautious persons in insurance reserves to the size of insurance reserves on reporting date (except for the insurers performing life insurance) on formula:

 

where:

DP - share of overcautious persons in insurance reserves on insurance to other, than life insurance, on reporting date;

SUM of WEDNESDAY - the amount of reserve of not earned premium, reserve of the declared, but not settled losses and the reserve which occurred, but unclaimed losses on insurance to other, than life insurance, the insurance reserves calculated according to Rules of forming on insurance to other, than life insurance, on reporting date.

2.6. Assessment of dynamics of the main financial performance of the insurer is performed by results of calculation of the following financial performance (coefficients) (further - group of indicators of dynamics of the main financial performance):

changes of own means (capital);

changes of assets;

loudspeakers of insurance premium - net - reinsurance.

2.6.1. Indicator of change of own means (capital) (PD1) is determined as percentage of size of own funds (capital) for reporting date to the size of own means (capital) for similar date of last year by formula:

 

where:

K1 - own funds (capital) for reporting date;

K0 - own funds (capital) for similar date of last year.

2.6.2. Indicator of change of assets (PD2) is determined as asset cost percentage on reporting date to asset cost for similar date of last year by formula:

 

where:

A1 - the total amount of assets on reporting date;

A0 - the total amount of assets for similar date of last year.

2.6.3. Indicator of dynamics of insurance premium - net - reinsurance (PD3) is determined as percentage of insurance premium - net - reinsurance for the accounting period to insurance premium - net - reinsurance for the same period of last year by formula:

 

where:

Spnetto-perestrakh1 - insurance premium - net - reinsurance for the accounting period;

Spnetto-perestrakh0 - insurance premium - net - reinsurance for the same period of last year.

2.7. Assessment of ratio of own means (capital) and undertaken obligations of insurance company (PN1) is performed by results of calculation of the relation of the actual size of margin of solvency to the normative size of margin of solvency, insurance company of normative ratio of own means (capital) and the undertaken obligations established by the Instruction of the Bank of Russia of July 28, 2015 No. 3743-U "About procedure of payments", the registered Ministry of Justice of the Russian Federation on September 9, 2015 No. 38865 ("the Bulletin of the Bank of Russia" of September 18, 2015 No. 79), on reporting date.

2.8. Financial performance (coefficients) of groups of indicators of assessment of own means (capital) and borrowed funds, assessment of profitability, quality evaluation and liquidity of assets, qualities of underwriting, reinsurance and dynamics of the main financial performance which value of denominator accepts zero value are not calculated.

Chapter 3. Final provisions

3.1. This Instruction becomes effective after 10 days after day of its official publication in "the Bulletin of the Bank of Russia".

Appendix

to the Instruction of the Bank of Russia of January 18, 2016 No. 3935-U "About procedure the Bank of Russia of monitoring of activities of insurers"

Voided according to the Instruction of the Central bank of the Russian Federation of 21.11.2016 No. 4207-U

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