Published: 20.11.2022 Updated: 04.01.2023

Laws, regulations, administrative rules and general guidance

National laws, regulations, administrative rules and general guidance in the field of insurance regulation, transposing or based on EU law or otherwise applicable in Latvia

EU legislation in the field of insurance regulation that is directly applicable within the territory of Latvia

The supervisory review process

Insurance activities are laid down in and regulated by Insurance and Reinsurance Law (hereinafter – the Law), regulations issued in accordance with the mentioned law, Insurance Contract Law, the Law On the Compulsory Insurance against Civil Liability in Respect of Motor Vehicles, Activities of Insurance and Reinsurance Intermediaries Law, other laws and regulations that regulate commercial activity and directly applicable European Union legislation.

The goal of supervision of insurance market participants is to timely detect in their activities possible breach of laws or causes of problems, according to the competence of Latvijas Banka performs mitigation measures for these causes and perform accordingly to minimize the influence of problems of insurance market participants on the overall financial and capital market. To fulfill this goal, Latvijas Banka carries out future-orientated and risk assessment-based supervision of the insurance activity, applying supervisory measures in a timely manner and taking into account the proportionality principle.

Latvijas Banka implements continuous and comprehensive supervision of insurance activity by:

  • off-site analysis of market participants performance indicators, constantly paying attention to quantitative and qualitative changes of financial indicators and fulfillment of regulative requirements to identify and assess the existing and future risks inherent in the business of insurance undertakings;
  • on-site and off-site reviews according to review plans, which are developed taking into account the results of risk score determination process for each insurance undertaking, performed within the frames of risk assessment process;
  • imposing supervisory measures on insurance undertakings, if in the risk assessment or detailed review process failures, existing or possible deficiencies or non-compliances in activities of insurance undertakings are identified, which threaten or may threaten in the future the stability of financial position of these market participants and negatively influence their ability to meet the obligations under the insurance or reinsurance contracts.

Future-orientated and risk assessment-based supervisory review process is carried out in several stages – analysis of the information reflected in reports, risk assessment and determination of risk score, planning of supervisory process, performing of on-site and off-site reviews and imposing of supervisory measures.

Risk assessment process is a tool to identify, analyze and assess risks inherent in the business of insurance undertakings and assess the quality, sufficiency and adequacy compliance with the nature, scale and complexity of their business of methods used by insurance undertaking to manage those risks.

Within the risk assessment process, on the basis of the results of the analysis of received information, impact assessment and risk and risk management system assessment and consequently determining for each insurance undertaking a risk score within the limits from "1" to "4".

The result of risk assessment process (risk score) is used to carry out effective supervision of insurance undertakings, including priorities and intensity of supervisory measures, plan on-site and off-site reviews and scope, goal and frequency of those reviews.

In carrying out supervision of the insurance and reinsurance activity, in order to ascertain the compliance of the insurance company with the requirements laid down in the Insurance and Reinsurance Law, Latvijas Banka shall review the elements representing the operation of an insurance undertaking mentioned in the Section 44 of the Insurance and Reinsurance Law.

Minimum frequency of mentioned  regular reviews and evaluations as well as the volume of resources necessary for applying of the supervisory measures to insurance undertaking according to individually determined risk score is laid down in the "Procedure for minimum frequency for regular review of elements laid down in Section 44 of the Insurance and Reinsurance Law and performing inspections".

Should situations occur, which threaten financial position of insurance undertakings and negatively influence their ability to meet the obligations under the insurance or reinsurance contracts, Latvijas Banka may impose supervisory measures on insurance undertakings, to prevent such situations.

Procedure for determining the minimum time interval for regular review of elements referred to in Section 44 of the Insurance and Reinsurance Law and performing inspections of activities

Aggregate statistical data

The exercise of options under Directive 2009/138/EC

Supervisory objectives, main functions and activities

According to the Law on Latvijas Banka, Latvijas Banka carries out the supervision of financial and capital market and its participants, including insurance companies.

The goal of Latvijas Banka’s activities shall be to protect the interests of investors, depositors and the insured, and to promote the development and stability of the financial and capital market.

Latvijas Banka shall have the following functions:

  1. to issue binding rules and take decisions setting out requirements for the functioning of financial and capital market participants and calculation and reporting of their performance indicators;
  2. by controlling compliance with laws and regulations and rules and decisions adopted by Latvijas Banka, to regulate activities of financial and capital market participants;
  3. to specify the qualification and conformity requirement for financial and capital market participants and their officials;
  4. to establish the procedure for licensing and registration of financial and capital market participants;
  5. to collect and analyse information (data) relating to the financial and capital market and to publish it;
  6. to ensure accumulation of funds with the Deposit Guarantee Fund, and Protection Fund for the Insured, their management and payment of compensation from these funds in accordance with the Deposit Guarantee Law and Insurance and Reinsurance Law;
  7. to ensure payment of compensations to investors in accordance with the Investor Protection Law;
  8. to analyse regulatory requirements pertaining to financial and capital market and draft proposals for their improvement and harmonisation with the regulatory requirements Community;
  9. to engage in systemic studies, analysis and forecasting of the financial and capital market development;
  10. to cooperate with foreign financial and capital market supervision authorities and participate in international organizations of the financial and capital market supervision institutions;
  11. to control that activities described in the laws and regulations governing the financial and capital market shall be provided only by the persons mentioned thereof.

Supervisory priorities

  • Conduct of on-site and off-site inspections of market participants according to approved plan of supervisory measures.
  • Improvement of on-site and off-site insurance supervision methodological framework, supplementing on-site and off-site supervisory handbooks according to amendments laid down in relevant legislation.
  • Improvement of supervisory framework for insurance and reinsurance distributors to ensure the compliance of insurance and reinsurance distributors activity with the requirements of Insurance Distribution Directive, ensuring clients (consumer) protection in conformity with the requirements of the mentioned Directive.