Tax and accounting insights for Ukraine
20.06.24
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The new Law on "Motor Citizenship" will promote market development and consumer protection

The Law of Ukraine "On Compulsory Insurance of Civil Liability of Owners of Motor Vehicles" (the "Law"), signed by the President on June 17, 2024, will ensure further development of this market segment and bring its functioning closer to EU standards.

The key goal of the Law is to introduce a qualitatively new model of market regulation in accordance with European standards, taking into account the interests of policyholders and injured persons, increase confidence in such insurance and further develop the market of "motor third party liability".

The respective legislative update was made on the basis of the NBU's legislative proposals developed with a view to implementing step by step the requirements of Directive 2009/103/EC of the European Parliament and of the Council of 16 September 2009 on civil liability insurance in connection with the use of motor vehicles and on the enforcement of the obligation to insure such liability in Ukraine.

Key innovations of the Law:

  • new quality standards for insurance coverage, including a gradual increase in the maximum amount of insurance payments to the level of EU countries, the introduction of a system of annuity insurance payments in case of serious damage to the health or life of victims, calculation of insurance payments in case of damage to a vehicle without deducting wear and tear of components and parts;
  • European approaches to the formation of the cost of "motor third party liability insurance" and the widespread use of electronic technologies, including the determination of a "fair price" for each insured taking into account his or her personal history, the transition to an electronic form of contracts through a single centralized database;
  • improving the level of customer service and simplifying the mechanism for settling insurance claims through the model of mandatory direct settlement of losses, abolishing the limitation of the maximum amount of insurance payment in case of registration of documents on road accidents through the European protocol;
  • improvement of the MTIBU management system in view of its socially important functions, in particular, the formation of management and control bodies, building a balanced decision-making system and improving the MTIBU supervision system.

"The NBU has held detailed discussions with the market on the innovations and is ready to continue the dialogue for successful approximation to civilized European rules," said Kateryna Rozhkova, First Deputy Governor of the NBU. "The law provides for a one-year transition period for the MTIBU to bring its activities in line with the new requirements. According to our preliminary estimates, the bureau will successfully cope with this."

The law, once promulgated, will come into force on January 1, 2025. Prior to the effective date of the Law, the National Bank of Ukraine

  • assess the quality of insurers' assets, including to identify potential weaknesses and avoid systemic problems with insurers' compliance with the new requirements;
  • develop regulations for the implementation of the Law, in particular regarding the functioning of the Unified Centralized Database of MTPL Insurance Contracts;
  • determine the procedures that will allow completing the transformation of MTIBU, which provides for the introduction of a classic two-tier corporate governance system in the bureau, compliance with the requirements for the formation of the Council and the Management Board, organization of the internal control system, etc.

As a reminder, the National Bank presented the concept of reforming the MTPL market in September 2022.

NBU

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