Accession to the European Union has been the key driving force behind Poland's financial sector development, as it contributed to improvements in the regulatory framework, according to the International Monetary Fund's (IMF) 2006 Article IV Consultation report. In 2001, the IMF conducted a Financial Sector Assessment Program of Poland's observance of the Insurance Core Principles (ICPs) developed by the International Association of Insurance Supervisors (IAIS). The IMF reported its findings in its 2001 Financial System Stability Assessment, which concluded that Poland broadly observed the ICPs and that the regulation and supervision of the insurance sector had been significantly strengthened. Weaknesses were identified with regard to the powers and independence of the supervisory agency; frequency of on-site inspections; corporate governance practices; and exchange of information with the domestic and foreign counterparts. At the time of the assessment, supervision of the insurance sector was conducted by the State Office for Insurance Supervision, which was replaced by the Insurance and Pension Funds Supervisory Commission in 2002. The Act on Financial Market Supervision was adopted in September 2006, establishing a new, integrated financial supervision authority - the Polish Financial Supervisory Authority (PFSA) - for the insurance, securities market, and pension funds sector. Starting on January 1, 2008 banking supervision is also carried out by the PFSA. Given the revision in October 2003 by the IAIS of the ICPs and methodology, and the change in Poland's supervisory and regulatory framework in 2006, there is insufficient information publicly available regarding Poland's compliance with the new, more stringent IAIS principles.

General Overview

In February 2001, the International Monetary Fund (IMF) conducted a Financial Sector Assessment Program (FSAP) in Poland, including an assessment of Poland's observance of the Insurance Core Principles (ICPs) developed by the International Association of Insurance Supervisors (IAIS). The FSAP findings were reported in the 2001 Financial System Stability Assessment (FSSA) report, which concluded that Poland broadly observed ICPs and that the regulation and supervision of the insurance sector had been significantly strengthened. Weaknesses were identified with regard to the powers and independence of the supervisory agency, frequency of on-site inspections, corporate governance practices, and exchange of information with the domestic and foreign counterparts. The IMF report noted that these deficiencies were expected to be addressed following the enactment of the new Law on Insurance Activity. The Act entered into force on May 22, 2003.

At the time of the IMF's 2001 FSSA, supervision of the insurance sector was conducted by the State Office for Insurance Supervision (Panstwowy Urzad Nadzoru Ubezpieczen, or PUNU). On April 1, 2002, the functions of the PUNU and the Office for Pension Funds Supervision (Urząd Nadzoru nad Funduszami Emerytalnymi, or UNFE) were merged into a newly created body, the Insurance and Pension Funds Supervisory Commission (Komisja Nadzoru Ubezpieczen i Funduszy Emerytalnych, or KNUiFE). Further, in September 2006, the Act on Financial Market Supervision was adopted. This established a new integrated financial supervision authority, the Polish Financial Supervisory Authority (Komisja Nadzoru Finansowego, or PFSA), by merging the KNUiFE and the Securities and Exchange Commission (Komisja Papierów Wartościowych i Giełd, or SEC). Starting on January 1, 2008, the responsibilities of the Commission for Banking Supervision (Komisja Nadzoru Finansowego, or BSC) were also transferred to the new regulator. According to M Furtek i Wspólnicy in a 2006 International Financial Law Review (IFLR) article, the PFSA is a collegial body with a chairman appointed by the prime minister, to whom the PFSA is accountable and submits annual reports. In its 2006 Article IV Consultation report, the IMF expressed concerns regarding the scope for political interference under the new legal framework for financial sector supervision, and noted that "the governance provisions for the new unified supervisory agency were little improved in the legislative process and continue to fall short of best practice" (p. 44). Given the IAIS's October 2003 revision of the ICPs and methodology and the change in Poland's supervisory and regulatory authority in 2006 and 2008, there is insufficient information publicly available regarding Poland's compliance with the new, more stringent principles. Accession to the European Union (EU) has been the key driving force behind Poland's financial sector development, as it contributed to improvements in the regulatory framework, according to the IMF's 2006 Article IV Consultation report. At the end of 2004, as stated in the World Bank's 2005 report on Accounting and Auditing, there were 73 insurance companies in Poland.

The Principles

ICP 1 Conditions for effective insurance supervision

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There is insufficient information publicly available addressing Poland's compliance with this principle as revised in 2003 by the IAIS.

ICP 2 Supervisory objectives

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The supervisory objectives of the PFSA, as noted on its website, are "to ensure regular operation of this market, its stability, security and transparency, confidence in the financial market, as well as to ensure that the interests of market actors are protected." Despite the information provided above, the available sources do not directly address Poland's compliance with this principle as revised in 2003 by the IAIS.

ICP 3 Supervisory authority

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At the time of the IMF's 2001 FSSA, supervision of the insurance sector was conducted by the PUNU. Per the same report, the PUNU's responsibilities included "the monitoring of financial condition of companies as well as the supervision of market-conduct activities of the licensed insurance companies" (p. 71). The IMF report expressed concerns regarding the allocation of supervisory responsibilities on licensing and withdrawal of licenses, and recommended strengthening the autonomy of the agency. The new Act on Insurance Activity was expected to transfer some responsibilities from the Ministry of Finance (Ministerstwo Finansów, or MoF) to the PUNU. The Act entered into force on May 22, 2003. On April 1, 2002, the functions of the PUNU, and the UNFE were merged into a newly created body, the KNUiFE.

The Act on Financial Market Supervision, adopted in September 2006, establishes a new integrated financial supervision authority - the PFSA - merging the KNUiFE and the SEC. Starting on January 1, 2008, the responsibilities of the BSC were also transferred to the new regulator. According to M Furtek i Wspólnicy's 2006 IFLR article, the PFSA is a collegial body with a chairman appointed by the prime minister, to whom the PFSA is accountable and submits annual reports. In its 2006 Article IV Consultation report , the IMF expressed concerns regarding the scope for political interference under the new legal framework for financial sector supervision, and noted that "the governance provisions for the new unified supervisory agency were little improved in the legislative process and continue to fall short of best practice" (p. 44). Despite the information provided above, the available sources do not directly address Poland's compliance with this principle as revised in 2003 by the IAIS.

ICP 4 Supervisory process

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There is insufficient information publicly available addressing Poland's compliance with this principle as revised in 2003 by the IAIS.

ICP 5 Supervisory cooperation and information sharing

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At the time of the IMF's 2001 FSSA , the PUNU lacked formal arrangements for exchange of information with domestic and foreign supervisors. The report recommended developing formal arrangements, including Memoranda of Understanding (MoUs), for information sharing. Per the same report, an agreement with the CBS was in preparation, and the new Act on Insurance Activity was expected to allow cooperation between the PUNU and other supervisory bodies. On April 1, 2002, the PUNU was replaced by the KNUiFE, and in 2006 the KNUiFE was incorporated into the PFSA. Given significant changes in the regulatory and supervisory framework and the revision of ICPs in 2003, there is insufficient information publicly available addressing Poland's compliance with this principle.

ICP 6 Licensing

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In its 2001 FSSA , the IMF report expressed concerns regarding the allocation of supervisory responsibilities on licensing and de-licensing to the MoF, and recommended strengthening the autonomy of the agency. The new Act on Insurance Activity was expected to transfer some responsibilities from the MoF to the PUNU. On April 1, 2002, the PUNU was replaced by the KNUiFE, and in 2006 the KNUiFE was incorporated into the PFSA. Given significant changes in the regulatory and supervisory framework and the revision of ICPs in 2003, there is insufficient information publicly available addressing Poland's compliance with this principle.

ICP 7 Suitability of persons

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There is insufficient information publicly available addressing Poland's compliance with this principle as revised in 2003 by the IAIS.

ICP 8 Changes in control and portfolio transfers

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There is insufficient information publicly available addressing Poland's compliance with this principle as revised in 2003 by the IAIS.

ICP 9 Corporate governance

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In its 2001 FSSA, the IMF noted that Poland had made "commendable progress towards incorporating the OECD Principles on Corporate Governance and relevant EU standards into the legislation dealing with insurance companies" (p. 72), but added that the legislation did not include specific requirements to incorporate corporate governance best practices into the insurance industry. The IMF report recommended establishing "the responsibilities of supervisory board and provide legal backing to PUNU to instill good governance principles" (p. 74). On April 1, 2002, the PUNU was replaced by the KNUiFE, and in 2006 the KNUiFE was incorporated into the PFSA. Despite the information provided above, the available sources do not directly address Poland's compliance with this principle as revised in 2003 by the IAIS.

ICP 10 Internal control

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According to the IMF's 2001 FSSA , "company boards should have responsibility for prudential oversight" (p. 74). However, there is insufficient information publicly available addressing Poland's compliance with this principle as revised in 2003 by the IAIS.

ICP 11 Market analysis

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There is insufficient information publicly available addressing Poland's compliance with this principle as revised in 2003 by the IAIS.

ICP 12 Reporting to supervisors and off-site monitoring

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The World Bank's 2005 report stated that Poland's 2003 Insurance Act requires insurance companies to prepare financial statements in compliance with the Accounting Act and the Regulations issued by the MoF, which are based on EU Directive No. 92/674/EEC on the Annual Accounts and Consolidated Accounts of Insurance Undertakings. Per the same report, insurance companies were required to submit their annual financial statements to the KNUiFE. The KNUiFE was incorporated into the PFSA in September 2006. Despite the information provided above, the available sources do not directly address Poland's compliance with this principle as revised in 2003 by the IAIS.

ICP 13 On-site inspection

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In its 2001 FSSA , the IMF recommended increasing the frequency of on-site inspections. Nevertheless, there is insufficient information publicly available addressing Poland's compliance with this principle as revised in 2003 by the IAIS.

ICP 14 Preventive and corrective measures

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There is insufficient information publicly available addressing Poland's compliance with this principle as revised in 2003 by the IAIS.

ICP 15 Enforcement or sanctions

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In its 2001 FSSA , the IMF recommended providing more flexible sanctioning tools to the PUNU in order to improve the efficiency of its interventions. On April 1, 2002, the PUNU was replaced by the KNUiFE, and in 2006 the KNUiFE was incorporated into the PFSA. Given significant changes in the regulatory and supervisory framework and the revision of ICPs in 2003, there is insufficient information publicly available addressing Poland's compliance with this principle.

ICP 16 Winding-up & exit from the market

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There is insufficient information publicly available addressing Poland's compliance with this principle as revised in 2003 by the IAIS.

ICP 17 Group-wide supervision

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There is insufficient information publicly available addressing Poland's compliance with this principle as revised in 2003 by the IAIS.

ICP 18 Risk assessment and management

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There is insufficient information publicly available addressing Poland's compliance with this principle as revised in 2003 by the IAIS.

ICP 19 Insurance activity

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There is insufficient information publicly available addressing Poland's compliance with this principle as revised in 2003 by the IAIS.

ICP 20 Liabilities

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There is insufficient information publicly available addressing Poland's compliance with this principle as revised in 2003 by the IAIS.

ICP 21 Investments

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There is insufficient information publicly available addressing Poland's compliance with this principle as revised in 2003 by the IAIS.

ICP 22 Derivatives and similar commitments

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There is insufficient information publicly available addressing Poland's compliance with this principle as revised in 2003 by the IAIS.

ICP 23 Capital adequacy and solvency

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In its 2001 FSSA, the IMF recommended including provisions into regulation to prevent "double gearing" of capital. However, there is insufficient information publicly available addressing Poland's compliance with this principle as revised in 2003 by the IAIS.

ICP 24 Intermediaries

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At the time of the IMF's 2001 FSSA , no action was required with regard to market conduct. The Act on Insurance Mediation entered into force on May 22, 2003. However, there is insufficient information publicly available addressing Poland's compliance with this principle as revised in 2003 by the IAIS.

ICP 25 Consumer protection

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There is insufficient information publicly available addressing Poland's compliance with this principle as revised in 2003 by the IAIS.

ICP 26 Information, disclosure & transparency towards the market

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There is insufficient information publicly available addressing Poland's compliance with this principle as revised in 2003 by the IAIS.

ICP 27 Fraud

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There is insufficient information publicly available addressing Poland's compliance with this principle as revised in 2003 by the IAIS.

ICP 28 Anti-money laundering/ Combating the Financing of Terrorism

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According to the U.S. Department of State (DoS) 2008 International Narcotics Control Strategy Report, the government of Poland considered its banks, insurance companies, brokerage houses, and casinos to be important venues of money laundering. The Law on Counteracting Introduction into Financial Circulation of Property Values Derived from Illegal or Undisclosed Sources and on Counteracting the Financing of Terrorism (hereafter referred to as the anti-money laundering (AML) and combating the financing of terrorism (CFT) law) was enacted in 2000, and provided for the creation of a financial intelligence unit - the General Inspector of Financial Information (Generalny Inspektor Informacji Finansowej) within the MoF. Under the law, insurance companies are subject to reporting requirements. Per the same report, the AML/CFT law was revised to implement the EU's 2005 Third Money Laundering Directive. The Directive was expected to be transposed into Polish law in December 2007, but elections in October 2007 delayed the process. The U.S. DoS reported that although Poland put many efforts into implementing a comprehensive AML/CFT regime in line with international standards, it remained non-compliant with various Financial Action Task Force standards. Little further information as to Poland's compliance with this principle is publicly available.