PARLIAMENT approved the first reading of the completely new Bulgaria Insurance Code on October 20.

So far, the rules for this type of business have been regulated by the Act on Insurance and a series of texts in other laws. In the past few years, however, it has become clear that the country will need to have all the different insurance activities and requirements in a single code of law.

The separate sections of the bill – which is still to undergo a second reading before being enforced – set the rules for the operation of insurance companies and brokers, the requirements for insurance deals, define the many types of insurance (like third-party liability, property and life insurance), and handle the highly sensible area of consumer protection.

The most controversial part of the code regulates the mandatory third-party liability motor insurance. After the code comes into effect, this type of policy will only have a one-year duration, instead of the currently existing options for shorter periods like three and six months.

The new code does allow for shorter insurance periods of not less than 30 days for vehicles with temporary or transit registration, for border insurance, for insurance of slow-moving and self-moving vehicles, and other special cases.

The third-party motor insurance had been causing a lot of concern lately, especially after it became clear that only 59-65 per cent of all drivers in this country had it. The European Union has been threatening to continue applying special monitoring on Bulgarian vehicles, even after the country joins the Union, because of the low number of drivers with the mandatory policy.

Data from the Financial Supervision Commission (FSC), which monitors the insurance business in Bulgaria, shows that only 50-59 per cent of Bulgarian motorists have third-partly liability policies. According to the Association of Bulgarian Insurers, the mandatory third-party liability insurance is at 65 per cent coverage.

Another bone of contention is a section of text in the insurance code draft, which says that FSC decisions on depriving insurance companies of their licences will no longer be subject to appeal. This provision contradicted the EU directives, the parliamentary committee on European integration chairman, Atanas Paparizov, told MPs.

FSC deputy chair Ralitsa Again pointed out the same contradiction earlier. Akin said the central bank is granting and taking away bank licences. However, after the country joins the EU, both the banking and insurance delicensing would have to be revoked, Again said.

New provisions in the code include changes in the levels of liability of the insurers, the introduction of financial supervision, preliminary information on insurance contracts and others.