Ch.Bilguun, Officer, Insurance Department, FRC

Insurance and risk are interrelated concepts. Risk is the formation of a difficult circumstance that may cause damage somehow, while insurance provides the opportunity to overcome the risk without financial stress. Therefore, the regulator requires insurers to have sufficient funds and reserves to cover the risk.

Global insurance markets are moving towards a Risk-Based Capital (RBC) system, and insurers aim to become more financially diversified and have adequate reserves. As a result, the insurance industry can overcome the crisis, continue operating normally, and offer full reimbursement to the insured in cases of claims. However, the global financial crisis and the COVID-19 outbreak have sent a strong message to the insurance industry, prompting Mongolia to accelerate its transition to a risk-based capital system.

Teus Mourik, an international consultant (funded by the World Bank’s SFFS project) worked in the FRC to establish a risk management system that meets international standards. The main objective was to improve control over the activities of insurance regulators, establish a risk-based inspection system and introduce appropriate inspection methods and techniques. The consultant’s work was also to strengthen insurance firms’ Own Risk Solvency Assessment (ORSA) methodologies, raise RBC valuation, and determine the risk tolerance. 

Teus Mourik, and professionals from the FRC’s Insurance Market Department discussed the basic requirements for adopting the RBC system in Mongolia. They also determined implementation procedures, the consequences of introducing the methodology to insurance companies, additional required measures, and recommendations. The work also assisted in determining the Mongolian market's risk coefficients, preparing risk-based asset estimates for well-known insurance market companies, and emphasizing the differences between non-life insurance, reinsurance, and life insurance. All of this contributed to the intensification of Mongolia's risk-based capital system. 

Strengthening Fiscal and Financial Stability Project, Room 205 United Nations Street 8/2 4th khoroo Chingeltei district Ulaanbaatar-15160 Mongolia
+976-70120582
training@sffs.mn