Albania: Interview with Mimoza Kaçi

Mimoza Kaçi is the Executive Director of the Albanian Financial Supervisory Authority (AFSA) in Albania. She was appointed to this position by the Albanian Parliament on April 11, 2024. Before this, she served as the Deputy Executive Director and Board Member of AFSA since December 2014.

Mimoza graduated from the University of Economics and Business in Vienna, Austria, specializing in capital markets and the insurance industry and holds a Doctorate in Economics from the University of Tirana. She has extensive experience in financial markets, regulation, and academia and has also contributed to international financial regulatory organizations. She is committed to further improving supervisory methodologies, as well as developing and modernizing the non-bank financial sector.

Do you remember when you first heard about Solvency 2 and what you thought at that time?

Solvency II has been a major topic in our discussions since I joined the AFSA in 2014. This directive is the reference and the objective we aim for in terms of the supervision of the insurance market. Though Solvency II entered into force in 2016 for most of the European countries, as the directive was already published back in 2009, it has been partly reflected in our actual insurance law as well. Some elements such as the risk-based supervision approach or other elements linked to corporate governance were introduced in Albania in 2014, adopted from this directive. At the time our focus was on the qualitative elements, as it was not feasible for a small market like ours to introduce the quantitative requirements in terms of capital adequacy, which would put unnecessary stress to the market which still needed to consolidate.

How important is Solvency 2 to Albania?

One of the major challenges for the Authority and the insurance market is the transition to the Solvency II regime. The implementation of this regime is a commitment of the Authority within the framework of aligning legislation with EU directives and international best practices in supervision, and the EU integration process of Albania.

This is also a very important milestone for the Authority, as two of the main directions set out in the 5-year strategy for the medium-term development of the insurance market include increasing the effectiveness of supervision and aligning legislation with European standards. It is expected to bring competitive advantages for professional insurers, contribute to the sound development of the insurance sector, and promote the role of insurance in the country’s economy.

Do you think Solvency 2 will help or hinder the Albanian insurance market?

The introduction of Solvency II is expected to bring competitive advantages for professional insurers, contribute to the sound development of the insurance sector, and promote the role of insurance in the country’s economy. However, Solvency II is expected to bring about a significant change in the risk management culture of insurance companies. While proper capitalization of insurers will enable the sector to cope with unforeseen shocks and potential development in a broader market, major challenges arise with the process where technical expertise is needed, and capacity building becomes a necessity.

Where does the FSA stand in the preparations for Solvency 2?

With the assistance of the World Bank, a roadmap toward implementing the Solvency II regime has been developed and is currently being implemented. Adapting to the complex requirements of Solvency II brings many technical and organizational challenges to insurance companies and AFSA.

Therefore, I consider essential our preparations to ensure that Solvency II has a gradual effect on capital requirements and compliance by insurance companies. We are currently in the second year of activities as foreseen in the roadmap, and the role of World Bank and experts such as PRS is crucial to guide us safely in this process.

Are you cooperating with other regulators regarding the implementation of Solvency 2?

AFSA is very active in its collaboration with its peer regulators. We have been exchanging continuously with regional regulators but also have been beneficiaries of projects funded by EU through other regulators, such as TAIEX on Solvency II, from HANFA, Croatia colleagues. We are keen on other collaborations and AFSA’s teams actively work on these opportunities. The accession in EU is expected to broaden our accessibility also to European tools and potential projects we might benefit from.

Where do you expect Solvency 2 to have the greatest impact on the Albanian market?

Introducing a supervisory system based on market value as opposed to a rule-based approach needs a change in the culture of the market as it will affect all its aspects. Increased requirements for capital adequacy and complying with them might be the greatest impact we expect. Moreover, insurance companies cannot conform to the new supervisory system immediately. It is essential therefore to provide for transitional measures, which ensure that Solvency II will have a gradual effect on the capital requirement and compliance by insurance companies.

What if the QIS shows that most of the market participants have a solvency ratio below 100%?  

The implementation of Solvency II capital requirements (Pillar 1) will be preceded by a quantitative impact study (QIS), which will assess the level of capital that individual insurers would be required to hold under SII requirements. This exercise will serve to identify key challenges of implementation, and the ways and time required to address them. Thus, we expect to have appropriate transitional measures in place to ensure that market participants will be able to meet the new legal requirements once they enter into force.