Regulations for the Management of Commissions and Operating Expenses of Insurers

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Based on Article 35, paragraph 1, subsection 1.1, of Law no. 03/L-209 on the Central Bank of the Republic of Kosovo (Official Gazette of the Republic of Kosovo, no. 77/16 August 2010), as well as
Article 4, paragraph 3, of Law no. 05/L-045 on Insurance (Official Gazette of the Republic of Kosovo /
no. 38 / 24 December 2015), the Board of the Central Bank of the Republic of Kosovo, at the meeting held on 31 August 2023, approved this:
REGULATIONS FOR THE MANAGEMENT OF COMMISSIONS AND OPERATING EXPENSES OF INSURERS
Article 1
Purpose and scope
1. This Regulation defines the criteria and limitations for the management of commissions and
expenses for non-life insurers.
2. This Regulation applies to all non-life Insurers licensed by CBK operating in the Republic of
Kosovo.
Article 2
Definitions
All the terms used in this Regulation have the same meaning as the terms defined in Article 3 of Law no. 05/L-045 on Insurance and Article 2 of Law no. 04/L-018 for Compulsory Motor Liability Insurance.
Article 3
General limitations
1. Insurers licensed to operate in the non-life insurance sector in the Republic of Kosovo cannot create
expenses that exceed the limitations within the reporting period defined by Article 7 of this regulation.
2. Despite the limitations set by this regulation, insurers must ensure that at all times they maintain
sufficient funds for the payment of claims and treat them with the highest priority.
Article 4
Limitation of expenses related to commissions paid to intermediaries of compulsory motor liability insurance
1. Insurers may apply a commission (including all other expenses) to insurance intermediaries
regarding the compulsory auto liability insurance product, up to a maximum of 8% of the gross

2 prej 10 written premium excluding VAT after returns and cancellations from compulsory motor liability insurance.
2. In cases of return and cancellation of policies, the commission paid for the remaining part of the
policy must also be returned. Termination, cancellation and replacement of the mandatory auto liability insurance policy must be done in accordance with the relevant CBK Instruction.
3. The claim for the return of the insurance premium must be made only for and on behalf of the insured
by the relevant insurer.
4. Under no circumstances may insurers apply commissions to the insurer's employees responsible for
the sale of insurance products.
5. The transfer of the payment of commissions and expenses of intermediaries for compulsory auto
liability insurance, provided for in Article 3 of this regulation, must be made only by bank transfer, from the bank account dedicated to the sale of compulsory motor liability insurance, determined with article 5 of this regulation.
Article 5
Keeping funds in bank accounts
1. Insurers are obliged to maintain only one bank account, in which they collect the funds collected
from the sale of compulsory auto liability insurance.
2. Insurers must ensure at all times sufficient funds for the payment of claims, the financing of the
Compensation Fund and other expenses.
3. Except for the payment of damages, the Compensation Fund, the payment of brokers' commissions
and the part for operating expenses, the account defined according to paragraph 1 of this article cannot in any way be debited for other purposes without the prior approval of the CBK (for other purposes means all investments, defined by the Regulation of assets for covering technical provisions).
Article 6
General limitation of administrative expenses
1. Licensed non-life insurers may in no case incur expenses in excess of 30% of the gross written
premium from all classes of non-life insurance.
2. For the purposes of this regulation, general administrative expenses are considered all groups of
expenses defined as follows:
2.1. Expenses for intermediation commissions and other sales expenses;
2.2. Employee staff expenses;
2.3. Service and supply costs from suppliers and third parties;
2.4. Expenses of depreciation and provisioning of accounts receivable from insurance,
2.5. Expenses for KIB as well as other expenses related to the gross written premium;
2.6. Representation, advertising and promotion expenses which must not exceed 3% of the gross
written premium without VAT;

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2.7. In cases where the insurer has not been prohibited by any other measure, sponsorship expenses
which must not exceed 1% of the gross written premium without VAT.
3. Underwriting expenses are recognized at the time of occurrence in relation to the gross written
premium and the same cannot be capitalized as deferred expenses.
4. In the calculation of the limitation of the insurer's general expenses in relation to the gross written
premium, the following expenses are excluded:
4.1. Financial expenses related to investment costs, interest expenses from bank loans, expenses
related to banking services and other financial expenses.
4.2. Expenses resulting from the loss in value, amortization and depreciation of financial, non￾financial assets, tangible and intangible assets with the exception of the provisioning of accounts
receivable resulting from insurance activity.
5. Advertising and promotion expenses are considered expenses that are made through different forms
of information, such as: television, radio, newspapers, magazines, direct advertising, the Internet, posters, posters, billboards, transit advertisements and others similar.
6. When advertising activity results in expected future revenues that exceed expected future costs to
realize sales revenues, the Insurer must be able to demonstrate the correlation between the product or service and marketing expenses based on verifiable historical data and patterns.
7. Under no circumstances should insurers allow advances to insurance brokers, or anyone else.
Article 7
Reporting of Insurers to CBK

1. Insurers are obliged to report electronically on a quarterly basis to the CBK the following
   information by the last day of the following month:
   1.1. The form completed with the data required according to appendix 1 of this regulation.
   1.2. The report of the gross written premiums of compulsory auto liability insurance for the previous
   quarter together with the calculation of the commission and other expenses from Article 3 of this regulation.
   1.3. The detailed report of the payment of damages from the compulsory auto liability insurance
   including the payment to the compensation fund.
   1.4. The detailed report of the sale of voluntary insurance together with the calculation of the
   commission and other relative expenses
2. The reporting period on a quarterly basis includes the calculation of data together with the limitations
   defined by this regulation as follows:
   2.1. first quarter, data from January 1 to March 31 of the reporting year
   2.2. second quarter, data from January 1 to June 30 of the reporting year
   2.3. third quarter, data from January 1 to September 30 of the reporting year
   2.4. fourth quarter, data from January 1 to December 31 of the reporting year.

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3. On a monthly basis, until the last day of the month, insurers are obliged to report to the CBK all
bank transactions related to premiums written, claims paid, expenses and other transactions of the period.
Article 8
Enforcement, Remedial Measures and Civil Penalties Violation of the provisions of this regulation will be subject to administrative measures and fines as defined in Law No. 03/L-209 on the Central Bank of the Republic of Kosovo and Law No. 05/L-045 on Insurance.
Article 9
Adaptation of policies
All non-life insurers are obliged to adapt all their internal expenditure policies and procedures to the requirements and limitations of this regulation within the three-month period.
Article 10
Annex
Annex 1 Form of reports is an integral part of this regulation.
Article 11
Repeal
With the entry into force of this regulation, the Regulation on the Management of Commissions and Operating Expenses of Insurers dated 30 January 2020 shall be repealed.
Article 12
Entry into force
This regulation shall enter into force on 1 October 2023. Bashkim Nurboja Chairman of the Board of the Central Bank of the Republic of Kosovo

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Annex 1:
Reporting form
Institution Insurer
Form name Operating Expenses by insurance classes Currency Euro (unless otherwise defined) Operating Expenses by insurance classes MTPL Non-MTPL Total Gross written premium in Euro - - - % of Gross Written Premium 0.0% 0% 0% Commissions for sales intermediaries Expenses for sales staff Costs of purchasing policies Costs for IRRT-Altec Costs of points of sale (rent, office material, etc.) Purchase cost Staff cost (salaries and other staff expenses) - € - € - € Electricity, Water and Heating Fuel Donations and Sponsorships Office materials, stationery, etc Expenses for gifts Office equipment and furniture maintenance Hardware and vehicle maintenance Rent payments Vehicle operating lease and other lease Communication costs and telephone networks Postage expenses Representation, Advertising (Marketing) Cleaning and hygiene expenses Guard and Security Consulting and Auditing Expenses Software development and license costs Intermediaries training costs Other expenses for supplies and services

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Total expenses for third parties and supplies Fee for CBK Fees, taxes and other charges Total taxes and fees Provisioning of accounts receivable from premiums Total expenses for provisioning Provisioning for unforeseen losses Other expenses Total Administrative Expenses - € - € - € Administrative expenses for KIB Expenses for the Compensation Fund Border Insurance Expenses Expenses for the Insurance Association of Kosovo Total Operating Expenses - € - € - € Description MTPL Border insurances Green card TPL+ Total MTPL - % of Gross Written Premium 0% 0% 0% 0% 0% Commissions for sales intermediaries - € Expenses for sales staff - € - € - € - € - € Costs of purchasing policies - € - € - € Costs for IRRT-Altec - € Costs of points of sale (rent, office material, etc.) - € - € - € - € - € Purchase cost - € - € - € - € - € Staff cost (salaries and other staff expenses) Electricity, Water and Heating - € - € - € - € - € Fuel - € - € - € - € - € Donations and Sponsorships - € - € - € - € - € Office materials, stationery, etc - € - € - € - € - €

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Expenses for gifts - € - € - € - € - € Office equipment and furniture maintenance - € - € - € - € - € Hardware and vehicle maintenance - € - € - € - € - € Rent payments - € - € - € - € - € Vehicle operating lease and other lease - € - € - € - € - € Communication costs and telephone networks - € - € - € - € - € Postage expenses - € - € - € - € - € Representation, Advertising (Marketing) - € - € - € - € - € Cleaning and hygiene expenses - € - € - € - € - € Guard and Security - € - € - € - € - € Consulting and Auditing Expenses - € - € - € - € - € Software development and license costs - € - € - € - € - € Intermediaries training costs - € - € - € - € - € Other expenses for supplies and services - € - € - € - € - € Total expenses for third parties and supplies - € - € - € - € - € Fee for CBK - € - € - € - € - € Fees, taxes and other charges - € - € - € - € - € Total taxes and fees - € - € - € - € - € Provisioning of accounts receivable from premiums - € - € - € - € - € Total expenses for provisioning - € - € - € - € - € Provisioning for unforeseen losses - € - € - € - € - € Other expenses - € - € - € - € - € Total Administrative Expenses - € - € - € - € - € Administrative expenses for KIB - € - € - € - € - € Expenses for the Compensation Fund - € - € - € - € - € Border Insurance Expenses - € - € - € - € - € Expenses for the Insurance Association of Kosovo - € - € - € - € - € Total Operating Expenses - € - € - € - € - € Description Accident and Health Marine and Transport Casco Insurance against fire and other Liability insurance Insurance of loans and guarantees Financial loss insurance Total Non￾MTPL

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-
% of Non
-MTPL Gross Premium Written 0% 0% 0% 0% 0% 0% 0% 0% Commissions for sales intermediaries - € Expenses for sales staff - € - € - € - € - € - € - € - € Costs of purchasing policies - € - € - € - € - € - € - € - € Costs for IRRT -Altec Costs of points of sale (rent, office material, etc.) - € - € - € - € - € - € - € - € Purchase cost - € - € - € - € - € - € - € - € Staff cost (salaries and other staff expenses) Electricity, Water and Heating - € - € - € - € - € - € - € - € Fuel - € - € - € - € - € - € - € - € Donations and Sponsorships - € - € - € - € - € - € - € - € Office materials, stationery, etc - € - € - € - € - € - € - € - € Expenses for gifts - € - € - € - € - € - € - € - € Office equipment and furniture maintenance - € - € - € - € - € - € - € - € Hardware and vehicle maintenance - € - € - € - € - € - € - € - € Rent payments - € - € - € - € - € - € - € - € Vehicle operating lease and other lease - € - € - € - € - € - € - € - € Communication costs and telephone networks - € - € - € - € - € - € - € - € Postage expenses - € - € - € - € - € - € - € - € Representation, Advertising (Marketing) - € - € - € - € - € - € - € - € Cleaning and hygiene expenses - € - € - € - € - € - € - € - € Guard and Security - € - € - € - € - € - € - € - € Consulting and Auditing Expenses - € - € - € - € - € - € - € - € Software development and license costs - € - € - € - € - € - € - € - € Intermediaries training costs - € - € - € - € - € - € - € - € Other expenses for supplies and services - € - € - € - € - € - € - € - € Total expenses for third parties and supplies - € - € - € - € - € - € - € - € Fee for CBK - € - € - € - € - € - € - € - € Fees, taxes and other charges - € - € - € - € - € - € - € - € Total taxes and fees - € - € - € - € - € - € - € - € Provisioning of accounts receivable from premiums - € - € - € - € - € - € - € - € Total expenses for provisioning - € - € - € - € - € - € - € - € Provisioning for unforeseen losses - € - € - € - € - € - € - € - € Other expenses - € - € - € - € - € - € - € - € Total Administrative Expenses - € - € - € - € - € - € - € - €

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Administrative expenses for KIB Expenses for the Compensation Fund Border Insurance Expenses Expenses for the Insurance Association of Kosovo - € - € - € - € - € - € - € - € Total operating expenses - € - € - € - € - € - € - € - € Institution Insurer Form name Currency Euro (unless otherwise defined) Staff expenses Total Number of employees Management staff (Directors and CEOs) Staff at the Center (except directors and CEOs) Staff at the points of sale who are paid a fixed salary Sales agents who are paid commissions Other Total - Expenses for salaries, contributions and other benefits Management staff (Directors and CEOs) Staff at the Center Staff at the points of sale who are paid a fixed salary Other Total staff costs € - Institution Insurer

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Form name
Currency in (%) (unless otherwise defined) Limitations according to the regulation Current in % According to the regulation, not more than:
Indicators in percentage
Expenses for commissions from MTPL 0% 8% Representation, Advertising and Promotion 0% 3% Sponsorships 0% 1% Total Expenses Report 0% 30%