Strengthening the Mortgage Insurance Sector in Serbia

Project Development Objective (PDO)

This project aims to support Serbia’s Ministry of Finance and relevant authorities to put in place an international best practice legal, regulatory, and supervisory framework and tools to promote a well-regulated mortgage insurance industry, thus enabling the expansion of affordable and sustainable homeownership in Serbia.


The National Mortgage Insurance Company (Nacionalna Korporacija Za Osiguranje Stambenih Kredita, or NKOSK) was established by the government in 2003 and began operations in 2004. NKOSK is the only mortgage insurer in Serbia. Mortgage insurers have a particularly important role for lower-income mortgage borrowers. By providing a mortgage guarantee and insurance, NKOSK is supposed to facilitate lower mortgage interest rates and thus improve housing affordability. The overall goal of this initiative is to support the National Bank of Serbia and the Ministry of Finance in strengthening the Serbian mortgage insurance (MI) sector, including transitioning NKOSK to a fully regulated insurance company. 


The project will support the following activities:
1.   Assessment of the legal, regulatory, and functional MI environment
     This assessment will develop a written report, which will include a review of (a) the MI sector;
     (b) gaps in comparison with the best global MI practices; and (c) recommendations for regulatory,
     legal, and product reforms. 
2.   Action plan to implement MI reforms
     This action plan will include (a) elements and sequencing of MI regulatory and legal changes;
    (b) NKOSK capitalization requirements and plan; (c) duration and format of the supervisory
     transition period; (d) format of the dual supervision during such transition period; and 
     (e) implementation milestones in volume of MI business, mortgage market development, and so
3.   Assistance in legal and regulatory amendments and in prudential and methodological tools
     This assistance will include (a) developing risk-based insurer reserve requirements; (b) drafting
     amendments to the laws on mortgage and insurance; (c) providing supervisory guidelines
     pertaining to institutional and corporate governance aspects of MI insurers; (d) proposing
     insurance and banking regulatory elements in support of codification of the MI product; and
     (e) designing regulatory reporting and data exchange mechanisms.
4.   Dissemination and professional knowledge sharing
     This activity involves conducting workshops to (a) present the report, (b) discuss with the
     stakeholders the directions for reform, and (c) disseminate the deliverables.

Expected Outcomes

The project activities aim to achieve the following short- and medium-term outcomes:
1.  Increasing awareness of and consensus on MI legal, regulatory, and operational gaps
2.  Approving an action plan with a clear, sequenced reforms road map
3.  Enacting amendments to the laws on mortgage and insurance
4.  Adopting regulatory reporting and data exchange mechanisms
5.  Codification of the MI product in insurance and banking regulations 
6.  Strengthening the process of risk transfer from the banking sector to the insurance sector
7.  Improving risk-based insurer reserve requirements
8.  Adopting supervisory guidelines for institutional and corporate governance aspects of MI insurers
9.  Strengthening of MI insurers in their capacity to price and retain the risk