Insurance Market Reform in Albania

Project Development Objective (PDO)

This project aims to assist the Albanian Financial Supervisory Authority (AFSA) with implementation of legal and regulatory reforms to (a) strengthen supervision and regulation of the insurance sector and (b) enable the development of an earthquake insurance product.


The government of Albania is seeking to grow and further develop its insurance sector. Inadequate regulation, low disposable incomes, and a poor record of claims performance have brought about a lack of public trust in insurance companies. This lack of trust has hindered the overall insurance sector in Albania. As a result, authorities have requested technical assistance to develop and implement a comprehensive set of secondary regulations, guidelines, and methodologies for effective thematic on-site inspections of and a risk-based supervisory framework for insurance companies. In addition, the government of Albania is seeking assistance to develop an earthquake insurance program to mitigate the cost of damages caused by the country’s high vulnerability to natural disasters and climate change.


Component 1: Motor third-party liability insurance–reserving regulation
The project team is conducting an actuarial analysis of historic claims data and developing data-reporting requirements, standard reserve-setting guidelines, and motor third-party liability (MTPL)–reserving regulatory requirements.
Component 2: General insurance supervision
The project team is (a) assisting the AFSA with developing an internal rating and ranking mechanism for insurance companies, (b) developing thematic supervisory on-site inspection manuals, and (d) training on-site supervisors. Additionally, the team is enabling revisions to the existing life and nonlife insurance regulations, as well as developing a risk-based supervisory manual.
Component 3: National earthquake insurance program
The team is currently conducting technical workshops with key stakeholders in Albania. These workshops will inform the framework for the first technical draft of the national mandatory earthquake insurance law.

Expected Outcomes

The main expected outcomes of the project are as follows:
Short-term outcomes
     1.  Improving regulation for MTPL insurance through minimum reserving requirements
     2.  Improving assessment of insurers’ claims reserves through the actuarial reserving tool
     3.  Enhancing supervision of insurance companies through thematic insurance manuals and
          training of AFSA supervisors
     4.  Aligning regulations with standards of the International Association of Insurance Supervisors
          and with the new insurance law
Medium-term outcomes
     1.  Enacting the National Earthquake Insurance Program and supporting insurance regulations
     2.  Establishing a level playing field in the MTPL insurance sector
     3.  Enhancing solvency and the capacity of local insurers to pay out claims
Longer-term outcomes that are reasonably attributed to this project
     1.  Increasing catastrophe insurance coverage among homeowners and small businesses
     2.  Creating a deeper and more stable insurance sector