ASSETS COVERING INSURANCE RESERVES WITHIN THE PRUDENTIAL SUPERVISION FRAMEWORK: SCIENTIFIC APPROACHES AND CONTEMPORARY REGULATORY PRACTICE (2012–2025)

Abstract

The article is devoted to topical issues of the formation and assessment of assets covering insurance reserves within the modern framework of financial supervision and the strengthening of prudential solvency requirements for insurers. In the contemporary supervisory model, reserve assets are no longer treated as a formal element of regulatory compliance but are increasingly regarded as a key instrument for ensuring insurers’ solvency, the financial stability of the non-bank financial sector, and the protection of policyholders’ rights. The National Bank of Ukraine implements a risk-based regulatory approach that establishes comprehensive requirements for the quality, liquidity, diversification, and reliability of assets covering insurance liabilities. At the same time, the role of internal control and the evidential basis of managerial decisions regarding the adequacy of asset coverage for insurance reserves is growing. In the absence of a systematic asset assessment framework, concentration, liquidity, and counterparty risks may escalate into threats to both insurers’ financial resilience and overall market stability. In this context, there is an increasing need to develop scientifically grounded models for assessing reserve-covering assets that are integrated with risk management systems, internal control mechanisms, and corporate governance. Particular attention is paid to aligning current NBU regulatory practice with scientific approaches to reserving, financial security, and internal control of non-bank financial institutions developed in prior domestic research and validated by insurance practice. The strengthening of prudential requirements for the activities of insurance companies in Ukraine has led to a substantial transformation of approaches to the formation and valuation of assets used to cover insurance reserves. Within the modern financial supervision framework, reserve assets are no longer viewed as a merely formal element of regulatory compliance but acquire the status of a key instrument for ensuring insurers’ solvency, the financial stability of the non-bank financial sector, and the protection of policyholders’ rights. The National Bank of Ukraine implements a risk-based regulatory approach that establishes comprehensive requirements for the quality, liquidity, diversification, and reliability of assets covering insurance liabilities. At the same time, the role of internal control and the evidential basis of managerial decisions regarding the adequacy of asset coverage for reserves is increasing. In the absence of a systematic approach to asset valuation, concentration, liquidity, and counterparty risks may transform into threats to the financial stability of both individual insurers and the market as a whole. In this context, there is a growing need to develop scientifically grounded models for assessing reserve-covering assets, integrated with risk management systems, internal control, and corporate governance. Particular attention should be paid to aligning current NBU regulatory practice with scientific approaches to reserving, financial security, and internal control of non-bank financial institutions developed in earlier domestic studies and confirmed by insurance practice.