Since 1st of May 2004 Polish insurance market has been a part of an integrated European financial sector. The activity of insurance companies is regulated by a number of national acts, these, however, been set up on the basis of the directives of the European Commission.

The history of the Polish insurance market goes back to the pre-war period. Before 1939 in Poland there were 38 mutual insurance companies, 72 private insurance companies and 16 insurance institutions. Only two of them survived World War II and the transformation of the political and economic system in the mid-forties. General Mutual Insurance Company, which changed its status to State Insurance Company (PZU), became a monopolist in the field of domestic life and non-life insurance. WARTA Insurance Company, the second company which managed to adapt to the new system, got the exclusiveness for running activities in the field of insurance of property and persons in foreign currency and reinsurance. Owing to the appointed range of activity of both companies the insurance market was dominated by PZU, which formed an integral part of the state administration.
The first break in the monopolised insurance market came with the Act of 20 September 1984 on insurance of property and persons. The legacy of the Act allowed new insurance companies to be established, provided that they would come into existence in the form of state companies, co-operatives or State Treasury joint-stock companies. The Act proved how limited the market was despite all the changes.

The first amendment of the above-mentioned Act took place on 17 May 1989. First of all, the new regulation abolished all restraints concerning the ownership structure of new insurance companies. However, it generally did not modify the principles of insurance market regulation. Thus, on the one hand, the far-reaching liberalisation was introduced, on the other, no criteria of licensing were determined. The issue of efficient professional insurance supervision remained unsolved. In this situation the Polish market did not open to foreign investors and transfer of know-how. The competition between companies was very limited, which did not reinforce the whole sector.

The evaluation of the current situation and Polands efforts to become the UE Member State forced the Ministry of Finance to initiate an overall reform of the insurance system in order to develop a modern insurance market in our country. As a priority it was assumed that the systemic solutions implemented in Poland had to be compatible with EU regulations so that they did not form an obstacle in the process of the integration with the European market in the future.

As a result of these works the Act on Insurance Activity was introduced on 28 July 1990 (with further amendments). The Act has taken into consideration most of the above-mentioned directives and introduced significant market reforms. Among its main achievements the following changes should be listed: a demonopolisation of the Polish insurance market, detailed determination of the general principles of commencing and conducting insurance business in insurance of persons and property, separation of life and non-life insurance sectors, which had an extremely big influence on the proper functioning of insurance companies and their financial policy.

In view of the fact that private insurance law covers a very wide and diversified range of issues, at the beginning of the decade, upon the governments motion, work on new codification of the insurance activity was undertaken. As a result a package of Acts had been passed, which consisted of the three following acts: the Act on insurance activity, the Act on compulsory insurance and the Act on insurance intermediaries. The first draft, passed in 2001, was vetoed by the President because of the excessive burden on the national budget. On 22 May 2003 the Parliament passed the new, modified law and most of its regulations have been binding since 1 January 2004. Apart from creating separate fields in functioning of the sector, the new amendments created more extended and precise definitions and regulated issues that have not been previously codified, such as:

• specifying and detailing the principles of running insurance activities in order to enhance the protection of the insured,
• stating precise principles of acting as an actuary.

Another important issue taken into account was the removal from existing law objections of the European Commission which concerned the adaptation of the Polish law to EU legislation. The third and final matter was to include development guidelines defined by the IAS Council in the Exposure Draft published on 31 July 2003 on Insurance Accounting.