'Astra Asigurari', one of the best known insurance companies in Romania, lost its license and is very likely to initiate bankruptcy procedures.
As of late, the Romanian insurance market has been hit by news that
the Financial Supervisory Authority, the FSA, filed a motion with Bucharest's
Tribunal to initiate bankruptcy
procedures for Astra Asigurari insurance company, the top Romanian
insurer in terms of gross premiums. The authority had withdrawn Astra's license in late August, after the company's
recovery plan failed.
The head of the FSA
Misu Negritoiu, said:
"The FSA's main concern in the upcoming period will be
protecting the interests of Astra customers in close cooperation with the
Guaranty Fund, as well as maintaining the stability of the insurance system.
After evaluating several scenarios, the FSA Council came to believe that the
fund has the capacity and the resources to cover customers' damages claims, in
keeping with the current legislation."
The impact of damages to be paid out by Astra, as calculated by the
Financial Supervisory Authority, stands at 700 million lei (almost 160 million
Euro), and the Insurance Guaranty Fund
has at its disposal almost one billion lei, which is approximately 226
million Euro. The head of the National Union of Insurance Brokers, Bogdan
Andriescu, spoke to Radio Romania about the implications of the FSA's decision:
TRACK VM: "It's a decision that
perhaps should have been made earlier, but they tried to save the company. They
could not go further with solvency indexes ten times lower than what was
needed. I still believe things will start normalizing in terms of damages due
to the Astra customers through the involvement of the Guaranty Fund, which will handle and pay them out. I
believe that, with this bankruptcy, the market has become a bit more responsible,
and I believe that they will be much more careful about indicators, and will
take this decision as a warning. In fact, we will start implementing the EU
Solvency II Directive on January 1, 2016, which demands better solvency
The Romanian insurance market grew
by 8.73% in the first half of the year as against the same period last year, up
to 4.32 billion lei, which is a little below one billion Euro, and also 5.08%
as compared to the second half of 2014, according to FSA data. "The Romanian
insurance market is highly consolidated. In the first half of 2015, 80.69% of
total premiums was gained by 10 companies, out of the 36 insurance companies in
the country", the FSA report specifies.
According to another FSA report, Romanian insurers last
year cut their losses by almost 100%. Net losses across the system were of only
35 million lei, about 8 million Euro, calculated as the difference between
figures for insurers who made a profit last year and those who registered
losses. According to the annual report of the FSA, 16 companies registered
losses, while 21 had a profit.
Here is economic analyst Radu Soviani:
"This is apparently a
positive development, because we also have to look at the way in which insurers
cut losses; if we look at the FSA report, we can see that they cut losses
mainly by raising premiums, for instance in terms of mandatory car insurance
premiums, which are the most valuable in Romania. Premiums are 14% higher than
the previous year, therefore,
considering that the number of customers for mandatory car insurance has
not gone up significantly, on the contrary, we may be allowed to suppose that
this cut in losses was, unfortunately, achieved almost exclusively by raising
these premiums, basically by making insurance more expensive, rather than by normal
means, such as increasing the number of the insured, new policies getting
signed, increasing the percentage of insured people out of the total potential
pool of insurance customers. In addition, a lot of people who had insurance had
the benefit of a bonus system in 2014 if they had no accidents for two straight
years, or three, or four. So, in
fact, the increase in the prices felt by the population, for those who did not get the benefit of
this bonus, actually stood at 20, 25 and even 30%, meaning significantly higher
prices, which hit quite hard the
purchasing power of regular people and of companies."
The Romanian insurance market features a number of major
international insurers such as Allianz, Generali, Gothaer, Grawe, Groupama, NN,
Uniqa, and Vienna Insurance Group.