The Romanian Insurance Market

the romanian insurance market '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 The authority had withdrawn Astra's  license in late August, after the company's recovery plan failed.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 coefficients."


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.



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Publicat: 2015-10-13 13:39:00
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