European Commission: The price cap of MTPL premiums in ROMANIA is not in line with EU law

23 February 2017 — Vlad BOLDIJAR
The European Commission pointed out in the most recent Country Report that the Romanian Government decision regarding the maximum tariffs for the mandatory car insurance premiums (MTPL) is not in line with the EU legislation, including the provisions of the Solvency II Directive.

"This intervention in the price setting of insurance premiums in the absence of a general system of price control does not appear to be in line with EU law, in particular with the provisions of the Solvency II directive", as the European Commission stated in the report.

At the same time, "the measure is also likely to aggravate current distortions and put further pressure, in the short term, on the profit generation capacity of insurers".

Last year, the Romanian Government decided to introduce maximum tarrifs for MTPL policies. The tarrifs were calculated by the Financial Supervisory Authority (ASF) and take into account on the engine capacity, the car type and owner's age. These maximum prices (which became effective on 17 November 2016) are applied for a period of six months, as the Government decided.

"The cap on insurance premiums, which became effective on 17 November 2016, was triggered by the increase in these premiums inter alia due to measures taken to address shortcomings identified during the 2015 balance sheet review and stress test. The government argues that the increase is the corollary of a distortion in competition as two main insures exited the market and passed an emergency ordinance to cap the insurance premiums for 6 months. The maximum caps on the premiums were calibrated by the Financial Supervisory Authority and adopted by government decision in November 2016".

At the same time, the European Commission states that the initiative of the Chamber of Deputies where were proposed changes to the legal framework of ASF, breaks the rules of international best practice.

"The Chamber of Deputies initiated a proposal to amend the legal framework of the Financial Supervisory Authority. The proposal includes new provisions on revoking the mandate of the Authority's board members, which is not in line with international good practices and have implications for supervisory independence. In addition, Parliament launched the procedure to revoke the mandate of the President (Misu NEGRITOIU) of the Financial Supervisory Authority following measures taken after the 2015 balance sheet review and stress test of the insurance sector to address shortcomings related to compulsory car insurance. This is an indication of political pressure brought in response to supervisory actions and limits the independence of supervisors".

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