Nicoleta RADU-NEACSU, General Manager, PAID Romania
Nicoleta RADU-NEACSU: This is a sensitive topic that we pay a lot of attention to. At present our situation is worrisome. In Romania the degree of penetration of the compulsory real estate insurance is not very high, although we started our activity 5 years ago. This penetration degree is currently almost 18%. Obviously, this is not what we wanted and targetted. Several factors need to be taken into consideration. First, our insurance Pool is a young one as the population hasn't become sufficiently aware of the importance of this type of insurance yet. It is our responsibility that we have totally taken on to inform on its usefulness and the fact that people can be benefit from this type of insurance at some point.
Second, one shouldn't forget the fact that the law that made PAID existence possible has undergone multiple changes over time, which have troubled the insurance market and the citizens' perception of this type of insurance. Not lastly, I think this type of insurance, being compulsory, needs to be somehow imposed more directly on the population. I would say at present people are not aware that this is an obligatory insurance product. These would be mainly the causes I consider important for which the penetration degree hasn't grown too much until now.
XPRIMM: Is there a significant difference in the coverage degree in the urban versus rural areas? If so, how do you explain this?
N.R.N.: Generally, in all the areas with an educated population the penetration degree is higher, so in urban areas there is quite a high penetration degree. Also, in the areas that are very well developed economically the penetration degree is higher. I would exemplify with the counties that are doing very well in this respect. Bucharest is top of the list, with an insurance degree of over 36%, then Timis, Brasov, Prahova and Constanta counties. These are the most developed counties in Romania and I believe there is a strong connection with the economic development in these geographic areas.At the opposite extreme, in thecounties less developed economically, where the penetration degree is lower, respectively Teleorman, Vaslui and Botosani, the penetration degree is under 10%. I think there is a direct connection between the degree of information and economic development, on the one hand, and the way the population perceives the importance of this type of insurance, on the other hand.
XPRIMM: How do you estimate the government intervention for aiding those struck by disasters, within the context of the compulsory insurance law?
N.R.N.: From a human point of view, each authority faced with a disaster happening in the city or area they are responsible for feels obliged to take action irrespective of the local situation. No mayor can ask his or her citizens being flooded by water up to the roof level if they have insurance. They are obliged to offer people the first aids in case of an emergency. Obviously, the compulsory insurance would allow citizens the chance to make a fresh start and a more consistent one, to rebuild their house and to restore their household, which means much more than receiving emergency aids that authorities must provide.
Unfortunately, the sanctions stipulated by our law in case of being uninsured arealso applied by the mayor and the local authorities. We believe this sanctioning procedure must be modified. Furthermore, more important than the application of sanctions is the information of citizens, and this is where our role starts. We must reach out all the Romanian population to inform them on the importance and the benefits of this type of insurance as well as on the fact that it can help one hope, in extremely difficult moments, for an easier fresh start. It seems very important to me that citizens don't have to beg for help from the state every time. We can do something ourselves in the moments in which we maysuffer.
XPRIMM: Could the prices or the difficulty of accessing an insurer be the reasons for the low penetration level in the rural areas?
N.R.N.: The price is not prohibitive; on the contrary, it is a social one. The law has been conceived on principles based on the ease of spreading this type of insurance throughout the country so that the price that has been set is very low from our point of view. Obviously, the current price does not cover the reinsurance level we need to purchase in order to be able to insure the citizens so that in case of a natural catastrophe we can compensate them. I think anyone can spare 10 or 20 euros per year. I also believe this is rather a matter of attitude and education; the citizens are not informed enough about the importance of this type of insurance.
XPRIMM: Speaking of information, quite little is known on the damages you have already paid. Would you mind providing a more detailed account of this?
N.R.N.: At least in 2014 PAID went through a testing period. It has been the most complicated year since the beginning of our activity, in which we faced a series of floodings causing over 900 damage claims as well as an earthquake which, although of small magnitude, brought us over 1,000 damage claims. As a result of these catastrophes or from different causes, there were almost 300 damage claims for landslides. These phenomena are real in Romania.
Over the year 2014 we paid RON 2,200,000 for damage caused by floodings and RON 773,000 for damage caused by landslides. Moreover, we paid almost RON 500,000 until the present as a result of the earthquake. This shows citizens were affected, there was total damage reported, and we had a lot of files for which the maximum compensation for the insured sum, EUR 20,000, was granted, especially in case of the landslides and the floodings. So we function and provide compensation even if the earthquake magnitude is at most 7 or other catastropes are not at apocalyptic levels. Currently there is a lot going on at PAID concerning these damage claims. We constantly have a high volume of damage claims to manage.
XPRIMM: In the event of a catastrophe happening, what is PAID exposure on the policies concluded?
N.R.N.: In this moment PAID exposure is very high, it is about EUR 29 billion, although exposure is not the most relevant. The maximum damage possible at present for Romania is somewhere around EUR 450 million. We are now reinsured through a reinsurance program of EUR 450 million.
XPRIMM: What plans do you have after July 15, when the reinsurance program is renewed?
N.R.N.: Our reinsurance program is renewed on July 15. We are going to purchase another EUR 500,000. Moreover, we intend to increase our own retention to minimum EUR 3 million. We currently have retention of EUR 1 million plus an "annual aggregate deductible" for the first event. It is noteworthy that we aim at growing our own retention to minimum EUR 3 million this year, which means we'll pay from our own pocket up to at least EUR 3 million in compensation in case of a disaster.
XPRIMM: How do you see the evolution of the penetration degree over the next years? What objectives have you set in this respect?
N.R.N.: We did the math with a view to implement the Solvency II directive and estimated a 60% growth for the next 10 years. This is an optimistic percentage, but I think it is possible to reach it to the extent we successfully implement the measure we set out to.
XPRIMM: What happens from the point of view of damage instrumentation in case of a catastrophe?
N.R.N.: One of the projects we care a lot about, along with the population awareness-raising campaign, is this implementation of a new intervention plan in case of an extended catastrophe.We came up with the idea of this project from the fact that we are, by law, a center coordinating the damage certification and assessment in case of an extended catastrophe. This plan follows that all damage be unitarily instrumented by all the insurance companies and a common communication plan be used along with a common IT platform in which to instrument these damage claims. Thus, we are aiming at having the same approach on the whole market, as well as common procedures to discuss and agree upon with ASF because it is very complicated to cope with a high number of claims separately.
XPRIMM: What are the main three objectives you have set for this year and for the next one?
N.R.N.: In the order of priorities I would consider that the implementation of the extended catastrophe plan is the most important point for our company. Second, there is the awareness-raising campaign and last but not least, switching to Solvency II.