Romania and Turkey: Current models of the compulsory home insurance system

22 June 2015 — Alexandru CIUNCAN
17.25% of all Romanian dwellings are insured as of May 31, 2015 out of a total of 8.8 million, Mrs. Nicoleta RADU-NEASCU, CEO of PAID, Romania has stated during the IIF - Property Insurance in a Stormy Era Conference.

The main reason for this level of penetration is the absences of penalties for those that do not obey the legislative framework - especially outside of large settlements. 75% of the total number of policies are covering residential buildings located in cities, with rural areas gathering only 25% of all policies. Premiums are EUR 20 or EUR 10, depending of the building type.

As for the steps to be taken for the future, the main elements that are being taken into consideration are the proposal for redesigning the actual legal framework, a national advertising campaign for raising awareness and the usage of alternatives sales channels.

According to PAID's CEO, the long term goals of the company are the development of the contingency plan for the entire insurance market in respect of Cat risks on residential property, the adjustment of the mandatory insurance premium based on actuarial calculations/ imposing a deductible, the development of alternative distribution channels and of a nationwide households database, assigning a unique identification

code for each dwelling. PAID - The Romanian Natural Disaster Insurance Pool is an insurance company founded in November 2009 with private capital through the joint efforts of 12 Member companies / Shareholders, at the initiative of the World Bank and of the Romanian Government.

Turkey is another country that decided to implement a mandatory catastrophe insurance pool - the TCIP, after one huge earthquake in 1999 that brought the country economic losses to more than USD 10 billion and insured losses to around USD 800.

The TCIP has now reached a penetration of some 40%, according to Mrs. Menekse UCAROGLU, CEO, IUC Group of Turkey with clients paying an average annual premium of less than 40 EUR.

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