XPRIMM News No. 150, February 25th, 2010

MTPL became more expensive, but remains much cheaper than in EU

Information circulated by the media lately is talking about alarming increases of the MTPL tariffs.

Allegations relate to the fact that this increase is unjustified and that buying the MTPL policy should remain at the decision of the driver, without being imposed by the law.

Still, what is the truth?

Firstly, let's consider the following scenario:

Ion POPESCU, pensioner, owner of a DACIA 1300 car from 1979, considers that his driving experience is enough to save him from the unpleasant events in traffic and decides not to renew its MTPL policy, thus saving some of the pension's money.

One rainy day, on the streets between the blocks, Mr. POPESCU does not correctly estimate the speed of an AUDI A8 from 2009 and does not give priority, engaging in a left turn. Following this incident, AUDI hits the DACIA, that bounces in a PEUGEOT 407 parked regularly. In this case, Mr. POPESCU is guilty for the whole accident.

Now, what are the chances that Mr. POPESCU can pay the claims caused by his lack of attention and what will happen once he is sued?

The guilty part is undoubtedly in a delicate situation and the role of an MTPL policy is quite obvious.

Regarding the rising prices, although we pay a more expensive MTPL, Romania has, at this point, the lowest price in the EU for this type of insurance. More precisely, if in Germany the average price for MTPL is around EUR 1,000, in Romania its value does not exceed EUR 90. Even the Bulgarian neighbors, which we often compare with, as standard of living, pay about EUR 170/year for this product.

Besides this aspect, it is a fact that in recent years the Romanians began to travel more abroad with their personal cars, and since 2007, by signing any MTPL policy, a car owner also buys the Green card policy.

Also, the frequency of cases in which it is required to cover body injuries based on the MTPL policy is increasingly higher, values being much higher than in the case of material damage, and profile companies estimate that the evolution of this segment will be a quick one.

In this context, the CNA - Motor Insurance National Conference will be the framework in which specialists in the filed will discuss the guidelines for development and optimal solutions to face an adverse economic period, but also directions for making the profile market more profitable. The event will take place on March 4th this year, at the Parliament Palace.

by mihaela.circu@mxp.ro

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Interview with Bogdan ANDRIESCU,
President,
UNSICAR

XPRIMM: Which do you think will be the main trends of evolution of the brokerage market, in 2010, in the current economic context?
Bogdan ANDRIESCU: The perspectives of the brokerage market are, in my point of view, extremely positive. Taking into account the evolution in 2009, when the brokerage market registered an increase, both in volume and as a share of insurance premiums, I consider that we will also register a growth in 2010. Although it will be a small one, not spectacular, it will have a special significance: most clients already trust brokers and, to an increasingly large extent, the others are also orienting to the counceling of brokers.
Customers who collaborate with brokers for years have already seen the benefits of working with them. In addition, they can compare products, especially on the retail segment, considered to be the "queen of the market" for several years.
On the other hand, I wish there were more brokers specialized in different areas, e.g. car brokers, who can compare the offers and explain all the advantages and disadvantages. They should have a high purchasing power, being able to negotiate advantageous prices.

XPRIMM: When referring to the economic changes following the crisis, what impact did they have on the insurance brokerage market? Were declines felt in the area of individual customers or in the corporate area?
B.A.: There were registered premiums decreases, in absolute value. Thus, primarily because of the crisis, insurance and reinsurance companies have operated price cuts, amid increasing competition. On the other hand, the underwritings have also diminished to some extent, especially on the corporate segment. Instead, we observed a tendency of owners to become more careful with their belongings and to protect them through insurance.
Also, some insurance owners have renegotiated contracts, in order to optimize both risks and costs.
For example, we found a drastic reduction in the lines of insurance for employees, "employee benefits" type.
Meanwhile, the insured have no longer oriented their choices only by the price criterion, but have also become extremely careful with the insurance company, analyzing how it could have been influenced by the crisis.
We can say that this economic period represents a time of triage, both of agents and of brokers, by the criterion of competence, and that is only to the market’s advantage.

XPRIMM: Referring to the professionalization of brokers, at this moment there are some normative acts in work that will regulate this area. What are the effects they will have on the market?
B.A.: I think 2010 will be the year of the start of professionalization of brokers, and not only, but also of the insurance agents and of the insurance market in general. So far, we have made efforts, in various directions, to professionalize the staff, those working in the insurance area, through courses, events, seminars. Thus, we tried, as much as possible, to compensate for the absence of such a continuous professionalization, which aims to complete the picture of the insurance system in Romania, with beneficial effects only.
For starters, in a first stage, the broker will get a license, then the continuous training will follow, consisting of a minimum number of hours that it will go through, in an annual professional training form.
Anyway, it is only natural to happen like this; more than that, there will be brought clarifications regarding the status of liquidators, of the loss adjusters, because they basically have a different segment of professional training than brokering. Basically, there are two different jobs, and training will therefore be different.

XPRIMM: What are the actions that UNSICAR has undertaken recently to enhance the degree of professional training in insurance?
B. A.: The UNSICAR publishing house, newly appeared, is part of this area of professional training, but especially of that of the general public information. We intended to cover, as much as possible, a number of “empty spots” in this area, and to publish books that both the insurance market and the related industries need. The first work is the most updated version of the "Dictionary of Insurance", published in Great Britain, at Financial Times Prentice Hall. A second book comes to meet, in particular, the insurance specialists and those in state institutions that are involved in determining guilt in accidents. The work includes a series of causes, together with the way of addressing them in Germany, translated by Sorin GRECEANU and Mihai WEBER. This book is also very useful to all drivers who travel in Romania and, especially, in Europe.

XPRIMM: What message do you have for the industry and what objectives have you set for this mandate, as President of UNSICAR? Are we talking about a new beginning or about a continuation?
B.A.: Naturally, the activity as President of UNSICAR is a continuation of what we achieved in the past years, but you should not overlook the fact that we are in a time of change. Thus, the IMD will change (editor’s note: Insurance Mediation Directive, which governs the activitiy of insurance brokers), and changes will be minor. In this sense, there must be done a major lobbying activity.
Meanwhile, the main event of the year will be the 10th anniversary of the founding of UNSICAR, moment which will be marked by an event at the end of 2010. We will also try to reposition ourselves in front of brokers members, our goal being to raise the quality standards of those who join this professional union.
We intend to encourage small companies. Brokering is an advantage of professionalization, of the man who wants to learn, who knows his profession, and from these small businesses, with a lot of patience and a lot of daring, one can reach a relatively large volume of business, enough to provide outstanding personal satisfaction.

XPRIMM: Thank you!

by andreea.state@mxp.ro

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Bogdan ANDRIESCU,
President,
UNSICAR

ISC changes the MTPL game
Claims to be paid to drivers based on the MTPL insurance will no longer be calculated by insurers based on their own assessment, but according to prices established by body shops, or provided in specialty catalogs. This measure will allow the damaged parts to seek payment of claims first and then to make the necessary repairs. Modifications to the ISC Rule related to the MTPL insurance were published on February 24 in the Official Gazette.
Click here to read more!
by andreea.ionete@mxp.ro, 25.02.2010

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Romanians, more optimistic about their economic situation
After a year marked by pessimism due to the financial crisis, Romanians consider the financial situation of their households has improved in December, a survey carried by GfK Romania showed.
The index measuring changes in personal finance during the last year has increased, with 57% of the respondents indicating a worsening of their financial situation compared to 61% in September-November.
30% of the respondents to the survey anticipate a deterioration in their personal finance over the next 12 months, versus 26% a year earlier.
More than three quarters of the respondents believe the economy has weakened markedly over the past 12 months, while 20% predict the country’s general economic condition will strengthen over the next year, versus 26% a year earlier.
by wall-street.ro, 15.02.2010

Fitch revises BCR, BRD, UNICREDIT and Banca Romaneasca's outlook to stable
Financial rating agency FITCH has today revised BCR, BRD, UNICREDIT and Banca Romaneasca's outlooks to stable from negative, following the agency's sovereign rating action on Romania. The ratings of the four Romanian banks reflect the institutional support from their parent companies and are limited by the Romania's "BBB" country ceiling.
"The long-term issuer default rating and Support ratings of the following four Romanian banks are driven by institutional support from their respective foreign parents and are constrained by Romania's country ceiling of "BBB"".
Long-term foreign currency IDR: FITCH affirmed Banca Comerciala's long-term foreign and local currency loan ratings at "BBB" as well as the bank's short-term foreign currency loan ratings at "F3". The agency affirmed the bank's individual rating at "D" and support rating at "2".
For the other three banks, FITCH confirmed their long-term foreign currency loan ratings at "BBB" and revised outlook to "stable". The agency affirmed their short-term foreign currency loan ratings to "F3" and support rating at "2".
For UNICREDIT and Banca Romaneasca, the rating agency affirmed their individual rating at "D".
by wall-street.ro, 16.02.2010

Romanian M&A reaches EUR 1 billion
Romanian M&A market reached EUR 1.045 billion last year, while 80 deals worth over EUR 1 million were shelved, according to a CAPITAL Partners report. As CAPITAL Partners has been keeping track of mergers and acquisitions for one year only, the report doesn't indicate the decline rate in the deal activity. However, a THOMSON REUTERS research indicates that 86 deals were completed last year in Romania, worth USD 2.1 billion (EUR 1.45 billion).
RAIFFEISEN Investment pointed to EUR 5.3 billion of mergers and acquisitions in Romania in 2008, 20% decline from a year earlier.
"The market is visibly climbing out of the frozen mode since December 2009, in terms of buyers' and sellers' interest in engaging in a deal. But it will take long before it actually reflects in the deal activity: I expect the market to recover slowly in 2010, and I hope to break even at least this year", said Doru LIONACHESCU, Partner of CAPITAL Partners private equity investment firm.
Investors and financiers have clearly changed their approach to the emerging market M&A which should contribute to the recovery of the local market, LIONACHESCU continued.
The investment banker said he expects a poor deal activity in the first quarter. “The first quarter of a year is usually the period when terms are negotiated, and only in the second half the deal is actually executed.
The biggest deals in the Romanian market have been the EUR 250-300 million acquisition of AB InBev brewer by CVC PE investment fund that included local operations, the acquisition of private clinic operator MEDLIFE by SOCIETE GENERALE Asset Management and of PROFI retailer by ENTERPRISE Investors.
Other two large deals announced last year have been the takeover of minority interests of Fondul Proprietatea and ELECTRICA in CEZ Distributie and CEZ Vanzare by Czech-based CEZ and the EUR 270 million acquisition of ZAPP mobile carrier by COSMOTE.
by wall-street.ro, 11.02.2010

Romania's economy shrinks 1.5% in Q4 over Q3, fails to escape recession
Romania's gross domestic product (GDP) compressed 1.5 percent in the last quarter of 2009 versus the previous trimester, while on the entire year, the economy reduced 7.2 percent over 2008, preliminary data published by the National Statistics Institute (INS) show.
Thus, Romania failed to escape recession for the sixth trimester in a row, despite estimates.
The analysts polled by NewsIn anticipated Romania's economy stepped out of recession in the fourth quarter of 2009, with an advance of 0.1 – 0.6 percent on the previous trimester, sustained by the industry's recovery, as constructions continue to have a negative contribution.
The economists expected a 7 percent economic contraction for the entire year, NewsIn states.
Compared to the same period in 2008, the economy reduced 6.6 percent in the fourth quarter; while on the whole, it stood 7.2 percent below the level of 2008.
The Vice governor of Romania's Central Bank (BNR), Cristian POPA, said on February 5 that Romania could report the first economic increase on the previous quarter in the first three months of the year.
Moreover, the head of the International Monetary Fund (IMF) mission in Romania, Jeffrey FRANKS, said Romania's economy could resume growth in the first trimester of 2010 and will advance about 1.3 percent during the whole year.
by wall-street.ro, 18.02.2010

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THE EDITORIAL STAFF:

President: Sergiu COSTACHE CEO: Adriana PANCIU
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Editor in Chief: Mihaela CIRCU
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