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XPRIMM News No. 172, February 10th, 2011


XPRIMM News - The Romanian Insurance Market Newsletter
No. 172, February 10th, 2011

If fines have been delayed, why should I insure my house?

After long delays and, finally, the introduction of mandatory household insurance, the authorities come up with two important changes for this year: the applying of the fine is postponed until July 15th, 2011, and those who have bought voluntary insurance do not have to also buy the mandatory policy.

The result? The rate of mandatory insurance underwritings has decreased from 10,000 policies a day to 1,000, and the sale of voluntary insurance is practically blocked. Companies have used the mandatory requirement as a lauching ramp for selling voluntary policies but, at present, we face a situation somewhat similar to that existing before July last year - a little over 15% of homes are insured nationwide (voluntarily). Most people say they buy such a policy only if there is a fine, if the bank is forcing them or as a result of damage.

Certainly, the number of people aware of the need for household insurance has increased year by year, but the increased number of unemployed and the decrease of incomes, under the circumstances of the economic crisis, are negatively affecting their affordability to buy insurance. If we add to this the fact that, for now, no one is making us pay fines, we ask ourselves the question: "Why should I insure my house?".

It would be pretty naive to imagine that the over 5 million homeowners that have not insured their house will rush in the next six months to buy voluntary household insurance.

After all, judging by the questions coming from the population, but also by the press voice, the fine is the main incentive for buying such a policy, rather than protecting the house and the property gained through a lifetime work. But what will happen if we face flooding or landslides this spring again? Who do we ask for compensation if we have flooded our neighbour or if our goods have been stolen from our house?

Both mandatory and voluntary insurance are available, cheap and useful solutions for protecting the households, against the risks faced by them. So, do we expect until we are threatened with a fine to buy insurance or do we voluntarily buy insurance, so that we will not "fine" ourselves afterwards?,

Optimism in the 2011 reviews for ALICO Asigurari Romania, to the benefit of its clients. An interview with:

General Manager, ALICO Asigurari Romania
Theodor ALEXANDRESCUXPRIMM: How do you assess 2010, considering the results of ALICO Asigurari Romania?
2010 was a good year for ALICO Asigurari Romania, a year of growth, in one word: profitable. The growth was sustained by the projects launched in 2009, when we extended the distribution lines and the types of products. The results were visible last year and they will be so in 2011, too.

XPRIMM: What are the 2011 perspectives for the life insurance segment?
T. A.:
2011 is marked by optimism, the development of this year being based on increasing the professionalism in the life insurance industry. Also, the implementation of Solvency II will provide better corporative governance for the insurance companies. The project is a legislative initiative and the insurance companies will adapt their practices to the good operating conditions provided by this directive. This program will also make the companies more transparent, more financially solid and the protection provided for the insured will improve.
Other implemented programs with a similar goal are the norm issued by the Insurance Supervisory Commission, related to the activity of insurance brokers, and the norm for agents' licensing.


csa_logo_120ISC: The Romanian insurance market is stable
The Romanian insurance companies are not dealing with serious problems - this is the result of the insurers activity and financial situations monitoring, based on their reports, announced ISC. Despite the decline of the gross written premiums, the insurers managed to maintain the technical reserves at a similar level to the one in 2009 and have the liquidity to meet their obligations towards the insured.

cristian_constantinescu6UNSAR: The optimistic scenario for 2011 is a 5% decrease of business
"The evolution of the MTPL market, where the number of policies for the whole year will register a reduction, over which a 20% decrease of tarrifs is overlapsed, will have a negative impact on the total volume of underwritings at the end of the year. Thus, my optimistic scenario is a 5% reduction of the insurers' business", said Cristian CONSTANTINESCU, President of UNSAR, during the 2011 edition of XPRIMM Annual Forecast Meeting.
"We are talking of a market that has been losing for six years, and is losing more and more - we are talking about hundreds of million EUR capital contribution in the last three years, in 2009 alone the contribution having been EUR 330 million worth. It seems that, for shareholders of companies present in Romania, money is neither few, nor too expensive. In 2011 we should see, in my opinion, some companies going out of the market - and not necessarily some that do not matter so much in terms of market share", warned Cristian CONSTANTINESCU.

radu_mustatea7ASTRA Asigurari: 2011, the toughest year for the insurance market
2011 will be the most difficult year for the Romanian insurance market, believes Radu MUSTATEA, President of the Board, ASTRA Asigurari: "Due to the crisis, I believe that in 2011 we will have a double digit decline of the Romanian insurance market, amid a significant decrease of the motor market. To this, massive reductions of MTPL and Motor Hull tarrifs (as insurance companies want to maintain customers this way), as well as increased frequency of claims ratio and of average claim are added".
According to ASTRA leader, these things will have a negative effect, firstly upon insurance companies, and then upon the market.

rangam_bir1ALLIANZ-TIRIAC: Pricing policies will have a major influence on the stability of the profile industry
"I noticed a drastic change in the past year regarding the motor segment. The MTPL segment will remain a key market in 2011, too, and this dominance will continue to put pressure on the overall insurance market. Given that car sales will continue to decrease, the Motor Hull segment will not register an evolution, either. On the contrary, prices will fall, the market structure will change and pricing policies will have a major influence on the stability of the profile industry", said Rangam BIR, General Manager of ALLIANZ-TIRIAC Asigurari.
"Realistically speaking, I expect for 2011 a decrease of 5% of the entire market, the optimistic scenario being to maintain at the 2010 level. A double-digit reduction is unlikely, it would mean a lowering down to the 2006 level and I do not expect the market to follow such a strong downward trend", added the leader of ALLIANZ-TIRIAC.

florina_vizinteanu_4BCR Life: The benefit of these years of crisis is customer quality. Life insurance can not end 2011 in the red
"This year, we expect a 4% increase for the market, but there are certain parameters that may come as pluses or minuses. We have new players on the market, companies have adapted to new conditions, they have improved and, after an increasing year 2010, there is no way we will witness a decline in 2011, given that last year brought a major improvement of the surrenders ratio, a re-enactment of the clients contracts and, therefore, an awareness of the need for protection and saving. So, the only benefit of these years of crisis is increased quality of life insurance customer", said Florina VIZINTEANU, President of the Board, BCR Asigurari de Viata.

ING Asigurari de Viata: In 2010, the life insurance market stagnated and for 2011 we expect a marginal increase
"2010 has started well and ended... not so well. After the first nine months, the life insurance market recorded a 3% increase, but the economic adjustment measures taken by the Government had a negative effect upon the market in the last part of the year. Therefore, we expect a stagnation of the life insurance segment results in 2010", said Adrian LUPESCU, Chief Insurance Risk Officer, ING Asigurari de Viata, during the XPRIMM Annual Forecast Meeting 2011.
Brokers are pessimistic regarding the insurance market's evolution
"I am pessimistic regarding the Romanian insurance market. There are multiple causes for such: Romania is being perceived as a country with high political risk, the legislation is contradictory, thus confusing, and the economical background is precarious. Thus, there is low credibility regarding Romania and the insurance market does not have the possibility to register growth again", stated Alexandru APOSTOL, General Manager, MAXYGO.
AXA Life Insurance: In 2010, people have understood better the risks and risk tolerance. In 2011, protection and guarantees products will dominate
"In 2010, we had a confirmation of the stabilization of the surrender ratio and of re-enactment of life insurance policies. People have better understood the risks and risk tolerance, which is the only advantage of the financial crisis", pointed out Violeta CIUREL, President of AXA Life Insurance, the most recent player on the profile market.
Health insurance: Business growth... starting 2012
2010 was not one of the top years for health insurance. Stagnation is also predicted for 2011 and business increase is expected only in 2012. "The health insurance market was placed at least 15 percentage points below the 2009 one. In 2011, I expect it to stagnate, presuming that increases will start next year", considers Carmen RADU, Deputy General Manager of the leading company in this market segment.
EUROINS: 2011 will bring a 10 to 15 percent drop on the insurance market; however, the property segment will register a double digit growth
"Unfortunately, the motor market is highly affected, both by the effects of the crisis, as well as by the dramatic reduction of tariffs. I do not think the motor market will normalize in 2011, on the contrary, I expect a fierce competition between companies, which will lead to a drastic drop in prices, which will have a devastating effect on the overall market", says Iulius Alin BUCSA, President, EUROINS.
CREDIT EUROPE Asigurari: People believe that a voluntary household insurance policy should cost EUR 20
"The degree of insurance penetration in GDP and insurance density are some very important indicators and, in our country, their values are continuously decreasing, having the lowest level in Central and Eastern Europe. In these circumstances, insurers must collaborate for the popularization of the concept of insurance among Romanians and to exploit the non-motor segments, mainly household and health insurance", stated Radu MANOLIU, Deputy General Manager, CREDIT EUROPE Asigurari.
UNIQA Asigurari: Decrease for the insurance market, but optimistic perspectives for the economy
"In 6-10 months, investments will be resumed. In recent years, investments have decreased by 75%, but they will return and they will generate jobs and wealth for the population", said Oliviu STOICA, President, UNIQA Asigurari.
2010 has been a good year for GENERALI on the life segment
2010 was a good year in the activity of GENERALI Asigurari on the life insurance segment: "The most important things were to maintain and to consolidate the portfolio and to reduce the surrenders rates", stated Ovidiu RACOVEANU, Life Insurance Manager, GENERALI Asigurari.
EUREKO: Financial plans for children will be the "stars" of 2011
"If we refer only to life insurance, we estimate a decrease of 6%-8% in real terms, the measures taken by the Government and increasing unemployment rate being felt at the level of our portfolio, too. Also, the fact that we have given up the non-life classes has had a major impact on the distribution force, which had to be readjusted and strengthened to sell and provide consulting services on health and life insurance", said Carmen RADU, Deputy Manager, EUREKO Romania.
GENERALI Asigurari: For each two PAD (mandatory household insurance) policies, a voluntary one is sold
GENERALI Asigurari sold approximately 60.000 mandatory household insurance premiums since the launching of the campaign, in July previous year, and "for every two sold mandatory premiums, we also sold a voluntary one", specified Razvan POPESCU, Head of General Insurance Service, GENERALI Asigurari, during "Ora de Risc" ("Risk Hour") radio show, broadcast on February the 1st on Radio RFI Romania.
MARSH is identifying the 10 major evolution trends of the local insurance market in 2011
The broker MARSH Romania has analyzed the insurance market perspectives and has identified 10 major evolution trends for the current year. Although they had also manifested in 2010, it is very likely that they continue their evolution in 2011, given current market conditions, said MARSH specialists.
BCR and BCR Asigurari VIG are offering MTPL with rate payment and with 0% interest
Owners of BCR cards will be able to purchase in six equal rates and with 0% interest an MTPL policy from BCR Asigurari. The policy is valid for one year and the clients must pay its value with their BCR credit cards at the POSs installed in the BCR Asigurari agencies and working points.
MAXYGO: Hostile economic environment makes it harder for life insurance to develop
"Politics and economics greatly influence the evolution of the life insurance market. Confused legislation and hostile economic environment can not generate growth. As long as unemployment increases and population incomes decrease, clients are not eligible to buy such products, although they would like and they understand their usefulness", said Alexandru APOSTOL, General Manager, MAXYGO.
Insurance companies, among the main job providers in 2011, too
Insurance market remains, in 2011 too, on the third position in the top of workforce recruitment, according to the recruitment site Thus, in the first three weeks of January, insurance companies have made 350 jobs available to those interested. Sales sector is leading the top, by far, with 700 job vacancies, of the nearly 22,000 positions announced by employers since the beginning of the year, followed by IT&C, with 550 vacancies.
eastern_re_150EASTERN Re is developing its international business
Reinsurance company EASTERN Re, one of the profile market leaders in Russia and CIS, underwrote in the previous year a premium volume worth EUR 23.4 million, 61% coming from reinsurance business. A 39% was made from direct insurance as a result of the merger between EASTERN Re and MEGAPOLIS insurance company, in June of 2010.

alma-ataRisk Management Conference in Kazakhstan - at the VIIth Edition
The seventh edition of the Risk Management International Conference has already become a tradition for the insurance and reinsurance leaders in Central Asia, CIS countries and Central and Eastern Europe and will take place during April the 14th and April the 15th, 2011, in Alma-Ata. For over six years, PRIMM Insurance & Pensions Magazine has been supporting the event as Media Partner.

generali4GENERALI might invest in a bank in Russia
The Italian group GENERALI is analyzing the possibility to participate in the capital of the state bank VTB from Russia, according to France Presse. The participation implies the acquisition of shares worth USD 300 million, which is approximately 1% of the bank's capital.
This action comes amid VTB starting, as part of its privatization strategy, of a campaign for searching potential investors, in Europe and in the United States, for selling 10% of its shares.

Russian insurers have increased their capital by 4%
The capitalization level of the Russian insurance companies has increased by 4%, in comparison with the previous year, up to EUR 3.9 billion, according to the data published by the supervisory authority.
Serbia: DUNAV Osiguranje sold a part of the shares it held in KOMECIJALNA Banka
DUNAV Osiguranje, the biggest insurance company in Serbia, sold to ERSTE Bank, in mid-January, 1% of the shares it owned in KOMECIJALNA Banka.
PM BOC: Taxes remain unchanged into 2012
The "hard part" is already behind, this is what Emil BOC told Romanians Monday evening, on the 7th of February 2011, after the negotiations with IMF team. In what might be regarded as a thank-you message to the public, who "understood the need for the spending cut effort" in 2009 and 2010, the PM assured Romanians their future is no longer under the threat of economic collapse.
Trade deficit down 5 pc in 2010
The trade deficit slumped by almost 5 percent last year, at RON 39.8 billion, as exports rose at a faster pace than imports, according to data released on the 9th of February, 2011, by the National Institute of statistics (INS). Thus, the trade deficit continued its falling trend, which started in 2009, as the impact of the international economic crisis started to be felt in Romania.
Premier BOC to coordinate EU funds absorption
The Authority for the Coordination of Structural Instruments (ACIS) will be placed under the Finance Ministry's subordination and the Prime Minister's direct coordination in order to monitor the absorption of European funds, PM Emil BOC announced on the 9th of February, 2011. During the Government meeting, the PM asked for the procedures entailed by this transfer to be quickly finalized.
Over EUR 2 million for organising tourist promotion events
As part of the project for promoting Romania through the new identity defined by the national tourist brand, the Ministry of Regional Development and Tourism (MDRT) initiated the acquisition procedure of services aimed at organising the events for the promotion and development of tourist products and destinations in the country and abroad, in 2011.
SMEs, key to successful economic growth
"The state should find solutions to curb red tape and controls to foster business", BNR Governor Mugur ISARESCU says.
Employers suggest dozens of economic recovery measures
Businessmen met on January 29th - 30th the Head of the Cabinet in a move to finding solutions to the economic downturn. Emil BOC promises lower tax on labour.

President: Sergiu COSTACHE CEO: Adriana PANCIU
Business Development Director: Alexandru D. CIUNCAN

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