THE LONG, HOT SUMMER OF PRIVATE PENSIONS

I have never received so many questions or so many requests of recommendations as I did over the past two months with regard to Private Pensions.
Who is "more trustworthy"? Can I join in? Will the system be functional? How safe is it? Are hopes going to be shattered, just like it happened before?

The weather forecasts show already a dry summer this year but, for the New Pension System, I already have four signs that it will be even more than that.

FIRST - three of my neighbours, with whom I barely exchanged two words in the past five years, stopped me just the other day, one by one, and asked me to "reveal" the Big Mystery of the Three Pillars. They kind of heard I was into some pensions and insurance magazine.

SECOND - for the first time, after 10 years of working in this field, a few friends, former classmates, asked me about what I was doing: how safe is the New Pension System and what fund should they choose. They read on 1asig.ro that I organized a Conference on this topic.

THIRD - TV channels broadcast, as never before, ingenious or just accurate ads, but obsessive in their frequency, of life insurance companies that are going to administer private pension funds, while newspapers put on their first page, in capital letters, news about the first contribution for Pillar III.

FOURTH - although conferences on private pensions follow one another in rhythms of south-american dances, they still have not managed either to talk out the topic, or to bore the audience that becomes ever more numerous.

Conclusion? With all due respect for insurance, we shall experience the "Long, Hot Summer of Private Pensions". The battle for the 2% is on!

by sergiu.costache@mxp.ro

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Interview with Mrs. Mircea OANCEA,
President,
The Private Pension System Supervisory Commission

XPRIMM: Mr. Chairman, we suggest to start with a recap: what is left to be done, from the legal point of view, in order to have a fully functional pension system?
Mircea OANCEA: As far as the first stage is concerned, in other words full authorisation of operators, of schemes and private pension funds, both voluntary and mandatory, the system is completely functional from the legal point of view. Operating ground rules have been already drafted for these entities.
On the other hand, the legislation will never be complete. It will always be perfected, based on market developments, on issues raised by operators or by us, as a supervisory commission. Most certainly, practice will have a say in all this.
Some issues regarding the collection of Pillar II contributions still need to be clarified. We are working on the methodology for enlisting in the funds that will be authorised. The draft will be examined by an inter-ministerial committee, made up of representatives of the Ministry of Economy and Finances, of the National House of Pensions (NHP) and of the Commission. At the moment, NHP keeps the records of the entire publicly insured population and it will continue to do so for Pillar II. We have to decide how the enlisting documents are to be recorded, and how these pieces of information are to be processed and transmitted. The same structure will be used to keep the records of the participants in privately administered pension funds.
In the same context, we need to set the basic rule for mandatory enlisting age limit - which should be 35 years old - and for the voluntary enlisting age limit of 45 years old.
We will basically choose one of two possible options: to take into account the exact age that one has at the beginning of the enlisting period or to take into consideration only the year of birth so that anyone who turns 35 in 2007 must enrol in a fund, while all those who turn 45 years old will be able to enlist if they want to.
Another interesting issue is raised by the young people who get employed after the enlisting deadline from 2007. We have to decide if they will have to choose a fund when they get hired or if they will have some time to have a look at the offer and then decide on the operator. I think the second option is better, but, however, this will be set in the future.

XPRIMM: One of the basic responsibilities of the Commission is to oversee the financial safety of the market. Where does the legislation stand in this respect? Are there any evaluation indicators for pension funds as well which will be followed-up?
M.O.: Of course we will have solvency and financial stability indicators, but I must stress the fact that private pensions are tackled differently than insurance. Our evaluations are run in a different manner. We clearly separate the fund and the administering company, as these two are distinct legal entities. The fund is assessed based on the investment return correlated to the average market return. If for a year, the fund return goes constantly below this average value by over 4%, the fund loses its operating licence. Consequently, a fund cannot afford returns which are significantly lower than the market average. This will push the administrator to constantly look for a balance to bring him a quite good return, on one hand, so that he can stay on the market, and an acceptable risk profile on the other hand.
As to the evaluation of fund administrators, we are getting closer to insurance procedures. This is the reason why, at European level, they have already started to talk about adopting a system which is similar to Solvency II model used in insurance. The European Insurance and Occupational Pensions Committee has been analysing Solvency II with a view to find a way to adapt this system, especially created for banks and insurers, to private pension systems and forward a directive draft in this respect by the end of 2008. Nevertheless, it is important to say that this will not be an easy process considering that, as far as pensions go, we can't talk about a harmonised European legislation as it is the case of insurance, capital market or banking. This is first of all due to differences between Western European systems and those from Eastern Europe. Let's not forget that Directive 41 itself is based on the 2001 reality, when the European Union had only 15 Member States. EU enlargement brought to the attention the situation from Central and Eastern European countries, which had adopted pension systems completely different to those from older Member States. In Western Europe, the system is highly occupational, with defined benefits, where funds are established by the employer with the employees and administered by the employer. In such a context, the financial stability evaluation of these institutions is greatly similar to the insurance industry. The countries of the "new European Union" practise exclusively defined contribution accounts and they make the distinction between funds and administrators. Under these circumstances, there are no guarantees for benefits level, but still the pension is always guaranteed. This brings along the need for guarantee funds, which are rarely encountered on Western markets. From the supervision point of view, this means different objectives and priorities of supervisory bodies. In our case, if something bad happens and the administrator goes bankrupt, the fund is taken over by another administrator. But, however, for this to happen we have to constantly check that there is money in the fund and that the interests of the participants are protected. Obviously, until a set of evaluation rules is adopted at European level, we will have to draw up our own rules for companies and for funds.
We intend to propose a set of solvency and risk indicators for pension companies by the end of the year because we don't want to deal with bankrupt administrators. We would like to work with administrators that have financial resources available at all times to meet their duties and, if they have chosen to guarantee a certain minimum return to the fund participants, that they are able to cover, from own resources, a potential return deficit. The minimum registered capital level of 4 million RON does not provide sufficient guarantee. On the contrary, this amount is the minimum needed to start the business.
I want to emphasize that the law doesn't impose on the administrators to provide a certain return. It is completely up to them if they decide to promise, as part of the pension scheme, a minimum guaranteed return. But, however, to make sure that if they make such a promise, they will be able to keep it, the administrators have to establish certain technical provisions. Therefore, we have already drawn up a Norm regulating pension scheme provisions. This normative act specifies the method of calculation, the rule and revision period of these provisions, which are to be adjusted to the return promised, to the establishment and source of amounts - from the administrators' own resources, not from the fund assets. The provisions will form a separate account and will be kept in depositary.

XPRIMM: We would like to go back and try to clarify where the Private Pensions System Supervisory Commission stands with regard to an issue that still causes strong debates: voluntary private pensions vs. capitalised life insurance. Besides the fact that in Romania the above-mentioned insurance products are not included in Pillar III, what differences between the two types of financial products make the Commission think that the confusion between them could be a potential risk for clients?
M.O.: Considering the structure of these products, the two products are meant to cover different needs. The private pension is a clear product of accumulation, whereas the insurance covers mainly a risk and the accumulation element comes second. This leads to major differences related to costs. In the case of insurance, the costs are higher because funds allocation is made mostly in the first contract period mostly to cover the risk. On the other hand, pension fund contributions are invested from day one. Unfortunately, clients who don't know this difference have unrealistic expectations for both products to lead to the same result. Or, at equally invested amounts, the return cannot be the same. These products were promoted as pensions when there was no legislation in place, but they cannot be called "pensions" anymore because this might mislead the clients. This decision was made so that voluntary pensions are not influenced and so that the population doesn't get confused by the two.
Moreover, there are great differences from the points of view of legislation, taxes, supervision, and organisation. Risk management and collection systems vary as well... briefly, there are considerable differences, even if, at a first glance, the products seem similar.

XPRIMM: Let's stay in the same topic of Pillar III. Have European companies shown any interest in selling voluntary private pensions in Romania? What are the operating terms for them?
M.O.: Only AIG Poland showed an interest in selling voluntary pensions and this happened because the Romanian operator of the group, AIG Life, said they wanted to work only on Pillar II.
Anyway, I don't think that the foreign administrators will not pour in. In addition, Pillar III provides a type of deductibility that cannot be applied to foreign operators unless they are authorised in Romania.
As far as Pillar II is concerned, it has nothing to do with supplementary occupational pensions, therefore it is not subject to the Directive on free movement of financial services. Actually, Pillar II pensions originate from social insurance. In this respect, we interpret the law in compliance with the National Bank of Romania.
It is true that the idea of occupational pensions has come to Romania too, as some administrators want to set up funds for certain professional groups. But the law allows other individuals to enlist in these funds as well. Pressures were made to change the law as to allow closed funds, but however, this didn't happen because we would have created a pillar for occupational pensions, more restrictive that the existing one. I think that the system adopted in Romania has some advantages because the employee can choose. At the same time, it makes the participant and the Supervisory Commission responsible.

XPRIMM: Numerous voices say that the private pension system is overregulated because "Romanians have already got burnt". Do you think that, when the market has matured enough, more "liberal" regulations should be adopted?
M.O.: This is possible, but not for authorisations. I think that the limits set for investment policies are quite permissive. For example, 50% of the share portfolio is more than permissive, especially that we are talking about pensions, and 70% in government securities is enough.
As far as I know, Ireland has much more restrictive rules, and if we keep in mind that the Romanian market is just at the beginning, we can say that the rules are adapted to the Romanian reality.
Let's remember that in '96-2000, Romania had some problems concerning the asset calculation for investment funds. This is one of the reasons why fixed asset investments, for example, are not allowed because although they seem extremely profitable at one moment, they are pretty unstable and may involve a lot of subjectivity when running the evaluation. However, it will be allowed to run transactions with mortgage bonds, which will be listed at stock exchange, similar to municipal bonds or government securities. Actually, the entire philosophy on which this system is based is to reflect the daily stock exchange value for transacted fixed assets in the net assets value.
For this reason we are considering to impose a certain type of investment even on listed markets. Let's not forget that RASDAQ shares are also listed shares. Still, this alternative system generates a very low volume of transactions, with minimum liquidity. Most of these bonds are transacted to a very small extent, which from our point of view cannot provide the liquidity needed for pension investment funds. Shortly, we can't ignore the fact that the Romanian capital market is just at the beginning and that it is very unstable.

XPRIMM: You have recently stated that the Private Pensions System Supervisory Commission will support any legal changes which could increase the volume of contributions (removing the 15% threshold for Pillar III, shortening the period over which Pillar II contribution percentage will increase). Is there a timeslot forecast for debating such measures?
M.O.: It is hard to predict when these changes could be made. The Commission can promote these changes but, it is the Government that has to make the final decision.
I personally think that this 15% limit sets a handicap for someone who enters the system later because they will find it hard to compensate for the short period of contributing by increasing the value of contributions. Still, as always, there are pros and cons. For example, the 15% threshold can be used to make pressures for declaring the real income.
In addition, an increase of the Pillar II contribution could lead to a better efficiency of the system and I will support such a measure.
Nevertheless, everything depends on the budget, on how budgetary efforts required by such a measure will match the effects of the planned decrease of social insurance. Even if people are generally optimistic about economic development, we don't really know what might happen tomorrow. Consequently, although I think that these measures would benefit the development of the private pension system and I will support them, I cannot predict when they will be implemented.

XPRIMM: Thank you!

by daniela.ghetu@mxp.ro

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Mrs. Mircea OANCEA,
President,
The Private Pension System Supervisory Commission

Romanian currency - best rate in 5 years
The Romanian currency reached on Friday (July 2nd) a 3.134 RON/EUR rate, the highest quota during the past five years, as a result of speculation sale orders for foreign currencies coming from foreign investors.
"The main cause of the RON appreciation is the cash regulation in banks, since we are at the end of the month and of the quarter as well. The exchange rate remains volatile", said Narcis NOAGHEA, dealer at the Romanian Commercial Bank (BCR), quoted by NewsIn.
Since the beginning of the year, the Romanian RON grew 6.61%.
by hotnews.ro, 2.07.2007

EUR 200 million, budgetary surplus in five months
The general consolidated budget for the first five months of the year had RON 606.7 million surplus (about EUR 200 million), representing 0.16% of the gross domestic product (GDP) and 0.3% more than the same figure at the end of April. According to the Ministry of Economy and Finances, the total income was RON 47.75 billion, while the expenses were 47.15 billion, representing 12.2% of the gross national product (GNP) and 12.1%, respectively.
Social insurance contributions were RON 15 billion, 3.9% of the GNP, while VAT brought RON 10.18 billion (2.6% of the GNP).
Profit and income taxes added up to RON 10.77 billion (2.8% of the GNP), while excises were 1.1% of the GNP (RON 4.4 billion).
by hotnews.ro, 28.06.2007

EBRD will invest EUR 350-400 million in Romania
The European Bank for Reconstruction and Development (EBRD) will invest about EUR 350-400 million in Romania in 2007, the Manager of EBRD Romanian office, Hildegard GACEK has stated.
"By the end of July we have invested in Romania about EUR 250 million, and by the end of the year I forecast investments worth about EUR 350-400 million," GACEK said. If between 1992 and 2000, the activity of EBRD was focused on co-financing of the public sector, now about 70% of the co-financing insured by the financial institution is directed towards the private sector. So far EBRD has invested EUR 3.5 billion starting from 1992, and the co-financing amounts for about 175 projects exceed EUR 6 billion. Banking and energy sectors are among the interest areas for EBRD.
The international financial institution finds interesting projects such as the construction of industrial parks and logistic centers. "This project meets the post accession strategy adopted by EBRD", Hildegard GACEK added.
by nineoclock.ro, 29.06.2007

MEF will issue bonds
The Ministry of Economy and Finances (MEF) intends to conduct, over Q3, issues of treasury certificates and benchmark bonds amounting to RON 2.6 billion, accounting to about half of the value announced for the previous quarter.
The indicative amount of issuances was quantified on the basis of estimations related to the collection of revenues and budgetary expenditure development for the third quarter, as well as the amount of Government public debt to be refinanced during this time period.
In the third quarter, they will reopen issuances of Governmental benchmark bonds maturing at three and ten years.
Finances will organize a total number of 12 bids, six with bonds, amounting to RON 1.2 billion, and six for treasury certificates, worth RON 1.4 billion.
The real amount as well as the other features of state bonds to be issued in July, August and September, will be announced in monthly issue prospects.
Two bids with bonds are scheduled on 5th and 19th of July, amounting to RON 500 million and RON 100 million respectively.
by costi.boroda@mxp.ro, 27.06.2007

17.1% more foreign tourists in Romania
The number of foreign tourists visiting Romania increased by over 17% during the first five months of the year compared to the similar period in 2006, the National Statistics Institute informs. The number of Romanians leaving as tourists abroad also increased by 22.3%, up to 3.74 million people.
Most tourists visiting Romania come from European countries (94.2%), and mostly from the European Union's member states (59.6%).
Tourism resorts received 2.27 million people between January and May, 12.9% more than during the first months of 2006, 77% being Romanian tourists.
by HotNews.ro, 4.07.2007

Nongovernmental credit rose 3.8 % in May
Romania's nongovernmental credit rose 3.8% in May this year as compared with the previous month, up to RON 106.49 billion, according to the National Bank data published today. The credit in national currency grew 4.4 % while the credit in foreign currency converted in Romanian curency (RON) advanced 3.2%. In euro, the foreign currency credit rose 4.9%.
As compared to last year's data, the nongovernmental credit registered a 49.1% boost due to a 50.3% higher RON component and 47.8% higher foreign currency component in RON equivalent.
Foreign currency credits for residential consumers grew 4.8% in May while RON-financed ones rose 4.5%. Compared with May last year, the foreign currency credit rose 80.8%.
by hotnews.ro, 29.06.2007

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PRIMM - 50 issues
PRIMM-Romanian Insurance&Pensions Magazine celebrates 50 issues. The moment coincides with the apparition of PRIMM No. 5/2007, published in English, as a retrospective over the most important anniversary event of FIAR - International Insurance and Reinsurance Forum 2007.
Launched in 1999, as a part of a great project of raising the people's awareness over the insurance industry's importance, PRIMM has become the most known and read insurance and pension publication.
" We consider that the publication has had a similar evolution with the insurance market. When PRIMM was first printed, insurance market represented little over EUR 200 million, and this year, when we celebrate the 50th number of PRIMM, the gross written premiums will surpass EUR 2 billion", Sergiu COSTACHE, General Director of PRIMM-Romanian Insurance&Pensions Magazine stated.
"We started with 4 numbers a year and 24 pages and we have got to 12 numbers a year, with substantial editing content, growing from month to month", Sergiu COSTACHE added.
"We are proud that we succeeded in being the main information source related to insurance and private pension market. To the base of this performance there are two factors extremely important: insurance industry and our readers", Adriana PANCIU, Executive Director, Media XPRIMM declared.
"During 8 years of activity and 50 magazines apparitions, PRIMM has transformed from a laudable intention into a efficient communication instrument, with international view.
During all this time, the magazine has presented the opinions of relevant specialists from the market, profile articles provided by credible European entities in the field, many photo-reports which promoted the national and international insurance events, studies, analyses and polls. All these successive transformations brought new rubrics dedicated either to the connections with other financial markets, either to domestic insurance activity or to profile market's presentation", Daniela GHETU, Editorial Director, affirmed.
" Surely, the 50 number of appearances will double with the help of our readers", Alex ROSCA, Editor in Chief, stated.
Starting with 2003, PRIMM-Romanian Insurance&Pensions Magazine has been member of PIA - Presse Internationale des Assurances, this being a recognition of the Romanian publication's quality.
In the end, the editorial team wishes to thank all those who give their support.
by mihaela.circu@mxp.ro, 3.07.2007

Insurance Day at Cluj
"One of the most important objectives of the Insurance Supervisory Commission is to be in permanent and tight connection with the territory", Aurelia CRISTEA, Member of the Insurance Supervisory Commission declared during the Insurance Day at Cluj-Napoca event organized by Media XPRIMM with the support and participation of the supervisory authority.
The conference gathered the leaders of the local insurance representatives and those of the most important insurance brokers from the North-West part of Romania and they had the chance of debating with the representatives of the Insurance Supervisory Commission on the insurer-broker collaboration on the local insurance market.
Aurelia CRISTEA provided information about the intentions of the supervisory authority regarding the activity in the territory. "Your opinion, as directly involved participants in the local insurance markets' development, is very important to shape a much correct image over the general needs of the Romanian insurance market. That's why, starting September, the Insurance Supervisory commission will collect your suggestions for the amendment proposals of the Law no.32/200, whom will be remitted to the competent authorities.
Also, the official presented the coordinates of a local project intended for the solving of human resources crisis which the insurance market is dealing with. "Together with the Babes-Bolyai University, we are working at the establishment of a centre for professional education in insurance as to easier cover the need for a qualified personal in the area. This should be a natural completion of the efforts made by the Insurance Supervisory Commission in order to support the Insurance Institute, so that to be in the territory necessary resources for the professional preparation of the employees in the field.", Aurelia CRISTEA stated.
"Besides, this project is intended to prepare the resources for the application of a norm regarding the professional preparation, which will soon be presented, one of the main aspect regulated by it being the compulsory internship period for professional perfecting", the quoted official added.
The dialog between insurers and brokers approached a series of important aspects as the commission amount, the solving damage files and the promptitude of payments, the responsibility towards clients and so on. In the end, Sergiu COSTACHE, General Director of Media XPRIMM declared: "We believe that the territory represents the main source of development for the Romanian market and the North-West region and Cluj, especially, has a significant potential. In this regard, "Where to Get Insurance?" Program will continue to provide information from territory and organize regional meetings of the insurance professionals".
by daniela.ghetu@mxp.ro, 8.06.2007

UNIQA, majority share holder of ASTRA
ASTRA-UNIQA Company will have a new shareholding structure. After the take over of the majority package of shares, UNIQA Group Austria will be the majority shareholder, with a 50% plus one share participation.
UNIQA has purchased another 23% of ASTRA from the previous majority shareholder, NOVA Trade. So, UNIQA has the control over its interests in ASTRA.
The transaction is about to be authorized by the local authorities. Also, UNIQA will make a compulsory offer to the small shareholders of the ASTRA Company listed on Stock Exchange, according to the legal requirements.
"In the new structure, UNIQA and NOVA Trade will continue their collaboration as to apply special projects for promoting and selling of facultative insurance policies, improving the services' quality, providing competitive services. They will emphasize the promotion and development of life insurance", the company's representatives declared.
ASTRA-UNIQA will continue to develop its partnership with RAIFFEISEN Bank, intending to extend their activity through investments in real estate field, activity already launched by UNIQA Group which purchased important objectives on Romanian market as Floreasca Tower.
At mid 2005, UNIQA Group, one of the main insurers on the European profile market and leader of the Austrian market, purchased 27% of ASTRA, and from the summer of 2006, the new logo contains the both names of the companies, ASTRA and UNIQA. The launch of the new co-branded logo was the precursory step of the UNIQA's participation extension in the shareholding structure of ASTRA.
ASTRA-UNIQA, leader on maritime and aviation insurance segment in Romania, aims for 2007 incomes from gross written premiums of EUR 140 million, up at 63% compared to the last years' results, and the increase of the profit, the diversification of the portfolio and the territorial extend.
At the end of the first trimester of 2007, the amount of gross written premiums reached RON 120 million, which means a consolidation of the volume of the last year premiums.
by mihaela.circu@mxp.ro, 29.06.2007

EUR 2.28 million underwritings for travel insurance
Travel insurance underwritings of the Romanian insurance companies went up to EUR 2.28 million in the first quarter of 2007, according to Insurance PROFILE Review. Least years' same period brought gross written premiums for this segment worth EUR 1.52 million.
Thus, the real growth in national currency on travel insurance class was 37.11%.
Insurance company RAI Asigurari led this insurance segment in Q1/2007, with a 30.52% market share, followed by OMNIASIG, with 19.95% and BT Asigurari with 11.28%.
Travel insurance underwritings are estimated to grow in June-August period, as this is the time when most of the Romanians leave the country for vacation.
The audited insurance market results for 2006 and Q1/2007 preliminary results are now available for download at the official site of Insurance PROFILE Review: www.insuranceprofile.ro
by mihaela.circu@mxp.ro 27.06.2007

Insurance brokers, mediatory on Pillar II
The insurance brokerage will be able to mediate pensions on Pillar II without establishing a new specialized company.
"The Private Pension System Supervisory Commission and the Insurance Supervisory Commission remitted to the Government a project of Emergency Ordinance in this regard", Aurelia CRISTEA, Member of the Insurance Supervisory Commission Council, declared for the first time.
by daniela.ghetu@mxp.ro, 28.06.2007

Another important name at start
GENERALI has put the necessary documents for the authorization of a pension company GENERALI Fond de Pensii at the Private Pension System Supervisory Commission. Thus, the Italian giant insurer stands in other important names that have already shown their interest in the private pension market.
"By the 1st of August, we will prepare a big team of marketing agents which to provide Romanian people quality services and information needed as to choose the private pension scheme and not to be aleatory distributed by the Commission", Ioan VREME, Project Manager, declared.
GENERALI aims a 12% market share, representing 300,000 participants, according to the Prognosis National Commission, which estimated the total number of participants at 2.7 million.
A few months ago the Commission's estimations highlighted that about 10-12 companies would activate on the private pension market. But, at the moment, we have already 12 companies about to take the start and this number may be overpassed in the next weeks. Among these companies there are important insurers from the worlds' insurance and pensions market as ALLIANZ-TIRIAC, AIG, AVIVA, EUREKO (through INTERAMERICAN), ING or VIG (through OMNIASIG).
by liviu.huluta@mxp.ro, 3.07.2007

Facultative pensions - a profitable activity for ING
ING signed 740 adhesion contracts to the ING Clasic Facultative Pension Fund in less than one month from the facultative pension start. Also, over 70 companies signed contracts with ING as to offer pension products to their employees.
"We wish to be in the preferences' top of Romanians on the facultative pension market and private pensions, with a 25% market share, respectively 30%", Bram BOON, General Director of ING Asigurari de Viata stated.
"It's a promising start, but certainly the potential is much significant and we expect the adhesion rhythm to increase while people will be aware of the facultative pensions' advantages", Bram BOON added.
As regards the private pension field, ING Asigurari de Viata was the first company which got the authorization for the establishment of ING Fond de Pensii. The agents network prepared for the pension products' promotion will overpass 30,000 agents according to the ING's officials.
by mihaela.circu@mxp.ro, 3.07.2007

Share capital increase for GENERALI
Insurance company GENERALI will increase its share capital by EUR 22.5 million, the insurers' capitalization thus growing to EUR 38.57 million, according to the decision made by the shareholders' General Meeting.
The move is to be financed by a 700 million nominative share issue, at a unit value of RON 0.1 (EUR 0.03).
From the capital increase, EUR 16.87 million will be attributed for general insurance and EUR 5.62 million for life insurance.
The capital increase aims to keep GENERALI in the legal solvency margin required for the life and non-life insurance activity, according to the document published in the Official Gazette of Romania.
In the first quarter of 2007, GENERALI Asigurari posted gross written premiums worth EUR 32.04 million, up 49% from the last years' same period.
Life insurance underwritings volume of EUR 4.80 million outruns the Q1/2006 figures with 59% while general insurance headed up 48% to EUR 27.25 million.
by mihaela.circu@mxp.ro, 26.06.2007

FIBA sets up insurance company
FIBA Asigurari received the authorization from the Insurance Supervisory Commission in Romania for setting up an insurance company.
The new born company will have a share capital worth EUR 3.64 million.
To begin with, the new insurer will write only non-life business, according to some previous statements made by the CREDIT EUROPE officials.
The majority owner of FIBA Asigurari is the Dutch subsidiary of the Turkish financial group FIBA Holding, with a 99.9% stake. The rest of 0.01% shares belong equally to four individuals including Tamer OZATAKUL and Omer TETIK.
Now, for launching the underwriting activity, the company needs the functioning authorization from the regulatory authority.
Setting up this company increases the number of Romanian insurance companies to 41.
Also, in less than six months since the Romania's EU accession, more than 120 insurers from the European community notified the supervisory authority regarding their intention to enter the national market.
by andreea.ionete@mxp.ro, 26.06.2007

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AVIVA and MDM Bank announce a new bancassurance partnership in Russia
AVIVA announces that it has reached a bancassurance agreement with MDM Bank, a leading retail bank in Russia.
According to the agreement, AVIVA provides insurance coverage for MDM card holders, as well as life insurance and savings products as an additional service available to bank customers. The sales will start this autumn, on September 1st.
MDM Bank is one of the largest Russian privately-owned financial institutions, with a wide distribution network and a broad customer base. Starting from Moscow, MDM Bank will offer AVIVA access to its network of over 100 branches located in nearly 40 cities across Russian Federation.
Referring to this partnership, Andrei DOUBININE, CEO, AVIVA Russia, had declared: "We are delighted to provide insurance cover for customers of MDM Bank, a well-established and successful business. AVIVA is a leading bancassurer world-wide with a first class reputation for implementation, and we transfer our international expertise to Russia. We are confident that our know-how will help us add customer value and build a successful partnership with MDM bank".
Also, in June, AVIVA announced other three bancassurance partnerships in Italy, Turkey and Spain.
AVIVA had received the license for the Russian insurance market last year, and its operations here involves about 200 employees. The company's goal for Russia is to be one of the first five local insurers, with a 10% market share.
AVIVA International is the world's fifth-largest insurance group and the largest insurance services provider in the UK. The company is the leading provider of life and pension products in Europe, actively growing the long-term savings businesses in Asian markets, Australia and the USA.
by irina.galasanu@mxp.ro, 2.07.2007

AXA, on the start line in Russia
The French insurance group AXA is interested in the Russian market and analyses the manners to consolidate the position in this country. In this context, there is the possibility for AXA to increase its shares rate (0.26%) hold in present by the insurance society RUSSIA.
The insurance market players in Russia consider that this possibility to reach the AXA objectives regarding the Russian market seems to be the most probable.
Previous week, the press service of the French group confirmed the insurer intention to develop on Russian market. Also, the group manifested a special interest regarding the Eastern Europe markets.
"It is a very dynamic market and strategically thinking, for us it represents indeed a big interest, and Russia occupies a special position within our plans", stated the group representatives.
"If RUSSIA society has potential and it can assure us with a solid position on the local market with perspectives to increase the market share, we will certainly invest in this company", the French group representatives completed. Meanwhile, if it is easier and more efficient for AXA to undertake another insurance company, it won't hesitate to choose this possibility.
"We are on the start line regarding Russia and we wait cautiously the moment when the gates will become opened, analyzing carefully the players on this specific market", the AXA representatives concluded.
In 2006, the income of the French group represented EUR 79 billion, with a sharing capital of EUR 47.2 billion and 400 share holders. Beside the managed activity in the insuring field, the French group also operates on the banking sector, assets and investment management.
by irina.galasanu@mxp.ro, 25.06.2007

Fusions and acquisitions in EU and CIS
According to INSURANCE TOP rating center data, in 2006, the EU acquisitions and fusions market (M&A) represented USD 178 billion, registering 77% growth comparing to the previous year. Increased by 205% representing USD 127 billion, the banking sector was the leader in this context, while the insurance market amounted to about USD 31 billion, 34% more.
At the same time, M&A within assets management sector registered a negative evolution of 350% which is almost USD 2.5 billion.
Following the same context and referring to CIS markets, M&A market capacity in Russia increased by 41% , representing about USD 71 billion, by 57% (USD 7,6 billion) in Kazakhstan, while it decreased by about 60% (almost USD 4,8 billion) in Ukraine.
The Ukrainian M&A market structure is composed of the banking sector representing 74%, transports - 6%, telecommunications - 4%, real estate - 4% and insurance sector with only 3%. The investors are focusing on more developed countries where the legislation is more permissive and loyal considering the foreigners.
According to INSURANCE TOP report, not all insurance companies with foreign capital have developed actively, since they met difficulties regarding the transformation processes.
Taking in consideration the insurance market evolution forecasts in Ukraine, the analysts state that by 2010 the real payments will represent USD 3-3.6 billion, that means 20% growth, 75% of which (USD 2.2-2.7 billion) will be due to the auto, credit and life insurances.
by irina.galasanu@mxp.ro, 20.06.2007

Ukraine May Introduce Unit-Linked Insurance
Under the terms of a draft law "On Insurance", the Ukraine may introduce a new life insurance class - unit-linked insurance. Such policies provide that insurers are obliged to pay out insurance claims (in an amount related to the results of allocation of unit-linked insurance technical reserves) in case of the insureds' death before the contract becomes invalid, and/or the insured person lives to the end of the contract, and/or there is a specified occurrence in the life of the insured. The news about the draft text was reported by the Ukrainian specialized insurance magazine Strakhova Sprava on June 25, referring to the announcement of Deputy Head of the State Commission for Regulation of Financial Services Markets in the Ukraine (SCRFSMU) Evgeniy Grigorenko at the Second International Investment Congress of Insurance Elite. The Congress was organized by Strakhova Sprava and took place in Kiev on June 20-21, 2007.
GRIGORENKO said that this insurance class would be in line with European legislation and world practices (EU Directive 2002/83, article 25). Under the terms of the document, technical reserves for investment insurance should be placed at the disposal of asset management companies. Customers will be able to choose between investment funds with different strategies from the list offered by the insurer. The contract will determine the compulsory minimal guaranteed insured sum in case of the insureds' death in accordance with the requirements of the authorities.
Unit-linked insurance contracts can be concluded for concrete terms or for whole life, though the minimum period is five years.
The new bill also proposes to found an institute of professional reinsurers and to work out the licensing procedure for this kind of activity; to set requirements on paying capacity with respect to the quality of insurers' assets, its management system and information disclosure; to specify the main directions of insurers' investments activity; and to establish requirements for the corporate management system.
by RP Newsline, 3.07.2007

CROATIA Osiguranje expands its business in Macedonia
Croatian insurance company CROATIA Osiguranje decided to introduce non-life insurance in Macedonia. Their plan is to expand their business in Macedonia by introducing the non-life insurance service through Vardar/CO, according to the CEO of CROATIA Osiguranje, Hrvoje VOJKOVIC. He believes they will start making profit after three years of operation in Macedonia.
CROATIA Osiguranje and Slovenian TRIGLAV are partners on theinsurance market of Macedonia, as CO holds a 33.6% stake in VARDAR Croatia (the other shareholder is a local insurer VARDAR Osiguruvanje) and TRIGLAV acquired in early june 100% of VARDAR Osiguruvanje for EUR 42 million.
Vardar Croatia is the only life insurer in Macedonia with a 0.3% market share in 2005.
by oleg. doronceanu, 2.07.2007

M&A on the Bulgarian insurance market
The Bulgarian based insurance companies BULGARSKI Imoti and BULSTRAD merged and will be operational under the brand name of BULSTRAD VIENNA Insurance Group. That is the outcome of last weeks' shareholders meetings, according to INSURANCE.BG.
The former director of BULGARSKI Imoti Insurance Company and BULGARSKI Imoti Life, Mr. Rumen YANCHEV is now Chairman of the Board of Managers and CEO for BULSTRAD. The former CEO for both companies mentioned above was Mr. Rumen GALABINOV who is now the deputy Chairman of the Board of Managers as well as a member of the directors board for BULSTRAD.
The merger should be completed within 6 months. A consultancy firm will be hired and even the search for one has been started.
Both companies will operate as one after the merger under the already approbated brand of BULSTRAD is completed.
The 2 companies of BULGARSKI Imoti joined VIENNA Insurance Group (VIG) in 2002 when the Austrians bought their majority share. BULSTRAD incorporated in the Group more than a month ago.
In April, VIG closed the deal for the acquisition of 60% of the capital of TBIH Financial Services Group - the majority shareholder of 10 companies in the non-banking field, including BULSTRAD Insurance and Reinsurance Company and DOVERIE Pension Insurance Company. The other 40% are owned by KARDAM.
The Austrian group, via TBIH, owns 52% of BULSTRAD and 58% of BULSTRAD Life and it directly owns 98.4% of the 2 companies of BULGARSKI Imoti. The companies of VIG are placed third on the Bulgarian insurance market.
BULSTRAD reached the first position on the market for the first 3 months of the year with its premium of EUR 30 million and its market share of 19.49%. BULGARSKI Imoti were placed 10th with a premium of EUR 5 million and a market share of 3.32%. Their common market share comes to 22.81% making them the undisputed leader.
BULSTRAD Life is placed fifth on the life insurance market chart with a market share of 7.31% while BULGARSKI Imoti comes seventh with a market share of 2.03%. The common market share of both companies suggests better results on the premiums amount chart.
by oleg.doronceanu@mxp.ro, 22.06.2007

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