This move is expected to ease financial pressure on insurers and could lead to lower policy prices, particularly for compulsory motor insurance (MTPL).
The Policyholders Guarantee Fund (FGA) is on track to settle 80-85% of outstanding claims related to City and Euroins by October 2025, with the remaining payments scheduled for early 2026. Both the FGA and BAAR have been covering these claims through permanent (non-repayable) and special (loan-based) contributions from insurers. However, BAAR has now stopped collecting special contributions and has begun reimbursing insurers, with full repayment expected by December 2027.
The total contribution rate to BAAR has been declining since 2023, but 2025 marks the most significant drop. Three years ago, insurers paid a combined rate of 5.5% (permanent and special contributions); by 2025, this figure has fallen to just 1.6%. Meanwhile, FGA contribution rates remain unchanged at 2% for permanent contributions and 5% for special contributions in general insurance, while life insurance continues to require a 0.4% permanent contribution with no special levy.
Looking ahead, a phased reduction in contributions is planned from 2026, with special contributions set to be eliminated entirely by 2027 when BAAR will complete reimbursements to insurers.
These financial adjustments free up resources for insurers, allowing them to enhance their products and pricing strategies. Lower premiums - especially for MTPL policies - are anticipated as insurers benefit from reduced operational costs.
With these measures in place, the insurance market is expected to become more stable and predictable, fostering investment and innovation across the sector.
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