“We are extending today the cap on MTPL insurance policy prices for another three months, until March 31, 2025, at the proposal of the Financial Supervisory Authority (ASF). We want to prevent market imbalances and avoid price increases for these policies. The cap was initially implemented in April 2023 and has been successively extended, resulting in the stabilization of the MTPL market,” stated Prime Minister Marcel Ciolacu at the opening of the government meeting.
“Currently, the Romanian MTPL insurance market continues to show a reluctance in the risk appetite of MTPL insurers for certain categories of policyholders. Additionally, there is a high degree of market concentration, which remains a vulnerability both in terms of exposure by insurance classes and the significant market shares held by a relatively small number of insurance companies. This indicates a low level of competition,” the Government Decision's substantiation note reads.
Describing the current status of the MTPL insurance market, the Financial Supervisory Authority explained that 2024 saw some positive developments, with gross written premiums reaching 6.8 billion RON in the first nine months, an 8.2% increase compared to the same period in 2023. Liquid assets also grew by 14% by the end of September, with liquidity indicators remaining solid and above legal requirements.
The technical results for MTPL insurers were positive, both gross and net of reinsurance, with the net combined ratio dropping below 100%, decreasing by 4 percentage points compared to the previous year. However, the market also faced challenges, with a significant increase in high-risk policyholders. Approximately 23,500 more cases were processed compared to early September, with insurers handling an average of 7,500 high-risk cases per month since the start of the year.
In ASF’s view, maintaining the cap for another three months term is meant to maintain the market equilibrium until the new Law on MTPL insurance will be adopted, along with a guide on good practice in the MTPL insurance industry and some other corrections/improvements in the regulatory framework will be implemented. ASF said that the imbalance between demand and supply in the MTPL sector persists and it is possible that the pressure on prices may increase if the cap is removed, leading to a decrease in the MTPL insurance coverage which is already below the level to which Romania committed when entering the EU.
On the industry side, UNSICAR – an association of the insurance brokers representing players with an aggregated market share of over 70%, sent a letter to the Minister of Finance, Marcel Boloș, protesting against the Government Decision. The letter argues that this measure has the potential to irreparably destabilize the insurance distribution market in Romania and expose insurance distributors to a significant risk of bankruptcy. “In Romania, the insurance distribution market primarily consists of independent, entrepreneurial companies with Romanian ownership, providing jobs for over 50,000 employees, assistants, and insurance agents. For this reason, UNSICAR strongly opposes any form of competition restriction, a limitation that has persisted in the insurance market for nearly two years. Its negative effects are deeply felt by the entire insurance market and, in particular, by the insurance distribution segment, which is facing significant financial losses,” the letter reads.
The document also stresses that "any extension that does not take intermediaries' situation into account will have irreparable medium-term effects on the industry, as well as on clients and the level of financial protection in our society. Furthermore, we must emphasize that the current government is ignoring the severe impact these measures have on independent distribution and, implicitly, on clients' quick access to multiple offers and MTPL comparators. This situation will lead to increased costs for clients, as people will end up paying more. In fact, the so-called cap has produced no positive effects; on the contrary, prices have risen above the inflation rate, and the Romanian MTPL market remains, arguably, the least competitive in Europe. The longer this cap is extended, the deeper the lack of competition will become, directly affecting clients," said the UNSICAR president.
Nearly Two Years of Price Capping
It is worth noting that in the context of EUROINS Romania's bankruptcy and the significant increase in MTPL policy prices, the government decided in April 2023 to cap MTPL prices at the base (B0) rates applied by insurers as of February 28, 2023. These rates were adjusted based on the bonus-malus class of each policyholder.
Prices were initially frozen starting April 11, 2023, for six months, until October 10, 2023. Subsequently, the decision was extended to December 31, then to the end of March, followed by June 30, and later to September 30, before being extended again to the end of this year.
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