Insurance industry losses triple

Insurance companies made threefold higher loses in 2004 than in 2003 amid higher indemnity payments in the auto insurance sector and for financial risk insurance, which is linked to consumer credit contracts.

A third of insurance companies had reported losses at the end of 2004, according to data presented on Tuesday by the chairman of the Insurance Supervision Commission, Nicolae Crisan, at the International Insurance and Reinsurance Forum organised by Media Xprimm. By contrast, in 2003 only a quarter of insurers reported losses.

Fourteen insurance companies posted aggregated losses of 969 billion ROL (17 million euros) at the end of the last financial year, compared with 231 billion ROL (6 million euros) in losses in 2003.

Twenty-eight companies finished the year with profits, with total net profits reaching 1,214 billion ROL (30 million euros) compared with 19 million euros in 2003.

The aggregated technical results put total profits from general insurance activities at 998 billion ROL (25 million euros), from 20 companies, and total losses at around 552 billion ROL (14 million euros), from 18 companies. Twelve insurers had positive technical results for their life insurance activities, totalling 616 billion ROL (15 million euros), while eleven companies registered cumulative losses of 227 billion ROL (5.6 million euros).

From total gross claims paid out by insurers for direct contracts, which totalled 13,077 billion ROL (325 million euros), 94% accounted for damages paid on the general insurance segment.

Net indemnities – the difference between gross indemnities and the sums recovered from reinsurers – came to 10,590 billion ROL (250 million euros) for 2004.

The categories of insurance of most importance in terms of total gross indemnities paid on general insurance were those of insurance for terrestrial vehicles (55%) and RCA (auto liability) policies (29%).

Indemnities paid on credit and warranty policies exceed 860 billion ROL (21 million euros) and were quick to increase, according to Crisan. From 3.3% in 2003, these types of indemnity reached 7% of total paid claims for general insurance, at a time when the share of premiums for this category rose by only one percent on 2003 to 6%.

Crisan said that by 2007 every insurer with credit and warranty insurance policies would have to establish a minimum safety fund worth 4 million euros, as stipulated by European Union directives.

Despite widening losses, Romanian companies are becoming more attractive to foreign investors.

Cristian Constantinescu, chairman of the National Union of Insurance and Reinsurance Companies and general manager of Allianz-Tiriac, believes the Romanian insurance market has a lot of potential and has become highly attractive to foreign insurers, particularly those encountering difficulties entering other markets.