Insurers need to up premiums

The Insurance Supervision Commission (CSA) demands all companies that sell credit and guarantee insurance to up their insurance quotes, because claims have increased. The increase in the premiums will raise the borrowing costs, as well.

“The claim rate is going up and there are no ways to settle given the current premiums, so that we feel premiums for this type of insurance need to go up,” Nicolae Crisan, CSA chairman said.

“Whereas insurers have sold insurance policies at 1.5%-2% quote until now, when the normal rate was of 5%,6% or even 8%, they need to react accordingly,” Crisan said, without naming the respective insurers, though. “You cannot just turn insurance companies into charities that would take the risk of the banking system upon themselves,” the CSA official added.

The quote is calculated as a ratio of the premium and the insured amount.

The credit and guarantee insurance policy sees the insurance company underwrite, in exchange for a premium, the risk of the clients of a specific bank defaulting on their loans. The amount of overdue ROL loans doubled in the first half of this year, therefore causing increasingly more serious damage to the insurance companies that have a strong involvement in this field.

For instance, Asiban settled almost 400bn ROL worth in claims in the first half, three times more than in the corresponding period of 2003. The company tripled revenues last year particularly because it sold more credit and guarantee insurance policies.

“We are looking into this. We will discuss it with CSA, as well and during a Board of Directors meeting that will be held soon,” said Mugurel Ceraceanu, Asiban’s chief executive.

BCR Asigurari, a company whose portfolio is made up nearly 40% of credit and guarantee insurance, settled four times the amount of claims in the first six months of 2004 than in the same time last year.

“From where we stand, the increase in the premium quote is only one of the steps that can be taken should the claims become alarming. We have no reason to worry now. As far as we’re concerned, the claims rate on this segment is the same as that for the comprehensive auto insurance (50%-60% i.e.). Furthermore, we’ve got reinsurance,” says Romeo Jantea, BCR Asigurari’s chief executive.

The overdue ROL loans have progressed five times faster (47%) in the first half of this year than the ROL loans, which increased by merely 10%. Consumer credits (for one to five years) were the fastest to progress last year. Instalments remain high because of the high interests charged by banks, and hence the default risk. sorin.pislaru@zf.ro