Insurers to be either solvent or insolvent

Insurance companies will no longer be divided into insolvent, possibly insolvent or solvent, but will simply be classified as solvent or insolvent companies, according to a change in regulations. Some of the insurers had disputed this classification last year.

The solvency margin calculated in line with financial data measures the insurer’s capacity of covering the assumed risks, namely its ability to pay the potential damages in full and in due time.

“The Insurance Supervision Committee (CSA) board decided to maintain a single reporting limit for the solvency margin, which is 1. Therefore, the insurer will be considered insolvent if the solvency margin is lower than 1, and will be solvent if this margin is equal to or higher than 1,” CSA chairman Nicolae Crisan said on Wednesday.

So far, the companies posting an insolvency margin ranging between 1 and 1.5 had been deemed as bearing “a high insolvency risk,” those ranking between 1.5 and 2 had a “low risk of insolvency”, whereas those exceeding 2 had been classified as companies with “no solvency risk.” Also, the companies ranking below 1 were and will be considered insolvent.

Some of the companies on the market had publicly disputed the previous classification last June, claiming CSA was “more Catholic than the Pope,” as the insurance companies in the European Union are divided only into solvent and insolvent, depending on the solvency margin: higher or lower than 1. At that time, Nicolae Crisan claimed the Romanian insurance market was still in its early stages, so tighter supervision was required. Yet, Crisan admitted “it is obvious that any company with a margin higher than 1 is solvent.”
sorin.pislaru@zf.ro