Solvency ratio stirs controversies

The representatives of the leading life insurance company in Romania, ING Nederlanden Asigurari de Viata are questioning the relevance of dividing the companies whose solvency ratio is above 1 into companies that are less likely, more likely or unlikely to go insolvent. The Insurance Supervision Commission (CSA) replies by saying the regulation has been endorsed by the EU representatives and, at any rate, it is too late to argue now. Other insurers’ representatives have mixed feelings about this. “CSA’s interpretation of the solvency ratio is irrelevant according to the European norms. Insurers in the EU are insolvent if their solvency ratio is below 1 and solvent if it is higher or equal to 1. There is no division by categories for solvency ratios above 1, as CSA did. The companies are either solvent or insolvent; in the latter case, the supervision body demands the respective company to come up with a financial recovery plan,” Violeta Ciurel, ING Nederlanden Asigurari de Viata general manager said. According to CSA, a solvency ratio of 1 to 1.5 means high insolvency risk, 1.5-2 means low insolvency risk, while above 2 means no insolvency risk at all. ZF