Winterthur closes Bucharest-based office

Winterthur, the insurance arm of Swiss financial group Credit Suisse, on July 31 closed its Romanian office after two years of operations, as the establishment of the privately managed pension funds has been postponed for an unspecified date, authorised sources told Ziarul Financiar.

“The company decided to come back when the situation of the privately managed public pension funds is clarified,” the above-quoted sources said.

The legislation on privately managed public pension funds was drafted by the Labour and Social Protection Ministry in 1998, together with several non-governmental foundations co-ordinated by the World Bank, being included in the set of laws concerning pension system reform.

As Parliament put off discussing the law, Isarescu-led government last November endorsed an emergency ordinance regulating the privately managed public pension funds.

This ordinance was among the first ones cancelled by Nastase-led government in January, while Florin Georgescu, head of the Budget-Finance Commission of the Chamber of Deputies and one of the leaders of the Social Democrat Party (PSD) publicly rejected the idea that privately managed public pension funds should be established over the next period.

Should it be enforced, as it happened in Poland, the Czech Republic or Hungary, the pension reform would mean that some 10% of the 37% contribution paid by the employers and employees to the social security budget would be directed to certain funds managed by private companies.

In the short term, the deficit of the social security budget would increase, but, in the long run, the pension system would be balanced.

The current system, where pensions are paid with the money collected from the employees, is increasingly ineffective due to the lower number of employees, while the number of pensioners is going up.

If private companies managed the contributions, part of the pension revenues would come from the amounts deposited in time and capitalised by the companies managing them. The reform does not involve the current pensioners, but those retiring 20 years from now.

“There is no connection between the change of the political regime and Winterthur withdrawal. It is just a matter of re-orientation,” the above-quoted sources said.

Several large international companies have lately entered the Romanian life insurance market – ING Nederlanden, Interamerican, American International Group or Commercial Union, in order to be prepared for the moment when the privately managed public pensions funds are established.