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XPRIMM News - THE ROMANIAN INSURANCE MARKET NEWSLETTER
No. 159, July 1st, 2010
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EDITORIAL


MTPL in times of crisis

Aggressive or just well applied marketing... we are witnessing these days a true renaissance of the old MTPL, a policy to which, if we apply the epithet "standard", we risk a splendid figure of speech.
If, until recently, the sole spot of color that was changing the stereotype of the mandatory motor third party liability insurance policy was, eventually, a gift with cosmetic flavour received by future insured in the famous MTPL campaigns, here we see that, for some time, things have changed.
We can now talk about household insurance policies offered at a lower price if they are bought together with a MTPL, about an interesting positioning on a particular segment of customers that are somehow more "quiet" - pensioners, or even about a package of products including a mini-Motor Hull.
The difference between offering, when selling a MTPL, a shampoo as a gift, and thinking a cross promotional offer, in the sense of joining with another insurance product, is colossal...

But the future will surely bring the widespread introduction of additional services and coverage which became standard in Western countries, such as free roadside assistance and replacement of vehicle during repairs. So, customers will prefer to buy MTPL and Motor Hull from the same insurer, so that they will benefit from such supplementary advantages.
Will all these offers succeed to offset the impact of the crisis, especially in rural areas?
Will the number of MTPL uninsured vehicles increase?

We shall see.
Passing over apocalyptic and (not seldom) slightly envious predictions of the competition - a competition, why not say it, sometimes too conservative -, clients are those who will benefit most from these experiments.

But how does the eye of the insurance specialist regard all these recent searches?
With concern, at least... and that until we will all have the certitude of a real evolution.

by alexandru.ciuncan@mxp.ro

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INTERVIEW


Interview with Shashi GOKARN
President
INTERLINK Insurance & Reinsurance Brokers

XPRIMM: Last year, at FIAR, we talked about the impact that the global crisis has over the insurance and reinsurance markets and about what the insurers, reinsurers and brokers could do in order to limit its negative effects. How do you appreciate the companies' activity over the past year? Were they efficient in their attempt to fight against the crisis?
Shashi GOKARN:
The recession created negative impact on international financial market. However, the effect on each country was different depending on its internal and external trade. Some countries managed to handle the situation efficiently, whereas a country like Dubai (an independent Emirate in UAE) had to slow down its activities especially in Real Estate/ construction areas. Those countries who were dependant on foreign markets for their products, foreign investors or on Holiday makers, faced great challenges, whereas countries who utilised their own market for their products absorbed the shock very well. Such countries provided moral supports to other countries to come out from the recession tangle and therefore the international market is now better placed to overcome the negative effect.
As it is known, the insurance and reinsurance companies experienced difficulties in business growth. Still, the market could hold on well, except some hick-ups here and there, to survive and continue. Added advantage in this recession period was not experiencing any major cat losses. This is nothing but blessing in disguise.
Insurers and reinsurers co-operated well with their respective clients and supported them wherever possible. Reinsurance market worked as usual, competing for the business, but accommodating their clients whenever required. Insurers faced hilarious task to maintain their books, but could do so with great difficulties. Many of the insurance companies have not shown any growth in premiums, but they could survive to see better tomorrow.
Brokers on their own tried to balance both sides taking care of the clients as well as insurers/reinsurers. The brokers community is at receiving end from both sides; still, improving situation has brought back the ray of hope.
Over all recession seems to be the past and future is picking-up.

XPRIMM: In which ways has the crisis changed the public perception towards the insurance broker? Is his role more important than it was before the crisis?
S. G.:
According to us, the public perception in our part of the world has not changed much. However, brokers are the connecting link between insured & insurers and also between reinsured & reinsurers. During recession, when original insured gets depressed because of the market conditions, it becomes duty of broker to keep insured's spirit flying high to continue the existing protection. Similarly, the reinsurance broker has to play a positive role to convince reinsurers to offer better rates to the client without adding any burden to them unless it is absolutely necessary. When any such crisis like recession occurs the spirit of the market already being affected, brokers have to hold on their nerves to advice all concerned from insured to insurer & insurer to reinsurer.

XPRIMM: What are the next steps that the companies should take in order to escape the present pressure generated by the crisis?
S. G.:
Companies, both direct as well as reinsurance, should co-operate with the client to continue existing good relations. Everyone knows that during this crisis period insured is the most affected party who needs support from everyone. Insurance company as well as reinsurance company could survive only if insured's health is in good order. To overcome the situation preserve companies energy by controlling not so important expenditures. If necessary, companies should spend their resources only when it is absolutely necessary. It doesn't mean retrenchment of existing employees has to be considered unless the company is in dire situation. This thumb rule applies to insured, brokers, insurers and reinsurers.

XPRIMM: Which are the main arguments that the insurers should use in trying to convince the public that the insurance products are necessary, especially in time of crisis?
S. G.:
Insurers should point out that during crisis such as Recession, terrorist attack the mood of the public turns towards depression. Market gets disturbed which in turn affects individuals. When individuals are affected, a small incident may give rise to a huge loss. Under such situation it is insurance protection which takes care of them.
Because of crisis, the company may loose its market giving rise to accumulation of finished goods or raw materials in their godown. If any untoward incident happens, the company will loose its capital unless covered by insurance.

XPRIMM: Thank you!

by oana.radu@mxp.ro

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Shashi GOKARN
Shashi GOKARN
President
INTERLINK Insurance & Reinsurance Brokers

MEDICOVER
 
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The 2011 PIA annual meeting will take place in Sinaia
Sofia was, two weeks ago, the host of the 55th annual meeting of the PIA (Presse Internationale des Assurances). On this occasion, the participants of the meeting decided that the next host city of the PIA meetings will be Sinaia, the event following to take place within the 2011 Edition of FIAR - International Insurance-Reinsurance Forum. The honor to host the annual PIA event went to Romania, which had Mexico as candidate. During the same meeting, Daniela GHETU, Editorial Director of PRIMM Publications, was named Vicepresident of PIA.
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by oana.radu@mxp.ro, 23.06.2010



How would the insurance market look like, without MTPL, after the first three months?
In the first quarter of 2010, the insurance market dedicated to the segment of mandatory motor third party liability policies has generated over 35.7% of the total insurance market, placing itself in the top of policies bought by Romanians. Also, with a volume of underwritings of EUR 200 million (RON 824 million), MTPL insurance has recorded a "double digit" nominal increase in euro of 16.5%.
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by vlad.boldijar@mxp.ro, 29.06.2010



SOLVENCY II knocks on the door
Financial consulting firm KPMG has organized on the 23rd of June, in Bucharest, a seminar with the theme: implementation of Solvency II Directive. The event represented an opportunity for insurance companies' specialists to better understand the challenges facing them in terms of the new solvency system, which will be implemented until January 1, 2013.
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by mihaela.circu@mxp.ro, 24.06.2010



OMNIASIG: "In the present context, we will underwrite between RON 1 and 1.2 billion by the end of the year"
OMNIASIG will reach with difficulty the underwritings target set for this year, according to statements of Constantin TOMA, President of the company.
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by vlad.panciu@mxp.ro, mihai.cracea@mxp.ro, 21.06.2010



The profit of ING Asigurari de Viata could fall 50% in 2010
ING Asigurari de Viata estimates to obtain in 2010 a profit of RON 35 - 40 million, compared to RON 77 million, under the circumstances of the deterioration of the national economic conditions and of the austerity measures adopted by the Government.
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by mihaela.circu@mxp.ro, 30.06.2010



The market will feel, in 2010, the "waves" made by AEGON
If, in what the life insurance market, as a whole, is concerned, estimates indicate a decline of 5% this year, for AEGON Asigurari de Viata 2010 will be the year when the sales and communication strategy that the company has built will say its word. According to the CEO of AEGON, Silvia SIRB, 2010 will bring to the insurer a three times increase of the business compared to 2009, which would translate in an underwritings volume of almost RON 6.5 million.
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by andreea.ionete@mxp.ro, 29.06.2010



Romania and Malta, the only countries where the number of accidents increased compared to 2001
According to a report of the European Transportation Safety Council (ETSC), in Romania, the number of deaths in road accidents in 2009 has surpassed the one in 2001. The only other country that has experienced this situation was Malta. Furthermore, Romania has the highest rate of deaths per number of inhabitants, with 130 victims per million people. The only countries that were close to this average were Greece, with 129 deaths per million inhabitants, and Poland, with 120.
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by mihai.cracea@mxp.ro, 23.06.2010



Travel insurance: a new leader and rising
With the start of the operation of portfolio transfer from the company RAI, the former absolute leader on the travel insurance line, to GENERALI Asigurari, Q1/2010 brought a new leader: ALLIANZ-TIRIAC.
Moreover, the first two companies, ALLIANZ-TIRIAC and GENERALI Asigurari underwrote together about 47.2% of total insurance premiums on the travel insurance segment.
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by vlad.boldijar@mxp.ro, 25.06.2010



KD life customers can choose between FlexInvest from EUREKO and policy lapse
KD Life, life insurance company placed under special administration by ISC in early March, signed an agreement with EUREKO Asigurari to transfer the portfolio. Following that, the insurer will be closed, thus ending its activity on the Romanian market. The agreement involves the possibility that the 5,500 customers of KD Life to make the conversions of their life insurance products with the FlexInvest policy from EUREKO Asigurari.
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by andreea.ionete@mxp.ro, 28.06.2010



Romania, one of the last countries in the CEE on the damages to property segment
Romanian insurers registered, on the damages to property insurance class, underwritings of around EUR 40 million (less than 2% of the total insurance market). In a top of the countries in Central and Eastern Europe on this insurance class, Romania ranks only 7th, out of a total of 14 countries, as it is shown in the Special Report "CEE, RUSSIA & CIS INSURANCE MARKETS 2009".
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by vlad.boldijar@mxp.ro, 22.06.2010

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50.1% increase for the Kazakh insurance market in the first quarter
Kazakh insurance companies have reported premiums of EUR 358 million in the first quarter of the year, an increase by 50.1% compared to the similar period of the last year, according to local watchdog. Mandatory insurance classes amounted to EUR 71.3 million (+25.2%) and facultative segment - EUR 286 million.
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by oleg.doronceanu@mxp.ro, 24.06.2010



GWP 3,4% increase in Poland in the first quarter

Polish insurers have paid approximately EUR 821 million in indemnities for the motor and property insurance in the first quarter of 2010, as results from the data collected by the Polish Chamber of Insurance (PIU). Life insurance benefits reached the amount of almost EUR 1.6 billion. The first quarter of this year was dominated by the losses caused by the long and frosty winter.
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by PIU, 26.06.2010



Bulgaria approved 2% tax on insurance policies
Bulgaria's Council of Ministers recently approved a 2% tax on insurance premium incomes, according to DNEVNIK.
The new tax will apply to all premiums in the general insurance market except for Cargo, where the first and final points of travel are outside Bulgaria, as well as on permanent health insurance covers. Life insurance and reinsurance premium incomes will also be levied no tax.
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by DNEVNIK, 25.06.2010



VIENNA Insurance approved new company structure
The 19th Annual General Meeting of VIENNA Insurance Group decided to spin off the entire insurance division as a 100 percent subsidiary, which will be called the "VIENNA INSURANCE GROUP AG Wiener Versicherung Gruppe", according to company's press release. As the largest individual company of the Group and leading insurance company in Austria, the Wiener Stadtische Versicherung AG VIENNA Insurance Group will conduct its operational insurance business. All preparations for the implementation of the resolutions have already been made by the management, guaranteeing a smooth transition.
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by oleg.doronceanu@mxp.ro, 01.07.2010



National Congress of Insurance Underwriters has come to its 2nd edition
The aim of the conference, organized by the National Insurance Guild and Association of Insurance Specialists Underwriters' Club in partnership with BUSINESS Format Group, is to create a new, democratic venue for exchanging experience, related to the vital issues of insurance underwriting, and working out the strategy of development. Also, organizers have committed themselves to enhance the Russian underwriters' professional reputation among the international community of insurers and clients, as well as to develop methodological bases for assessing the underwriters' professional level.
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FINANCIAL NEWS


Romania's Austerity Laws Published In Official Journal
Romania's two austerity laws cutting state employees' salaries by 25% and recalculating certain categories of pensions were published Wednesday, on the 30th of June, 2010, in the Official Journal, after they had been promulgated by the head of state on Tuesday.
The two austerity laws were forwarded to President Traian BASESCU for promulgation, after the Parliament eliminated the articles that stipulated pension cuts, recently declared unconstitutional by the country's Constitutional Court.
Monday evening, the joint committee for legal matters in Romania's Parliament unanimously adopted favorable reports on the austerity law package and eliminated the articles slashing or recalculating public pensions.
The committee eliminated the provisions which reduced pensions and remuneration for caretakers of disabled pensioners by 15%, those which set the pension point at RON 622.9 (EUR 1= RON 4.3688), those which involved the recalculation of magistrates' pensions and other articles which made reference to the unconstitutional provisions.
The Parliament adopted on the 29th of June, 2010, the report on the law aimed at reestablishing the budgetary balance, with 321 votes to two, as well as the report on the pension recalculation law, with 323 votes to 24 and three abstentions.
Romania's Constitutional Court ruled last Friday that some of the austerity measures for which the Government received a confidence vote in Parliament are unconstitutional, namely those referring to pension reductions.
by Mediafax, 30.06.2010


BNR maintains monetary policy interest rate at 6.25 pc
The Board of Administration of the National Bank of Romania (BNR) decided, on the 29th of June, 2010, to maintain the monetary policy interest rate at the historical minimum of 6.25 per cent, the rates of reserve requirements applied to RON deposits, at 15 per cent, and, in the case of foreign currency deposits, at 25 per cent, Mediafax informs.
Moreover, the Central Bank announced that it proposes to encourage a "firm" management of liquidity in the banking system, a much stronger message than the one promoted in the preceding May meeting, when BNR's BA was speaking of an "adequate" management of liquidity. "BNR keeps a close watch on trends in the internal and international business environment, so that, by the adequate use of the instruments in its power, it may ensure the stable level of prices in the medium run and financial stability", is stated in a BNR release.
Economic analysts had anticipated such a move from BNR, given that further maintaining a relaxed monetary policy is out of the question due to the inflationary pressures generated by the raising of VAT to 24 per cent. Moreover, floods occurring in the past days could contribute to the rise of inflation and the drop of GDP, ING Bank analysts argue.
It is the first time this year that BNR hasn't reduced the interest rate during the monetary policy session. The Central Bank has repeatedly reduced, since the beginning of this year, the interest, in each of the four preceding monetary policy sessions, from 8 per cent to the historical minimum level of 6.25 per cent, but maintained the rates of reserve requirements applied to RON and foreign currency deposits, at 15, and, respectively, 25 per cent.
On the other hand, BNR announced, on the 29th of June, 2010, a new historical minimum for the RON, against the EUR. Thus, the reference exchange rate reported by BNR was of RON 4.3688/ EUR, rising by 1.65 ban compared to the Tuesday level, of RON 4.3523/ EUR, although the RON appreciated in the first half of Wednesday's inter-banking session, compared to the rate reported at the close of the preceding session.
The national currency appreciated due to sales made by foreign players, against the background of optimism on currency markets in the region, after the rate rose, on Tuesday evening, at RON 4.4010/ EUR, a historical threshold.
The dollar started its day on the inter-banking market at RON 3.5913, to ebb, subsequently, at RON 3.5716. On Tuesday, RON's drop against the American currency had been even steeper than its depreciation against the EUR. The dollar had soared to the record level of RON 3.5697, rising by 7.01 ban compared to the level reported on Monday by BNR. "A depreciation of the RON by 10-15 per cent would not affect the banking system stability, but, at a rate of RON 5/ EUR, each financial institution would react according to the type of credits in its portfolio. We will not witness a steep depreciation of the national currency against the euro, as BNR has all the instruments needed to ensure stability", Steven van GRONINGEN, President of RAIFFEISEN Bank, stated, quoted by The Money Channel.
Moreover, according to analysts of French bank SOCIETE Generale, investors should buy RON, considered an appealing investment, Hotnews informs. Analysts recommend the buying of RON, anticipating that the currency would appreciate to RON 4.2/ EUR. The National Association of Romanian Exporters and Importers (ANEIR) considers the depreciation of the RON is a temporary trend, estimating that the exchange rate would reach RON 4.1-4.3/ EUR in the near future.
by nineoclock, 30.06.2010


July 1 - "D-Day" for price rises following VAT hike
The main effects the value-added tax's (VAT) raise by five per cent after the entry into force of the amended Fiscal Code today is expected to have are chain price rises, a weaker local currency and augmenting unemployment. Romanians will buy fewer goods with 100 RON.
The private sector is not the only victim of the VAT rise, but also low and average-income Romanians who will have to pay more for their shopping. Bread, milk, meat, vegetables, vegetal oil, sugar, garments and drugs will be 10 per cent more expensive on the average - industry representatives say - and small and medium-sized companies will be pushed towards bankruptcy and lay-offs. The main effect of increasing the value-added tax is the slumping purchasing power, namely the income-price ratio.
ROMPETROL announced yesterday that gasoline and diesel fuel prices will go up by 25 to 28 bani, after the VAT hike. Other companies in the fuel field are expected to operate similar changes that analysts fear might inflame the inflation rate.
All dietary supplements sold in pharmacies will be more expensive starting July 1. The bigger VAT will apply to vitamins, calcium, magnesium, vitamin C, spirulin and lecithin, all of which are subject to 19 per cent VAT at present. The tea that is used in diets or as remedy will also suffer the price mark-up. On the other hand, drugs used in therapies for cardiac and lung medical conditions, hypertension or infectious diseases will not be affected by the new, higher VAT.
Smokers are also in for bad news, for the price of cigarettes will go up by an average of one leu a pack following the increase in VAT and of the guarantees paid for fiscal warehousing, JTI Romania's Corporate Affairs Director, Gilda LAZAR, said. The cheapest cigarette brand sold in Romania will cost RON 9.9 a pack.
In addition, tills also need to be reprogrammed in order to calculate and display the new VAT rate of 24 per cent, according to Money.ro.
The president of the Association of Employers operating in the Pork Industry, Gheorghe CARUZ, thinks tax hikes may cause 25 per cent of operations in his field to close down.
The announcement about the VAT increase seems to have resurrected Romanians' shopping appetite, even if for a couple of days. Large retailers registered increases of customer flows in the last few days and basic food sales exploded, with Romanians stocking up on food and fast-moving consumer goods before the higher VAT entered into force. Retailers report 20 to 30 per cent sales increase in the last two to three days compared to average sales figures before the VAT rise announcement.
by nineoclock.ro, 30.06.2010


EC: LIDL-PLUS deal, a competition threat
European Commission found that the proposed acquisition of PLUS Bulgaria and Romania by the German-based retail group LIDL would affect the competition in the local consumer-goods market, the institution said in a press release.
These markets will be examined by the antitrust authorities in Romania and Bulgaria, so as to decide whether the transaction meets internal regulations.
EC sent to competition authorities in Bulgaria and Romania the review of the proposed acquisition of TENGELMANN'S PLUS operations in Romania and Bulgaria by the German retailer LIDL.
The inquiry carried out by the Commission revealed that the deal would affect the competition in the consumer-goods markets in Romania and Bulgaria. The transaction that was notified to the Commission on May 5 hasn't raised any antitrust issues as far as competition with other EU countries is concerned.
Bulgaria and Romania have requested the Commission to resend to internal competition regulators, the items referring to the economic concentration in Bulgaria and Romania saying the transaction affects the competition in their local markets.
LIDL is a German discount store chain held by SCHWARZ group that runs over 9,000 stores in 23 countries across Europe, including Romania and Bulgaria.
by Wallstreet, 1.07.2010


Only 5% Of Romanians In Urban Areas To Seek A Loan This Year - Survey
One in three Romanians in the urban environment has a bank loan to repay and only 5% of urban residents plant to take out a bank loan this year, according to a study compiled by Research 360insights for MEDIAFAX.
34% of Romanians in urban areas have at least one form of loan, most of the credit coming from bank loans.
Regarding loan intentions, 89% of Romanians do not intend to take out a loan this year, and only 6% plan such an action. Bank loans are targeted by 5% of individuals, while 2% of Romanians plan a leasing loan and 2% seek in-store credit.
Most loans will be contracted from banks, for five to six-year intervals and monthly payments of some RON 600 (EUR 1= RON 4.3537).
The bank loans will mostly target the redecoration (23%) or purchase of a home (15%), while other goals include refinancing, coverage of expenses, buying a car or education.
by Mediafax, 30.06.2010

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Les Rendez-Vous de Septembre
September 11th-16th, 2010
Monte Carlo, Monaco
Organizer: RVS
Media Partner: PRIMM Magazine - Insurance&Pensions
Official web-page: www.rvs-monte-carlo.com


Baden-Baden XPRIMM Symposium
October 24th, 2010
Holland Hotel Sophienpark
Baden-Baden
Organizer: PRIMM Magazine - Insurance&Pensions


31st Baden-Baden Meeting 2010
October 24th-28th, 2010
Baden-Baden, Germany
Official web-page: www.badendirectory.com

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THE EDITORIAL STAFF:

President: Sergiu COSTACHE CEO: Adriana PANCIU
Business Development Director: Alexandru D. CIUNCAN

Editor in Chief: Mihaela CIRCU
Scientific Advisor: Daniela GHETU
International Column Coordinator: Andreea IONETE
Senior Editors: Vlad PANCIU, Oleg DORONCEANU
Editors: Vlad BOLDIJAR, Oana RADU, Mihai CRACEA, Andreea STATE
General Secretary: Lidia POP

Accounts Manager: Georgiana OPREA
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e-mail: xprimm@primm.ro

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