Valeriu CHITAN
Chairman of the Board of Directors
National Commission for Financial Markets, Republic of Moldova

XPRIMM: Mr. CHITAN, a year ago you took over the mandate of CNPF Presidency, during a period of instability on the insurance market. Are you satisfied with what you have done so far?

Valeriu CHITAN: Instability that our market had faced during the last years, amplified by the financial crisis, has revealed several vulnerabilities in the work of the authorities who are responsible for supervision and regulation of the financial market (banking and non-banking). This was a key moment from which we redefined our role in the surveillance and consolidation of the market, in other words, we learned from our mistakes and adapted to the new realities. After a thorough internal and external analysis, we started by encouraging management within the institution to assume, in the true sense of the word, the sectors they manage and adopt a modernization vector.

We should understand very clearly: one of the key roles of the CNPF is the protection of consumer rights, an objective that we have pursued, including ensuring the stability of the insurance market and proactive supervisory measures. For us, 2017 meant rebuilding the identity and integrity of the institution. Among its achievements we managed to adjust the Insurance Law, to adapt the legislation related to the capital market and the joint-stock companies, to complete the Law on CNPF with new provisions to strengthen the financial autonomy and the institution's budgeting base and to adopt the development draft of our strategy until 2022.

XPRIMM: As you mentioned, among the important achievements in 2017 we can highlight the adjustment of the legislation, which will contribute, among other things, to increasing the transparency of the insurance companies' shareholders. Why are those measures necessary?

Valeriu CHITAN: As everyone knows - Moldovan insurance sector has faced several challenges during previous years, being exposed to "orchestrated" actions by some shareholders, which have resulted in negative consequences and caused imbalances.

I'll just name a few realities and challenges that we are facing at the moment: the financial viability and financial stability of the insurance market actors as a whole, such as: low performance of corporate and financial management; the provision of disproportionate fees by insurance intermediaries - which inhibits development of the market; optional insurance remains still underdeveloped; the monitoring status of the Republic of Moldova in the framework of the "Green Card" International System; the modest share of foreign investments in industry. Therefore, we need to recognize and accept the realities, but also to clearly set our basic objective - recalibration of the insurance market - from regulation to operational management.

XPRIMM: One of the newest insurers on the market, GENERAL Asigurari, which already holds a significant share, last year faced certain difficulties. What do you think about this?

Valeriu CHITAN: We are monitoring the situation of all insurers and their financial indicators very carefully, and at present the situation of the insurance company GENERAL Asigurari is stable. Thus, the decision of the shareholders of the company to increase their charter capital by MDL 20 million and to amend their charter documents was authorized. We continue to monitor all the company's shares, so we have all the necessary tools to intervene and ensure market stability, given by the law.

XPRIMM: In recent years, the market has been marked by important changes in the ranking of insurers, and also the establishment of special administration for a traditional company. What is the amount of expenses incurred due to this since establishment of special administration and how many policies are in place?

Valeriu CHITAN: Since establishment of the special administration (08.07.2016) and by the end of September 2017, indemnities of about MDL 16 million were paid and the insurer has 6,940 insurance policies in force. The company also records solvency and liquidity ratios above the limit set by the normative acts. I would like to stress the considerable and sustained efforts made by the special administrator and the supervisory authority to ensure the insurer's compliance with the solvency and liquidity requirements.

XPRIMM: During first9 months of 2017, the insurance sector has seen a slight increase. What are your estimates of market outcomes at the end of 2017?

Valeriu CHITAN: We will be able to talk about this only at the end of February when we will have summarized annual financial and statistical reports of the insurers. But we could refer to the official results after the first 9 months of 2017 - the market grew by over 5% and the amount of paid indemnities slightly declined (0.8%).

Considering the exchange difference of the national currency with the European and American currency at the end of 2017, we estimate an increase in national currency premiums by about 6%. At the same time, estimation in the European currency will mean an increase of the insurance market by about 10%.

XPRIMM: Starting from 1 April 2018 new regulations for calculation of solvency ratios of the companies,referred to in, will enter into force. Do you think that some insurance companies will leave the insurance market in 2018?

Valeriu CHITAN: New regulations in this regard will help to avoid interpretations reviewing the dispersion of eligible assets and, in essence, financial reinforcement of the insurers. Among these is the requirement to apply a 1.25 coefficient to calculate the minimum solvency margin, which means the need for additional assets in the portfolio of an insurer. At the same time, the categories of assets in which the insurance reserves can be invested are modified and completed, being filled with bonds and shares of the issuers, admitted on the regulated market, and within the multilateral trading system. At the same time, new requirements were set for the asset valuation exercise and certain limits of the dispersion rules have been modified. Until the application of the financial consolidation coefficient, Green Card issuers were forced to adjust their share capital up to MDL 22.5 million, which implicitly increased the minimum solvency margin and required an additional portfolio of assets to meet the requirements regulations.

XPRIMM: How do you assess the current situation in the Green Card segment, in the light of the measures taken by CNPF together with the National Motor Insurers' Bureau (BNAA)?

Valeriu CHITAN: We take all the necessary actions to ensure the efficient functioning of the Green Card system, both at the market level and at BNAA, which guarantees the future respect of all possible responsibilities and financial obligations, resulting from the status of "Guarantor Bureau".

I would also highlight in this context the effectiveness of some recently adopted measures, namely those legislative amendments that relate to the amount of minimum social capital for insurers selling Green Card policies, as well as to the increased powers of the BNAA to exercise centralized management of claims files "Green Card" in the State Automated Information System RCA Data.

I appreciate that we have a proactive and responsible behavior in relation to all the obligations assumed before external authorities, and we must further demonstrate that we have the proper financial capacity of companies to maintain our membership of the International Green Card System. It is also about strengthening our image in front of international partners and confirming that we are able to assume obligations and respect them, and here I will assure you that the authority will make all the necessary efforts and actions provided by the law, together with the BNAA and other institutions involved.

XPRIMM: What are your estimates regarding the insurance brokerage market? Is the CNPF preparing certain measures that target them?

Valeriu CHITAN: The brokerage market is in constant change. During first 9 months of 2017 brokers' revenues amounted to MDL 332.4 million or 31.13% of the total GWP of insurers. At the same time, CNPF initiated the procedure for amending the legal framework regarding the licensing of insurance brokers as well as regulating the substance of their activity.

XPRIMM: What would you propose in the short and medium term and especially for 2018?

Valeriu CHITAN: We will finalize and implement the normative acts initiated in the previous period, adapting them to international requirements and practices, so as to comply with the commitments assumed by the state authorities under the Association Agreement between the Republic of Moldova and the European Union. Ensuring financial stability of the market and, respectively, protecting creditors/beneficiaries is our priority. Thus, we will take all necessary measures to implement crisis management rules, including through appropriate and rapid instruments in case of deterioration of certain insurers.

XPRIMM: What are the expectations from the insurance companies this year?

Valeriu CHITAN: First, we rely on maintaining stability and increasing the financial capacity of the insurance system, transparency and new good faith investors. The development of voluntary insurance products, fairness to clients, timely and appropriate payment of compensation, communication and improvement of companies' trust in insurance products and services - these should be the main advantages and priorities of the market players and also the supervisory authority.

XPRIMM: What is the message that you would like to send to consumers of insurance services?

Valeriu CHITAN: At European level, a consumer is at the heart of all actions of the supervisory authorities. Despite whether the legislation is being amended and proactive measures are being promoted towards insurance companies and other actors involved.

Consumers of insurance products need to trust in insurance companies, benefit from quality services and, of course, receive compensations in time and in the amounts required, according to the conditions stipulated in their insurance contracts. In this respect, I encourage them to be properly informed at the time of conclusion of their policies, to ask for clarifications and all the information necessary for insurers and, in case they feel unfair, to address the CNPF. We have a major focus on clients of insurance companies, namely to restore confidence in this market and to ensure a balance between regulations, risk management and capital requirements, on one hand, and the quality of financial services provided by insurers on the other hand, to protect consumers. We will insist that we keep this balance every year, because nothing will last unless it is renewed at all times.

XPRIMM: Thanks, we wish you a lot of success!

N.red.: Valeriu CHITAN is an honored economist and manager, with a vast experience in the financial and economic field, occupying numerous top management positions, including the Minister of Finance, Member of the National Bank Board of Moldova; Deputy Governor for the Republic of Moldova within the Governing Council of the International Monetary Fund; Governor for the Republic of Moldova within the Governing Council of the World Bank, and a member of the Court of Accounts for many years. Graduate of the Faculty of Economics, he holds a Master in Business Administration from the BledSchool of Management Faculty in Slovenia.

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