Foreign rival companies will make an aggressive entrance not just in the insurance or brokerage sectors, but in all the segments of the financial market: banks, private pensions, mutual funds, believes Theodor Alexandrescu, the manager of AIG Life, the second biggest life insurance firm in Romania in terms of gross underwritten premiums.
In the first two weeks of January, more than 20 insurers of Europe announced their entrance through notification on the Romanian market, and 10 insurance brokers announced the same last week. Why is it that so many insurance companies have entered the Romanian market so rapidly?
"Because a rising number of companies prefer to benefit from the size of domestic companies to expand directly," explains Alexandrescu.
"When an increasing number of companies will come to sell policies in a country without settling there through a distinct company, we will see competition emerging between ruling bodies-who offers the best conditions for a company to settle in a country or another," explains Alexandrescu. Thus, some companies can simply withdraw from a certain country if licensing conditions are tough, operational costs be too high or supervision norms too restrictive.
How will these new companies arriving on the market operate?
"There will be marketing partnerships through brokers, banks or even through other insurance firms. All of them will come. What you've seen so far is just the beginning. The European market is governed by competition and free competition must be stimulated on the Romanian market, as well," explains Alexandrescu. However, unlike Poland, the Czech Republic or Hungary, the Romanian financial industry is not solid enough, and therefore the impact will be much more dramatic in our case than in the countries that joined the EU in 2004.
"We registered shrinking inflation and ongoing GDP growth, too but much later. Thus, the time span between the moment we started witnessing economic stabilisation and the moment of integration is much shorter in our case. Inflation stalled market development. It is only when inflation is below 10% that long-term financial products become relevant," Alexandrescu also says.
AIG Life in February will launch three unit-linked products with investments on the Bucharest Stock Exchange of between 10 and 90%.
The company at the end of 2006 had 250,000 customers and expects to reach 280,000 customers in 2007. For the new unit-linked policies, the target is 10,000 customers. Alexandrescu says that together with AIG Romania (controlled by the same AIG US financial giant), AIG Life "covers" 850,000 persons, with life or accident insurance.
The company estimates gross underwritten premiums rose by 40% in 2006 year-on-year, to 42 million euros and expects to see similar growth this year.
AIG Life
Will launch 3 unit-linked products in February, with investments on the Stock Exchange of between 10 and 90%
In late 2006 had 250,000 customers and expects to reach 280,000 customers this year
Estimates gross underwritten premiums in 2006 rose by 40% year-on-year and expects to witness similar growth this year
Estimates net income last year advanced by 40%, to 4.7 million euros
2007 income target has not been made public
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