Few people may have thought about it so far, but whoever has actually dealt with this issue must have dubbed it an absurdity: Romanians or Romanian companies are (still) only allowed to buy insurance policies from local companies. This regulation, which cannot be found in any other economic sector, is to be changed soon, because of pressure coming from the European Union and the World Trade Organisation. Thus, the insurance market deregulation will no longer be a mere slogan.
According to Law 136/1995, Romanian natural or legal persons must close insurance contracts with companies based in Romania, except for those cases when the requested type of insurance is not provided on the Romanian market. As the exception is very hard to find, all kinds of insurance policies are now concluded in Romania. Or at least it looks that way - because, in case of large insurance contracts, closed by multinationals, the Romanian insurers reinsure the policies to foreign companies (a move also known as fronting). This is the case of the insurance policies concluded for Sidex or Petromidia, for instance.
The Insurance Supervision Commission (CSA) is now working on a law draft set to modify Law 136, thus abrogating the respective article.
"We shall eliminate this discrimination from the law, as it is in breach of EU Directives and of the deregulation calendar for financial services that Romania undertook at the WTO," says Nicolae Crisan, CSA chairman.
According to Crisan, the new regulations could enter effect as early as this summer, due to an emergency ordinance, because "time is pressuring us." "The law draft also comprises other important stipulations for the insurance market. We should comply with EU directives as soon as possible," the CSA chairman explained.
Consequently, the foreign insurers will be free to sell insurance policies on the Romanian market or the Romanian citizens/companies will be able to buy policies from abroad.
Once this ban is lifted, what will follow? Market players have different opinions, as far as the short-term impact is concerned. Still, everybody agrees that, in the long run, this (de)regulation will be felt, as competition will become tighter.
Omniasig VP Fanel Plopeanu is quite frank: "I'm afraid. This means that the big companies can go straight to the insurers abroad. Everybody stands to lose, including the CSA, which now cashes commissions from the sale of policies by the companies registered here," he says.
"It will come as a market shock. This must be a well thought out regulation. Perhaps they should include mutuality - namely Romanian companies should also be able to sell policies abroad," says Mihaela Tudor, legal advisor to the National Union of Insurers and Reinsurers.
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