Eduard Simionescu, General Manager of GrECo Romania talks about corruption and other obstacles, the domination of motor insurance and the necessity of IT solutions in insurance.
How do the current political developments and economic conditions in Romania influence the insurance industry and clients’ risks?
SIMIONESCU: Romania had enjoyed robust growth after joining the EU in 2007. The predictibility of the political decision-making remains the main challenge after the country had four different prime ministers during 2017 and 2019.
At the beginning of this year 2020, the economy was expected to expand by 2,21% in 2020 and the inflation was anticipated to fluctuate between 3,86% and 3,0%. However, the disruption caused by the COVID-19 pandemic is already visibile and its full effects are yet to be calculated. Almost one in five companies in Romania was forced to either reduce or stop their activity in the last months.
In which economic segments do you expect increasing investments in the coming years?
SIMIONESCU: Considering the fact that Romania’s key industries are construction, manufacturing, agriculture, oil and gas, textiles and tourism, we expect that they will continue to account for the majority of next years investments and also to consolidate their share to the country’s GDPR and employment.
Car manufacturing, offshore exploration in the Black Sea and tourism events such as medieval castles fair, concerts and film production could be the choice of more and more investors.
What are the biggest risks foreign companies doing business in Romania need to consider?
SIMIONESCU: Little progress in improving the predictability of the state decisions impacting the companies and employees and in the fight against corruption can be assessed as the major exposures while making deals in Romania. Poor quality of infrastructure (motorways, railways) and the outward migration of skilled labour are also disquieting factors for the companies.
As per the World Bank’s “Doing Business 2020” ranking, evaluating the ease of doing business in various 190 countries around the globe, Romania ranks 55th, with the lowest scores for getting electricity and construction permits as the biggest problems, followed by the insolvency resolution and minor investor protection.
How do Romania’s risks differ from those in other countries?
SIMIONESCU: As an ex- communist country, Romania is still facing some historical impediments such as:
– Industrial assets were not insured under communism. Even today, state-owned enterprise managers may buy insurance only to the extent that it is required for a bank loan.
– Insurance awareness among the general population has been low and is still developing. Most individuals’ experience of insurance is limited to the compulsory classes and they still see insurance as a form of taxation rather than a service. Even the mandatory household insurance only has an actual penetration rate of 20%. Voluntary insurance is further discouraged by low income levels.
– A further legacy of communism is a lack of awareness of individuals’ legal rights. This results in little third party liability insurance being written apart from the compulsory classes.
Despite these holding back factors, the yearly insurance spending per inhabitans increased year by year to reach EUR 109 in 2018. It is still below the average of the EU, EUR 2,170 per person, or two-three times lower than that of Hungary or Poland but the perspectives are promising after the campaigns to raise awareness of the benefits of insurance developed by the insurance industry.
In case of companies, it was observed that they buy only particular categories of insurance (such as leased plant and car insurance and employee benefits) rather than comprehensive insurance programmes.
From a natural perspective, Romania is exposed to earthquake and floods that lead to particular higher conditions for the (re)insurance contracts compared to its neighbouring countries or to Western Europe countries.
What are the main facts of the insurance market in Romania?
SIMIONESCU: In 2018 total gross written premiums (life and non-life) were RON 10.14bn (USD 2.57bn). Non-life (excluding personal accident and healthcare) accounted for RON 7.64bn (USD 1.94bn). Motor is the largest class, accounting for 72.3% of the non-life market.
At the end of June 2019 there were 28 insurance companies authorised to operate in the Romanian market. Major insurers are City Insurance, Allianz-Tiriac, Euroins Romania, Vienna Insurance Group companies (ASIROM and Omniasig) and Groupama. There were also 11 branches authorised in other EU member states conducting their activity (non-life and life) in Romania under freedom of establishment as at 30 June 2019.
There is a high level of market concentration in the top five non-life insurers in Romania (they accounted for 72,22% aggregate market share in 2018) exaggerated by local companies having very high market share of MTPL, by far the biggest line in Romania. There are no longer any MTPL tariff classes. Although a six-month cap was placed on MTPL premiums commencing 18 November 2016, with effect from 18 May 2017 the premium cap ceased to apply and the ASF now publishes reference fees in order to provide a benchmark for consumers to compare their MTPL quotes from insurers. The main distribution channels used to be direct sales forces and agents but brokers have become the dominant force. Most commercial/industrial business is broker-controlled.
What specifics differ from those in other countries?
SIMIONESCU: The large share of the MTPL in the overall insurance portfolio is, for sure, very particular for Romania. In respect of the regulatory frame, the EU directives and regulations to be implemented in the member states should result in a similar working environment for the brokers and insurers and similar care taken of the customers’ demands and needs
How does your approach differ when it comes to Employee Benefits?
SIMIONESCU: Employee Benefits have proved to be an attractive motivation and retention tool and thus we have seen increases in this line of business for the last 4-5 years. Our specialised Health & Benefits team and particular attention is further allocated within our company to the EB business line as more and more clients value this product and invest in sophisticated insurance plans.
Can international insurance programs be implemented?
SIMIONESCU: EU insurers can do business with Romanian clients as per the FoS, Freedom of Service principle. Non- EU insurers are not allowed to conduct insurance business in Romania without authorisation.
There are many international programmes for the Romanian subsidiaries of international companies that we service, either by managing the locally issued fronting policy or by providing certain agreed services for the FoS programmes. The major requirements for our activity are discussed and agreed in advance of the service provision so that we ensure the highest degree of compliance. Furthermore, periodical, at least annual, stewardship reports are issued to the use of the controlling broker and customer.
Please describe GrECo Romania’s incoming business servicing capabilities. Can you tell us about your most complicated case when dealing with international clients?
SIMIONESCU: Critical requirements for our colleagues who deal with the international clients are the previous experience in dealing with complex accounts and English proficiency. Apart from English, we are glad to have colleagues in our team who can speak French, German and Italian.
For sure, the most sophisticated cases are those to comprise more parties than just our clients and we face the challenge to accommodate interests that may diverge to some extent from those of our clients. For example, when working on recent construction project, we managed to solve the queries of our client the contractor, of its financing bank, of the state construction authority (the principal) and of the construction professionals employed by the principal in a satisfactory manner.
What regulatory challenges are companies facing? What types of insurance are mandatory?
SIMIONESCU: The compulsory classes include motor third party liability and professional indemnity for an increasing number of professions (construction professionals, lawyers and notaries, medical profession etc).
A form of directors’ and officers’ liability insurance is compulsory for the managers of joint stock companies. The Law on Compulsory Home Insurance requires every householder to buy first-loss insurance against the perils of earthquake, landslide and flood.
The compliance with Solvency II supervisory system, GDPR and IDD and AML/CFT is of continuous concern for all the insurance market players preoccupied to deliver high standard services to the customers while observing the current legal framework.
How do you cope with these regulatory issues?
SIMIONESCU: Our specialists within the central office in Austria and within the local team collaborate and exchange information so that the policies and procedures that we implement locally are compliant with the national requirements and also, if case, with our group requirements. In addition, helpful data and guidelines are provided by the local association of brokers, whose leverage in the market has continuously increased to the benefit of its members.
When was the last (most recent) bankruptcy of an insurance company in Romania?
SIMIONESCU: After the period 2015-2016 when two local insurers, mainly focussed on MTPL insurance, went bankrupt, we witnessed the withdrawal of the insurance licence and start of bankruptcy procedure of the company Certasig in February 2020. It appears that Certasig, that was not issuing any motor insurance, got into difficulties after some large marine losses in the region and after failling to review its capital reserves.
Our team in charge of markets security is constantly analysing the public information about the insurance companies in respect of their financial standing and compulsory indicators, claims behaviour, etc in order to those placements with potential high risk. Co-insurance arrangements and/ or re-marketing of a closed deal are also options we consider in case of potential large exposures.
Where do you at GrECo Romania focus on when advising clients and what special expertise have you developed?
SIMIONESCU: We value the permanent dialogue with our clients so that we correctly understand the particularities of their business and so that we are able to indicate what insurance solutions suit them best.
Apart from our team for international clients, there are experienced colleagues specialised either by insurance line or by industry so that we can liaise with a wide range of clients for various needs. They are supported by pur Headquartes in Vienna not only in respect of knowledge exchange but also if complex cross border placements. It is worth to mentioned that we have developed an unique IT in-house (we have our IT Development team based in the Belgrade office) solution which allows us the immediately distribute insurance offers or policies to the bank and leasing customers. We are proud to say that probably this technology is the best in our country and we are constantly upgrading it and adding new features.
GrECo Romania GmbH – Sucursala Bucureşti
Eduard studied law at the University of Bucharest and the Romanian American University and graduated with a master degree in 2002. Already during this time he worked for a multinational insurance broker as an Account Executive. Later he was promoted to department manager for financial lines. In 2010 he joined GrECo Romania as a General Manger. Since then he and his team have demonstrated strong growth and excellent client service.
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