A crash cours on insurance in Romania

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.

Eduard Simionescu

Eduard Simionescu

General Manager
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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Characteristics of insurance in Hungary

Béla Argay, General Manager, Zoltán Mezős Head of Domestic Business and Zsolt Tóth, Head of International Business at GrECo Hungary talk about developments in Hungary, the lack of a social health system and how they deal with insurance market security.

How do the current political developments and economic conditions in Hungary influence the insurance industry and clients’ risks?

ARGAY: There are a lot of foreign investors in Hungary, German investors are the most significant. Our key sectors are automotive, construction and food and agriculture. In recent years the political environment is not conductive to foreign investment, the current government is pursuing protectionist, populist economy politics. In Hungary all the insurance companies (with one exception) are in foreign ownership, all the major international insurers are here.

What are the main facts of the insurance market in Hungary?

ARGAY: In 2018 total insurance premium amounted to 1.081 billion HUF (ca. 3 billion EUR), of which 49% was life insurance. Brokers and intermediaries play a significant role (approx. 500 brokers on the market), while in the retail market segment online brokers have a major relevance. In the corporate business the dominant lines are property and liability.

GrECo Hungary has been on the market for 30 years as a leading international broker company. How does your approach differ when it comes to Employee Benefits?

ARGAY: GrECo Hungary concentrates on group Health & Benefits solutions for its clients. The market was adversely affected, that the government has been taxing the Employee Benefits (EB) products since beginning of 2019. Due to the lack in the social health system the demand on private health care is growing, therefore we are developing new innovative solutions in this field.

Can international insurance programs be implemented? How do you coordinate with the controlling broker?

TÓTH: Yes, of course, many international insurance program were and are implemented. Programs coming from the EU work on a Freedom of Service basis, programs from outside of EU have to be admitted and fronted.
A special regulation about insurance tax (rather insurance levy) has to be considered.

GrECo Hungary ensures an excellent client service based on the long term (about 30 years) experience and specialized service team with good languages skills. Our General Manager and I coordinate the work with the controlling brokers. The service strictly follows the agreed service standards.

Besides myself my team consists of five account handling people. They all they speak English and/or German. They have 10-30 years´ experience in handling international clients and insurance programs. My team is supported by specialists handling EB-programs and motor insurance of big truck fleets.

Can you tell us about your most complicated case when dealing with international clients?

TÓTH: This would be a large multinational German company, which has four individual production factories in Hungary. They need a sophisticated, rather the most comprehensive service including handling of cases under international programs (property, liability, CAR, D&O and Cargo). GrECo Hungary is also handling additional local lines, like employer’s liability (100 claims per year), employee benefit programs (travel, group life and accident), and motor insurance as well.

Was there a recent bankruptcy of an insurance company in Hungary?

MEZŐS: The ASTRA Insurance company (Romanian ownership) went in bankruptcy in 2015 . This affected a lot of car owners and fleets, also private persons with home insurance. We had to manage a quick transfer of several MTPL and casco programs of our clients.

This is one reason why we take market security very serious. Locally we are following the course of the insurance companies. Our carrier risks are monitored on a group level and we will not work with those companies who are not fulfilling certain predefined parameters. If the client wants to partner with such a company we strongly advise him about all possible negative implications this may bring.

This matter will be even more important since it can be expected that also insurers will be affected by the crisis. The overall economic situation will create a more challenging environment for the insurers’ operations. The strong backing of our group and the centrally provided support allow us to adhere to the highest possible servicing standards.

Where do you at Hungary focus on when advising clients and what special expertise have you developed?

ARGAY: We are focusing on thorough risk analysis to understand client’s activities, their insurance needs and loss history. Based on this we are preparing a special risk mapping to show our clients their insurance coverages and lack of covers, which can affect negatively their balance sheet.

Béla Argay

General Manager
GrECo Hungary Biztosítási Alkusz Kft

Béla joined GrECo International Kft. in 2004 and since then inspires the colleagues to reach their potentials and exceed expectations . Béla has previously worked at Gerling-Konzern Hungary, as General Manager, he leads the company with the positive „can do” attitude and acquired new markets. Béla is Customer-focused and company centric manager with the experience in leading teams to record breaking revenues.

Zsolt Tóth

Regional Manager
GrECo Hungary Biztosítási Alkusz Kft

Zsolt first joined GrECo International Kft. in 1992 and was appointed Head of the International Department in 1999. He leads the team with a methodical approach and his extensive experience. Zsolt has previously worked at Providencia – Insurance Company, as Claim Adjuster, with his thoroughness and professional knowledge made all problematic claims look easy. At GrECo Zsolt is leading the team that is handling all international clients serviced by GrECo Hungary.

Zoltán Mezős

Zoltán Mezős

Regional Manager
GrECo Hungary Biztosítási Alkusz Kft

Zoltán started to work in the insurance market in 1997. He joined to GrECo in 2011 when he was the Competence Center Manager of Property and Liability. Later he was promoted tor Head of Risk and Insurance Technique and in 2019 he became the Regional Manager of Central Hungary. He leads our team with experience from different fields, such as Insurers, brokers and Financing Leasing parties. Zoltán has previously worked at Lombard Leasing, AIG Hungary, Aon Hungary and AIM Insurer. Zoltán is responsible for all Account Managers with domestic portfolio and support them in sales process and is an advisor with his high insurance knowledge.

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Insurance in Czech Republic from A to Z

Jiri Kulas, General Manager and Pavel Mazanec, Head of the International Department of GrECo Czech Republic talk about the world’s best country for cross-border trade, specifics of health insurance and the high percentage of insurance brokers.

How do the current political developments and economic conditions in Czech Republic influence the insurance industry and clients’ risks?

KULAS: GDP grew in 2019 by approx. 2,7% which means moderate slow-down compared to 3% GDP growth in 2018. Positive factors are very low unemployment rate and increase of average income. Before the outbreak of coronavirus pandemic it was expected that the GDP growth will continue to slow-down to approx. 2% in 2020 mainly because of the situation on other EU markets and Brexit as the Czech Republic is very export oriented country. The overall good economic situation had also positive effect for the insurance market. It is reflected in an 5,7% increase of written premium in 2019. The main driver of this solid increase was non-life insurance which grew by 7,3%.

In 2019 the insurance market faced some major legislation/regulatory changes. The first one was IDD which imposed many new duties on insurance sector, e.g. examination of professional competence of insurance intermediaries which has to be passed until November 30th 2020. The other one is the one-off taxation of technical reserves of the insurance companies from 1.1.2020 which will represent an amount corresponding to approx. 1 year profit of the whole Czech insurance market. It will very likely lead to premium increase.

In which economic segments/industries do you expect increasing investments in the coming years?

KULAS: Due to the fact that Czech Republic is an export oriented country it is apparent that the transport infrastructure is not adequate to the traffic. Therefore we can expect large investments into the construction/reconstruction of roads and railway. All analyses show that if the economy wants to stay competitive it is absolutely necessary to invest into sectors/products/services with high value added. Of course automotive sector will play an important role also in the future.

What are the biggest risks foreign companies doing business in the Czech Republic need to consider?

KULAS: The Czech Republic, long known for attracting top multinational companies and talented workers, was in fact recently named among the world’s best countries for cross-border trade, and one of the easiest nations to do business in. But there are still some challenges to consider. Some of the major ones are ongoing changes to the tax system, language barrier when dealing with Czech authorities, complex bureaucracy, speedier judicial process and greater transparency in public procurement is needed.

What are the main facts of the insurance market in the Czech Republic?

KULAS: The total premiums written in 2019 was CZK 136.72 billion. This represents an increase of 5.7% compared to 2018. I tis important to mention that these figures don´t include health insurance because it is not a commercial insurance but there is a state scheme in the Czech Republic.

Life insurance premium written amounts to CZK 45.12 billion in 2019, up by CZK 1.15 billion, or 2.6%, compared to 2018. On the other hand the number of active insurance contracts decreased by 1,5% and new contracts dropped by 13% compared with 2018.

Non-life insurance in 2019 – especially in the second half of the year – confirmed a robust growth rate, with premium written for the year rising by 7.3%. Compared to 2018, it strengthened by CZK 6.19 billion and currently amounted to CZK 91.6 billion.

Corporate insurance (excl. Motor Hull and Motor Third Party Liability) shows written premium of CZK 20.24 billion, up by 5,5% compared to 2018.
It is difficult to estimate the premium volume placed by insurance intermediaries because there are several intermediaries associations in the country. However taking into account just corporate insurance we can estimate that 95% of the premium is placed through insurance intermediaries.

What are the most interesting recent developments?

KULAS: MTPL is currently strengthening by 8.3%, surpassing 3.4% growth in the number of insured vehicles, but the average loss in this sector is growing at an increasing rate of approx. 7% for property damage (now CZK 45,000), resp. 8% for health damage (now CZK 400,000) than average premiums (growth of approximately 5%).

Motor Hull insurance maintains a high 10.1% growth rate. This continuing significant trend is due to the increasing number of motor vehicles insured.

Corporate insurance confirmed solid growth exceeding 5.5%. Despite the expected slowdown of the Czech economy, compared to 2018 (+ 4.9%), growth in premiums written in this cross-cutting segment continued to accelerate.

What specifics differ from those in other countries?

KULAS: As already mentioned there is no commercial health insurance. The only exception are expats where a commercial insurance product is available. The other non-commercial insurance is employer´s liability / workers compensation. This cover has to be bound with only two insurers directly without broker´s involvement. No insurance tax is imposed on insurance premium.

Brokers account for about 95% of all corporate insurance sales in the Czech Republic. The share in life business is by far smaller as it is dominated by MLM structures such as internationals like OVB, Swiss Life or locals like Partners or Broker Consulting. Our company is not involved in Life business but we have established collaboration with one of above mentioned international MLM´s.

Can international insurance programs be implemented? Which special features have to be considered? How is this done at GrECo CZ? How do you ensure excellent client servicing? How do you coordinate with the controlling broker?

KULAS: Implementation of the global insurance programs with the local fronting partners in the Czech Republic works mostly without difficulties, some companies in the Europe are covered on FOS basis. The local fronting Policies are usually issued either in Czech language or in both, Czech and English language. For communication with our foreign partners or some clients about insurance Policies in Czech language we use the standard forms – Policy Digests or Policy Summaries in English or German language.

In order to meet the Czech law stipulations, Motor Third Party Liability Policies (and the Green cards) can be issued only by insurance Companies licensed in the Czech Republic.

Please describe incoming business servicing capabilities? How many and what languages are spoken in your international team? How many years of experience does your team have in international client servicing?
Can you tell us about your most complicated case when dealing with international clients?

KULAS: The servicing capacities of GrECo Czech Republic Incoming business department are five Account Managers and one Account Executive, English or German speaking. GrECo CZ was established back in 1992 and the incoming business is provided since the very beginning, i.e. for almost 30 years.

MAZANEC:For international clients we provide full broker service, including claims handling and advisory works. Complicated cases could be the claims, which are covered on FOS basis under the global programs and settled with a Loss Adjuster abroad, just because all supporting documents are in Czech language and wording of the global program is not available to us. In such cases it is necessary to closely coordinate the claims handling procedure with controlling broker.

What regulatory challenges are companies facing? What types of insurance are mandatory?

MAZANEC: Like in every EU country we have to follow all EU directives and regulations like IDD or GDPR. The local translation of IDD was even stricter compared to some other countries. All insurance intermediaries have to pass a special exam to prove professional qualification.

Compulsory Insurances in the Czech Republic are, like in most countries, Motor third party liability and via a government scheme, employers’ liability. Other compulsory lines are very industry specific, like in aviation or railway operations and clinical trials of the pharmaceutical industry or for risks that could pose a threat to the public like nuclear power plants.

Where do you at GrECo Czech Republic focus on when advising clients and what special expertise have you developed?

KULAS: Our values are market power, industry expertise and experienced broking team. Many of our employees have been working for more than 10 years for GrECo. Our company is regularly evaluated by the professional insurance panel being one of the top 5 brokers in the country – usually as the only international broking house. Furthermore we are following GrECo Group´s strategy of Specialties. We are able to offer specialist knowledge to our clients in areas like Aviation, Financial Institutions, Transport & Logistics, Construction & Real Estate, Sports & Entertainment, etc.

Jiri Kulas

Jiri Kulas

General Manager
GrECo International s.r.o. – Czech Republic

Jiri holds Ph.D. degree from University of Chemical Technology in Prague. He started his professional career as a property underwriter in Generali in 1998. After one year he joined Aon as an Account Manager. In Aon he worked in various managerial positions starting as claims handling director up to chief commercial officer and company´s executive responsible for overall business. He was also a member of the core group of European Sport, Recreation and Entertainment practice group. He joined GrECo in 2011 and in 2012 he became General Manager.

Pavel Mazanec

Pavel Mazanec

Regional Manager
GrECo International s.r.o. – Czech Republic

Pavel has been working in the corporate insurance industry for 23 years, 18 of them as an Account Manager for international clients. After his academic education in engineering and insurance he joined GrECo in 1996. He heads the department for the servicing of Czech subsidiaries of international corporations.

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Jonathan Höh

Group Sales & Market Coordination

T +43 5 04 04 396