Alert and sustained increases in insurance are still a dream
 While the stabilization of the economy and of financial markets in the latter part of 2009 is likely to reduce tension in the insurance market, weak economic environment makes it difficult to reach, in the next period, sustained and alert growth rates of the profile market, shows the Financial Stability report for 2009, recently published by the NBR.
Insurance companies have been affected by economic recession, by falling prices of shares in the first half of the year and by the depreciation of the leu, but received substantial returns from investments in government securities and bank deposits.
As a result, insurers have adjusted acquisition and administration expenses depending on market dynamics, 2009 marking a significant slowdown in the growth pace of expences on general insurance sector and a contraction for life insurance contracts.
Regarding investments, insurers have turned to fixed income instruments, mainly state bonds, but also to bank deposits due to significant yields offered and to preference for liquidity. Life insurance related investments, for which investment risk is transferred to customers, advanced in 2009 under the circumstances of underwritings increase on this insurance segment, the investments in shares, although growing, still having a low level.
"The flexibility of insurance companies to the economic conditions is beneficial for the financial stability of the sector, because it reduces pressure on efficiency indicators and it does not take place a transfer of costs to insurance policies", said the NBR report.
Profitability indicators had a slightly positive evolution in the first half of 2009 after the strong depreciation of 2008, due to capital increases, adjustment of acquisition and administration costs to the difficult market conditions, due to a proper risk management, but also due to substantial yields offered by state securities and bank deposits.
Thus, add NBR experts, "positive results have been growing, and the negative ones have reduced their dispersion, but profitability indicators remain below 2007 levels, but reversing the trend may indicate greater stability of insurance companies in the next period".
Also, some insurance companies have registered deterioration of prudency indicators, under the circumstances of the losses in the current activity or of reduction of the prices of financial assets, capital injections being needed for liquidity and solvency rates to be maintained above the regulated minimum level.
Therefore, 19 insurance companies have received capital injections from shareholders, amounting to over RON 550 million in 2009, most of them being operated at the request of the ISC.
Author: Andreea IONETE
on 27.08.2010
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