Angela TONCESCU, President, Insurance Supervisory Commission
Indeed, the Insurance Supervisory Commission supports the need for a greater involvement of insurance companies and brokers in the social life, because, beyond the gesture of humanity, they also have the possibility to become better known among the population and, implicitly, to contribute to promoting the concept of insurance.
XPRIMM: The economic landscape of the past two years has brought a number of challenges for the insurance market. However, this industry can be characterized by one word - stability. What were the main measures through which the supervisory authority has contributed to maintaining this stability?
Angela TONCESCU: All the Insurance Supervisory Commission's efforts are focused to prevent and act in due time, so that the effects of the financial crisis upon the market be reduced to minimum. In this respect, we are permanently monitoring the activity of insurance companies and brokers and we are taking all measures required to ensure that prudential parameters are met by the insurers in particular. Since 2010, the ISC has a new approach on the supervisory and control process, which starts, in the first place, from the analysis of the manner in which the insurers activity is conducted, from the way of establishing objectives, as well as from the means of implementation and monitoring performances. Also, the objective examination of risk management and of internal control systems has become an important target of the supervisory process.
At the same time, through all the decisions taken, but also in the meetings we have with the representatives of insurance companies and brokers, we are trying to stimulate the adoption of prudent behavior in terms of underwriting activity, risk transfer, intermediation, so that the main objectives of each company will be market stability, protection of insurance products consumers and loyal competition, founded on the business ethics principles.
At least until now, I can say we did this, as long as insurance companies’ reserves meet all the legal requirements, while liquidity and solvency parameters are compliant with the prudential norms as well.
Currently, the Commission representatives are involved, at European level, in elaborating measures of implementation of the future solvency regime directive, Solvency II. Together with similar authorities in some countries with which we were able to establish informal partnerships, especially those with whom we already have close collaboration relationships, we will make every effort for these measures neither to allow further interpretations, nor disfavor states with a structure of the insurance market similar to the Romanian one.
XPRIMM: Which are, in your opinion, the major milestones of the Romanian insurance market’s evolution in 2010?
A.T.: In terms of gross written premiums volume, the figures for the year 2010 and even those in the first quarter of 2011 were not a surprise, because we were expecting the insurance market to decline. This evolution is normal considering the fact that the insurance market is closely related to other markets, such as, for example, motor sales market or bank loans market, which themselves have registered decreasing evolutions. The unfavorable evolution of unemployment, weakened household income and the population pessimistic expectations regarding financial security, which led to the postponement of the decision to buy insurance, completed the influence of these factors.
On the other hand, in 2010 several measures have been implemented, which certainly will contribute to market development in the coming period and to increasing the level of consumer’s trust in insurance. I mean, for example: the beginning of the bonus-malus system implementation, the electronic issuance of MTPL policies, regulating how insurers and brokers are solving complaints, applying legal provisions related to the obligation to inform the consumers, regulation of professional qualification requirements that should be fulfilled by the people working in distribution of insurance products etc.
Also, in 2010, the activity of underwriting mandatory household insurance against natural disasters began and, in spite of ulterior legislative and other changes, I hope that insurance companies will be able to explain to people that the fine they could receive is not the worst thing that could happen to them, but the fact that, in the absence of insurance, nobody will pay them any compensation for damages they might suffer. And that natural calamities, whether is earthquake, fire or landslide, do not expect a specific date to occur.
XPRIMM: Which new trends will leave their mark on the insurance market development in 2011, a year that analysts believe to be one of economic growth revival?
A.T.: Preliminary figures for the first quarter of this year show a significant increase of underwritings on the fire and allied perils class, and especially in household insurance, as well as of gross written premiums of general liability insurance or credit insurance. Therefore it seems that insurers have successfully focused their efforts on the development of other insurance lines, temporarily giving up the motor insurance classes, which are now less likely to revive due to low sales of vehicles and auto leasing.
Although it is still difficult to make a forecast with a small margin of error, precisely because the insurance market depends on evolutions in other sectors of national economy and of people's purchasing power, I think we will not witness decreases of the magnitude of those so far, and that the market has overcome the hardest part.
Certainly, the Insurance Supervisory Commission will do everything the legal framework allows, in order to support market development, and will be flexible in finding optimal solutions to specific problems, like we have already been doing so far.
XPRIMM: Following the QIS 5 Country Report conducted among insurers in Romania, how do you assess the level of preparation of the profile companies for the implementation of Solvency II?
A.T.: For the insurance sector in Europe and, obviously, in Romania, the undeniable priority of the moment is to continue preparing for the implementation of Solvency II project.
In the context of the financial crisis, European Commission states even more firmly that the implementation of Solvency II at the date proposed by the Omnibus II directive, namely January 1st, 2013, is and remains a major objective for all involved.
For more thorough preparation of the implementation of this Directive, the Insurance Supervisory Commission has initiated concrete actions since 2006, when Romania had not yet joined the European Union. These actions aimed, primarily, the constant and active ISC participation in working groups dedicated to Solvency II project of the European Commission, of the European Council, of the European Committee of Insurance Supervisors - current EIOPA, and of the International Association of Insurance Supervisors.
Due to this participation, we are able to obtain accurate and useful information for decisions we need to take in order to implement Solvency II in Romania and, more importantly, to contribute to the elaboration of regulations in such way that we can protect the interests of the Romanian market. To achieve this, we managed to make informal partnerships with some countries, because it is impossible to "fight" alone against the ideas that other countries with much bigger insurance markets, with different structures and benefiting from a much more responsible attitude from consumers than our country try to impose.
This strategy has already worked for the final text of the Solvency II directive, where we have managed to obtain the elimination of provisions that would have disadvantaged the Romanian market compared with large insurance markets.
Another action for which the Insurance Supervisory Commission has allocated significant human and material resources is related to training its own personnel and the personnel of insurance companies, regarding the future solvency regime.
A conclusive example in this respect is represented by the numerous seminars, conferences and training sessions that ISC has organized in recent years, both for our staff, as well as for the staff of insurance companies, either in the Phare projects that we have benefited from, or by our own forces. Most training actions have enjoyed the presence of renowned experts in the field, such as: Karel van HULLE – the responsible for the Solvency II project of the European Commission; Carlos Montalvo REBUELTO - Executive Director of EIOPA; Paul SHARMA - coordinator of Basel II and Solvency II projects within FSA-UK, members of the IAIS secretariat etc.
Also, of special importance is the continuous dialogue between ISC representatives and the project responsibles for Solvency II implementation in each insurance company, which was established following the assessment made by ISC in May 2010 regarding the degree of preparation of each insurance company for the implementation of the new solvency regime.
Due to the transparency and availability to communicate of ISC, insurance companies are permanently informed on the legal status of the future solvency regime and on actions that are taken in this respect at European level, which certainly will help them assimilate more easily the Solvency II requirements.
The high rate of participation in QIS 5 of Romanian insurers (respectively 70% of insurance companies that, according to current data, fall under the incidence of Solvency II) provides a positive message regarding the fact that the insurance industry is getting ready for the implementation of the new supervisory regime.
Although from the QIS 5 insurers’ reports results that in some areas progress must be made, such as, for example, data quality or IT systems, still the signals were positive, and all participants indicated that they will be ready at the date of the entry into force of the new supervisory regime, January 1st, 2013.
Given the complexity of technical specifications, of internal models and of specific procedures of aggregation, evaluation and compliance of indicators in the new solvency regime, which involves a laborious and long-time documentation, it is very important that the technical training actions be pursued with the same experts, both of the insurers and of the supervisory authority.
XPRIMM: One of the main problems faced by insurers in Romania is lack of information in the field of potential insured. How do you think the overall industry can contribute to increasing the degree of insurance education of the public?
A.T.: I must notice the fact that, lately, representatives of insurance companies and brokers are much more active in this respect. There are more and more seminars and conferences, campaigns to promote various products, the media is more interested in the insurance field and, consequently, more and more information reaches the public. The professional association of insurers is making efforts for conducting a program of financial education in schools, and probably the first result of these steps will allow it to focus on the most effective courses of action to educate future consumers.
XPRIMM: Last year, ISC has been an initiator and an active and strong supporter of the CSR component in the insurance market. What do you think the importance of these campaigns of social responsibility is?
A.T.: Indeed, the Insurance Supervisory Commission supports the need for a greater involvement of insurance companies and brokers in the social life, because, beyond the gesture of humanity, they also have the possibility to become better known among the population and, implicitly, to contribute to promoting the concept of insurance.
All of us - and I mean both ISC and the two professional associations UNSAR and UNSICAR - have felt that such actions must be oriented especially towards helping children, who can contribute the most to the change of mentality regarding the need for insurance. Thus, we can also view the current charity actions of the representatives of the insurance market as a long term investment in this area.
XPRIMM: What message do you have for the Romanian insurance market?
A.T.: It is understandable that each company is trying to develop its business and promote its own image. But I wish they understood and acted accordingly, that by merging their efforts to support common causes, they can achieve much better results than by individual efforts.
I am reffering, for example, to supporting together actions such as those of financial education of the population and of economic agents, of increasing the presence in the media also with other information than the one related to the companies’ own financial results, of strenghtening population’s trust in the insurance industry and others. I am convinced that such actions will contribute to the improvement of the insurance market’s image, which will be reflected implicitly in the quantitative growth of this sector.
Editor: Mihaela CIRCU
| Published on 09.06.2011