Guy HUDSON, Partner, JLT Re
Reinsurance is essential for a motor portfolio. For the third party liability losses there is the possibility for losses to occur in EU countries that allow claims for Unlimited damages, therefore any insurance company issuing motor third party liability in Romania must buy an unlimited reinsurance protection.
XPRIMM: What are the main challenges the Romanian motor insurance market is facing now?
Guy HUDSON:
The main challenge for the Romanian motor insurance market at this time
is to adapt to the rapidly changing legislative environment relating to
third party liability claims both at home and abroad as Romania and its
neighbouring countries strive to meet the requirements of the EU MID 5.
In addition for motor hull insurance, at a time when leasing contracts
reduce and the financial crisis continues to reduce both sales and the
clients' ability to pay, the challenge remains to grow a portfolio
without reckless competition.
XPRIMM: Compared to other markets in Europe, which are the particularities of the motor insurance market in Romania?
G.H.:
Romania shares many of the EU-wide issues relating to motor insurance.
Perhaps one unique characteristic of the Romanian market is the practice
of Romanian citizens purchasing motor vehicles in Bulgaria and then
repatriating and managing them in Romania. These purchased vehicles are
removed from the tax registration in Bulgaria but not removed from the
reporting process and thereby remaining with Bulgarian licence
plates.Conversely in Romania, the purchased vehicle is neither
registered nor taxed nor does it become a vehicle with Romanian
registration. Accordingly the insurances for vehicles resident and
managed in Romania has been concluded by a Bulgarian insurer and yet
claims occur in Romania or in other member states of the EU. This issue
has been well noted by the authorities who are looking at various
methods to remove this anomaly. Although not unique, Romania is
different in issuing separate policies for TPL and motor hull risks,
whereas in general most Western European countries issue a
"comprehensive" policy.
XPRIMM: Are there any measures to be taken to bring profitability back to the motor insurance market?
G.H.:
Market statistics demonstrate that motor hull insurance has not, in
general, provided profit for insurers in Romania for a number of years.
Some improvements can be implemented by improved damage assessment
information systems as well as by better negotiated contracts with
suppliers of parts and services including third party claims handlers.
It might seem self evident but the charging of a commensurate premium
that reflects the levels of current damage amounts is the surest way to
bring profitability to the motor insurance market.
XPRIMM: Is reinsurance important for motor insurance? (having in mind that bodily injury claims and moral damages keep rising)
G.H.:
Reinsurance is essential for a motor portfolio. For the third party
liability losses there is the possibility for losses to occur in EU
countries that allow claims for Unlimited damages, therefore any
insurance company issuing motor third party liability in Romania must
buy an unlimited reinsurance protection. The terms of reinsurance are
important bearing in mind the Increased limits under the EU 5th
directive in the neighbouring countries of Greece, Italy and Bulgaria
and a perceived increase both in claims frequency and the severity of
claims. A delay in the process of claims notification can occur due to
the recent phenomenon of policies issued in Bulgaria for Bulgarian
registered cars that are then taken by Romanian nationals to be driven
principally in Romania as mentioned above. It is important also that the
motor hull account is considered when deciding on levels of aggregate
exposure protection for catastrophe losses ( hail, flood, earthquake and
conflagration).
XPRIMM: What
strategies do western companies have regarding reinsurance on the motor
insurance segment? Do you work with any Romanian companies and what do
you think about their reinsurance strategy in this sector?
G.H.: Generally
for Western Insurance Companies the portfolios of motor insurance are
large, stable and with little fluctuation. Excess reinsurance is bought
for the potential large third party liability claim but most companies
will retain a large amount on a risk basis to avoid paying for the
frequency claims. Some motor quota shares are bought for solvency
purposes. JLT Re is actively working with Romanian Insurance companies
in order to identify improvements to scope of coverage and looking to
maintaining competitive pricing models.
Editor: Mihai CRACEA
| Published on 06.09.2012 |
