IMF: The mandatory household insurance premiums should be reviewed
The mandatory household insurance premiums, established based on the AOL Law, to EUR 10 or EUR 20, depending on the type of construction, should be revised, according to recommendations made to the Romanian insurance industry by the IMF, in the Financial Stability Assessment Report, published Friday, following the IMF delegates' visits to Romania.
"Mandatory household insurance, which will be applied this year, represents a sensitive mechanism for financing and state budget relief in the event of a natural disaster. However, insurance premiums should be reviewed in order to be sufficient for an effective reinsurance of the program. Also, the potential exposure of the Government under this insurance protection scheme should be estimated and made public", recommends the IMF report.
The introduction of a mandatory household insurance scheme was prepared amid low volumes of claims that would be covered by insurance in case of a disaster, considering the low degree of insurance coverage, of 25% of the total 8.4 million households. Of the total number of households, approximately 70% of households are type A, according to ISC data, for which the mandatory annual insurance premium will be EUR 20, at an insured sum of EUR 20,000, the remaining 30% being type B buildings, for which the premium is EUR 10/year and the sum insured - EUR 10,000.
According to the law, mandatory insurance will cover three basic risks specific to Romania: earthquake, floods and landslides.
"Similarly, in terms of insurance premiums and reserves established for the motor classes, the ISC should ensure that they are reviewed and they are set out in full accordance with the risks they cover", explains the IMF.
Also, changes imposed by the implementation of the new solvency regime Solvency II will increase the risk component in the surveillance activity. Since insurers will ask the ISC guidance for implementing the new requirements, this will require increased capacity of the supervisory authority in this regard, says the IMF report.
Author: Andreea IONETE
on 01.03.2010
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