PRIMM: You have been appointed president of the Insurance Supervisory Commission almost a year ago. What did this year mean for the institution you manage?
Angela TONCESCU: This year meant sustained work and a period where we had to focus both on streamlining the internal organization and working procedures and on solving, within time constraints, all problems in the motor insurance field, knowing at the same time that before the accession, this chapter was marked with a yellow flag by the European Commission. Through the actions and measure we have taken, we managed to successfully overcome those moments.
In parallel, we started a series of actions intended to contribute to the development of the insurance market and to raising the general public’s confidence in it, actions aimed at various levels, together with improving and completing the regulatory framework, strengthening the prudential supervision that we conduct for the insurance and brokerage companies, drafting the legislation that allows for the registration and verification of insurance agents, increasing the professional qualification level of the market and the ISC personnel.
Romania’s accession to the European Union brought about new responsibilities for the Insurance Supervisory Commission, related both to the drafting of the legislation at European standards, which will have to be transposed in the national legislation subsequently, as well as to the representation of our country, on insurance issues, in all European bodies. Given this context, we would like for our supervisory body to become an institution with a high level of professionalism, a trustworthy partner in the European space, this representing actually the foreseen ISC Strategy for 2007 - 2011, that we have adopted recently.
We are persuaded that, in order to reach this level, we need a collaboration between the representatives of the Insurance Supervisory Commission and the representatives of the insurance industry that functions under the best possible conditions, therefore a higher quality and frequency of our consultations was and shall continue to be an important aspect for us. We hope that the market sees this as a deeper transparency and a better dialogue and that they already appreciate the efforts the management of the Insurance Supervisory Commission undertakes in this respect.
PRIMM: How do you assess the evolution of the Romanian insurance market over the past decade, both in terms of business volume and from the perspective of the market maturity and quality of products and services?
A.T.: I believe we can distinguish at least three stages of market development, the first two being clearly identified through the entry into force of Law no. 32/2000 and by the creation of the Insurance Supervisory Commission. In a first stage we had the creation and development of the competitive market, by having numerous companies on the Romanian market, many of them being quite reputable at European level. A second stage represented a consolidation of the market and the improvement of the primary and secondary legislative framework, especially in a situation where, since 2002, the preparations in insurance for Romania’s accession to the European Union have started. A third stage has a recent starting date, and we are persuaded we need to prove that we are truly Europeans. During all this time, the insurance market increased in terms of business volume, and quite often at a higher rate compared to the growth of other sectors of the national economy, which proves that the general public’s confidence also followed the same trend.
PRIMM: What do you consider was the most difficult moment that the Romanian insurance market went through over the past ten years?
A.T.: I believe that we had somewhat difficult moments when we started the re-authorization of insurance companies, namely in 2001, and then, when going through the stages of increasing the registered capital according to the minimum requirements. However, all these measures were part of the preparation process for the accession to the European Union and were meant to mitigate the impact of this moment. Actually, today’s reality proves that the measures we’ve taken were opportune and, moreover, a necessity.
PRIMM: How would you describe the Romanian insurance market at this moment, from the point of view of its maturity, potential, quality of operators and products...?
A.T.: We can talk about an established market, strongly competitive, with functioning rules that, though improvable, still cover the most relevant aspects to allow us for an efficient prudential supervision. But if I think of the insurable potential, which is quite high, I believe we cannot talk yet about a mature market. Regarding the quality of products and operators, we can say that there is always room for improvement and here we can mention the measures to be taken by the Insurance Supervisory Commission in order to increase the level of professional qualification and provide a protection for the insurers’ interests.
PRIMM: Talking about the near future perspective, what do you think are the main trends to be seen on the insurance market in the next several years? Changes in the insurers’ way of operating, new entries on the market, interaction with other financial markets etc.
A.T.: We must be aware of the fact that, after the 1st of January 2007, Romania is competing directly with the insurance market from the other EU member states, from the perspective of the economic and institutional performances. The insurable potential in Romania will lead to an increase in the activity of the already existing insurers, but also the attraction of new investors. One must also consider that, just like in any sector of the financial market, the activity must be well managed and supported with considerable financial resources, so as to be able and cover the undertaken risks, which are obviously growing.
Therefore, we shall probably witness take-over actions, new infusions of capital and changes in the ranking of insurance companies and brokers as well.
The interaction with other sectors of the financial market shall increase, naturally, to the extent to which the demand for more sophisticated products shall increase as well.
PRIMM: How would you assess the development level in the insurance brokerage activity? What trends will we see in the future in this field?
A.T.: I believe the role of brokers will be strengthened more and more, especially given the freedom of movement for services. In only four months that have passed since the accession, when we had this opening of the borders, the Insurance Supervisory Commission received 66 notifications on the intent to conduct insurance activities on the Romanian territory, issued by insurers from 12 EU member states. Most notifications were received from companies in countries with a long tradition in insurance, but with relatively saturated markets, I might add, such as Great Britain, France, Austria and Germany. All of them will need representation on the territory of Romania, otherwise they won’t succeed, if they really want to enter on the Romanian market.
PRIMM: The adoption of European practices and legislation in all aspects of the economic life in Romania shall have an impact on the development of the insurance market as well. Do you think that in the next several years we are going to witness a drop in the weight of motor insurance to the advantage of other insurance classes (for instance, property insurance, general and/or third party liability insurance, health insurance etc.)?
A.T.: The data we have confirm that vehicles remain the most “valuable” asset for the Romanians, so unfortunately, at least on medium term, I don’t believe we are going to witness a consistent drop in the weight of motor insurance.
Of course, we expect a development in other business lines, such as health insurance, traditional life insurance and investment fund insurance, such as insurance for financial losses and general third party liability insurance, but it is highly unlikely that their weight becomes so high that it outnumbers the motor insurance.
PRIMM: What are the priorities of ISC for the future, both in terms of supervision and in terms of institutional development?
A.T.: As shown in the ISC Strategy for 2007 - 2011, that we adopted recently, the general objective is to strengthen and develop the Romanian insurance market, as well as to increase the role of the Insurance Supervisory Commission at national and European level, by capitalizing as best we can on Romania’s membership to the European Union.
In order to meet this goal, we have set a series of strategic objectives, among which I would like to mention the priority for changing the philosophy of the supervisory activity, as a necessary prerequisite for the implementation of the future solvency regime, Solvency II.
This objective appears as a priority in a context where, on the 10th of July this year, the European Commission shall adopt the text of the Framework Directive Solvency II and, according to the planned calendar, the actual implementation of its provisions shall start with the year 2012.
Considering the magnitude of changes that the new solvency regime will impose at legislative, organization and professional level, it will be applicable only under a very good cooperation with the ISC and insurers, by setting up a calendar of actions intended for the accurate and unified understanding and integration of all necessary changes. ISC has already started a series of actions and programs for professional training and we have planned to maintain them in the following years.
As a EU member state, we shall also have the obligation to continue and transpose and implement the European legislation. Other objectives are aimed at:
• developing a systematic dialogue with the authorities and institutions in Romania whose actions might have an impact on the insurance market, in order to transfer the best practices in the implementation of community policies;
• developing the prudential supervision and control tools for the Insurance Supervisory Commission;
• developing and maintaining an active dialogue between the supervisor and the representatives of the insurance market, in order to have a unitary approach of common problems, including the new Solvency II concept;
• active and efficient participation in the drafting and implementation of the European Union legislation;
• intensifying the cooperation with the similar supervision authorities from the EU member states, as well as with other institutions, well-established at international level, in terms of relevant expertise and, last but not least, more actions and, implicitly more visibility of ISC, both internally and internationally.
Daniela GHETU
