The lack of stable cash flows is also a major hurdle for foreign investors.
Local insurers do not fear foreign competition as they believe
the domestic market is sufficiently consolidated and at least on
the short term the Romanian insurance industry has a low appeal
because of recent years’ negative figures.
The Romanian insurance market has been in negative territory for
five consecutive years, mainly because of the dependence on the car
insurance segment and on the dumping prices operated by many
insurers, which could weigh heavily in a foreign insurer’s decision
to invest in a domestic business.
Losses narrowed down, though, last year, to RON41 million (EUR9.7 million), from RON103 million in 2009.
At the same time, foreigners must edge in on a market that is far more concentrated than in the past, with the top ten companies holding over 80% of total underwritten premiums.
With a single exception, Astra, owned by businessman Dan Adamescu, all large companies are already controlled by foreign financial groups, present on the market for 10 or even 15 years.
Few foreign companies have entered the domestic insurance market in the past four or five years, especially as a new obstacle has emerged besides the high losses posted by the industry.
Amid the economic downturn, the market followed a downward trend in 2009 and 2010 and last year slid below EUR2 billion. The decline continued in the first months of this year, when domestic insurers’ turnovers contracted by 6.6% to RON2.1 billon.
Insurance regulator CSA has recently announced it had received signals from several foreign investors interested in entering the domestic market, but that nobody was willing to sell. However, foreigners wanting to tap the Romanian market through an acquisition have to settle for a small company at best.
(EUR1= RON4.216)