The strategy was approved in a PAID shareholder meeting on April 26, on the suggestion of Astra Asigurari, the leader of the local insurance market. Implementing the strategy requires amendments to Law 260/2008 on mandatory home insurance against earthquakes, landslides and floods.
PAID is the only company authorized to issue mandatory home insurance policies, also called PAD policies. It was set up in September 2009 and the shareholders are Astra – 15%, Groupama Asigurari – 15%, Platinum – 15%, Generali Romania – 11%, ABC Asigurari, Carpatica Asig, Certasig, City Insurance, Credit Europe Asigurari, Euroins and Grawe Romania (each with 5.5%).
According to the strategy, the premium for PAD policies must be raised to “a level sufficient to ensure the revenue needed to contract adequate protection from reinsurance of the portfolio of mandatory insurance against natural disasters.” The benefit and premium can be amended by order of the president of the Insurance Supervision Commission (CSA), the market regulator.
The strategy also suggests only PAID shareholders be allowed to issue PAD policies. At the moment, several non-member insurers sell voluntary insurance policies similar to PAID’s for the same prices (EUR10 and 20), while covering additional risks beside earthquakes, floods and landslides. The strategy says these insurers should be allowed to sell voluntary policies for benefits higher than the mandatory benefit, meaning higher than EUR10,000 or 20,000 (depending on the type of building).
The third point entails amending Law 260/2008 to make PAID the single reinsurer for insurance policies covering natural disasters and issued by PAID shareholders. PAID’s current reinsurance program is worth EUR300 million and expires at the end of July.
PAID manages around 500,000 policies, as of March 31, from a maximum of more than 800,000 in August 2011, and might slump to around 300,000 policies by June this year, as contract renewals and sales of new policies are low.
Astra estimates the strategy will boost PAID’s revenue from EUR23.94 million in 2013 to EUR70 million by 2017. The pool’s shareholders will also see their revenue from disaster insurance premiums shoot up from EUR38 million to EUR140 million.
In 2011, PAID reported underwritten premiums of 35.3 million lei (EUR8.3 million), from RON29.6 million the year before, according to CSA data. The disaster insurance market grew by 22.4% in 2011, to RON1.18 billion, while claims dropped by 4.5%, to RON238.41 million.
Astra’s contribution on this segment was RON304.01 million, from RON127.83 million in 2010, according to the data of UNSAR, the Union of Romanian Insurance and Reinsurance Companies. At the end of last year, the company’s portfolio comprised 3.42 million policies, including 2.35 million on the disaster insurance segment.
Other companies with high underwritten premiums on the disaster insurance segment were Generali – RON109.9 million, Groupama – RON106.5 million and UNIQA – 62.2 million, all less than Allianz-Tiriac, which posted RON162.4 million and is not a PAID shareholder.
Last year, the Romanian general and life insurance market shrunk by 4.3%, to RON7.95 billion, because of lower revenue from the general insurance segment, which declined by 6.5%, to RON6.21 billion, according to CSA. (EUR1=RON4.3747)