Romania Non Life 2009

Country Map
Map of the Area
Market Developments
Key Facts
General Country Information
Politics and the Economy
Supervision and Control
Taxation
Legal System
Insurance Market Overview
Reinsurance
Distribution Channels
Multinationals, Captives, ART and Risk Management
Insurance Policies
Natural Hazards
Property
Construction and Machinery Breakdown
Motor
Workers' Compensation and Employers' Liability
Liability
Surety, Bonds and Credit
Marine, Aviation and Transit
Personal Accident and Travel
Appendix No 1 - Market Statistics
Appendix No 2 - Company Statistics
Appendix No 3 - Directory

INSURANCE MARKET REPORT
ROMANIA: NON-LIFE (P&C)

© AXCO 2009

NON-LIFE (P&C)

Contents Page
Country Map 1
Map of the Area 2
Market Developments 3
Key Facts 4
General Country Information 6
History 6
Geographic Description 7
Population and Demographic Trends 8
Largest Cities 12
Politics and the Economy 13
Government Structure 13
Current Political Situation 13
Economy 15
Currency and Exchange Control 22
Supervision and Control 24
Legislation 24
Compulsory Insurances 25
Changes in Legislation 26
Supervision 30
Non-Admitted Insurance Regulatory Position 32
Fronting 35
Company Registration and Operating Requirements 35
Taxation 40
Legal System 42
Insurance Market Overview 45
Historical Development 45
The Market Today 46
Market Participants 50
Reinsurance 58
Local Reinsurance Market 58
Local Reinsurance Arrangements 58
Distribution Channels 66
Multinationals, Captives, ART and Risk Management 70
Multinationals 70
Captives 70
A.R.T. & Risk Management 71
Insurance Policies 72
Natural Hazards 75
Earthquake and Other Geological Hazards 75
Windstorm 80
Flood 81
Bushfire 85
Subsidence 85
Hail 85
Cresta Maps 85

Romania - Non-Life (P&C) Report © Axco 2009

Contents Page
Property 86
Construction and Prevention 87
Social Hazards 89
Householder/Homeowner 89
Industrial and Commercial 92
Agriculture 95
Construction and Machinery Breakdown 98
Construction and Erection all Risks 98
Machinery Breakdown 100
Motor 102
Workers' Compensation and Employers' Liability 111
Liability 114
General Third Party 114
Product Liability 116
Professional Indemnity 117
Directors' and Officers' Liability 120
Pollution and Environmental Liability 122
Financial and Professional Risks 123
Surety, Bonds and Credit 124
Marine, Aviation and Transit 128
Marine Hull 128
Marine Cargo 131
Marine Liability 164
Energy 164
Aviation 165
Personal Accident and Travel 168
Personal Accident 168
Travel 170
Appendix No 1 - Market Statistics 172
Insurance Supervisor's Report 172
Non-Life Market Totals 173
Non-Life Insurance 174
Personal Accident 178
Appendix No 2 - Company Statistics 181
Appendix No 3 - Directory 183
Industry Organisations 183
Insurance Companies 183
Reinsurance Companies 186
Captive Managers 186
Intermediaries 186
Loss Adjusters 188

Romania - Non-Life (P&C) Report © Axco 2009

Country Map

Romania - Non-Life (P&C) Country Visited: Jan 2009
1 © AXCO 2009

Map of the Area

2 © AXCO 2009

Market Developments
• Groupama has bought Asiban. It has also become the owner of OTP Garancia Asigurari and BT
Asigurari, all of which will be united under the Groupama brand by the end of 2009.
• The Vienna Insurance Group (VIG) has bought Erste Bank's insurance operations in central and east
Europe. In Romania, this gives it ownership of BCR Insurance, to add to its existing investments in
Asirom, Omniasig, Agras and Unita. In order to defuse competition concerns, VIG has sold Unita and
Agras to UNIQA.
• PPF Investments has sold Ardaf and RAI to Generali PPF Holding.

• Greek financial group EFG Eurobank, the majority owner of Bancpost, has established EFG Eurolife
General Insurance Co Ltd.
• Bulgarian investor Eurohold has bought 70% of Asitrans and changed the company's name to Euroins
Romania.
• Coface, Euler Hermes, AIG Europe and QBE Insurance (Europe) have established Romanian branches
on a freedom of services basis.
• The Law on Obligatory House Insurance finally got through parliament on 8 October 2008 and received
the presidential signature on 4 November 2008. When the administrative infrastructure has been
completed in mid-2009, the law will require every householder to buy first-loss insurance against the
perils of earthquake, landslide and flood.
• Statutory motor third party liability limits effective from 1 January 2008 are EUR 150,000 (USD 205,479)
per event for property damage and EUR 750,000 (USD 1.03mn) per person for bodily injury. These will
be increased on 1 January 2009 and 1 January 2010.
• A new Company Law, which came into effect on 1 December 2006, has made D&O insurance
compulsory for the managers of joint stock companies.
• With effect from 1 January 2007 the policyholders' protection fund levy for non-life insurance has been
reduced from 1% of total premiums to 0.8%. The supervisory levy has been increased to 0.5%.

The Future
A number of companies deliberately under-priced their motor portfolios in 2006 and 2007 in order to
increase their gross written premiums and therefore the price for which they could be sold to a foreign
bidder. The failure to respond to a rapidly deteriorating claims environment led to an underwriting loss of
nearly USD 135mn in 2007. Now that virtually every company which can be sold has been sold, there are
hopes that insurers will try to return to profit by increasing their motor rates and enforcing accidental
damage deductibles. Profitability should also be helped in the long run by insurers' withdrawal from the
consumer credit insurance segment.

3 © AXCO 2009

Key Facts
The graph below shows the growth in the life, non-life and PA and health markets for the period 2003 to
2007.

• When this report was in preparation the rate of exchange was RON 2.78 : USD 1 and this rate has been
used for all current conversions. For previous years the average annual rate for the year in question has
been used (see Currency and Exchange Control within the Politics and the Economy section of this
report). Where figures such as indemnity limits are expressed in euros, these have been converted to
US dollars at a rate of EUR 0.73 : USD 1.
• Romania is situated in the north-east corner of the Balkan Peninsula and occupies an area of 91,699
square miles (237,500 sq kilometres). The estimated population in mid-2007 was 21.50 million, making
Romania the second most populous country in east Europe after Poland. The population is shrinking
and ageing and suffers from high rates of youth emigration.
• Romania is a relatively new country: it gained its independence from the Turkish Ottoman Empire in
1877, but only acquired its current borders after uniting with the Hungarian province of Transylvania in
1918. The country had a hard-line communist regime from 1948 until the overthrow of Nicolae
Ceausescu in the revolution of December 1989.
• The general election held on 30 November 2008 resulted in a near tie between the centre-left Social
Democratic Party and the centre-right Democratic Liberal Party, both of which won around 33% of the
popular vote. The complexion of Romania's next government will depend on which of the leading parties
is able to form a coalition with the National Liberal Party, which won 18.6% of the vote.
• Real GDP is expected to continue growing in 2009 despite the global economic slowdown, though at a
much slower pace than in previous years.
• Total market income in 2007 was RON 7.18bn (USD 2.94bn), of which non-life accounted for RON
5.73bn (USD 2.35bn). This made Romania the 39th largest non-life market in the world. Non-life
insurance penetration was 1.36% of GDP, equivalent to USD 106.96 per capita.

4 © AXCO 2009

Key Facts
• At the time this report was being prepared the Romanian insurance market comprised 42 companies, of
which 21 were non-life, nine were life and 12 were composite. The structure of the non-life market has
been completely transformed over the last two years by the group-building acquisitions of the Vienna
Insurance Group, Generali PPF Holding, UNIQA and Groupama. Once fully assembled these four
groups will have an aggregate market share (based on the 2007 market shares of their component
companies) of 68.5%.
• Non-EU insurers are not allowed to conduct insurance business in Romania without authorisation.
Romanian policyholders are allowed to place their insurance with non-admitted carriers abroad.
• There are no longer any tariff classes.

• The compulsory classes include motor third party liability and professional indemnity for an increasing
number of professions, including accountants, lawyers, insurance brokers, medical staff and hospitals. A
form of D&O has been made compulsory for the managers of joint stock companies. The Law on
Obligatory House Insurance will eventually require every householder to buy first-loss insurance against
the perils of earthquake, landslide and flood.
• Foreign companies are allowed to purchase any percentage of a domestic company's equity or to
establish wholly-owned subsidiaries or branches. EU insurers may enter the market on a freedom of
establishment or freedom of services basis.
• The main distribution channels are direct sales force and agents. In 2007 brokers controlled 26.2% of
non-life premiums. Banks are an increasingly important source of loan-related business.
• Romania is prone to both flood and earthquake. The capital city Bucharest lies in the most active
seismic zone.

5 © AXCO 2009


History
Early History
101 The indigenous people of Romania, known collectively as the Dacians, were conquered by
the Roman Emperor Trajan between 101 and 117 AD. They were organised into the
Roman colony of Dacia Felix until being over-run by barbarians from the east in 271. The
Romanians believe that their race stems from the union of the native Dacians and the
Roman colonists, hence the name of the country and the many words in the language that
are derived from Latin.

1200 In the middle ages the country was divided into a number of principalities. Transylvania in
the north-west was ruled by Hungary, whilst Wallachia and Moldavia had native dynasties.
The latter two became tributaries of the Turkish Ottoman Empire and were later ruled by
Greek families from Istanbul, known as the Phanariots, who were imposed on the
Romanians as an alternative to direct Turkish occupation.

1877 After a series of wars between Russia and Turkey, the provinces of Wallachia and
Moldavia were united under King Karol I and recognised as the independent Kingdom of
Romania.

20th/21st Century
1916 Romania joined World War 1 on the side of Britain and France, and was rewarded with the
previously Hungarian territory of Transylvania (in 1918) and the provinces of Bessarabia
and Bucovina. The country thus doubled in population and territory and acquired its
present borders.

1941 The strength of a native fascist movement known as the Iron Guard and resentment at the
Soviet annexation of Bessarabia and Bucovina caused Romania to enter World War 2 on
the side of Nazi Germany.

1944 Soviet armies entered Romania in August.
1947 The continuing presence of the Soviets allowed the Romanian Communist Party to usurp
power and declare a people's republic on 30 December. Party secretary Gheorghe
Gheorghiu-Dej pursued a hard-line Stalinist policy domestically, but resentment at Russia's
creation of the Republic of Moldova out of the Romanian province of Bessarabia led to an
increasingly independent stance within the communist bloc.

1965 Gheorghiu-Dej died in March and was succeeded by Nicolae Ceausescu. The latter
achieved a favourable standing for Romania in the West by refusing to follow Russian
foreign policy, but inflicted the most appalling privations on his own people as he pursued
increasingly megalomaniac schemes of social engineering.

1989 Popular resentment at the excesses of the regime finally came into the open in December
when the people of Timisoara rioted in support of a dissident priest, Laszlo Tokes. The
spirit of revolution spread to Bucharest and an unprecedented demonstration on 21
December caused Ceausescu and his wife to flee the capital by helicopter. They were
soon caught and after a one-day show trial were executed on Christmas Day.

6 © AXCO 2009

1990 After the fall of Ceausescu a group of Communist Party members led by Ion Iliescu
assumed power under the name of the National Salvation Front. Romania's first free
elections were held on 20 May and were won by Iliescu's Party of Social Democracy
(PSD).

1991 A new constitution was adopted confirming Romania as a multiparty democracy.
1996 Control of both the presidency and parliament passed from the PSD to the reformist
Democratic Convention.
2000 After four years of political instability and economic decline, power was returned to the
PSD. Ion Iliescu was re-elected as president for the third time.
2004 In March Romania was admitted to Nato. In November/December Traian Basescu was
elected president. His ally Calin Tarinceanu became prime minister.
2005 In May Parliament ratified the EU accession treaty. In July the leu was redenominated by
the removal of four zeroes.
2007 Romania became a member of the EU on 1 January.

Geographic Description
Country Name
Romania.

Frontiers and Coastline
Romania occupies the north-east corner of the Balkan peninsula and borders on Ukraine to the north and
east, Moldova to the east, Bulgaria to the south, Serbia to the west and Hungary to the north-west. The
country has an eastern coastline of 145 miles (234 kilometres) on the Black Sea between its borders with
Bulgaria and Ukraine.

Land Area
Romania has a land area of 91,699 sq miles (237,500 sq km).

Administration
For administrative purposes Romania is divided into 41 counties plus the municipality of Bucharest.

Topography
The eastern Carpathians and the Transylvanian Alps swing in a mountainous arc from the northern to the
western borders of Romania. The territory enclosed by the mountains is known as Transylvania and is
predominantly hilly and wooded. The highest peak is Moldoveanu at 8,347 feet (2,544 metres). The outer
rim of the country, extending from Oradea in the north-west through Timisoara and Bucharest to the Black
Sea, is predominantly flat and fertile. Forests cover more than a quarter of the land.

7 © AXCO 2009

The main river is the Danube, which forms the southern border of Romania with Serbia and Bulgaria. The
Danube flows into the Black Sea near Romania's border with Ukraine forming a delta region of 1,544 sq
miles (4,000 sq km) made up of lakes, channels, marshes and floating reed islands. An artificial canal,
completed under Ceausescu, connects the Danube at Cernavoda with the Black Sea at Agigea, cutting out
248 miles (400 km) of barely navigable river. This forms the final stretch of the 1,863-mile (3,000-km)
waterway linking Rotterdam with the Black Sea via the Rhein-Main and Nurnberg-Regensburg canals.

Climate
Romania has a typical continental climate characterised by cold snowy winters and hot dry summers.
During the winter months snow lies for 30 to 50 days at low levels and the Danube and other rivers
regularly freeze over. The mildest area is the Black Sea coast though even this can experience severe
conditions when cold winds blow out of the Russian steppes to the north-east.

Average maximum and minimum temperatures and average monthly precipitation for the capital Bucharest,
at latitude 44º 30' N and at a height of 302 feet (92 m) above sea level, are shown in the following tables:

Population and Demographic Trends
Population
The latest census was conducted on 18 March 2002 and recorded a population of 21,680,974. This made
Romania the second most populous country in east Europe after Poland. The latest population estimate for
mid 2007 was 21.5 million.

The total population since 1956 was as follows:

8 © AXCO 2009


Year Population
2005 21,623,849
2002 21,680,974
1992 22,810,035
1977 21,559,910
1966 19,103,163
1956 17,489,450
Source: National Institute of Statistics

Population projections are as follows:

Year Population
2050 15,928,000
2025 19,494,000
2010 21,147,000
Source: UN Population Division (UNPD)

Romania has an unusually large rural population: in 2007 country dwellers accounted for 44.7% of the
population and city dwellers for 55.3%.

According to the 2002 census, 89.5% of the population are ethnic Romanians. The next largest ethnic
groups are the Hungarians of Transylvania with 6.6% and the Roma with 2.5%. The nomadic lifestyle of the
Roma population has led to a significant under-recording of their numbers, which are unofficially estimated
at two million. This would make them the largest minority group in Romania and the largest Roma
population of any European country.

The birth and death rates per 1,000 since 1985 were as follows:

Year Birth rate Death rate Rate of natural increase
2007 10.0 11.7 (1.7)
2005 10.2 12.1 (1.9)
2001 9.8 11.6 (1.8)
2000 10.5 11.4 (0.9)
1995 10.4 12.0 (1.6)
1990 13.6 10.6 (3.0)
1985 15.8 10.9 (4.9)

The birth rate fell almost every year after 1990, partly as a result of economic hardship and partly because
a long-standing ban on birth control was abolished after the overthrow of Ceausescu. The rate did not rise
again until 2004.

The infant mortality rate per '000 live births since 1950 was as follows:

9 © AXCO 2009


Year Infant mortality rate
2007 12.0
2005 15.0
2001 18.4
1990 26.9
1980 29.3
1970 49.4
1960 74.6
1950 116.7

The change in age structure of the population since 1970 is shown below, including projections for 2010,
2025 and 2050.

Age group 1970 1980 1990 2000 2005 2010 2025 2050
To 14 25.9 26.7 23.6 18.4 15.7 15.1 13.4 12.5
15 to 59 60.8 60.1 60.8 62.6 65.1 64.6 62.0 48.3
60 and 13.2 13.3 15.7 19.0 19.3 20.3 24.5 39.1
above
Note: due to rounding some totals may not equal the breakdown above.

The change in age structure of the population aged 65 and 80 and above is shown below, including
projections for 2010, 2025 and 2050.

Age group 1970 1980 1990 2000 2005 2010 2025 2050
65 and 8.6 10.3 10.4 13.5 14.8 14.9 19.3 30.2
above
80 and 1.1 1.3 1.8 1.8 2.4 3.0 3.9 8.1
above

Life Expectancy
Average life expectancy at birth for the period 2005 to 2007 was 69 for males and 76 for females. The table
below shows how this has changed since 1970.

Year Males Females
2005 to 2007 69.00 76.00
2003 to 2005 68.19 75.47
2000 to 2002 67.61 74.90
1990 to 1992 66.56 73.17
1980 to 1982 66.70 72.17
1970 to 1972 66.27 70.85

The following table shows expectations of life at various ages over the 2000 to 2005 period.

10 © AXCO 2009


Present age Males Females
At birth 66.5 73.3
60 16.0 19.1
65 13.0 15.3
80 5.7 6.3
Source: UN Population Division (DESA)

Major Causes of Death
The following table shows the leading causes of death in 2005:

Cause of death Male Female
Diseases of the circulatory system 77,216 85,781
Neoplasms 26,292 18,614
Injury, poisoning and other 9,618 3,223
external causes
Diseases of the digestive system 9,068 5,645
Diseases of the respiratory system 8,311 5,040
Infectious and parasitic diseases 1,925 664
Diseases of the genitourinary 1,364 1,012
system
Diseases of the nervous system 1,055 907
Endocrine, nutritional and 1,018 1,230
metabolic diseases
Other 2,594 1,524
Total 138,461 123,640

Of the men who died of infectious and parasitic diseases in 2005, 77% died of tuberculosis. Almost four
and a half times as many men as women died of the disease in that year.

Language
The official language is Romanian, the closest Romance language to Latin. It is written in Latin script with
diacritical marks. The Hungarian and Roma minorities speak Hungarian and Romany respectively.

English is most commonly used for international business purposes.

Religion
The majority religion is Christianity. More than 85% of the population are Orthodox Christians and there are
also communities of Catholics, Lutherans, Uniates and Unitarians, particularly in Transylvania.

11 © AXCO 2009


Largest Cities
Capital
The capital of Romania is Bucharest, a city with an estimated population of 1,931,838 on 1 July 2007. It is
situated in the south of the country near the Bulgarian border. As well as being the financial and
administrative centre of the country, Bucharest has important textile and engineering industries. Several
multinational IT and software companies, such as IBM and Oracle, have their European headquarters in
Bucharest and in early 2008 PepsiCo announced plans to build a new bottling plant in the city.

Other Major Areas/Cities
Population figures are estimates for 1 July 2007.

Cluj-Napoca, the leading city of Transylvania, has a population of 310,243, one-third of whom are ethnic
Hungarians. It is home to Romania's largest university and has its own airport offering domestic and
international flights.

Iasi, the cultural capital of Moldavia, has a population of 315,214, and is situated near Romania's border
with the Republic of Moldova. It has two universities, including Romania's oldest university.

Constanta, with a population of 304,279, is the largest port on the Black Sea. It has a significant
ship-building and ship-repair industry.

Timisoara, in the west of the country near the Serbian border, has a population of 307,347. The city is an
important transport hub and agricultural centre.

Brasov, with a population of 277,945, is situated in the Carpathian Mountains near the geographical centre
of the country. The city's manufacturing industries include tractors and aero-engineering.

12 © AXCO 2009


Government Structure
Constitution
Romania adopted a new constitution in 1991 redefining the country as a parliamentary republic. Changes
in the constitution required for Romania to join the EU were adopted by referendum in October 2003.
Amongst other provisions, the new constitution extended the presidential term from four to five years and
strengthened the judiciary.

Executive/Legislature
The head of state is the president who is directly elected for a maximum of two five-year terms. The
president appoints the prime minister. The executive is the cabinet, which is appointed and headed by the
prime minister.

The national legislature is a bicameral parliament composed of a Senate (137 members), which is elected
for a four-year term by proportional representation, and a Chamber of Deputies (332 members). The
Chamber of Deputies is also elected for a four-year term, but 327 members are elected by proportional
representation whilst the remaining seats are reserved for ethnic minorities.

Electoral System
President and parliament are elected by universal adult suffrage. Both chambers of parliament are directly
elected for four-year terms from 42 multi-member constituencies comprising 41 counties and the
municipality of Bucharest.

The last parliamentary elections were held in November 2008; the next are held in November 2012. The
last presidential elections were held in November and December 2004; the next are due in November
2009.

Local Government
The 42 local administrations are democratically elected. Each county has an elected council. There is also
a centrally appointed prefect who can impede council-initiated legislation that is contrary to national law.

Current Political Situation
Present Government
The results of the 2008 election are shown in the table below.

13 © AXCO 2009


Party name Acronym % of vote Seats
Democratic Liberal Party PDL 32.4 115
Social Democratic Party PSD 33.1† 110
Conservative Party PC 4
National Liberal Party PNL 18.6 65
Democratic Alliance of UDMR 6.2 22
Hungarians in Romania
Minorities - 3.6 18
Others - 6.1 0
Total - 100.0 334
Note: † the Social Democratic Party (PSD) and Conservative Party (PC) share the same percentage of votes.
Source: Parties and Elections in Europe

The Prime Minister-designate is Mr Theodor Stolojan, who was nominated following the 2008 elections. He
replaces Mr Calin Tariceanu of the National Liberal Party (PNL). Mr Traian Basescu of the Democratic
Liberal Party (PDL) remains president. A coalition government is to be formed between the pro-presidential
PDL and left-of-centre Social Democratic Party (PSD).

Political Situation
The 2008 elections ended in a political stalemate, with neither the Social Democratic Party (PSD) nor the
Democratic Liberal Party (PDL) winning a majority in government. Now, both parties are expected to form a
coalition, with the Prime Minister-designate, Mr Calin Tarinceanu, being appointed its leader. The two
parties have differing policies and are likely to clash on domestic and foreign issues. The PDL support
market-based policies, having introduced during its previous mandate an income tax rate that the PSD
opposed. The PSD is more likely to implement social protection initiatives in order to bolster job rates and
boost workers' rights. Yet the unwillingness of the PSD to press ahead with judicial reforms or pursue
cases of corruption could see Romania face severe penalties from the European Commission for failure to
adhere to European standards. The European Commission has required that the country report every six
months on the progress it has made in tackling contentious issues such as corruption and money
laundering. Penalties might include withholding EU regional aid payments in cases of persistent fraud or
suspending the country's legal system if it fails to bring offenders to trial. In May 2008 it emerged that a
British company was suing the Romanian state for USD 100mn in a high-level corruption case involving a
former prime minister. This is likely to be adversely received by the European Commission, which is
already unhappy with the progress made thus far by Romania in its fight against corruption and could lead
to a suspension of EU aid.

International Relations
Romania joined the EU on 1 January 2007. The EU remains concerned about corruption and the slow pace
of judicial reforms, however. Romanian citizens have fewer rights than citizens of existing EU countries as
many EU members, fearing an influx of cheap labour, have restricted the amount of work legally available
to them.

Romania is a member of the UN, Nato, World Bank and IMF.

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Economy
Economic Performance
Romania emerged from communism with a state-owned economy entirely unsuited for competitive survival.
Successive governments lacked the competence or the will to undertake structural reforms, resulting in
widespread poverty and economic backwardness. As a result, Romania was only judged to have a
quot;functioning market economyquot; in October 2004, just two months before it signed its accession treaty with
the EU.

Real GDP growth in 2007 was slowed by a fall in gross value added in agriculture as a consequence of
drought, whilst on the demand side household consumption was the main driver; domestic demand in 2007
grew by a little over 13% year on year. Nevertheless, the prospects for the agricultural sector improved in
the third quarter of 2008, with growth likely to average 8.6% in the year. Yet this acceleration in economic
growth is likely to be short-lived, as the domestic economy feels the effects in 2009 of the global crisis on
the financial markets. Economic forecasts are likely to be revised downwards in the near future, as the
chances increase of Romania falling into a recession. A currency crisis or an IMF bail-out cannot be ruled
out.

Inflation fell to 4.8% in 2007 from 6.6% in 2006. Planned large increases in public spending in the run-up to
the next election, as well as rising wages and high food prices, will all contribute to raising inflation to an
anticipated rate of 7.9% in 2008. Nonetheless, a tightening of fiscal and incomes policies once the elections
are over is expected to result in lower inflation in 2009.

Romania's consolidated budget deficit for 2007 was equivalent to 2.3% of GDP according to government
calculations and the country has set a target of 2.3% for 2008 also. The IMF has urged Romania to move
away from the highly expansionary fiscal policy of 2007 and to target a budget deficit of 1.75%, however,
but the government is unlikely to exercise fiscal restraint until after the elections due at the end of 2008.

Gross Domestic Product
The actual GDP figures for the five years to 2007 are shown below. These are in two forms, RON and
converted to US dollars at the average annual rate of exchange.

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The growth in real GDP for the five years to 2007 based on 2000 prices in domestic currency is shown
below.

Real GDP growth rates of 8.6% and 2.6% are forecast for 2008 and 2009 respectively.

In 2007 the main contributors to the GDP were:

Industry % of total
Services 49.9
Industry 23.4
Agriculture and related industries 6.6

In 2007 GDP per capita in USD in Romania and comparative economies was as follows:

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Country GDP per capita
Czech Republic 17,186
Hungary 13,873
Poland 11,397
Romania 7,586
Bulgaria 5,177
Source: IMF

Current Account Balance
The current account balance in US dollars for the five years to 2007 is expressed in the graph below.

The current account deficit amounted to 13.6% of GDP in 2007, the result of a surge in imports caused by
domestic demand growth.

Foreign Exchange Reserves
Foreign exchange reserves, excluding gold, are quoted in US dollars below.

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Inflation
Annual consumer price inflation for the five years to 2007 is shown in the graph below.

Inflation is expected to rise to 7.9% in 2008 before falling to 5.8% in 2009.

Interest Rates
Key interest rates over the five years to 2007 are shown below.

Investment type 2003 2004 2005 2006 2007
Deposit rate 11.02 11.54 6.42 4.77 6.70
Lending rate 25.44 25.61 19.60 13.98 13.35
Money market rate 18.95 20.01 8.99 8.34 7.55
Treasury bill rate 15.07 n/a n/a n/a 7.11
Source: IMF

Employment
The percentage of the working population unemployed over the five years to 2007 is shown in the graph
below.

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In 2007 the economically active population was 9,994,000. The following table shows the number of
employees in the main sectors of the economy in 2007:

Sector Percentage
Agriculture 29.5
Manufacturing 24.1
Trade 12.3
Construction 7.2
Transport, storage and communication 5.2
Education 4.2
Health and social assistance 4.0
Real estate and other services 3.0
Hotels and restaurants 1.4
Other 9.1
Total 100.0

Earnings
Since 1 January 2008 the gross minimum wage in Romania has been RON 500 (USD 210) per month.
Average gross monthly earnings for the listed industry types are shown below for April 2008.

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Industry type Gross monthly earnings
RON USD
Financial intermediation (not 5,298 2,228
insurance & pensions)
Mining and quarrying 3,145 1,323
Insurance and pensions 2,862 1,204
General government 2,843 1,196
Utilities 2,699 1,135
Education 1,945 818
Health and social assistance 1,595 671
Manufacturing 1,436 604
Construction 1,433 603
Wholesale, retail and repairs 1,421 598
Agriculture, hunting and related 1,174 494
services
Hotels and restaurants 944 397

Romanian workers have enjoyed extremely high rates of earnings growth over the last few years, though it
still remains the case that real wages in 2007 were only 12% above their level in 1990.

Growth in average real and nominal net monthly earnings is shown below in percentages for the five years
to 2007.

2003 2004 2005 2006 2007
Average net 27.7 23.8 24.5 16.1 20.4
nominal monthly
earnings
Real Earnings 10.8 10.5 14.3 8.8 15.0

Key Industries
Manufacturing

The Ceausescu regime endowed Romania with an over-sized, uncompetitive and resource-intensive
state-owned manufacturing sector. Major industries included heavy engineering, chemicals, car production,
shipbuilding and steel, the leading example of the latter being the Sidex-Galati steel mill. This employs over
20,000 workers and is the largest in south-east Europe. Some industries have been sold to foreign
investors (Sidex-Galati to Mittal Steel and Automobile Dacia to Renault), but the majority are effectively
bankrupt.

20 © AXCO 2009

Production of sophisticated consumer goods and machine tools had been largely neglected and
engineering products did not meet the standards expected by world markets, leaving Romania dependent
on imported technology and foreign direct investment (FDI). Modernisation of Romania's industry has
accelerated since 2000. Several foreign car manufacturing companies, such as Ford, Renault and Daimler,
have either already invested in Romania or are involved in talks to do so.

The private manufacturing sector is mainly focused on food processing, textiles, leather, footwear and light
engineering.

Agriculture

Agriculture accounted for 29.5% of total employment in 2007 (a higher proportion than in any other east
European country except Albania) but only accounts for around 6.6% of GDP. Agricultural production has
declined precipitously since 1990, largely because of a land restitution programme that has created four
million smallholders with an average plot size of only 2.28 hectares. The main crops are wheat, maize,
sugar beets and sunflower seeds.

Oil and Gas

Romania is richly endowed with reserves of oil (230mn tonnes) and natural gas (180bn cubic metres).
Production has been declining for over 20 years, though there is hope that this will be reversed by a EUR
3bn (USD 3.8bn) investment programme, part of it directed to offshore exploration in the Black Sea. The
country also has a refining capacity of 600,000 barrels a day.

Textiles

There has been significant foreign investment in the clothing and footwear sectors, which now account for
over 16% of all exports.

Exports and Imports
In 2007 total exports were USD 40,265mn, with the most important commodities broken down as follows:

Commodity Percentage
Machinery and mechanical equipment 22.18
Base metals and products 16.32
Textiles and textile products 13.32
Vehicles and transport equipment 11.91
Mineral products 7.79

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The most important export destinations were as follows:

Destination Percentage
Italy 17.0
Germany 16.9
France 7.7
Turkey 7.0
Hungary 5.6

In 2007 total imports were USD 69,946mn, with the most important commodities broken down as follows:

Commodity Percentage
Machinery and mechanical equipment 24.88
Vehicles and transport equipment 13.78
Mineral products 12.04
Base metals and products 11.08
Chemicals products 7.58

The most important sources of imports were as follows:

Source Percentage
Germany 17.2
Italy 12.7
Hungary 6.9
Russia 6.3
France 6.2

Currency and Exchange Control
Currency and Exchange Rate
The Romanian currency is the leu (plural lei), which is abbreviated to RON in this report.

After years of high inflation the leu had fallen to the point where there were nearly 30,000 local currency
units to the US dollar. A re-denomination exercise was therefore conducted on 1 July 2005 which involved
the deletion of four zeroes. This changed the average 2005 US dollar exchange rate from 29,140 old lei (or
ROL) to 2.914 new lei (or RON).

Foreign exchange controls were lifted on 18 February 1997 and the leu was made internally convertible on
30 January 1998. After a number of years of actively managing the exchange rate of the leu, the National
Bank announced in November 2004 that it would allow the currency to fluctuate in accordance with market
forces.

The average annual exchange rate against the US dollar for the five years to 2007 is shown below.

22 © AXCO 2009


The latest exchange rate when this report was in preparation has been used for all current conversions
(see Key Facts). For previous years, the average annual rate from the above chart for the year in question
has been used.

Exchange Control
There are no foreign exchange controls. Permission is not needed to purchase foreign currency or to make
remittances abroad. There is normally no shortage of hard currency, though there was the prospect of
Romania facing a currency crisis as foreign investors pulled out of the country in panic in October and
November 2008.

23 © AXCO 2009


Legislation
EU Legislation
The European Union (EU) is a grouping of 27 European countries which have agreed a process of
co-operation and integration in economic, political and judicial affairs.

The body of legislation created at the EU level, which has evolved over several decades, has an important
impact on insurance in member states as the EU works to complete the implementation of the Financial
Services Action Plan (FSAP) adopted in May 1999. The FSAP has three objectives:

• a single market for wholesale financial services

• open and secure retail markets

• state-of-the-art prudential rules and supervision.

The considerable progress which has been made towards adoption of the FSAP is comprehensively
covered in the separate Axco EU Legislation report which can be accessed by clicking on the link below.

Domestic Insurance Legislation
The insurance law is Law No 32/2000 on Insurance Companies and Insurance Supervision which came
into effect on 10 April 2000. This regulates insurance companies and intermediaries and provided for the
establishment of the Insurance Supervisory Commission (CSA). The law has been supplemented by
numerous regulations issued by the CSA and by the following amendment laws:

• Law No 76/2003, which came into effect on 26 March 2003

• Law No 403/2004, which came into effect on 28 October 2004

• Emergency Ordinance No 201/2005, which came into effect on 29 December 2005

• Law No 113/2006, which came into effect on 16 May 2006.

The insurance law incorporates all the current EU insurance directives .

Law No 136/1995 on Insurance and Reinsurance in Romania, which came into effect on 1 February 1996,
regulates insurance contracts and sets out the basic principles of property, liability and personal insurance.
The law was amended by Law No 76/2004, which came into effect on 26 May 2004 and Law No 172/2006,
which came into effect on 19 May 2006.

Law No 503/2004 on the Winding-up of Insurance Companies lays down the procedures for dealing with
insolvent insurance companies.

24 © AXCO 2009

The Law on Obligatory House Insurance, which was passed on 8 October 2008, has introduced
compulsory insurance of dwelling houses against the perils of earthquake, landslide and flood.

Legislative Process
New insurance legislation is normally drafted by the CSA and approved by the Ministry of Finance and the
Ministry of Justice. Draft legislation must be considered by a Committee of the Senate before being
debated and passed by the full Senate. Legislation then passes to the Chamber of Deputies for debate and
approval before being signed into law by the president. Insurance legislation may also be introduced by
emergency ordinance, which may be passed by the government before being debated by parliament.

The Romanian insurance industry has been plagued by hasty and ill thought-out legislation arising partly
from a lack of government understanding of the industry and partly from the sheer number of laws which
had to be passed before the country could accede to the EU. A current example is the Law on Obligatory
House Insurance, which was framed before a technical feasibility study had been conducted and which
now requires the insurance coverage to be tailored to a pre-determined premium rather than vice versa.

Statutory Tariffs
There are no statutory tariffs.

Compulsory Insurances
List of Compulsory Insurances
• Motor third party liability.

• Air carriers and aircraft operators.

• Nuclear liability.

• Workers' compensation (state scheme).

• Professional indemnity for doctors, nurses, dentists, hospitals, pharmacists, lawyers, insurance
intermediaries, administrators, liquidators, notaries and accountants.
• Professional indemnity for financial institutions which keep electronic records of securities transactions
and companies which register electronic signatures.
• Tour operators' bonds.

• Personal accident and occupational disease insurance for employees who belong to factory fire
brigades.
• D & O for managers of joint stock companies.

• Shipments of waste (financial guarantee or insurance).

25 © AXCO 2009


Supplementary Information on Compulsory Insurances
EU legislation establishes minimum insurance requirements for air carriers and aircraft operators flying
within, into, out of or over the EU. Insurance is obligatory to cover liability in respect of passengers,
baggage, cargo and third parties. For more details please see the EU Legislation report.

A financial guarantee or insurance is required for all shipments of waste imported into the EU, exported
from it or in transit through it. It is intended to cover costs where recovery or disposal is illegal or cannot be
completed as intended. For more details please see the EU Legislation report.

Compulsory insurance of dwelling houses against the perils of earthquake, landslide and flood is expected
to come into effect in the middle of 2009. Further details are given in the Legislative Update section of this
report.

Changes in Legislation
Legislative Update
Law on Obligatory House Insurance

The floods which affected Romania in 2005 caused estimated property damage of EUR 1.5bn (USD
1.9bn), only 1% of which was insured. Demands for state assistance not only placed a severe strain on the
budget but also reminded the government of the much greater financial burden which would result from a
severe earthquake. The government therefore decided to introduce a pre-funding mechanism for natural
catastrophe in the form of compulsory house insurance.

Work on drafting the legal basis for the new scheme, known as the Law on Obligatory House Insurance,
began in mid-2006 but was delayed by inter-ministerial consultation and by a change of government in
early 2007. A draft law was finally submitted to parliament on 29 September 2007 but was not passed until
8 October 2008 and did not receive the presidential signature until 4 November 2008. It will now take at
least six months to draft the secondary legislation, set up the Insurance Disaster Pool and arrange
reinsurance. The earliest start date for the compulsory insurance scheme will therefore be the middle of
2009.

The main points of the Law on Obligatory House Insurance are summarised below.

• All owners of residential properties in both the public and private sectors will be obliged to insure their
buildings against the perils of earthquake, landslide and flood. Obligatory insurance will not extend to
annexes, outbuildings or contents.
• Homes covered by the obligatory insurance requirement will be divided into two types: Type A
constructed of steel, concrete, wood, baked brick or any other material created by the application of
heat; and Type B constructed of unbaked brick or any other material not created by the application of
heat. The precise definitions of the two building types will be contained in regulations issued by the
Insurance Supervisory Commission (CSA).

26 © AXCO 2009

• Type A homes will be covered for a first-loss sum insured of EUR 20,000 (USD 27,397) for an annual
premium of EUR 20 (USD 27); Type B homes will be covered for a first loss sum insured of EUR 10,000
(USD 13,699) for an annual premium of EUR 10 (USD 14) (actual figures will be the local currency
equivalent converted at the exchange rate prevailing on the day of settlement). Policies will be written on
a reinstatement basis. Insurance premiums and limits may be adjusted from time to time to reflect
factors such as building cost inflation and reinsurance costs. Such adjustments shall be carried out by
the government during the first five years and by the CSA thereafter.
• Apartment blocks comprising at least four apartments may be covered by a collective policy. If a house
is covered by a lease, the lessor will be responsible for arranging the insurance.
• Premiums will be tax-deductible for income tax payers. Premiums for those receiving social assistance
benefits will be paid by the state.
• The insurance scheme will be underwritten by a special purpose joint stock (re)insurance company
called the Insurance Disaster Pool (abbreviated to PAID) in which participating insurance companies will
be shareholders. The maximum permissible shareholding will be 15%. PAID will be governed by Law No
32/2000 on Insurance Companies and Insurance Supervision and will be supervised by the CSA. PAID
will act as 100% reinsurer of its shareholders' obligatory household underwriting and will be allowed to
purchase retrocession coverage in the international market. The Romanian government may lend
money to PAID to cover its retrocession premium for the first year of the scheme and any shortfall
between direct premiums collected and retrocession premiums due over the following four years.
Government loans may also cover any insured losses which exceed the upper limit of PAID's
retrocession programme.
• Obligatory house insurance policies will be issued by insurance companies which are shareholders in
PAID. Policies will be valid for one year with premiums payable annually at least 24 hours in advance.
Premiums may be paid to insurers, agents or brokers or at local authority offices. Collected premiums,
less an administration fee, should be passed on to PAID. The amount of the administration fee will be
set by the CSA.
• Local authorities should provide PAID with a list of all houses and homeowners in their locality. Each
month PAID should provide each local authority with a list of residents who have not taken out obligatory
house insurance. The local authority should write to defaulters reminding them of their obligation to
insure. Those who do not insure will be liable to a fine of RON 100 to RON 500 (USD 36 to USD 180)
and will not be entitled to any form of state aid if they suffer a catastrophe loss.
• Obligatory house insurance policies may not be issued for illegally constructed dwellings. Insurers shall
not be liable to compensate policyholders who have increased the vulnerability of their properties by
carrying out building alterations without the necessary permit.
• Losses should be adjusted by PAID insurers.

• The compulsory insurance requirement will come into effect 90 days after the CSA has issued all the
regulations necessary to bring the law into effect.

The Law on Obligatory House Insurance has proven to be extremely controversial, not least with the
insurance companies which might be thought to be its natural supporters. Areas of difficulty are
summarised below.

27 © AXCO 2009

• The government announced insurance premiums of EUR 10 or EUR 20 per dwelling before any
modelling had been conducted. Subsequent research on reinsurance costs suggested that the scheme
would only be financially viable with a minimum deductible of 5%, and yet no deductible has been
allowed for in the law.
• In order to avoid comparison with the compulsory household insurance of the communist era, the
government has refused to allow premiums to be collected as part of the local property tax. Premium
collection will therefore be the responsibility of participating insurance companies. The government
expects 80% of Romania's 8.25 million householders to pay their obligatory insurance premiums as
required by law. Most observers doubt whether the penetration rate will be anything like that high,
however, particularly in country regions where insurance companies have only a limited branch network.
• Because of low premium levels it may not be economic for insurers or intermediaries to market
obligatory house insurance policies.

As a result of these issues, not all insurance companies are expected to participate in PAID. Those that do
participate will see the mandatory cover as an opportunity not only to educate the public about insurance
but also to cross-sell top-up household cover and other personal lines. Public opinion seems also to be
divided about the merits of being forced to insure, though the publicity given to recent disasters such as the
Sichuan earthquake in China is said to have had a persuasive effect.

Motor third party liability (MTPL)

Ordinance No 14/2007, which came into effect on 1 January 2008, requires MTPL insurers to have
minimum technical reserves for MTPL of 60% of their gross written MTPL premium income. A subsequent
ordinance has laid down a more detailed methodology for calculating MTPL reserves, including IBNR
reserves. Alternative methodologies may still be used, provided they give rise to a higher level of reserves.

Law No 136/1995 has been amended by Law No 304/2007 to allow motor accidents which do not involve
bodily injury to be notified to insurers by means of an quot;amicable reportquot; rather than a police report. The
motorists involved may still ask for a police report if they prefer. Although the new claims notification
system was due to come into effect on 1 July 2008, objections from the insurance industry mean it is
unlikely to be adopted before 2009. Insurers are concerned that the new system will increase their claim
handling costs and be an encouragement to fraud.

Statutory MTPL limits

Ordinances issued by the Insurance Supervisory Commission (CSA) have set out the following timetable
for increasing Romania's statutory MTPL limits:

• Statutory limits effective from 1 January 2008 are the lei equivalents of EUR 150,000 (USD 205,479) per
event for property damage and EUR 750,000 (USD 1.03mn) per person for bodily injury.
• Statutory limits effective from 1 January 2009 will be the lei equivalents of EUR 300,000 (USD 410,959)
per event for property damage and EUR 1.5mn (USD 2.05mn) per person for bodily injury.

28 © AXCO 2009

• Statutory limits effective from 1 January 2010 will be the lei equivalents of EUR 500,000 (USD 684,932)
per event for property damage and EUR 2.5mn (USD 3.42mn) per person for bodily injury.

Reinsurance directive

Because parliament was unable to legislate for the transposition of the Reinsurance Directive in time, the
CSA had to introduce the directive by regulation. This required a total of 15 different regulations extending
the rules applicable to insurance companies to apply also to reinsurance companies. The exercise was
finally completed on 23 June 2008.

Accounting regulations

Order No 7/2007 introduced accounting regulations for insurance business in accordance with the relevant
EU directives, including the transposition of Directive 2006/46/EC.

Intermediaries

The CSA has established a register of insurance intermediaries in accordance with Directive 92/2002. New
regulations require registered individuals to obtain a professional qualification within three years of further
regulations being passed for the accreditation of specialist training institutions.

Employers' liability

Law No 237 Amending the Labour Code extends employers' legal liability for bodily injury to include
non-economic losses (before the amendment employers were only liable for economic losses). Employees
are now allowed to sue if they are subject to undue stress, disrespectful treatment or damage to their
reputations. Such actions are exempt from the normal advance court tax of 6% to 8% of the damages
claimed.

Green cards

Border controls on Romanian vehicles were finally abolished in August 2007, allowing Romanian motorists
to drive abroad without having to buy a separate green card.

Compulsory D&O

29 © AXCO 2009

A new Company Law, which came into effect on 1 December 2006, made D&O insurance compulsory for
the managers of joint stock companies.

Insurance law amendment

Law No 32/2000 on Insurance Companies and Insurance Supervision was amended by emergency decree
on 8 November 2006 to allow life and non-life insurers to enter the voluntary pensions market. The
amendment requires participating insurers to meet separate capital requirements for insurance and
pensions and to maintain separate accounting records and reserves.

The amendment also allowed non-bank financial operations such as leasing companies to sell
complementary insurance products and extended the business scope of insurance brokers to include
voluntary pensions.

Projected Legislation
International Financial Reporting Standards

The CSA has approved a strategy for the progressive implementation of International Financial Reporting
Standards over the period 2007 to 2010.

Supervision
Insurance Supervisory Authority
The insurance supervisory authority is the Insurance Supervisory Commission (Comisia de Supraveghere
a Asigurarilor or CSA). The CSA was established by the Law on InsuranceCompanies and Insurance
Supervision as the successor to the Supervisory Office of Insurance and Reinsurance Activity (SOIRA)
which had been acting as insurance supervisor since 1 February 1992. The CSA should have commenced
operations within 60 days of the new law coming into effect (that is, by 10 June 2000), but was held up by
political infighting over the composition of its board. This was only resolved after the general election victory
of the Social Democratic Party allowed the government to dictate a board of its own choosing, and the CSA
finally commenced operations on 2 July 2001.

The CSA is an autonomous entity answerable to the Romanian parliament. The commission is run by a
seven-member council comprising a president, two vice-presidents and four other members. Council
members are appointed by parliament for a five-year term and must have at least five years' previous
experience in finance or insurance. The current president is Angela Toncescu who took over the role from
Nicolae Crisan when his five-year term expired on 1 July 2006. The CSA is funded by licence application
fees and supervisory levies on premium and commission income.

The CSA is responsible for drafting insurance legislation, issuing regulations under the Law on
InsuranceCompanies and Insurance Supervision and approving legislation in other sectors of the economy
which might have a bearing on insurance . The commission authorises and supervises insurance
companies and insurance intermediaries, manages the policyholders' protection funds and deals with
consumer complaints. The CSA had 152 staff at the end of 2007, up from 138 the previous year. The
commission is divided into 14 departments and directorates, of which the most important are:

30 © AXCO 2009

• supervision and on-site inspection directorate

• financial stability and actuarial directorate

• front office directorate (responsible for handling consumer complaints)

• regulation and licensing non-life insurance directorate

• regulation and licensing compulsory insurance directorate

• regulation and licensing life insurance and pension fund management directorate

• guarantee fund department.

Insurance supervision is based on the analysis of companies' financial returns, supplemented by on-site
inspections. Inspections normally take place every two years but can be brought forward for companies
whose financial returns give grounds for concern. The CSA is currently changing its supervisory approach
from compliance-based to risk-based in preparation for the introduction of Solvency II.

Emergency Ordinance No 201/2005, which came into effect on 29 December 2005, requires insurers to
employ a minimum of one actuary approved by the CSA who is responsible for calculating premiums,
technical reserves and the solvency margin and for submitting an annual actuarial report to the supervisory
authority. The actuary must report any breaches of the law to the insurance company's management within
two days. These must be reported to the CSA if management takes no action within 10 days. Insurers must
also appoint an approved auditor who must report directly to the CSA if he or she uncovers any breaches
of the law or any circumstances which may imperil the insurer's financial condition or lead to the expression
of a qualified opinion in respect of its annual financial statement.

At the beginning of 2007 insurance companies were required to set up internal risk management systems
and to start submitting risk management reports to the CSA from 30 June 2008. Each insurer must have a
risk management committee reporting directly to the board.

Statutory Returns
Insurers are required to submit audited accounts for a financial year ending 31 December by 30 April of the
following year. Insurance company accounts must be presented in accordance with International
Accounting Standards and the relevant EU directives. The CSA also requires annual risk management
reports, six-monthly financial reports, quarterly reports on the assets covering technical reserves, and
monthly reports on outstanding loss reserves and liquidity.

The CSA has approved a strategy for the progressive implementation of International Financial Reporting
Standards over the period 2007 to 2010.

31 © AXCO 2009


Insolvency Regulation
Law No 503/2004 on the Winding-up of Insurance Companies has given the CSA a wide range of powers
for intervening in the affairs of financially deficient insurers. These include the limitation of premium income,
the prohibition of writing or renewing certain classes of insurance, the prohibition of certain investments, an
increase in capital and the implementation of a financial recovery plan. If these prove ineffective, the CSA
can apply to the courts for the appointment of a special administrator who can assume control of the
company for the purpose of preventing its actual insolvency.

Romania is unusual in having a policyholders' protection fund (PPF) which applies to both individual and
corporate direct insurance policyholders. The fund was established as part of the state budget under the
terms of Law No 32/2000 but was only properly constituted when it was taken over by the CSA on 1
January 2003. The original unitary fund was divided into separate life and non-life funds on 1 January
2005.

As far as non-life insurance is concerned, the fund provides full compensation for claims against insolvent
motor third party liability insurers. For other lines of business, the fund pays 50% of outstanding claims as
at the date bankruptcy proceedings are initiated, reduced to 25% in the case of credit and guarantee and
financial loss. Policyholders' claims against insolvent insurers take precedence over those of all other
creditors. The PPF is only liable for claims which cannot be met from the bankrupt insurer's assets and only
comes into play once bankruptcy proceedings have been concluded. The PPF is funded by a levy of 0.8%
of insurers' collected annual premiums.

Consumer Dispute Resolution
The CSA has a memorandum of understanding with the National Authority for Consumer Protection,
allowing policyholders to take their complaints to either body. The CSA has a dedicated complaints
department called the Front Office Directorate, and though this has no authority to make binding awards
against insurers, its recommendations are said to carry considerable weight with company managers. If
recommendation fails, the complainant has no option but the courts. There is no insurance ombudsman as
such

The Front Office Directorate dealt with 1,296 complaints against insurers and brokers in 2007, of which
over 50% were settled in favour of the complainant. Around 75% of complaints related to motor insurance.
Fewer than 10% of complaints were in relation to life insurance.

The insurers' association UNSAR has established an arbitration forum which charges lower fees than the
courts. Although the forum is mainly intended to resolve subrogation disputes between insurers it can also
deal with disputes with policyholders if the policy includes an arbitration clause.

Non-Admitted Insurance Regulatory Position
Definition. Non-admitted insurance refers to the placing of insurance outside the regulatory system of
the country where the risk is located. A policy may be issued abroad, or a risk may be included in a global
master policy, by an insurer which is not authorised in that country. An authorised insurer is one which is
permitted to do business in a country (or region) by the local supervisory authority.

32 © AXCO 2009

Romania Non Life 2009

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