The state wants to create a new insurance company in which CEC Bank will have more than 99% of the shares and Imprimeria Națională less than 1%, government sources told HotNews.ro. When contacted by HotNews.ro, CEC Bank officials confirmed that they have started the procedure to establish the insurance company, which is expected to be operational by the end of the year.

What CEC Bank says about the future insurance company

• “CEC Bank SA is going through the stages of establishing an insurance company, the preparation of legal documentation and obtaining the necessary permits for establishment have begun. When all the details are finalized, we will make this information public. We expect that the enterprise will be operational by the end of the year.” CEC bank representatives told HotNews.ro on Tuesday, without providing any other details.

Government sources said that under the current scenario, the new insurance player would be more than 99% controlled by CEC, with less than 1% stake held by National Printing Office.

• “Currently, CEC Bank has to conduct market research to send to the Ministry of Finance. Depending on this study, it will be known what types of insurance the new company will sell.” government sources said.

According to HotNews.ro, the insurance company will at least initially sell general insurance that CEC Bank needs to increase revenues, such as home insurance or guarantees.

• It remains to be seen whether the future insurance company, indirectly controlled by the state, will also enter the auto insurance segment – RCA.

The business project has not yet been finalized at the CEC Bank level, so the bank cannot provide too many details.

• Contact Tuesday HotNews.ro about staffing plans of this insurance company, officials of the Financial Supervision Authority (ASF) it was noted there that until now “not a single request in this regard has been received by the GU – insurance reinsurance sector, authorization service.”

The Ministry of Finance mandated CEC to enter the field of general insurance

CEC Bank, an institution controlled by the state through the Ministry of Finance, is preparing to enter the general insurance market, according to a response received by Budgetul.ro in January of this year from the ministry led by Adrian Caciu.

• “The Ministry of Finance, as a shareholder (on behalf of the state) of CEC Bank SA, instructed the Bank to take the necessary steps to establish CEC Bank SA as a company in the general insurance sector, in accordance with legal provisions.
• The given mandate takes into account the interest of CEC Bank SA in expanding its activities on the insurance market, taking into account the possibility of such an initiative aimed at diversifying the income base by expanding the activities of CEC Bank into adjacent financial segments, following the model practiced by other competitors in the system, in order to diversify the portfolio of products and services, which can be offered to clients through the development of new types of activities in the field of insurance.
• At this stage, CEC Bank SA is going through the stages of establishing an insurance company, the preparation of legal documentation and obtaining the necessary permits for establishment have begun.” submitted for Budgetul.ro by the Ministry of Finance.

The state is already present in the insurance market through EximAsig, but not RCA

After the last major insurance failure, namely City Insurance, significant increases in RCA prices and contributions to the Policyholder Guarantee Fund, motor carriers petitioned the government to set up a state-owned company to sell RCA insurance.

The Romanian state currently has an insurance company, Exim Asig, which it controls through EximBank, but it only sells insurance for legal entities (housing, guarantees, accidents, commercial receivables) and does not have RCA policies in its portfolio.

City Insurance Bankruptcy: More than €120 million in payouts, and this is just the beginning

Injured parties and creditors of City Insurance, the former bankrupt leader of RCA, have recovered about 603 million lei (more than 123 million euros) by the end of last year, but this amount covers only a quarter of the total payment requests, it has been announced. as of January 18, 2023, the Policyholder Guarantee Fund (FGA).

Starting from November 29, 2021 and until the end of 2022, FGA paid the insurance creditors of City Insurance SA approx. 603 million lei for 64,568 payment requests approved by the FGA Special Commission out of a total of 250,692 registered payment requests.

We will remind you that in September 2021, the ASF revoked the permission to operate at City Insurance, and in May 2022, the court finally decided the bankruptcy case of this insurer.

In the first phase, the FGA registered 260,764 payment requests, but as a result of the internal review process, 10,072 payment requests were closed as duplicates or added to other previously registered payment requests.

Why RCA prices could go up: Insurers forced to pay more to FGA

In order to manage the bankruptcy of City Insurance, as well as the other major bankruptcies of Astra and Carpatica, the Financial Supervisory Authority (ASF) decided to increase the fees that insurance companies pay to the FGA for managing insurance bankruptcies.

• “The year 2022 was marked by an increase in the general insurance contribution rate collected by the FGA from insurance companies from 1% to 2.5%, resulting in the collection of an average monthly contribution of 24.8 million lei.
• The current year brought a new increase in the premium rate for general insurance from 2.5% to 4%, which leads to an average monthly increase in revenue to a projected level of 46 million lei.” emphasized in the Insurance Guarantee Fund (FGA).

These successive increases in the premiums that insurers pay to the FGA could lead to further increases in RCA prices this year.

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