The Chamber of Deputies, the decision-making body, approved changes on Wednesday that will allow money to be drawn into the Insurance Guaranty Fund (FGA), which has to pay hundreds of millions of euros after two major bankruptcies in 2 years: City Insurance and Euroins. , a company with millions of RCA customers.

On Wednesday, the deputies adopted by 168 votes “for”, 47 “against” and 33 “abstentions” the legislative changes to the legislation on the Policyholders’ Guarantee Fund, which pays out losses in the event of the insurer’s bankruptcy.

The bankruptcy of Euroins, an insurer with nearly 2.8 million RCA policyholders that began this year, is putting a tough test on the Insurance Guaranty Fund (FGA), which was supposed to somehow manage the payment of compensation to victims of City Insurance, another former RCA leader last year.

Last week, HotNews.ro wrote that in addition to freezing RCA prices, the parliament wants to take urgent measures to get money from the Insurance Fund (FGA), which took over the management of Euroins and must pay damages of up to 500,000 lei. under the insurance contract.

• VIEW THE FINAL REPORT WITH ACCEPTED AMENDMENTS HERE

RCA insurers will temporarily pay a special contribution which will later be reimbursed by the FGA

One of the main changes is that RCA insurers have to contribute even more to the Policyholder Guarantee Fund through a special contribution in the form of a loan, which they will repay in full when the FGA has the money.

• “A special contribution will be charged to policyholders if the Fund manages insolvency situations, according to which sums exceeding the Fund’s availability will be calculated,” says the amendment adopted by the deputies.

The proposal was made last year by Deputy Julius Marian Firczak (minority) in the context of the bankruptcy of City Insurance, but until recently the project remained blocked in the Chamber of Deputies.

How much will the special contribution be and how will the money be returned

The decision to withdraw Euroins’ license was published in the Official Gazette on March 17, 2023, and the FGA will be able to make the first payments to customers and victims of this insurer just over 60 days from that date.

The assessment of amounts owed to the FGA for an insolvent insurer is carried out after the insurer submits to the Fund a list of insurance contracts in effect on the date of notification of the aforementioned decision, a complete list of claims, as well as technical operational and accounting records related to these contracts and files.

In addition to the amendment regarding the establishment of a special contribution, the same deputy proposed another amendment that establishes how the amount of this contribution will be determined:

• “The percentage share of special contributions is approved by the decision of the financial supervision board at the request of the board of the Fund.
• (..) special contributions due and credited to the Fund’s account will be returned to insurers when the Fund’s availability is sufficient to cover the amounts due to insurance creditors and to the extent that the Fund is provided with financial resources provided by this law.
• The fund does not owe interest on collected special contributions.”

Will we pay more in the RCA if insurers are also required to pay a special contribution?

The question is whether the introduction of this additional fee will be reflected in the final price we pay at RCA.

In justifying his proposal, the deputy claims that this should not be the case.

• “The proposed amendment provides for the regulation of a separate source of income for the Fund, namely the establishment of special contributions paid by policyholders, in exceptional cases, contributions of a temporary nature collected by the Fund as a loan and subject to reimbursement. to the extent of providing the Fund with the financial resources provided for by this Law.
• In this sense, it is possible to avoid a possible increase in insurers’ contributions and a possible damage to their heritage, thus protecting the uninterrupted course of insurance activity in Romania and implicitly the interests of the insured by establishing a special contribution that is fully refundable.” it is stated in the justification of the amendment regarding the special contribution.

PSD-PNL amendment: the state can guarantee FGA loans

Another important amendment, recently introduced by the PSD-PNL deputies, is aimed at “diversifying the types of loans to which the Fund can apply if necessary to fulfill the obligations imposed by law.”

Thus, the financial resources of the FSA will also be able to come from:

• “loans from credit institutions, with or without a state guarantee, treasury loans or compulsory loans through the issuance of the Fund’s securities.”

Other amendments aim to establish an obligation to contribute to the FGA for European insurers (authorised in other Member States but carrying out insurance activities in Romania on the basis of the right of establishment) through branches, in order to strengthen the protection of Romanian consumers. .

Why ASF says this special contribution should not increase the price of RCA

Valentin Ionescu, director general of insurance at ASF, told the government last week, after the RCA price cap was passed, that the contribution should not affect the final prices for policyholders.

• “There is a corresponding proposal in Parliament PL-x No. 511, and we are talking about a special contribution. The fixed contribution now payable to the FGA will have another component, the special contribution.
• As a result, our intention is that if FGA PL-x No. 511 moves forward with this new provision, the possibility of a special contribution in the form of a loan, the insurance companies will provide a significant portion of the contribution for the FGA, it will be a special contribution, that is, in the form of a loan, after FGA will be replenished, after payments, it will return this loan to the insurance companies.
• At the moment, the fixed contribution is non-refundable and therefore cannot be used in the calculation of solvency.
• The special contribution, even if given to the FGA as a loan, can be used in the calculation of solvency and as a result should not affect the RCA tariffs.” – said the representative of the ASF.

Read also: Urgent measures in the case of Euroins bankruptcy: RKA insurers will pay a special contribution / The state will guarantee the loans of the FSA – project

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