​The government wants to extend the RCA price cap for another 3 months, until June 30, 2024, citing the need to “fight excessive price increases that may suddenly arise amid imbalances” in the market, it said. the draft GD released on Tuesday evening during a public consultation by the Ministry of Finance.

• SEE DRAFT HG AND KEYNOTE

Reasons given: Only 7 out of 10 cars have RCA and a large number of high risk insureds

The Ministry of Finance in the explanatory note to this project emphasizes that in the RKA market “there is still restraint regarding the risk appetite of RKA insurers for certain categories of insured”.

In addition, “there is a high degree of concentration that continues to represent a market vulnerability both in terms of risk by insurance class and in terms of significant market shares held by a relatively small number of insurance companies, demonstrating a low level of competition.”

• “At the same time, it is noted that a high number of high-risk insured persons remains in the category of high-risk insured persons of entire risk categories, which leads to systemic risk in terms of the degree of insurance protection of the car fleet in Romania and the non-fulfillment of Romania’s obligations arising from the Treaty on Accession to the European Union .
• In this sense, it should be noted that as of December 31, 2023, out of the total number of vehicles in the national fleet, namely 10,333,293, 7,053,399 vehicles were insured.
• It is important to note that for January-March 2024, more than 21,000 requests for the allocation of high-risk policyholders were registered, that is, each RCA insurer took on about 2,600 such policyholders,” the document says.

This whole situation, the Ministry of Finance says, can generate negative consequences in the form of additional pressure on prices after March 31, 2024, as well as other socio-economic problems, such as:

• the impossibility of covering the risk to which other road users are exposed, in case of inclusion in the traffic of uninsured vehicles;
• increased risk for road users during traffic accidents involving uninsured vehicles, especially in case of serious injury or death;
• an increase in the need for financing the National Defense Fund as a result of its obligation to compensate for damages caused to third parties by uninsured vehicles;
• the obligation of uninsured persons, the perpetrators of accidents, to compensate from their own funds the losses paid from the available National Defense Fund.

Finally, the Ministry of Finance says that there are currently a number of changes to national legislation on RCA insurance that are proposed to correct existing imbalances.

The Government’s decision: extension of price restrictions for another 3 months

To correct this state of affairs, the Ministry of Finance proposes as a temporary solution to extend the RCA tariff restrictions for another 3 months until June 30, 2024.

• “By applying this measure, we are fighting against excessive price increases that may suddenly arise against the background of the above-described imbalances, and the gradual stabilization of the RCA insurance market in order to avoid the spread of negative effects to other sectors of the national economy.” “, the explanatory note says.

The state intervenes for the fourth time in a year to prevent RCA prices from rising

The government initially decided to cap RCA prices on April 5, 2023, in the context of a bankruptcy initiated by the former leader of RCA. More specifically, RCA prices were capped at their own premium rates applied by each RCA insurer on February 28, 2023, and will remain in effect for 6 months, until October 10, 2023.

Later, this deadline was extended to December 31, 2023.

Then, on 29 December 2023, due to market conditions in the context of still high inflation, a new regulation was issued which allowed the indexation of insurance premiums, practiced by RCA insurers on 28 February 2023, with a maximum interest of 6.8% for a period of 3 months ending at the end of this month.

On the basis that imbalances in the RCA market have not ended and there is still a risk of excessive price increases, the Treasury is now stepping in for the fourth time in a year and proposing to extend the RCA price cap for another 3 months, as set at the end of December.

It is likely that the draft will be approved on Thursday at a meeting of the Government.