Mrs Florentina Almadjanu, The Romanian National Association Of Insurance And Reinsurance Companies General Executive
Every Balkan country needs to organise a catastrophe pool, said Mr E.Gurenko, insurance and risk management specialist for World Bank. He was a guest at the ICAR Forum in Bucharest, hosted by Media XPRIMM. Turkey is the only country that has organised a catastrophe pool. The earthquake in 1999 caused damages evaluated to USD 22 billion. There is an insurance company union in Greece, which cover for catastrophe risks. Romania is preparing a catastrophe pool, since the country suffered some natural disasters losses in the last years, the damages were assessed to EUR 1.5 billion. The idea is that the Romanian citizens are to pay EUR 10- 20 and thus insure their homes against fire and floods. Serdio Costaki, X PRIMM General Executive, said that the question is whether a catastrophe pool should be organized, the question is how should it should be organised and be operational. The forum was organised with the support of the Ministry of Administration and Interior and World Bank. INSURANCE.BG was the official media partner for Bulgaria. The event gathered Romanian officials, insurance business representatives and leading managers in the insurance business from all over the world. The statement of World Bank, experienced in that very practice ( in Turkey, Mexico, the Carribean countries), is that each and every Balkan country needs to organise a catastrophe pool. 92.6% of all economy losses are suffered by the developing countries. The losses amount has been covered by insurance companies much more frequently, in the developed countries during the last 25 years, while the percentage in the poor countries does not exceed 13% of even 3%. The government cabinet should invest in the catastrophe pool since it is expected to do something when disaster strikes.
World Bank introduced a model of how a catastrophe pool can be funded. The most important issues, though, is what part of the responsibility should the state government actually assume. Experience
has taught that the state plays a very significant role and what is more the government needs to reinsure the risks. It is the major pool investor as well as a controller. The private sector, on
its turn, is to determine the prices, provide experts appraisal, make the compensation payments and manage the whole organisation. Mr Gurenko's conclusion was that catastrophe pools work best as a
public- private cooperation.
Mrs Almajanu, it was made clear that Romania is to introduce a catastrophe pool in 2007. What do you think are the advantages of this kind of risk management?
The advantage is that thus all citizens ensure themselves, accumulating resources in a certain fund. All industry companies are to make catastrophe pool deposits as well. The so organised system is to work better than for the reinsurance companies as well, having a greater reasources reserve.
Tell us how is the catastrope pool going to be organised?
There is no clear scheme yet. The discrepancy comes from the differrnig visions of the insurance market participants and the government cabinet. The business insists on the formation of a catastrophe pool, but the bill being currently passed does not suit the way the insurance companies expect the pool to actually work.
What do you mean?
It the pool is organiosed in the way the business wants it to be, the state is not going to participate and especially- not going to administrate it. It is not clear if the state is going to make any deposit in the beginning. The government wants to have a capital of the reinsurance premium, but have not decided on anything yet. It is not decided on the catastrophe pool management as well, but we think that the business should manage it.
Do all the Association members share the same opinion on the pool management?
There are no internal contradictions. We amalgamate 77% of all insurance companies. We have a merged opinion but it differs from the vision of the government cabinet.
How do the Romanian citizens consider the catactrophe pool establishment?
MediaXprimm, the only media focused on insurance, conducted a survey. The results read that 50.8% of the Romanian citizens think there should be a catastrophe pool; 40.7% do not support the idea. Many people live in areas that have not suffered natural disasters, so they do not think it reasonable to buy insurance since the chance an earthquake is to strike their homes does not exceed 1%, and flood is not a threat at all. All this comes to say that the people do not appreciate insurance practices.
Is the catastrophe pool lack of clear vision the most serious problem the Romanian insurance market is facing?
This is the most frequently discussed issue these days. We have as well had some problems with MTPL insurance recently, since the EU demands a very high coverage percentage. We cannot guarantee 100% of the citizens have actually bought this insurance product. I think the percentage varies between 70 and 80%.
What is your advice to countries like Bulgaria who are just starting to think of introducing a catastrophe pool?
I can give some advice to the Bulgarian insurance business, since I represent the business. I would recommend them to be united and stand for their mutual position. The Bulgarian business had to decide whether it is ready to bear the responsibility. If the companies decide on organising a catastrophe pool they need to determine the concrete parametres themselves.
What do you thing will be the impact of the EU membership on the insurance market?
I do not expect any concussions. When the market is open to all the major companies the competition is to be much more severe, of course. But since most big companies are already present on our market no very significant changes are expected.
